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Do you know any trading coaches who publish the results of their trades daily? Dr. Duke posts the trading track records of his Flying With The Condor™, Conservative Income, Dr. Duke's Trading Group, and The No Hype Zone Newsletter services in the free downloads section of this web site. If you have questions about any of the trades, Ask Dr. Duke.

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This market has given us many days or weeks we would compare to roller coaster rides, but today took the cake. It looked weak from the open and forced me out of the few remaining positions. But it just became uglier and uglier. SPX opened at $1876 and dove as far as $1812 before recovering a bit. The intraday low in the October 2014 correction was $1821, so this was a significant pull back. SPX closed at $1859, down $22. At one point in the late afternoon, SPX had actually traded back up to the opening price at $1876 - that is a serious round trip. RUT was even more surprising. RUT closed up $4 at $999, after dipping down to $958. That is only the third positive day for RUT this year.

Volatility spiked up to 32% during all of this craziness, but closed back at 27.6%. Trading volume spiked higher with 4.3 billion shares of the S&P 500 stocks trading today. Trading volume rose 17% on the NYSE and increased 38% on NASDAQ.

The CPI reported for December at -0.1%, close to the previous month's 0.0%. How can CPI be zero when all of my grocery bills are higher? Housing starts came in at 1.149 million for December, down from 1.179. Building permits followed suit with a decline from 1.282 million to 1.232 million for December.

This reminds me of road trips with the kids when they were younger. "Are we there yet?" I don't know, but that long lower shadow on the SPX candlestick and a positive day on RUT certainly are signals in that direction.

 

China announced 6.9% GDP growth for 2015 this morning. Even though we would be jealous to have that level of growth, that's the low in a slow downward slide for China. But is that worth the U.S. market crashing and turning into a bearish trend? Oil prices continue to dominate the discussions and continue to be blamed for the market weakness. Yes, China is slowing and requires less oil. Yes, everyone and his cousins are pumping cheap oil and we are swimming in it. I continue to think this has been seriously overblown. Our economic data have been weak and muddling along for years. The politicians just try to tell us everything is rosy. But even my less rosy view of the economy doesn't paint the dreaded R word.

The markets opened and traded higher this morning, but the enthusiasm was short lived. SPX closed up one dollar at $1881 after being as low as $1865. The August flash crash lows are around $1870. RUT, as usual, traded more weakly with a $13 loss, closing at $995. For the previous three sessions, RUT appeared to be trying to settle around $1010 and RUT opened there this morning and traded up for a while before weakening.

VIX is interesting. In spite of all of the hand wringing of the doomsday gurus, VIX has remained relatively low. VIX pulled back 1.1 points today to 25.9%. That isn't low volatility, but it isn't crash mode either. On August 24th, VIX hit over 53% intraday and closed at 41%.

You may be following the Stock Traders Almanac as they discuss the three January indicators: the Santa Claus rally, the first five days of January indicator and the month of January indicator. The first two have already turned in negative signals. SPX has to get back to $2038 by the end of the month to be positive. Gaining $157 is feasible, but days like today do not appear to be increasing the odds. In years where all three indicators are negative, the past track record of predicting a flat or negative market for the year is impressive.

Traders will remember the first two weeks of 2016. SPX closed at $1880, down $42 today and down 7.7% for the year. SPX traded down and broke through the August flash crash lows today, but the good news is that SPX bounced and closed above those lows. But we will see if that matters on Tuesday. RUT closed at $1008, down $18. RUT traded weaker than SPX over all of 2015, and this year is no different so far. RUT is off 11% for the year. RUT broke through the August flash crash lows back on January 6th, and broke through the October 2014 correction lows on January 11th. RUT traded as low as $984 this afternoon before recovering somewhat into the close. You have to go back to the summer of 2013 on the charts to find RUT trading around $980.

Trading volume remains high with 3.9 billion shares of the S&P 500 stocks trading. Trading volume increased 17% on the NYSE and rose 6% on NASDAQ. But higher volumes on option expiration aren't unusual. Implied volatility has been high as the market has tanked; the VIX hit 31% intraday and closed today at 27%, up three points.

Our markets will be closed Monday. It is impossible to predict what news event might occur over the long weekend and either accelerate the downward spiral or stimulate a strong bounce higher. I have hedged our February iron condor position and been whipsawed several times. At the close today, that position is being held at about a 7% loss. We'll see what next week brings.

What started the day as a sideways market turned ugly this afternoon. Starting around noon, SPX started declining and closed at $1890, down $48. SPX didn't close at its low for the day, but it was close. RUT was just as weak, giving up $35 to close at $1010. Trading volume remains high with 3.4 billion shares of the S&P 500 stocks trading. Volume on the NYSE increased 6% and trading on NASDAQ increased 18%. Volatility increased as the market declined, with VIX closing at 25.2%, up almost three points.

RUT is hitting new record lows, having broken the support levels set by the October 2014 correction on Monday and trading even lower today. SPX has not traded downward as aggressively and remains about twenty points above the August flash crash and sixty points above the October 2014 correction.

The most interesting question is "Why"? The financial news networks were interviewing all the gurus this afternoon, asking that very question. The answers were interesting. The most common answer was to blame dropping oil prices. But oil prices have been pretty steady this week, trading around $30. What changed this afternoon? One pundit claimed the markets are predicting a recession, but the last several GDP reports have been languishing around 2% growth for 2015. No one is happy with that, but it isn't negative (economists define a recession as two quarters in succession of negative GDP growth). Let's consider the oil price rationale.

Declining oil prices have traditionally been interpreted as resulting from reduced demand, suggesting lower economic activity. So declining oil prices often signal a slowdown in the economy. That may well be true if we have normal supply market reactions. But OPEC has just opened the spigots even more, flooding the market with oil. Reduced demand decreases prices but increasing supply also reduces prices. Add to this the reports of ISIS selling oil at $10 to fund their activities and we have a market flooded with cheap oil that may be primarily a supply problem, not a demand problem.

There is no question that the global economies are slowing, but none of the major economies are flirting with negative GDP growth. We are still seeing positive GDP growth here in the states; I may complain that it is too low, but it isn't negative.

Then why is the U.S. stock market in the tank?

The intraday trading pattern of today's market was almost identical to yesterday's: higher at the open, then trading off with a rally into the close. One sign I interpreted as significant was that the VIX was declining even as SPX traded down this morning. SPX opened up at $1928 this morning and traded up to $1947, but almost immediately began to decline, reaching the low for the day at $1914 around 2 pm ET. Then the market rallied over the last 90 minutes of trading, closing at $1939, up $15. Today's open and close on SPX were back within the Bollinger band.

RUT traded similarly, but less bullish, closing up $3 at $1045. RUT's candlestick was a near perfect doji, the sign of balance between buyers and sellers, often signaling a trend transition. The VIX lost two points to close at 22.3%. That is a decline in volatility of about five points in two days - another signal of transition. Trading volume remains elevated with 2.9 billion shares of the S&P 500 stocks trading; the 50 dma is 2.4 billion shares.

The February position in the Flying With The Condor™ service is near break-even; at one point today, my position was actually profitable. The partial hedge is doing its job and buying us time. I closed the January position for a 13% gain, so we are off to a good start in 2016 in spite of all of the hysterics in the market. The cable business channels are dragging out all of the extreme bears. Their message is simple: "sell everything; buy a tent and move into the woods.". Fear sells.

I don't mean to be cavalier; this remains a dangerous market. But I put my money where my mouth is. I bought SPX calls yesterday and added to that position today.

 

Today marked the first time this year that I have seen some encouraging signs in the market. Although, "encouraging" may be too strong. The market opened higher, but, just as we have seen before, it turned and traded lower. But today proved different. SPX rallied strongly during the last 30 minutes today. That was refreshing. SPX closed at $1924, up $2. RUT closed down $4 at $1042. Volatility contracted with the VIX losing almost three points to 24.3%. Trading volume remains high with 3.1 billion shares of the S&P 500 trading. Trading volume on the NYSE rose 0.4% and volume rose 7% on NASDAQ.

The unofficial beginning of the earnings season is always marked by Alcoa, and the market liked what they heard after the close today; trading in AA rose after hours.

The positive signs I observed were:

1. SPX traded as low as $1901, but then recovered $23 to close.

2. RUT closed right at the correction low of October 2014 yesterday. RUT opened and traded down another fifteen points today, but then recovered ten points into the close.

3. AA missed analyst estimates for revenues, but beat earnings estimates by two cents. In spite of this, AA shares traded higher after hours. AA's business is always viewed as a good measure of the industrial economy.

4. Volatility contracted.

I don't want to read too much into it, but these signs appear to be a bit more positive that what we saw last week. Perhaps we are nearing the bottom.

The ultimate answer will be revealed later this week.

The Santa Claus rally refers to the historical trend for the S&P 500 index to rally the last 5 trading days of December and the first two days of January. The Santa Claus rally has failed to materialize 15 years since 1950, including this year. Two of those, in 2000 and 2008, preceded significant market drops. The next two indicators for the market are the first five days of January and the performance for the month of January. When all three indicators are negative, the market has been flat or down every year except 1982. So we aren't off to a great start. Looking back at 2015, the Santa Claus rally was negative, the first five days were weakly positive and the full month of January was negative. And we ended the year with the S&P 500 index down -0.7% or up 2%, if you count dividends in the return.

Trading volume dropped back from yesterday's highs with 2.4 billion shares of the S&P 500 stocks trading today, right at the 50 dma. Trading volume declined 12% on the NYSE and declined 8% on NASDAQ.

SPX strengthened a bit today and closed up $4 at $2017. RUT gained $2 to close at $1110. Volatility contracted with the VIX declining 1.4 points to 19.3%.

No new economic data was reported today, but the ISM services index, ADP's private employment payroll report, and factory orders are all expected tomorrow.

As we face the new year, I'm not seeing much positive news. Will we continue to see a range-bound market or is it going to get worse yet?

 

Today was certainly not the way anyone would like to start the new year. China's stock market collapsed overnight and the dominos fell across the globe. SPX closed at $2013, down $31 and RUT lost $27 to close at $1109. SPX had traded down to $1990 by about 11 am ET and wandered sideways from there. But a surge in the last thirty minutes of trading brought SPX back to $2013. This keeps the index within the sideways range it has been trading within since the recovery from the August flash crash. RUT has been trading weaker than SPX for many months and today's close is near the August flash crash lows, whereas SPX remains about 140 points above the flash crash low. Trading volume jumped markedly after the low holiday trading with 2.8 billion shares of the S&P 500 stocks trading. Volume popped up 55% on the NYSE and was up 52% on NASDAQ. Volatility popped up over two points with the VIX closing at 20.7%. The only somewhat reassuring sign in the markets today was the recovery in the last few minutes of trading.

The price volatility of this market continues to whip traders back and forth. Investors Business Daily's market indicator moved to Confirmed Uptrend on 12/30/15 but whipped back to Market in Correction today. IBD's market indicator normally allows investors to be on the right side of longer term market trends, but that hasn't been the case for the past year or more, as prices whip back and forth almost daily.

The market was primarily reacting to China's market collapse, but U.S. economic data didn't help. The ISM manufacturing index came in at 48.2 for December, down from 48.6. Values in this index less than 50 denote contraction as opposed to expansion. Construction spending decreased 0.4% for November, going negative after the small, but positive, 0.3% increase in October.

I closed our January iron condor for the Flying With The Condor™ service on January 31st for a 13% gain. The February position is up 4% so 2016 is off to a good start. The Flying With The Condor™ service ended 2015 with a net gain of 40%, as compared to a -0.7% loss in the S&P 500 Index.

So much for the Santa Claus rally...

2015 is going into the record books as the toughest year for traders in 37 years. The best performing asset class of 2015 is stocks, and they were only up 2% for the year, including dividends. By comparison, stock market investors were toasted in 2008, but bonds were up 22%. The average hedge fund this year is down 4%. Bill Ackman of Pershing Square Capital has told his investors the fund's returns for 2015 will be the worst since its founding in 2004. Warren Buffet's Berkshire Hathaway stock is down 11% for the year. To find a year with worse returns, one has to go back to 1937, when the best performing asset class was three month treasury bills at +0.3%.

2015 was the year for non-directional trading. Our Flying With The Condor™ trading service was up over 40% for 2015. Non-directional trading systems outperform when the market is largely trading sideways, turn in smaller, but positive, returns when the market is trending higher, and outperform bear markets with smaller losses. Historically, markets trend strongly higher or lower only about 25% of the time, so non-directional traders have an edge.

SPX closed today at $2044, down $19, while RUT lost $14 to close at $1136. Volatility rose a bit with the VIX at 18.2%, up about 0.9 points. Trading volume of the S&P 500 stocks came in at 1.5 billion shares, well below the 50 dma of 2.4 billion shares. Everyone has taken off for the holidays.

For 2015, the S&P 500 index opened at $2059 and closed at $2044, down 0.7%. The Russell 2000 Index opened the year at $1210 and closed at $1136, down 6.1%. NASDAQ was the only major index in positive territory, opening at $4760 and closing at $5007, up 5.2%.

My subscribers to the Flying With The Condor™ service were fortunate to be with me this year. That 40% gain helped offset some of these other poor performing sectors.

I hope you spent a wonderful Christmas with family and friends. Char and I visited close friends in Florida over Christmas and plan to spend this evening with a small group of close friends here at home. Thank you for trusting me with this responsibility this year. I wish you a new year in 2016 filled with happiness and prosperity. Best wishes.

A few days ago, it seemed all traders were concerned about was the FOMC (a bit of an exaggeration), but now every twitch of the spot oil prices is telegraphed into the stock market. SPX went into free fall this afternoon, dropping $36 to close at $2006. RUT dropped $14 to $1121. Volatility rose again with the VIX closing at 20.4%, up 1.4 points. Trading volume was higher, as one would expect on expiration Friday. Trading volume rose 69% on the NYSE and increased 27% on NASDAQ.

The fear is that falling commodity prices are an indication of global economic weakness. This is in stark contrast to the positive assessment of our economy from the FOMC this week. Is that why the markets rallied so strongly on Wednesday, but then sold off yesterday and today?

RUT continues to trade more weakly than SPX. After this week's see saw in prices, RUT is only 1.6% off of the August flash crash lows. However, SPX would have to drop almost 7% to get back to those lows. RUT's weakness is not a positive signal.

SPX settled at $2029.72. The 2160/2170 call spreads in our December position expired worthless. This resulted in a 8% loss for December, but ends the year for the Flying With The Condor™ service at +40%.

I track the difference between the Thursday close and the settlement price for SPX. The average change this year was $9.60, but August and September were big months with changes over $20. This was the origin of my developing the Two Sigma Rule for closing spreads on the Friday before expiration week. This has proven to be a conservative measure for deciding whether to close spreads early or to allow them to go into expiration to expire worthless.