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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.

Dr. Duke practices what he preaches! You are entering the "No Hype Zone"!

 

The markets seem to be slogging through molasses with small price moves, low trading volume, and declining implied volatility. SPX closed down $3 to $2031 while RUT lost one dollar to close at $1163. Volatility remains relatively low at 15.8%. Trading volume is sluggish with 2.1 billion shares of the S&P 500 trading today (flat with yesterday and below the 50 dma). Trading volume declined 1% on the NYSE and rose 6% on NASDAQ.

Housing starts for September came in at 1206 thousand, up from August's 1132 thousand. Building permits were on the opposite side with August's 1161 thousand declining to September's 1103 thousand. But the good news is that these data remain fairly positive for the real estate market with new housing construction running around a million units for 2015.

Earnings announcements continue to elicit strong responses with CMG down about $50 and ISRG up $35 in after hours trading. Playing these announcements is not for the faint of heart. For those of you who love the thrill ride, AMZN announces Thursday after the close.

The bulls appear to be in control of this market now; we are seeing the classic higher highs and higher lows. But trading volume is low and the price moves are limited in either direction. Are we returning to the sideways trend we saw earlier this year? Many of the large institutions have predicted a strong rally for the balance of this year, but we are starting to run out of time.

IBM reported disappointing earnings after the close and is down about 5% in after hours trading. Will that affect the overall market? Possibly. This earnings season has been a bit of a mixed bag thus far. At the least, IBM's performance may worry analysts about the state of the overall economy. I doubt that it will force the market lower, but it could hold it down a bit, maybe to more of a sideways trend. SPX traded down about ten points from the open, but recovered to close up one dollar at $2034. I would term that as weakly bullish. RUT traded in a similar fashion, closing up two dollars at $1164. RUT traded down as low as $1155, the 50 dma, but bounced off that support and closed quite a bit higher at $1164. Trading volume was down across the board with 2.1 billion shares of the S&P 500 trading (the 50 dma = 2.5B). Trading was down 15% on the NYSE and down 7% on NASDAQ. Volatility was essentially unchanged with the VIX at 15%.

This is a weak week for economic news; the principal market moving events will be the earnings announcements.

I closed the November iron condor position in the Flying With The Condor™ service on Friday for a gain of 13.4%; this brings our year to date performance to 43%. Why aren't you with us?

The markets continued higher today with SPX closing up $9 at $2033; RUT wasn't quite so bullish, losing about fifty cents on the day. Volatility continues to contract, with VIX dropping nearly a full point today. VIX has been steadily dropping since its recent high of 28% on September 28th. Trading volume wasn't particularly high on this expiration Friday with 2.3 billion shares of the S&P 500 stocks trading today. Trading volume was up only 1% on the NYSE and moved down 11% on NASDAQ. Many analysts were looking for SPX to definitively break the recent mid-September highs around $2000, and we had our doubts earlier this week, but today's move higher was encouraging. Perhaps we can finally stop worrying about a retest of the flash Monday lows from late August.

Industrial production for September decreased 0.2%, slightly worse than August's -0.1%. Capacity utilization was essentially flat in September at 77.5% (August was 77.8%). The JOLTS job openings data came in at 5.370 million for August down from July's 5.668M. The University of Michigan's consumer sentiment survey reported 92.1 for October, up from September's 87.2.

I closed my November iron condor position on RUT today for a gain of $115 per contract or +13.4%. Even though this is an early close (34 days left), we were able to lock in 82% of the maximum potential gains. Why continue to be exposed to the market if you can lock in over 80% of the potential gains? This brings our year to date returns in the Flying With The Condor™ to +43%.

Enjoy your weekend.

Just a couple of days ago, I was complimenting SPX for closing for three consecutive days above $2000, or roughly the mid-September high. But SPX couldn't stand the heat and has now retreated, closing down $9 at $1994. RUT has traded even weaker, never reaching the mid-September highs. RUT closed at $1137, down $11. Trading volume remains below the 50 dma on the S&P 500 with 2.4 billion shares, but it was up from yesterday. Trading volume rose 9% on the NYSE and increased 23% on NASDAQ. Volatility remained calm, with the VIX rising only four tenths of a point to 18.0%. My previous thesis appears to be holding, viz., not strong enough to mount a bull run for new all time highs, but not really weak enough to start a bearish trend lower.

Perhaps the Fed's Beige Book threw cold water on the markets. A them running through the minutes was the weakness of our economy and whether it could withstand a interest rate hike. The PPI for September came in at -0.5%, lower than last month's 0% change. Retail sales for September didn't inspire anyone, up 0.1% over August.

I'm out here in Las Vegas for the Traders Expo. I am looking forward to seeing many of you here. It is always nice to put faces to the email exchanges.

SPX closed up $3 at $2017 on reduced trading volume, and RUT lost one dollar to close at $1164. Today was the third consecutive close above $2000, which was where the last bounce higher stalled in mid-September. Just as important, each close has been moving steadily higher, but the markets are slowing. Trading in the S&P 500 stocks slowed dramatically today to 1.8 billion shares. Trading volume on the NYSE dropped off 21% and volume declined 26% on NASDAQ. Volatility continues to contract, with the VIX dropping off almost a full point to 16.2%.

So the market is slowing. Trading volume is declining and implied volatility is contracting. Good news or bad news? The beauty of options trading is that you don't really care; you have tools in your trading toolbox for any occasion. But let's consider the underlying economic drivers.

The panic about China pushing the whole globe into recession appears to have passed. Yes, China's economy is slowing, and that does affect the global economy, but we aren't heading into recession. After all, the last quarterly GDP number here in the states was +3.9%. But we are not in the booming economic spurt that has historically been typical of recoveries from past recessions. Despite all of the pronouncements from the politicians, this remains a weak economy. That is why the FOMC has been so hesitant to raise interest rates. They don't want to squash what meager progress we are seeing.

Our November iron condor position on RUT at 960/970 and 1280/1290 continues to build gains with $121 per contract or +14% as of today's close. I will probably close this position soon since we now stand at about 85% of the maximum gain for this position. If we were to close the November trade today, we would be up 43% in the Flying With The Condor™ service for 2015.

I'm back. I had some web site issues and was unable to post a blog earlier this week.

The strong bull market trend of the past couple of years may not be back, but it at least appears that we have pulled back from the brink of a severe market crash. SPX gained $16 today to close at $1996 and RUT closed at $1153, up $19. Volatility continued to pull back with the VIX losing a full point to close at 18.4%. Trading volume was up with 2.7 billion shares of the S&P 500 companies trading. Trading volume on the NYSE increased 15% and volume increased 3% on NASDAQ.

The FOMC minutes and the weekly unemployment claims will be released tomorrow. That may slow down this market as traders wait for and then peruse those Fed minutes for clues.

I closed my RUT Oct 1040/1050 put spreads yesterday; I will allow the 950/960 puts to go into expiration and expire worthless. Assuming they do expire worthless (seems like a safe assumption), my second October position will close with a gain of 11.3%. You may recall I closed the first October position on August 21st for an 11% loss. Our RUT November 960/970 and 1280/1290 iron condor stands at a net gain of $112 per contract or +13% as of today's close. That brings our year to date performance in the Flying With The Condor™ service to +43%. And that assumes that the gains were not reinvested, so that is a conservative number.

 

Today's market was quite the carnival ride. When I checked the futures this morning, they looked modestly positive. But the jobs report took the steam out of the bulls, and the markets opened down and traded lower. That lasted until about 10 am ET and then the bulls just started a slow but steady climb higher - and it didn't stop. SPX climbed right into the close at $1951, its high for the day. RUT closed up $17 at $1114. Volatility came in almost two points with the VIX closing at 20.9%. Trading volume spiked upward with 2.8 billion shares of the S&P trading. Trading volume increased 11% on the NYSE and moved up 4% on NASDAQ.

The jobs report disappointed analysts with 142 thousand jobs, up slightly from last month's 136k, but far short of what traders were hoping. The unemployment rate stayed at 5.1%. Yesterday's unemployment claims data were more positive with continuing unemployment claims hitting a new low at 2.2 million. Factory orders also reported today at a negative 1.7% for August, even worse than July's -0.2%. So the economic data wasn't stellar, but it isn't signaling a recession either. The big question for traders is whether today was just a short covering splurge or if we have indeed seen the bottom of this correction. I suppose we will have to wait until next week to get some clues to the answer.

Have a great weekend.

Yesterday was pretty ugly with SPX losing $50 in a single day. But the futures were pointing higher this morning and traders moved the markets higher until about mid-morning. SPX weakened and hit its low for the day around 3:30 ET, but then it recovered to close at $1884, with a small two dollar gain for the day. RUT didn't fare as well, losing $7 to close at $1084. But that is consistent with recent trading, with RUT leading the broad markets lower. Volatility pulled back 1.2 points to 26.5%. Trading volume fell off today with 2.7 billion shares of the S&P 500 trading. Trading declined 1% on the NYSE and declined 6% on NASDAQ.

The Case Schiller housing price index moved to an annualized price gain of 5% for July, up slightly from June's 4.9%. The Conference Board's consumer confidence survey increased to 103.0 for September from 101.3. But this positive data was overwhelmed with concerns about a global slowdown.

I didn't expect the markets to retest the lows of the flash crash, but I was wrong - here we are. Interestingly, volatility remains lower than it was during the flash crash. Apparently, the big players aren't very anxious this time around. But that leaves us with the question of whether we are testing previous lows and rebounding or trading lower yet. I don't see the economic case for trading lower - but that betrays my presumption that rational thought guides the market.

Here is an interesting factoid I came across today: companies in the S&P 500 have issued fewer negative earnings pre-announcements and more positive earnings pre-announcements for the third quarter of 2015 relative to the past two quarters. So I continue to think our economy is plugging along, not the strong recovery we would like, but we are heading over the cliff either. So I think we are on the verge of bouncing higher.

It appears that the markets have simply replaced a higher sideways trading range with a lower sideways trading range. For several months, SPX wandered between $2040 and $2130, and now it appears that the new trading range is $1900 to $2000. Before the correction, one could argue that the S&P 500 was becoming overpriced with price to earnings and price to dividends ratios near historical highs. Those ratios remain slightly above historical averages, but maybe this correction was a healthy adjustment. And the longer we tread water, the more in-line those ratios will become. The markets opened higher this morning, but then declined to lows around noon. But then the bulls revived themselves and recovered most of the early losses. SPX closed at $1939, down $4, while RUT lost $3 to close at $1140. Trading volume declined across the board with 1.9 billion shares of the S&P 500 trading. Trading volume declined 17% on the NYSE and declined 21% on NASDAQ.

There weren't any significant economic data reported today, and that may have contributed to the lackluster trading day.

On the Friday before the flash crash on Monday, 8/24, I closed the October position we had on RUT for an 11% loss. That took the year to date gains on the Flying With The Condor™ service to +34%. I recently opened a new October iron condor on RUT positioned at 950/960, 1040/1050 and 1240/1250 (the put spreads are split over the 950/960 and 1040/1050 strikes). This position now stands at a net gain of $76 per contract or +9%. Our November iron condor on RUT at 960/970 and 1280/1290 stands at a net gain of $63 per contract or +7%. If we were to close both positions today, we would stand at a net gain of 40% for the year; maybe we should just go lie on the beach for the rest of the year. No, that sounds like retirement in the rocking chair - too boring.

My conclusion drawn from all of the traders and finance professionals I have dealt with over the past couple of weeks was that the Fed wasn't going to raise interest rates and that was good. They feared a rate hike would tank the market. The Fed didn't raise interest rates and now it is stating to look like the market will trade lower on that news - but it is early to draw that conclusion. The market will have to continue to digest the FOMC announcement and other economic data. But today's market didn't look good. SPX lost $32 to close at $1958 while RUT closed down $17 at $1163. Volatility rose almost two points, with the VIX closing at 22.8%. Trading volume on this expiration Friday was high as usual, so that wasn't the reinforcing sign to the bearish day as it might normally have been. Trading in the S&P 500 companies rose to 3.8 billion shares, well above the 50 dma at 2.4B. Trading volume popped up 56% on the NYSE and increased 60% on NASDAQ.

There wasn't any significant economic date released today, so today's market action may be primarily attributed to the market trying to decide what the FOMC announcement means for the future of the U. S. markets.

I just came back from the All Stars Options Conference held in the NYSE. This is a first class conference - highly recommended. While waiting to get in the building one morning, I noticed a statue and plaque across the street. I stood on the steps of Federal Hall where George Washington took the oath of office for the presidency in 1789. Federal Hall was built as a city hall by the British in 1703 and it was the home of the first U.S. Congress and Supreme Court. The NYSE also has a rich history. They have the letter on display written by Thomas Edison to the exchange offering his ticker tape quotation machine, one of the first treasury bonds issued after the revolutionary war and many other interesting displays - cool place to visit.

Have a great weekend.