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Do you know any trading coaches who publish the results of their trades daily, as the trade progresses? Dr. Duke analyzes the market and reviews the progress of his iron condor spreads in the Flying With The Condor™ service each day in this blog. If you have questions about any of the trades, Ask Dr. Duke.

The November 2014 position in the Flying With The Condor™ account survived the downturn in October very nicely and was closed with a 13% gain. We also dodged the flash crash on August 24th by going to cash the previous week. The Flying With The Condor™ service ended 2015 up 40%, handily beating the S&P 500 Index. Check the Track Record in the Downloads section for details.


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

 

Fresh from filing my tax return, I am greeted by an article today telling me 45% of Americans pay zero taxes. Is that their fair share?

Markets appear to be slowing as they enter the neighborhood of all-time highs. SPX continued to rise today, tacking on $6 to close at $2101. RUT only gained a dollar, closing at $1140. NASDAQ lost $20 to close at $4940. Trading volumes picked up with 2.3 billion shares of the S&P 500 companies trading today. Trading volume rose 6% on the NYSE and also rose 9% on NASDAQ. Trading volumes on SPX and the NASDAQ Composite remain below the 50 dma.

Housing starts came in at an annualized rate of 1089k for March, almost flat with February's 1194k. Building permits were right in line with 1086k, up from February's 1177k.

Passover begins Friday evening and the markets have historically softened just before Passover, according to the Stock Traders Almanac. Perhaps a large number of traders close positions to take their profits before taking off for the holiday.

So far, the markets have chosen to ignore most of the bad news coming out of the earnings announcements, but that may not last long. We also have a FOMC meeting coming next week. That may start to give traders pause.

 

March was a very strong month for the markets, and many bulls argued the trend would continue and new highs were soon to be achieved. But the markets have slowed as they approached the recent highs from December. SPX closed today at $2081, down $2 and RUT closed up $2 at $1131.

The recent highs in SPX were $2078 on 12/29, $2103 on 12/1, and $2110 on 11/3. Contrary to much of the hoopla in the financial press, SPX has barely reached the late December highs and appears to be losing its momentum. Thus far in this earnings season, earnings declines from year over year comparisons have been ignored. Bad news is good news. I don't see economic data worthy of recession fears, but I don't see booming economic data either.

Trading volume was modestly higher today, surprising for an option expiration Friday. Trading in the S&P 500 came in at 2.1 billion shares, remaining well off the 50 dma. Trading volume rose 4% on the NYSE and rose 2% on NASDAQ.

Volatility was largely unchanged with the VIX at 13.6% (down a tenth of a point).

The Empire manufacturing survey moved up in April to 9.6 from last month's 0.6. Industrial production continued to decline in March, down 0.6%, after declining 0.6% in February. Capacity utilization declined a bit to 74.8% for March, down from 75.3% in February.

SPX settled at $2083.83 today. RUT still had not posted its settlement price as I write this blog. You may download a spreadsheet of SPX and RUT settlement prices in the downloads section of my web site.

Data point for defunct bureaucracies: A friend of mine appealed a mistake in her property tax assessment and the tax assessor said she would have to wait for her refund until the next installment of taxes are paid in June because they are out of money...

I am going to mow the lawn for the first time this season this weekend. I know, I know. You've been mowing for a month already. We can't afford to grow grass here in Illinois.

J.P. Morgan reported lower earnings this morning, but the picture wasn't as bad as analysts expected, so JPM traded higher and led the market higher. Analysts have been predicting lower earnings for the first quarter for the past several weeks, and JPM seemed to deliver on that prediction. But the bulls are determined to see the glass half full, so bad news became good news.

SPX gained $21 to close at $2081. RUT also traded higher, with a close at $1130, up $24. The VIX dropped a full point to 13.9%. Trading volume was up slightly with 2.5 billion shares of the S&P 500 stocks trading today, but remains below the 50 dma at 2.6B.

The Producer Price Index (PPI) reported a slight decline (-0.1%) for March, close to last month's -0.2%. Retail sales declined 0.3% in March. One of the mysteries of lower gas prices has been how little of that bonus has shown up in retail sales. Perhaps consumers are saving money for a rainy day?

Earnings reports for the banks continue tomorrow with several notable names including Bank of America and Wells Fargo. CitiGroup follows on Friday. Will the market continue to shrug off declining earnings and mediocre economic data? Maybe this is the bull market "climbing the wall of worry?"

The markets opened lower this morning but then bounced higher with SPX tacking on twenty dollars to close at $2062. RUT gained $11 to $1106. Volatility retreated with the VIX closing down 1.4 points to 14.9%. Trading volume popped higher with 2.4 billion shares of the S&P 500 companies trading. Trading volume on the NYSE rose 19% and volume rose 15% on NASDAQ.

No significant economic data was reported today. The Fed's beige book (minutes from the last meeting) will be issued tomorrow afternoon. Those minutes could be market moving, depending on the recorded discussions. Analysts are looking for clues for the timing of the next interest rate hike.

Even with today's large move, the trend of SPX remains sideways. A break above $2075 would be necessary to start to take the bulls' case seriously. I fail to see the economic data to make the case for a strong bull market. But the market could trade higher on the back of the Fed. That is why the beige book release is potentially significant.

J. P. Morgan reports earnings tomorrow morning. That could set the tone for the market opening tomorrow, but then the beige book takes over in the afternoon.

Markets hesitated today as Alcoa was set to kick off this earning season. SPX opened higher but couldn't hold the highs and closed down $6 at $2042. RUT lost $3 to $1094. Volatility rose about one full point with the VIX closing at 16.2%. Trading volume was basically flat with 2.1 billion shares of the S&P 500 trading today. Trading volume rose 7% on the NYSE, but fell 3% on NASDAQ.

Alcoa (AA) beat analyst earnings estimates but missed sales estimates, so shares were lower in after hours trading. Traders often watch AA for a guage of basic industrial strength. The big banks report later this week and will be watched for additional clues of overall economic strength. Analysts' earnings estimates have been revised downward significantly more than usual as the first quarter progressed, so more attention than usual is being paid to the sales and earnings data as well as the outlooks for the next quarter for the blue chip stocks.

Several members of the FOMC are speaking this week in advance of the beige book being released Wednesday. I am unsure all of this increased transparency is good for the markets. It seems to contribute to the daily price volatility.

If earnings do come in lower this quarter as analysts have predicted, today's market weakness may be the new normal for several weeks.

Several reports of the decline of first quarter earnings have been receiving a lot of attention on Wall Street. FactSet summarized the changes of analyst earnings estimates for companies in the S&P 500 for the first quarter of 2016. The aggregation of the earnings estimates for all the companies in the index dropped by 9.6% during this period. By comparison, the average decline in quarterly earnings estimates over the past 10 years is 5.3%. Analysts don’t like what they are seeing in 2016 and this began to weigh on the market in this week's trading. SPX dropped $21 to close at $2045 and RUT lost $13, closing at $1096. Volatility rose with the VIX closing up 1.3 points to 15.4%.

Trading volume rose today with 2.5 billion shares of the S&P 500 companies trading. Trading volume rose 15% on the NYSE but was nearly flat on NASDAQ (up 0.4%).

The ISM services index came in at 54.5 for March, up from 53.4. JOLTS job openings dropped slightly in February, from 5.604 million to 5.445 million.

An article in IBD today speculated that the high tech sector may be particularly hard hit in this earnings season. FactSet's report issued last week, but that story is gaining visibility and worrying traders. All of the craziness of the presidential primaries probably isn't helping either.

The markets were subdued today, probably due to many traders taking an extended long weekend. The fact that markets remained closed in Europe may have influenced those decisions. SPX closed at $2037, up one dollar. RUT also closed up one dollar at $1073. Volatility rose a half point to 15.2%. Trading volume reflected the small market gains with only 1.7 billion shares of the S&P 500 stocks trading today. Trading dropped 17% on the NYSE and declined 12% on NASDAQ.

Pending home sales were encouraging, increasing 3.5% in February, a big improvement over January's 3.0% decline.

The balance of the week is loaded with economic data: Case Schiller housing prices, ADP private payrolls, Chicago PMI, ISM manufacturing index,  and construction spending. And the week ends with the jobs report, aka, the non-farm payrolls report.

Until tomorrow...

We had become accustomed to higher prices every day, but it had to slow down eventually. Yesterday's market shook off the Brussels attack, but pulled back a bit today for no apparent reason. SPX closed down $13 to $2037 and RUT gave up $22 to close at $1076. Volatility rose almost one point with the VIX at 14.9%. Trading volume was up slightly with 2.1 billion shares of the S&P 500 companies trading. Trading on the NYSE rose 8% and trading volume was up 11% on NASDAQ.

New home sales came in at 512 thousand for February (annualized); this is a small increase from January's 502k.

The 200 dma at $2017 should act as support for the SPX. The resistance level at $2050 has now been reinforced; it will be even harder to break through next time. RUT is back in the neighborhood of the August flash crash retest. Earlier this month, RUT thrashed in this area for about two weeks and never did break through the August flash crash levels at about $1105. We may be caught in this choppy market for a while.

The markets paused today with SPX rising only two dollars to $2052 and RUT losing three dollars to close at $1099. Volatility continues to contract with the VIX dropping about two tenths of a point to 13.8%.

Trading volume was down dramatically after expiration Friday with 2.0 billion shares of the S&P 500 stocks. Trading on the NYSE dropped 52% and trading volume dropped 44% on NASDAQ.

The only economic data released today were existing home sales for February at 5.08 million, down from 5.47 million homes.

SPX opened weakly this morning and traded down to $2043 before rebounding to close at $2052. It seems as though everyone assumes the bull market is returning. This is surprising since it wasn't long ago that the doomsday gurus were on every finance cable network. The reality is probably in between those extremes. The basic U.S. economic data simply don't support the idea of a booming market. But those same data don't support the dire predictions of recession either. Stay tuned.

Equity and index options expire tomorrow at midnight. Many of you may think that today was expiration, but the options contract is a binding legal contract and the brokers need time to make all of the cash transfers and equity purchases and sales before the contracts expire. SPX settled at $2050.07 and RUT settled at $1097.85. I closed our SPX Mar 2050/2060 call spreads yesterday for $1.00; allowing them to enter expiration would have saved us some money; settlement at $2050.07 means one contract would have resulted in a $7 debit whereas we spent $100 to close one spread. But we would have been taking a big risk. Sometimes the difference between the Thursday close and settlement is large. It averaged $9 for SPX last year but ran as high as $23. If you are interested, download my SPX and RUT settlement spreadsheet.

SPX closed at $2050 today, up $9. RUT also continued to run, closing up $10 at $1102. Volatility continued to contract with VIX losing half a point to 14%.

SPX has now put the 200 dma in the rear view mirror. The high at $2078 from December 29th is the next resistance level. I am inclined to think the Fed induced euphoria will end by then. For example, here is a sobering stat: FactSet reports that the estimated profit margin for the first quarter for the S&P 500 is 9.3% - the lowest since 4Q 2012. If we exclude energy companies, it rises to 10% and that is the lowest since Q1 2014. Either way, that doesn't look like the economic strength one expects behind a bull market.

Enjoy your weekend. The tulips are sprouting outside. But we are expecting snow this evening. Let me go check why we are living here...