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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"!

 

Yesterday, it seemed as though the market wasn't too happy with the ECB's announcement and Mario Draghi's news conference. But after some reflection, the bulls came out swinging this morning and never backed off. Apparently, negative interest rates are the friend of the bulls.

SPX closed up $33 at $2022. RUT closed at $1088 for a gain of $24. Volatility pulled back with the VIX dropping two points to 16.5%. Trading volume contracted a bit with 2.4 billion shares of the S&P 500 companies trading today. Trading volume dropped 9% on the NYSE and declined 8% on NASDAQ. SPX closed right at the 200 dma. I was surprised it didn't bounce off the 200 dma. We'll see on Monday. Breaking that level will confirm the end of the correction and send the doomsday folk to the back room.

There wasn't any significant economic data reported today. Traders will begin to focus on the FOMC meeting and announcement next week. We have long list of economic data coming out next week: PPI, CPI, retail sales, housing starts, building permits, and several others. But the Fed announcement is the biggy (technical term).

Have a great weekend. We are actually having some nice weather in Chicago.

 

The markets appeared to be just treading water today as they anticipate the meeting tomorrow with Mario Draghi and the ECB.

SPX closed up $10 at $1989 and RUT increased $5 to $1073. Volatility relaxed a little with the VIX falling about a third of a point to 18.3%. Trading volume continued to decline with 2.3 billion shares of the S&P 500 trading today. Trading volume declined 12% on the NYSE and also dropped 9% on NASDAQ.

No significant economic news came out today. Will Draghi's actions tomorrow push our markets higher? Or will it serve as a reminder that the central banks are running out of bullets? It is hard to predict the direction, but it will likely move our markets.

SPX has run up against resistance at $2000. That level and the 200 dma at $2020 are the levels that need to be broken before we can be reasonably confident the downdraft so far this year has been curtailed. Many analysts have drawn a bearish trend line from the December highs, and that trend line is very close to the 200 dma. So that level on SPX is crucial to watch.

So we wait on Mario...

Markets opened lower, traded even lower, recovered, and then sold off in the last two hours of trading to close at the lows of the day. SPX lost $23 to close at $1979. RUT fell $26 to $1068. Volatility rose with the VIX adding 1.3 points to 18.7%. Trading volume fell again today with 2.5 billion shares of the S&P 500 trading. Trading volume declined 2% on the NYSE and declined 6% on NASDAQ.

No economic data were released today. Are traders pulling back a bit in anticipation of the Fed meeting next week? Most analysts believe additional interest rate hikes are off the table, but the market may be apprehensive.

I had hedged my March and April iron condor positions Friday, but removed those hedges today.

No significant, market-moving economic reports are due this week. Will the market remain weak until after the Fed meeting?

The bulls have been on a strong run higher for the past couple of weeks. Today's slowing only seems natural. SPX broke through the magical $2000 level with a close at $2002, up two dollars on the day. RUT continues on a tear with a twelve dollar gain to $1094. When one thinks of the small caps as the "risk on" stocks, RUT looks very bullish. But RUT has far more to make up from the correction than does SPX. Even with the strong moves higher the past couple of weeks, RUT remains below the lows hit in the initial flash crash on August 24th.

Volatility was largely unchanged with the VIX at 17.2%. Trading volume pulled back today with 2.6 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE declined 20% and trading on NASDAQ dropped 6%.

URBN was trading very strongly the past few days, probably in anticipation of its earnings announcement this evening. I entered this trade and shared it with my trading group today: URBN Mar/Apr 25/28 diagonal call spread for $234. Due to the high volatility before the announcement, I was able to sell the Mar call for 39% of the price of the long April $25 call. Even though the earnings announcement is a dicey time to go bullish on any stock, we hedged our downside nicely by selling so much premium to significantly reduce the cost basis in the long April call. In after hours trading, URBN has traded up to $31.44, so it looks like we have a big winner.

Now the market debate has turned from "the sky is falling" to "how high can it go?" I think both extremes are wrong. The basic economic data don't support a strong bull market. But those same data don't justify all of the doom and gloom of the past few weeks either. We may also see some treading water in the markets as the FOMC meeting next week comes into focus.

The markets continued their climb higher today. SPX gained $7 to close at $1993. RUT tacked on $10 to arrive at $1076. Volatility continued to contract with VIX losing 0.4 points to 16.7%. Trading volume was slightly higher with 2.8 billion shares of the S&P 500 companies trading today. Trading volume on the NYSE was up 9%, but trading volume on NASDAQ was only up 1%.

Initial unemployment claims came in at 278k, essentially flat with last week's 272k. Continuing unemployment claims were also flat with 2.257 million, slightly higher than last week's 2.254 million. Factory orders increased 1.6% in January, up from the 2.9% decline in December. The ISM services index was flat for February at 53.4; January's number was 53.5.

The jobs report comes out before the market opens tomorrow. Will it matter to this bullish market?

I'm in Orlando for the Money Show. I have been impressed by the quality of the speakers. I recommend you check out the next Money Show. I have learned a lot over the past two days. If you are in the neighborhood, send me a note; we can meet, share a coffee, and discuss this market.

The futures were up about $10 when I first checked them early this morning, and the market did follow through with a positive open. Often those positive opens are met with selling, but not today. The markets just kept on pushing steadily higher all day with SPX gaining $46 to close at $1978. RUT gained $21 to close at $1054. SPX rose 2.4% today; RUT rose 2.0%, but the NASDAQ composite rocketed higher by 2.9%. Trading volume was higher across the board today with 2.9 billion shares of the S&P 500 stocks trading. Trading rose 4% on the NYSE and increased 13% on NASDAQ. Volatility made a huge move today with the VIX dropping almost three points to 17.7%. Where did those bears go?

Construction spending increased 1.5% in January, a nice improvement over December's +0.6%. The ISM manufacturing index came in for February at 49.5, up from January's 48.2.

It appears this positive economic data finally broke the pessimistic hold the bears had on the market. SPX has finally decisively broken resistance at $1940 from January 29th. Over the past week, SPX has flirted with that level, closing alternatively above and below $1940. But today's run was decisive. But I'm not betting on a strong bullish run to new highs. First of all, the economic data aren't that great, and secondly, this presidential election is giving many traders the jitters. Socialism used to be a bad word...

 

SPX opened higher this morning and traded up to $1958, but then started a steady decline and closed at its low for the day - not a good sign. SPX closed down $16 at $1932 and RUT lost $3 to close at $1034. SPX reached $1940 on 1/29 after hitting the correction low on 1/20. Then SPX turned and set a new lower low on 2/11 at $1829. That is why many technical analysts were watching for the resistance at $1940 to be broken. SPX did indeed have three closes above $1940 last week, but it couldn't hold those levels today. Volatility tacked on almost a point with the VIX closing at 20.6%. Trading volume was up a bit with 2.7 billion shares of the S&P 500 trading today. Trading rose 0.6% on the NYSE but dropped 2% on NASDAQ.

The Chicago PMI issued its February report at 47.6, down from 55.6. Pending home sales declined 2.5% in January, down from December's +0.9%.

The jobs report will issue on Friday, but it seems early for the market to be stalling in advance of that report. Maybe the fundamental issue is that there aren't sufficient strong economic data to fuel a bull market. On the other hand, I don't think the data are weak enough to justify a bear market. Maybe the sideways thrashing back and forth will be the norm, at least until we get the elections behind us.

The various headlines I have used over the past 12 to 18 months to describe these wild roller coaster rides in the markets are getting old. Wild reversals are now almost commonplace. SPX traded down as low as $1891 today before reversing to close at $1930, very close to its high of the day. RUT outperformed SPX, trading up $10 to close at $1022. Trading volume popped up with 2.7 billion shares of the S&P 500 stocks trading. Trading volume rose 12% on the NYSE and increased 13% on NASDAQ. The VIX ran higher this morning but then pulled back to close at 20.7%, down 0.3 points.

New home sales declined in January to an annualized rate of 494 thousand, down from December's 544 thousand.

It appeared as though oil prices drove today's stock market, lower at the open and then reversing higher. But the transition wasn't smooth; the correlation is unraveling.

I continue to find the speculation about another 2008-type of market crash surprising. It doesn't seem to occur to anyone that we are missing a stimulus like the huge subprime mortgage disaster that drove that crash. The doomsday gurus speak of banks holding too much oil related debt. That seems unlikely since the Fed have tightened up all of the reserve requirements significantly since 2008. That is part of the reason you cannot get a mortgage today. One analyst on Fast Money today was matching the shapes of the last several months of the price chart to the time just before the 2008 crash. He thought the matching shapes of the charts were predictive even though there is no comparable economic trigger for a crash today. Consider the 2000 bear market. It was driven by the dot com bubble. The 1987 crash was purely a price correction from very high price multiples. None of those conditions exist today.

SPX closed at $1946, up $28 and RUT gained $12 to close at $1022. VIX dropped over one point to close at 19.4%. Trading volume declined in the S&P 500 stocks with 2.5 billion shares. Trading on the NYSE dropped off by 12% and trading volume on NASDAQ declined 6%. Normally, these declines after option expiration would be expected, but Friday's trading volumes weren't dramatically higher as they usually are. Thus, today's small declines were also unusual.

No significant economic data were released today.

Today's close in VIX at 19.4% matches the previous low in VIX this year, on January 5th. This also places VIX at the bottom edge of its Bollinger bands. That sets up the possibility of VIX oscillating back to the upper edge of the Bollinger bands just as it did at the first of the year and also on the first of February. Or it could wander sideways for a while. Given the economic and political uncertainties, I doubt VIX will move much lower.

Today's close in SPX was about six points higher than the peak hit February 1st after bouncing back from the correction lows. So the first resistance level has been broken. Next is resistance at the 50 dma at $1950. Institutional traders will be watching that level closely.

SPX opened the day weakly and traded as low as $1902 before bouncing to recover all of its losses and closed unchanged at $1918. RUT was even more positive, closing at $1010 for a $5 gain. Volatility continued to contract with the VIX losing 1.1 points to close at 20.5%. Trading volume was surprisingly low for an options expiration Friday with 2.7 billion shares of the S&P 500 trading, down slightly from yesterday and well below the 50 dma at 2.9B. Trading volume rose 4% on the NYSE and increased only 2% on NASDAQ.

The latest Consumer Price Index (CPI) was released for January today with a net change of zero, up from the negative 0.1% change reported in December. Where does this data come from? My grocery bills have certainly not been flat.

Today's market action was most encouraging on several fronts:

1) Stocks resisted the decline in oil prices.

2) RUT behaved even more bullishly than SPX.

3) SPX recovered all of its losses into the close - a very bullish tape.

Update on the Flying With The Condor™ service: We closed the remaining spreads of the Feb position last Friday for a loss. The overall portfolio stands at a 5% loss on the year. But the March SPX condor now stands at a 10% gain, and April is up 3%. So we didn't miss the correction bullet, but we have already recovered nicely.

If any of you are planning to be in New York City next week for the Traders Expo, please let me know so we can get together.

Have a great weekend.