RSS FEED

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 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.

In a move reminiscent of 2015, the gains of the past few days were met with some measured pull backs today. SPX lost $9 to close at $1918 and RUT lost $6 to close at $1005. However, volatility continued to contract with VIX declining 0.7 points to 21.6%. Trading volume fell off significantly with 2.8 billion shares of the S&P 500 stocks trading today, below the 50 dma at 2.9B. This was the first day this year that S&P trading volume fell below the 50 dma. Trading on the NYSE dropped 11% and trading volume on NASDAQ declined 20%.

Investors Business Daily (IBD) moved from "Market in Correction" to "Market in Confirmed Uptrend" yesterday.

Initial unemployment claims reported today at 262k, down from 269k last week. Continuing unemployment claims rose by 30k to 2.273 million. The Philadelphia Fed manufacturing survey reported a value of -2.8, not good, but an improvement over the -3.5 reported last month.

It would be nice to see SPX make it back to $1940, where it ran into resistance at the end of January. The decline in VIX on a down day was encouraging. That suggests that traders are thinking that the worst is behind us. Tomorrow is expiration Friday, which will bring an increase in trading volume. We'll see whether the volume is into a bullish move up to $1940.

 

Markets opened strongly this morning and didn't slow down as the day progressed. SPX gained $31 to close at $1927 and RUT closed up $15 at $1011. Volatility continued to contract almost another two points with VIX closing at 22.3%. Trading volume was up with 3.1 billion shares of the S&P 500 trading. Trading on the NYSE increased 7% and trading on NASDAQ was up 9%.

The minutes from the last FOMC meeting were released this afternoon and traders were encouraged by the amount of discussion and concern about market volatility and uncertainty. Most analysts concluded that future interest rate hikes were at least deferred for several months.

A raft of economic data was released today. The PPI for January came in at +0.1%, up from December's -0.2%. Housing starts were down a bit in January at 1099k; December's starts were 1143k. Building permits were flat with 1202k in January and 1204k in December. Industrial production increased 0.9% in January, a big improvement from December's -0.7% decline. Capacity utilization was up slightly in January to 77.1%, from 76.4%.

This market has been so extremely emotional that it is hard to be confident that we are really out of the woods. Oil prices were up again today, but that could change in a flash with the report of the next rumor. As I have explained, the U.S. stock market should not be so tightly correlated to oil prices, but that realization is only slowly sinking in. The next two resistance levels to watch on SPX are $1940 and the 50 dma at $1961. Bulls have to take comfort that SPX has gapped open on both of the last two trading sessions - very bullish. But nervous Nellies like me worry that these increases may be too strong... I closed or rolled several of my Feb positions out to March just to give myself some breathing room in case something happens tomorrow. My Mar put spreads in the Flying With The Condor™ service are up 5% and I added the call spreads today to complete the March position.

SPX gapped open higher this morning and gained $31 to close at $1896. RUT was also rallying with a close at $996, up $24. Volatility contracted a little over a point with VIX at 24.1%. That contraction seemed smaller than the bounce in the markets, causing me to wonder if there is more downside to come. SPX closed at its high for today, a strong bullish sign. Trading volume was strong, but not much higher than Friday with 3.0 billion shares of the S&P 500 trading. Trading volume on the NYSE was flat and volume was up 7% on NASDAQ.

The Empire manufacturing survey issued a report today at -16.6 for February, not very good, but an improvement over January's -19.4. The FOMC minutes will be issued tomorrow. It is hard to predict what might come out of reading those tea leaves.

Today's strong run on SPX took it back to the middle of the Bollinger bands. Keep in mind that the last bounce higher in SPX only made it to $1940 before collapsing.

But, on a positive note, today's run higher was a breath of fresh air for those with underwater put spreads going into Feb expiration. But I took my losses last week rather than sit on pins and needles all weekend.

Now we sit and wonder, is the "sky is falling" crowd correct? Is this only a temporary respite?

The markets opened strongly this morning and just kept on climbing the mountain all day. SPX closed at $1865, for a gain of $35, and RUT rose $18 to close at $972. A strong measure of the strength of a rally is the lack of profit taking. SPX just continued higher, closing precisely at its high for the day. That suggest that traders are expecting this rally to continue next week. Yesterday's markets were encouraged by comments from one of the OPEC countries appearing to be open to reducing oil production. That comment wasn't really relevant since it didn't come from the Saudis, but it caused oil to trade up yesterday and that trend continued today.

Let's consider that for a moment. We have been told that declining oil prices suggest weak industrial demand so stock prices should sell off. But when someone suggests that OPEC may cut oil production and therefore lower oil supplies, the stock market trades higher? An abundance of oil supplies has nothing to do with reduced industrial production. This point and several others illustrate how emotional and irrational this market has become. I was watching an interview this afternoon and when the interviewee assigned a low probability of an upcoming recession in the U.S., the talking head spoke over him and began to excitedly chatter on about the weak fourth quarter GDP number and so on. She seems to have forgotten that a recession is defined as two successive quarters of negative GDP growth. We have yet to have the first one. Sensationalism has invaded the financial media. Fear sells.

Retail sales increased modestly in January, up 0.2% and the University of Michigan consumer sentiment survey reported 90.7 for February, down from 92.0.

I would argue that we are seeing many signs on the charts of this market finding support. But the lack of rationality about the connection of oil prices to the U.S. stock market, and the excessively pessimistic financial press worry me. One could make a contrarian argument here for the bounce, but it seems as though the shrill cries from the "sky is falling" crowd are drowning out a rational discussion. Markets may easily go to extremes and stay there longer than expected; it is simply human nature.

I closed the remaining put spreads in my February SPX iron condor this afternoon. I can easily make the case for the bottom being behind us and this bounce continuing next week, but the excessive irrationality and wild swings back and forth worry me. So I closed Feb for a loss. We have already closed the January position for a nice gain; assuming our March position does well, we should be back to break-even shortly.

The markets will be closed Monday. Enjoy your long weekend.