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For the second month in succession, the jobs report came in much weaker than expected with only eighty thousand new jobs. The unemployment rate stayed constant at 8.2%. The markets traded off in response with SPX losing $13 to close at $1355. RUT dropped $10 to close at $807. Trading volume continued low, probably a result of the holiday week. Trading in the S&P 500 stocks came in at 2.1 billion shares, well below the 50 dma at 2.8B. Trading volume dropped 12% on the NYSE and rose 2% on NASDAQ.
SPX traded down as low as $1348, but recovered somewhat in late afternoon trading. SPX traded in the range of about $1310 to $1360 through most of June, and it appears the index is now back in that trading range. SPX managed to punch through resistance at $1370 before the holiday, but could not hold it. RUT's pattern is somewhat different. RUT spent most of June in the range of $735 to $785, but broke out much more strongly than SPX and appeared to even threaten to break the highs around $825 set in late April. So RUT remains in thin air even after today's pull back. Will RUT's new trading range be $725 to $825? I am focusing on these support and resistance levels because it isn't clear if this brief bullish run of the past several trading sessions is over or not. Some are even predicting a bearish push to much lower levels. Don't forget the Goldman Sachs call for $1285. I am inclined to think a choppy sideways trading range is the most likely result of the current mix of tepid economic data with underlying recessionary fears.
My July RUT iron condor stands at a P/L of +$2,220 with delta = -$49 and theta = +$81. Since there is so much less time remaining in the July position, today's pull back helped a lot. The call spreads are now about one and a half standard deviations OTM. The August condor stands at a P/L of -$1,180 with delta = -$98 and theta = +$84. I hedged this position before the holiday, but removed that hedge this afternoon. But this condor is far from out of danger. The Aug 850 calls still have a delta just under twenty.
Enjoy your weekend.
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I am increasingly skeptical of anyone who tells me he understands these markets. The incredible bullishness of the past two sessions continued today, even on a holiday with an early market closing. SPX closed at $1374, up $9. RUT is trading even more aggressively, closing up $11 at $818. Trading volume was mixed, but still higher than one might expect before a holiday. Volume was up 42% on the NYSE. On the other hand, trading volume was down 3% on NASDAQ.
There wasn't any new economic data today to explain the strong rally on Wall Street. ADP's payroll report will come out Thursday and then we get the jobs report on Friday. Many will be watching the jobs report closely for evidence of more economic softening. Much of the recent data appears to be pointing to a slowing of the economy at best and perhaps a new recession at worst. That is what perplexes me about the strength of the market over the past three sessions.
My July condor is feeling the pressure of this market run with a P/L of +$1,360 with delta = -$92 and theta = +$125. The 850 call remains one standard deviation OTM, but the relentless push higher is being felt. The Aug condor stands at a P/L of -$1,980 with delta = -$50 and theta = +$51. It doesn't seem possible that this rally can continue, but maybe that is precisely what we are in for - hard to predict these things.
Enjoy your mid-week holiday. Remember to be thankful for your prosperity and your freedom. Those benefits are inextricably linked.
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The supreme court surprised everyone today by ruling ObamaCare constitutional. I didn't see that one coming. Most analysts see this as negative for businesses and hiring. Hence the markets traded down. SPX traded as low as $1313 before recovering to close at $1329, down $3. SPX rallied almost $13 in the last hour and a half of trading. RUT closed almost unchanged at $776. Today's trading is one more data point for the strength of the $1310 support level. Perhaps traders see the costs of ObamaCare as "baked into" current stock prices. Trading volume jumped up a bit with 2.8 billion shares of the S&P 500 trading; trading on the NYSE jumped 19% and increased 5% on NASDAQ. VIX spiked above 21% but then settled to 19.7%.
Final GDP numbers for the first quarter came in at an annualized growth rate of 1.9% - not great, but not a recession either. Initial unemployment claims dropped six thousand to 386k and continuing unemployment claims dropped fifteen thousand to 3.3 million. These aren't great numbers, but they aren't dreadful either.
My July condor position stands at a 15% gain with delta = -$13 and theta = +$32. I haven't seen any news out of the European Summit. Is Germany going to bail out the rest of Europe or kiss them good bye?
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I missed my blog on Friday. I was in West Virginia with my wife as she sold her mother's house and settled the estate. On Friday afternoon, a severe storm came through and all of the electricity went out. In fact, it still wasn't on Saturday morning when we left.
Today's markets largely traded sideways today and seemed hesitant to add to Friday's huge gains. But then then the floodgates opened in the last hour of trading. This was a little surprising after the ISM manufacturing index reported out at 49.7 for June. This was the first time this index has indicated a contraction in manufacturing (any numbers below 50) since July 2009. Perhaps traders are seeing improved prospects for QE III if we receive more poor economic data? If so, this is strange reasoning: the economy is tanking so I'm bullish because the Fed will bail us out? Really? It will be interesting to see what the jobs report brings us Friday. Fewer jobs being added and higher unemployment numbers will cause the market to rally?
SPX closed at $1366, up $3, but RUT really took off in the last hour today: up $9, closing at $808. Trading volume dropped off to 2.4 billion shares of the S&P 500. Trading on the NYSE dropped 25% and volume dropped 5% on NASDAQ.
VIX fell slightly to 16.8%, so fear has lessened, but certainly has not disappeared. The holidays this week are a bit of a complication. The largest overhanging negative for this market is bad news out of Europe. Whenever our markets are closed and the rest of the world's markets are open, I worry a bit.
My July iron condor on RUT stands at a net gain of $1,920 on 20 contracts with delta = -$61 and theta = +$88. My Aug condor at 650/660 and 850/860 stands at a P/L of -$940 with delta = -$98 and theta = +$89.
Remember that the exchanges will close early tomorrow and be closed all day Wednesday.
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Some modestly good economic numbers were enough to boost this market today, but the fear is still running high as evidenced in the VIX at 19.5%. Durable orders came in with a 1.1% increase for May and pending home sales were up 5.9% in May. This brought out some buyers who drove the SPX up $12 to close at $1332. RUT rose $11 to close at $776. Trading volume remains flat with 2.3 billion shares of the S&P 500 trading; trading volume on the NYSE was down 3% and trading on NASDAQ was up 2%.
While everyone is focused on the European Summit, it also seems like everyone on CNBC is telling us they don't expect anything substantive to come out of the summit. So we have heightened fear of what might come out of Europe coupled with low expectations. That is a formula for sideways choppy trading and I expect that is exactly what we are in for. The supreme court ruling on ObamaCare isn't likely to move the overall market much, in my opinion, but I could be wrong. We'll see. I think that event will be more fodder for the talk radio shows rather than market moving.
My July iron condor on RUT stands at a 15% gain with delta = -$17 and theta = +$27. At this point, there isn't much time value in those options, so the theta decay is pretty small. The primary question with this position at this point is whether to close it early or not. On the one hand, I can capture a nice 15% gain and go take a nap. On the other, the debits to close, while small, add up to real money on several hundred contract positions. We'll see. One thing I am not considering is rolling spreads up or down to increase my gains. I have learned the hard way that when I stretch for those additional gains, I often get in trouble... Some will accuse me of being boring, but I'm up over 30% at mid-year!
