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Today was another incredibly bullish ride in the markets. Hard to believe we were fearing the end of civilization on June 1. That is a bit of an exaggeration, but not much. It appears that traders have convinced themselves that the Fed will announce some type of quantitative easing or operation twist type of program to invest some "juice" into our economy. But I fear the market will be disappointed; I'm not sure Bernanke has much left he can do, and I'm not sure how much "punch" he has in his remaining tools. If I'm right, how severe will that disappointment be? We'll see tomorrow afternoon. I worry that it could get ugly; but, then again, I have been wrong before.
SPX closed up $13 at $1358. Interestingly, that close is right at the lows of April 9 and 23. RUT closed at $786, up $14. Trading volume jumped up with 2.8 billion shares of the S&P 500 trading today; the 50 dma is 2.85 billion. Trading on the NYSE was up 9% and trading increased 15% on NASDAQ. The VIX opened at 17.7%, dropped a bit to a low of 17.4%, but then slowly increased throughout the day to close at 18.4%. In my view, this is still a surprisingly low VIX given the situation in Europe.
Housing starts for May came in at 708k, down from last month's 744k. Building permists rose by 57k to 780k in May. So the housing numbers were a bit of a mixed bag - certainly not the impetus for such a big rally in the markets.
My July iron condor on RUT stands at a gain of $1,960 on 20 contracts with delta = -$38 and theta = +$50. Fortunately, my put spreads are down at 610/620, so they should be safe tomorrow. Watch the markets tomorrow afternoon after the FOMC announcement; whatever happens, it shouldn't be boring!
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I don't know about you, but I was expecting something dramatic after the Greek elections, but the market shrugged it off. SPX opened at Friday's close (first surprise), traded downward to about $1334 and then slowly strengthened to close at $1345, up $2. RUT closed up $1 at $772. Trading volume fell markedly from Friday with 2.3 billion shares of the S&P 500 trading. Trading on the NYSE was down 39% and volume was down 2% on NASDAQ. There wasn't any significant economic data reported today, so attention remains focused on Europe's economic crisis. Today was the second close above resistance on SPX at 1335-1340. Even more surprising, VIX fell almost three points to 18.3%. I don't quite understand it, but apparently, the crisis is over.
This bullish momentum may be based on a presumption of some type of assistance from the Fed and that announcement is slated for Wednesday afternoon. Could the markets pull back then if that "gift" isn't delivered? It's a dangerous market. I think the best strategy is to play it based on an assumption of a trading range for the time being. In any case, it can turn on a dime. Be careful.
The drop in volatility helped my July iron condor on RUT. It now stands at a net gain of +12% with delta = -$22 and theta = +$53. So now we watch for Bernanke before returning our attention to Europe.
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The markets opened downward this morning, but recovered quickly and just traded sideways most of the day. But someone pulled the switch around 2 pm ET and the markets headed south. SPX bounced off $1310 a few minutes before the close. SPX lost $8 to close at $1316. RUT closed at $754, down $7. SPX is caught in a tight trading range of about $1310 to $1325. My guess is that trading range will hold the balance of the week as traders wait for the Greek election results this weekend.
Trading volume was flat with 2.5 billion shares of the S&P 500 trading (fourth day in succession right at 2.5B). Trading on the NYSE was down 2% and trading volume was up 1% on NASDAQ.
The VIX jumped two points today and closed at 24.2% - it's going in the wrong direction!
My June iron condor on RUT stands at a net gain of +$1,840 with delta = +$12 and theta = +$271. Unless we get a $25 point decline tomorrow, I will allow these spreads to expire worthless this weekend. The July condor is up $1,380 with delta = -$1 and theta = +$65. So the recent market swings back and forth have left this position perfectly delta neutral. The 610/620 put spread is over two standard deviations OTM and it is tempting to roll it up, but there is just too much uncertainty in the market. It is comforting to know those spreads are that far OTM.
We'll see what tomorrow brings, but I doubt we will see any big moves until next week, after the Greek elections. The increasing VIX suggests traders are apprehensive about what next week will bring.
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The markets traded up strongly on increased volume today, apparently on the conviction that central banks will come to the rescue of all of these debt-ridden countries. That doesn't make sense to me, but we'll see. SPX grew $14 to close at $1343 while RUT tacked on $9 to close at $771. Over 3.2 billion shares of the S&P 500 stocks traded today and trading volume on the NYSE was up 17%. Trading on NASDAQ increased 20%.
VIX shaved off less than a point to close at 21.1%; so the markets may have been up strongly, but fear is still at pretty high levels.
The Greek elections are Sunday and preliminary assessments look like the leftists who wish to repudiate the bail-out agreement are in the lead. I find it hard to imagine that the markets are going to find anything to be bullish about Monday morning. Regardless of what happens in Greece, nothing will be definitively settled by Monday. But SPX has had two strong days and broke through resistance at $1335 to close at $1343 today. So many people are more optimistic than I am.
SPX settled at $1336.47 and RUT settled at $762.27, so the spreads of my June iron condor on RUT at 690/700 and 880/890 expired worthless for a gain of 11.4%. This brings the year to date record for the Flying With The Condor™ to 29.4%. By contrast, the S&P 500 stands at a gain of 7% for the year. The July position at 610/620 and 850/860 stands at a P/L of +$1,660 with delta = -$22 and theta = +$63. I am glad those July put spreads are far OTM, because I am worried about this market next week.
But it is now time to leave the market behind. Focus on your family and what you should be thankful for and enjoy the weekend.
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The markets appeared to falter this morning, but then the bulls took charge and kept control through the close with markets closing near their highs for the day. SPX closed at $1324, up $15 after trading as low as $1307. RUT closed up $11 at $762. Trading volume was flat with 2.5 billion shares of the S&P 500. Volume on the NYSE was down 2% while trading volume on NASDAQ was up 7%. It appears that the resistance level to watch is around $1335 on SPX and the "falling out of bed" number is around $1275. For now, it isn't apparent which direction the market is headed. VIX dropped down almost two points to close at 22%, but that is still fairly high, suggesting a fair amount of tension in the markets at this point.
The main focus of traders appears to still be Europe and the developments there do not appear to be reaching any kind of definitive end. If traders are waiting for an "end" to the debt crisis in Europe, they will be waiting for quite a while. Will the next round of earnings announcements be a distraction? Or will the next earnings disappointment "pile on" to Europe and take the market south? Or will the Greek elections provide the catalyst for the big move downward?
My June iron condor is just about played out with a net gain of $1,840, delta = +$10 and theta = +$125. The maximum gain if both spreads expire worthless is $1,940 or 11% on the capital at risk. The July condor stands at +$1,660 with delta = -$18 and theta = +$56.
Perhaps the market is basically treading water until after the Greek election results? Should we close our positions this week? We should at least hedge any trades that are on the edge because next week could see some big moves.
