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The S&P 500 Index started the day in positive territory but then moved into the red around noon and stayed there most of the afternoon. Then it scrambled out of the hole in the last thirty minutes and managed to close with a gain of $2 at $1321. RUT gained $1 to close at $767. All of this choppy trading occurred on lower trading volume with 2.9 billion shares of the S&P 500 trading (the 50 dma = 2.8B). Trading volume declined 11% on the NYSE and dropped 10% on NASDAQ. The last two trading sessions in SPX have seen long lower shadows on the candlesticks with closes near the session highs; in and of itself, this suggests some building of support. But this is still a precarious market; any news or even rumors out of Europe could send it tumbling.
The VIX dropped to 21.5% today, down from recent highs, but still at an elevated level. Take heed; be cautious.
Initial unemployment claims came in at 370k, down two thousand from last week. Continuing claims dropped 29k to 3.26 million. Durable orders increased 0.2% in April, an improvement from last month's 3.7% drop. So hard economic data for the states continues to muddle along - not terrible, but not great either. Traders are primarily focused on the events unfolding in Europe: will Greece leave the EU? What effects will that have on the global economy? Who is next after Greece? At best, Europe is in for some hard times; will that drag down the global economy? So far, institutional traders appear to be adopting the posture of "shoot first" and try to ascertain the facts later. That makes for a lot of volatility. Thus far, we aren't seeing the extremes of price volatility we saw last August, but who knows what tomorrow may bring?
My June iron condor position on RUT stands at a P/L of +$1,040 with position delta = +$43 and position theta = +$87.
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The futures were looking pretty bleak last evening, but the markets opened only slightly down this morning. However, the bears started pulling the major market indexes lower until around mid-day when buying pulled the markets up to recover most, if not all, of the earlier losses. SPX traded as low as $1297 before recovering to close at $1319, up $2 on the day. RUT closed $6 higher at $765. It appears like SPX is trying to establish support around $1290 to $1295 over the past four trading sessions. Trading volume bumped up modestly with 3.2 billion shares of the S&P 500 stocks changing hands. Volume on the NYSE was up 1% and trading on NASDAQ was up 4%.
New home sales for April came in at 343k, a gain of eleven thousand over March. The FHFA Housing Price Index increased 1.8% in March. It doesn't seem like we have had positive news in housing for some time. To be sure, these reports aren't worthy of fireworks, but the data does give us hope. Real estate fuels a large portion of this economy.
My June iron condor on RUT at 690/700 and 890/900 stands at a P/L of +$700 with delta = +$51 and theta = +$83. Is it safe to get back in the water? I would be very cautious. Bad news continues to flow out of Europe; future news reports could push us over the edge, searching for support down around $1265. If you are trading non-directionally, be careful to follow your rules and hedge yourself appropriately. If you are trading directionally, trade small and carefully.
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The markets rebounded strongly today with SPX running up $21 to close at $1316. RUT closed at $765, up $17. VIX pulled back to 22% today after being up over 25% intraday on Friday. Trading volume declined to 2.8 billion shares of the S&P 500. Trading on the NYSE was down 33% and trading volume on NASDAQ decreased 31%.
Today's move on SPX takes us back above the $1305 support level. But one day does not end a correction. There weren't any domestic economic data reports today, and, to my knowledge, we didn't get any new encouraging news out of Europe. So I'm not sure why the markets rallied today. Some positive comments came out of China over the weekend and that was said to have encouraged traders, but that seemed thin.
My June RUT 690/700 and 880/890 iron condor stands at a P/L of +$400 with delta = +$54 and theta= +$75. Now for the big question: can the markets trade upward two days in succession?
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The markets opened up positively this morning, but afternoon trading took its toll. SPX rose as high as $1328, but pulled back to close at $1317, up $1. RUT lost $5 to close at $760. Trading volume was pretty flat with 2.9 billion shares of the S&P 500 trading today; Trading on the NYSE was up 9% but trading was flat on the NASDAQ.
Some cited existing home sales as the basis of today's strong open, but those came in at 4.62M for April, up modestly from March's 4.47M. Analysts expected 4.65M. The VIX dropped as low as 20%, but jumped back up in the afternoon to close at 22.5%.
My June iron condor on RUT stands at +$240 with position delta = +$57 and position theta = +$85. Are we bouncing back after this market correction, or is this just a pause before the next negative news flash comes from across the pond? I don't think the sovereign debt situation in Europe is anywhere near being resolved. So I am inclined to anticipate further declines at some point. Use caution.
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There was a glimmer of hope in the markets this morning, mostly driven by the Facebook IPO, but then the bears started to take control once again. SPX closed down $10 at $1295 and RUT broke through its 200 dma and closed at $747, down $7. Today's close on SPX confirmed yesterday's break of support at $1305; now we look to about $1265 for the next support level. The 200 dma is at $1278. Even more bearish is the trading volume level which increased again today to 3.4 billion shares of the S&P 500; trading on the NYSE increased 23% and trading volume increased 30% on NASDAQ. Some of this volume increase can be attributed to options expiration, but I still see it as predominantly bearish.
VIX increased again today, closing at 25.1%. We aren't seeing the free fall of last August or the volatility swinging back and forth as it did then, but this correction is getting nasty. In fact, I started to wonder today if the trend has shifted. Perhaps it is the beginning of a bearish trend rather than a minor correction within a bullish trend.
The remaining 910/920 call spreads in my May iron condor will expire worthless with RUT settling at $753.60 (I closed the 720/730 put spreads yesterday). I hedged the June 690/700 and 880/890 RUT iron condor today with July 700 puts. This position closed today with a P/L = -$100 with delta = +$11 and theta = +$12. Our hedge will serve to hold losses to a minimum while we buy time for the index to either slow down and trade sideways or pull back. With the closing of our May position, the year to date results for the Flying With The Condor™ stand at +26% with the S&P 500 up 3% for the year. If SPX trades down to $1258, the market will have given up all of 2012's gains, but we are making money.
So now I put the hectic expiration Friday behind me and look to dig some holes to plant whatever my wife bought at Costco - I'm the unskilled labor this weekend. Enjoy.
