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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1927
Today marked the second day that the bears took control around 2 pm and closed the markets near the lows for the day. This morning, the S&P futures were positive and the market opened up in positive territory, but it didn't last long. SPX closed down $8 at $1331, definitely breaking support at $1340. RUT lost $2 to close at $777 (too bad it isn't a slot machine). Trading volume bumped upward today with 3.0 billion shares of the S&P 500 trading. Trading on the NYSE was up 12% and volume on NASDAQ increased 10%. VIX rose as high as 23% and then closed at 22%. Today marked a ten session losing streak - where's the bottom? SPX hit a temporary high in late January around $1325 before heading higher - that is the most logical support level at this point. All in all, not a good day for the bulls: bears driving the market to lows at the close on higher volume - not good.
Most of the economic data was positive today, but that didn't seem to matter as much as worrying about Europe and Greece in particular. The CPI came in flat and the National Association of Home Builder's survey of members bumped up to 29 for May from April's 25. The Empire manufacturing survey came in stronger than expected at 17.1, up from 6.6 in April.
My May condor stands at a P/L of +$1,400 with delta = +$32 and theta = +$378. The put spreads remain well OTM at 720/730. The June position stands at +$840 with delta = +$35 and theta = +$75. Assuming the May spreads expire worthless, our year to date returns will hit just under 26%.
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1896
The markets played out what has become the usual game plan up to a point today: the S&P futures were down last night, the markets opened downward this morning, and then started strengthening. But then the markets broke the pattern by selling off in afternoon trading, driving the closes to values near the lows of the day. SPX broke support and traded below $1337 this morning before rebounding. About 2 pm this afternoon, SPX reached $1347 and then sold off into the close at $1338, down $15. RUT closed at $779, down $11. This was not the usual bullish support pattern we have been seeing of late. On the other hand, trading volume fell off today, after being above the 50 day moving average for the past four sessions, it dropped below the 50 dma to 2.6 billion shares today. Trading volume was flat on the NYSE and down 4% on NASDAQ.
Support and resistance levels are a bit fuzzy, so it isn't obvious that SPX has broken the support level at $1340 with today's close. I felt better this morning, seeing SPX bounce back above $1340 after flirting with $1336. If the markets open weakly again tomorrow, we could be searching for the next support level - $1310? To continue that pessimistic thought, note that the VIX spiked up and closed at its high today of 21.9%. The big institutions are starting to hedge themselves and that worries me.
I find it interesting that only a few weeks ago, traders had decided the European debt problems didn't pose a problem for the global economy. Even when S&P downgraded Spain's debt by two categories, the markets yawned. But that has all changed. Now the sky is falling. Of course, the bungling over at J.P. Morgan doesn't help.
My May iron condor on RUT continues on toward expiration with a net gain of $1,280 with delta = +$37 and theta = +$315. Even with the recent market weakness, the put spreads at 720/730 remain well OTM; the delta of the 730 puts is 4. The June condor stands at a P/L of +$700 with delta = +$33 and theta = +$80.
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
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Much like yesterday, the markets opened and traded lower in the morning. Then the bulls started buying and pulled the markets back up. SPX closed down $9 at $1355 after trading as low as $1343. RUT closed down $4 at $789. Trading volume rose again today with 3.1 billion shares of the S&P 500 stocks trading. Volume on the NYSE rose 4% but volume dropped 5% at NASDAQ. The candlesticks on RUT and SPX for yesterday and today have long lower shadows; often this pattern is indicative of a support level being solidified. $1340 is a solid support level on SPX from February and early March. The $785 level on RUT was touched in early March and twice in April; the price action the last two days has dipped below $785 and then rebounded higher. The bottom line is that we are sitting on support waiting for the indexes to either definitely bounce and move higher or break support and hit new lows. But we may be waiting a while before the news from Europe settles down a bit, so watch your positions carefully; if in doubt, hedge yourself or go to cash.
My RUT iron condor for May stands at a P/L of +$1,140 with delta = +$30 and theta = +$136. The June condor is up $1,200 with delta = +$17 and theta = +$67. So far, both positions are handling this pull back without any problems, but if support breaks, I may have to get busy dodging the truck. It will be interesting to see what the unemployment claims report brings tomorrow - more fuel for the fire, or a calming effect?
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1864
S&P futures were down significantly again last evening due to reports that China's exports were down for April. But somehow, by the time our markets opened this morning, the futures were back in positive territory. The recent intraday trading pattern was reversed today; it has been common for the markets to open down, trade farther down and then rebound to recover most of the losses. Today reversed that pattern - we opened higher, traded higher yet, but then gave back a large portion of those gains. SPX traded as high as $1366 before closing at $1358, up $3. RUT closed up $3 at $792. This price action is disconcerting; it suggests the bulls had control early in the day, but they couldn't hold it and the bears pulled it back down. This is basically the opposite of the price action of the past two days. The earlier pattern where the market trades downward, but is pulled back up, suggests the strengthening of support; today's action suggests just the opposite - as soon as the market traded higher, the bears took it back down. So don't let your guard down just yet.
Another interpretation of this price action is that this market is effectively in balance between the bulls and bears, which suggests some choppy sideways action until some news or event tips the market one way or the other. Trading volume declined today with 2.9 billion shares of the S&P 500 trading. Trading on the NYSE was down 16% and trading declined 3% on NASDAQ. The VIX declined to 18.8%, suggesting some lessening of tension, but still on the high side.
Initial unemployment claims for last week were flat at 367k and continuing claims declined 61k to 3.23 million.
My May iron condor stands at a gain of $1,260 with delta = +$31 and theta = +$133. The June position is up $1,220 with delta = +$16 and theta = +$72. Tomorrow I will run the Two Sigma Rule on the May position, but it looks like we will allow both spreads to expire worthless at this point - but that could change overnight!
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1972
Traders worried again today about the consequences of the elections in France and Greece. The markets opened and traded significantly lower this morning before recovering much of the losses late in the day. SPX traded as low as $1348 before bouncing to close at $1364, down $6. RUT behaved similarly, but recovered almost all of the early losses, closing down $1 at $793. Trading volume spiked upward with 3.0 billion shares of the S&P 500 stocks changing hands. Trading volume was up 20% on the NYSE and was up 24% on NASDAQ. There was no economic news of any consequence, so all of the focus was on the European debt crisis.
The strong recovery after trading so low today was very bullish. It is premature to relax, but in the absence of some new troubling news, it appears the bulls have the edge. The VIX closed at 19% after spiking as high as 21% during the day.
My May RUT iron condor at 720/730 and 910/920 stands at a P/L of +$1,320 with delta = +$37 and theta = +$50. Both spreads remain over two standard deviations OTM. The June RUT iron condor at 690/700 and 880/890 stands at a P/L of +$1,300 with delta = +$2 and theta = +$69. This position is almost perfectly delta neutral at this point. This is a spooky market, so keep your eye on the ball - follow your rules and resist the urge to predict tomorrow's action (if you're trading delta neutral).
