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The continuing Greek negotiations to restructure their debt don't appear to be nearing a resolution and this weighed on traders at the open this morning. But markets traded stronger through the day and much of the losses were recovered by the close. SPX didn't quite recover all of its losses, closing at $1315, down $1. But RUT bounced around 11 am ET and drove to a positive finish at $788, up $5. This divergence in SPX and RUT would be considered bullish by most analysts. The mid-cap stocks typically lead bullish recoveries. Trading volume remains weak with 2.8 billion shares of the S&P 500 trading; this is just below the 50 dma. Trading volume declined 2% on the NYSE and dropped 3% on NASDAQ.
No economic reports were released today. The VIX rose a bit but remains relatively low at 18.9%.
My Feb iron condor on RUT stands at a P/L of +$2,220 with delta = -$60 and theta = +$89.
I took a flyer today and bought the AAPL Feb 460/470 call spread in anticipation of AAPL's earnings announcement this evening. And AAPL didn't disappoint; all of their results exceeded expectations. It was a risky trade, but home runs are fun when you get them.
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The markets continued their strong bullish run this morning, but continued chatter about the negotiations surrounding Greek bonds, and more importantly, the lack of progress, appeared to wear down traders. So the markets plunged into red ink around noon and spent the rest of the day trying to climb out of that hole. SPX tacked on less than a dollar to close at $1316 while RUT closed down $2 at $783. The price action on both SPX and RUT were of the classic doji candlestick variety - the mark of indecision. This candlestick often foretells a market reversal, but not necessarily always. At a minimum, it suggests that bullish sentiment and bearish sentiment are roughly balanced at this point. The markets have had a strong run so far this year, so a little pause might be in order. The doji may not indicate a reversal as much as a pause.
The VIX increased less than half a percentage point on this minor pullback, closing at 18.7%. Other than the news out of Europe, there was no significant economic news today. In fact, we won't have any significant economic reports until Wednesday with FOMC and pending home sales.
Trading volume was down today with the S&P 500 trading right at the 50 dma of 2.9 billion shares. Volume declined 20% on the NYSE and declined 14% on NASDAQ.
My February iron condor on RUT stands at a P/L of $2,460 with position delta = -$47 and position theta = +$73. Most of the gains in this position are coming from the put spreads, although the 840/850 call spreads could be closed for a small profit now. But the delta of the short 840 calls is less than 7, so those spreads are quite safe for now. My perception is that a strong earnings season has motivated much of the bullish run this month. Will the market's attention return to Europe after the announcements begin to wane?
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The bulls took charge today and drove markets significantly higher. SPX opened up and steadily tacked on gains as the day wore on; this is unusual; it has been a winning strategy for the past several weeks to simply watch the open and then place your bets for the opposite direction intraday. SPX gained $14 to close at $1308 and RUT also gained $14 to close at $779. This is the first time RUT has closed above the highs set in late October. Trading volume increased a bit but still remains rather anemic for a strong bull market. 3.2 billion shares of the S&P 500 traded today, just above the 50 dma at 2.9B; trading volume on the NYSE was only up 1%, but trading on NASDAQ was up 12%.
If you ascribe to the seasonal patterns in the markets, a strong showing in the first two weeks of January often forecasts a positive year for the markets. But that pattern also includes a weak patch of trading in late January into February before the bullish trend takes over for the year. I am still skeptical that the European debt crisis can be ignored, but we seem to be doing just that for the past couple of weeks.
The PPI dropped 0.1% in December, so no signs of inflation yet; industrial production increased 0.4% - not huge but positive. Capacity utilization increased a bit to 78.1% in December; those levels haven't been seen since 2008. This dose of economic data was certainly positive, but not as strong as the market's rise today (at least in my opinion). The VIX opened up higher this morning at 23.2% but moved down throughout the day to close at 20.9%.
My Feb RUT iron condor was pushed back a bit by this strong run upward; the P/L stands at +$1,740 with delta = -$58 and theta = +$95. The Feb 840 calls are still under nine delta. The Jan RUT 670/680 put spreads are almost $100 OTM at this point. Unless something dramatic happens tomorrow, I will allow them to enter expiration and expire worthless.
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The markets took a breather today. SPX gained $1 to close at $1315 while RUT closed at $785, up $2. To my surprise, VIX fell almost two percentage points to close at 18.3%. Wow! The markets have really forgotten about the European debt issues. I can't get over how quickly this market posture has changed, and with little or nothing substantially different in Europe. Trading volume was mixed with a slight decrease in the S&P 500 trading down to 3.3 billion shares; trading on the NYSE rose 13% and trading on NASDAQ declined 1%.
The only economic news of the day was existing home sales for December, which were up to 4.61 million from the previous 4.39M.
RUT settled at $780.62 and SPX settled at $1313.93 for January. That officially completed my second January iron condor with a 7% gain as the 670/680 put spreads expired worthless. The Feb RUT condor stands at a P/L of +$2,460 with delta = -$51 and theta = +$57. Thus far, the Flying With The Condor™stands at a gain of 5% for 2012, as compared to a gain of 4.5% on SPX, so we are managing to stay ahead of the broad market so far this year (these results only include closed positions).
Well, I have to go clear out some snow; we are in the middle of winter storm here. Have a pleasant weekend.
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The markets jumped up at the open today and held most of those gains into the close. SPX once again closed above support at $1294, up $5, and RUT closed at $766, up $1. Interestingly, RUT has yet to break the resistance set in late October last year. One other anomaly was the VIX, closing at 22.2%, up over one point on a positive, upbeat market day. That divergence worries me a bit. Today's upbeat day was a bit surprising after all of the downgrades in Europe and the negative news surrounding Greek debt refinancing. Are we becoming immune to news concerning European sovereign debt? Or is the stock market just too inexpensive to ignore at these prices? Many measures suggest multi-year low prices, such as the price/earnings ratio of the Dow Jones Industrials at a five year low of 11.9. While stock prices have been trending sideways, corporate earnings have been growing. This may be fueling the bullish sentiment that appears to hold this market up even in the face of negative news from Europe.
The Empire Manufacturing Index reported 13.5 for January, up significantly from the previous reading of 8.2. The PPI, industrial production and capacity utilization data will be reported tomorrow.
My Feb iron condor on RUT at 590/600 and 840/850 stands at a P/L of +$2,260 with position delta = -$33 and theta = +$73. I still have the Jan RUT 670/680 put spreads open.
