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The markets traded down today on a good jobs report - that is not a good sign. If the bulls can't take control when they get good economic news handed to them, what happens when we get the next bit of bad news from Europe? SPX lost $3 to close at $1278 and RUT closed at $750, down $3. So SPX manages to stay above the support level at $1270, but it appears to be just treading water. By contrast, RUT has not been able to break through the resistance at $755. Trading volume fell back today with 2.8 billion shares of the S&P 500 trading. Volume dropped 16% on the NYSE and decreased 8% on NASDAQ.
The jobs report for December came in very positively today with an increase of 200 thousand jobs and a decrease in the unemployment rate to 8.5%.
My Feb iron condor on RUT stands at a P/L of +$1,640 with delta = -$23 and theta = +$75.
Looking back at the first week of trading in 2012, one has to be impressed by the lack of direction in this market. It seems the bulls cannot make headway even with good economic data. On the other hand, the bears have not made their case stick either. My condors love this market.
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One might have expected a bit of a sell-off after such a strong showing yesterday, and this morning appeared to be playing out in just that way. But then the bulls reasserted themselves. SPX pulled back to $1268 this morning but then fought back to close unchanged at $1277. So SPX managed to stay above that $1270 support level. RUT couldn't hold the line, losing $5 to close at $747. Trading volume fell back from yesterday with 2.8 billion shares of the S&P 500 trading. Volume decreased 9% on the NYSE, but increased 2% on NASDAQ.
No significant economic news came out today, but tomorrow will bring the ADP private payrolls report, unemployment claims, and the ISM Services Index.
I keep wondering when the next shoe may drop in Europe - another bond rating downgrade or an actual default in Greece? That's why I can't get too excited about this bullish rally starting the new year. European sovereign debt just seems to be hanging over this market, keeping traders on edge.
My Feb iron condor on RUT at 590/600 and 840/850 stands at a P/L of +$1,350 with delta = -$24 and theta = +$76. With a strong theta/delta ratio and a modest gain tentatively in place, this position is working well thus far.
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It appears the much anticipated Santa Claus rally has not materialized; of course, there were not many traders int he market this week, so anything is possible when everyone comes back after the holiday weekend. SPX closed down $5 at $1258 and RUT closed at $741, down $4. Ironically, after such a volatile year in the markets, the S&P 500 closed today exactly where it closed on 12/31/2010. I often have someone ask me where the Dow closed today or something similar and it usually surprises them when I say, "I don't know". I have never understood the fascination with following 30 stocks to monitor the health of the markets rather than following 500 stocks.
So, after a volatile year filled with riots and wars in the Middle East, a Japanese tsunami and subsequent disaster, a downgrade of US debt, and a year long fascination with the European debt crisis, we end up exactly where we started. If your portfolios ended the year in positive territory, no matter how small the gains, you beat the market - and not many professionals can claim that this year. The average hedge fund lost over 10% in 2011.
There was virtually no economic news today and the trading volume remained low with 1.6 billion shares of the S&P 500 trading. Volume was up 2% on both the NYSE and NASDAQ.
My Jan iron condor on RUT stands at a net gain of $1,300 with delta = -$90 and theta = +$242, so the theta/delta ratio remains healthy. The long weekend of time decay will help this position significantly, so I will be looking for an opportunity to take my profits next week. The Feb condor stands at a P/L of +$680 with delta = -$18 and theta = +$79. Our theta/delta ratio is even stronger for this position, but we still have 48 days to expiration, so the long weekend won't have as significant of an effect.
I thank all of you for your support and confidence this year. I appreciate your business, but I think of many of you as much more than business partners. I wish all of you and your families a happy and prosperous new year in 2012. Enjoy your long weekend.
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The markets roared off to a very bullish start to the new year this morning. SPX tacked on $19 to close at $1277 and RUT closed up $11 at $752. SPX closed above resistance at $1270, a very bullish sign. But SPX bounced off resistance at $1285, the high set in November. Trading volume changes from Friday are not very instructive since trading volume was so low last week. But it was interesting that volume in the S&P 500 did not quite get to the 50 dma at three billion shares - not so bullish a sign.
The Dec ISM Manufacturing Index rose a bit in December to 53.9 (was 52.7 in November). Construction spending rose 1.2% in November. Several analysts cited these reports as the reason for the bullish rally, but this data doesn't seem to be that impressive. The FOMC minutes were released this afternoon, but there wasn't much news there. Some FOMC members believe additional Fed accommodation will be required to boost the economic recovery.
I closed the RUT Jan 770/780 call spreads today; assuming the 670/680 put spreads expire worthless, this will result in an $800 gain on 20 contracts or a 7% gain. But that assumes this rally continues; we'll see. The Feb iron condor on RUT stands at a P/L of +$760 with delta = -$32 and theta = +$87. So now we watch and see if this rally has legs. I have my doubts.
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2011 has been a year for record volatility in the markets, and price action yesterday and today appeared to underscore that record. SPX gained $13 to close at $1263 and RUT gained $10 to close at $745. With this gain, SPX almost regained everything it lost yesterday. I have not kept track, but it seems like we have seen this type of whipsaw price action many times this year. What was an unusual event has become common. Trading volume remains low this holiday week; only 1.6 billion shares of the S&P 500 stocks traded today (the 50 dma is 3.0B). Trading volume dropped on the NYSE by 3% and dropped 5% on NASDAQ. The exchanges will be closed on Monday and we may see even lower trading volume tomorrow as traders leave for the long weekend. Some analysts were quick to declare the Santa Claus rally was on again after watching the markets rally back today, but one has to wonder about the logic.
The Chicago PMI came in at 62.5 for December, which was almost flat with November at 62.6. Unemployment claims jumped up to 381k from last week's 366k while continuing unemployment claims grew by 34 thousand to 3.6 million.
My Jan RUT condor now stands at a P/L of +$900 with delta = -$103 and theta = +$210. The Feb iron condor position on RUT stands at a P/L of +$500 with delta = -$26 and theta = +$81. The theta/delta ratios of both of these positions are healthy, but the call spreads of the Jan position are under pressure again. Assuming we can muddle through tomorrow, the three day weekend should help both positions. VIX dropped one point to 22.7% and that helped these negative vega positions a bit.
