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Every major market index was down today. It started early with Intel's lowering of its outlook and it appears that as traders reflected on the Euro Summit over the weekend, they lost confidence that anything of substance had been really decided. So the fear that the European debt issues will spread to cause global economic issues is alive and well. SPX shed $19 to close at $1236 and RUT closed at $733, down $12. Institutional money managers appear to be sitting on the sidelines; trading volume was flat to decreased today with 2.8 billion shares of the S&P 500 trading, unchanged from Friday. Trading volume was down 7% on the NYSE and was down 6% on NASDAQ.
Interestingly, the VIX actually declined today as the markets also declined - is this a bullish divergence? The last three trading sessions have been maddening, steadily retracing the same territory each day. We will hear something from the FOMC tomorrow, but it isn't likely to move markets.
My Jan iron condor on SPX stands at a P/L of +$600 with delta = -$40 and theta = +$99. The call spreads are just outside one standard deviation OTM, so this position is in reasonable shape. The risk is principally on the call spread side since the 970/980 put spreads are very far OTM and thus unlikely to present a problem. The 560/570 put spreads are all that remain of the Dec RUT iron condor position, so they will expire worthless this weekend.
It will be interesting to see if today's divergence in the VIX is foretelling a move back up tomorrow. Of course, given the see saw action of the last several sessions, it is the bulls' turn tomorrow.
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The markets apparently liked what they were hearing out of Europe today (although there was a paucity of specifics), and so the buying commenced. SPX gained $21 to close at $1255; ironically, SPX gave up almost the same amount yesterday as it gained today. At one time, that would be considered an unusual coincidence, but not for 2011; this kind of volatility has become the norm. RUT behaved similarly to SPX, gaining $23 to close at $745. The VIX trimmed back to 26.4%, about where it was a week ago, after nearly reaching 31% yesterday. In spite of today's big gains, trading volume declined with 2.8 billion shares of the S&P 500 trading today; trading at the NYSE was down 13% and volume was down 10% on NASDAQ.
Economic data was minimal today with the University of Michigan Consumer Sentiment survey coming in at 67.7 for December, up slightly from November's 64.1.
My Jan iron condor on SPX stands at break-even with delta = -$45 and theta = +$87 on 20 contracts. The RUT 560/570 put spreads are all that remain of the December position, so they will most likely expire worthless next weekend.
So the European Watch continues; the next market moving news may well be some credit rating downgrade this weekend or next week. I believe this market remains a risky place for directional trades; use tight stops.
We had our first snow today here in Chicago - I offer that for those of you in warmer climates so you can gloat. Enjoy the weekend.
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The markets opened and traded sideways most of the day. SPX made a run higher in the last hour of trading, but gave up most of that gain before closing roughly unchanged at $1258 (up only $1) and RUT was flat at $747. Trading volume also fell off with only 2.7 billion shares of the S&P 500 trading. Trading volume was down 11% on the NYSE and was down 12% on NASDAQ. The VIX rose slightly today to close at 28.1%.
No significant economic data was reported today. The market appears to be treading water while waiting on the Euro Zone summit later this week. But I will be surprised if we receive definitive news out of the summit.
My Jan iron condor on SPX stands at a P/L of -$900 with delta = -$49 and theta = +$89. Now we return to the Euro Zone watch...
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I grew up in an America where we were infamous for not having a clue about what was going on anywhere else in the world. How surprising it is now to find us knowing the names of Europeans involved in the ECB, finance ministers and other European leaders. Moreover, our markets have been hanging on every bit of news coming out of Europe. Today was no different. Our markets were basically treading water looking forward to the Euro Summit when news came out late in the afternoon that the G20 was considering some kind of lending program to assist Europe. That spiked the major market averages for a few minutes, but then most of those gains were erased into the close. SPX ended up with a $3 gain to close at $1261 and RUT gained less than a dollar to close at $746. Market trading volume was flat to modestly higher with 3.0 billion shares of the S&P 500 trading (3.3B is the 50 dma). Trading volume was up 14% on the NYSE and up 11% on NASDAQ.
More ominously, today marks the fourth session that the VIX has moved upward, closing today just under 29%. This marks a classic divergence with the VIX moving upward as the market averages track sideways. At best, it represents a great deal of uncertainty among traders as they hedge themselves against a possible down draft. At worst, it is predicting the down draft. I am inclined to think we will continue to trade largely sideways, but within a volatile trading range - in short, more of the same. My reasoning is simplistic. I don't see any clear and definitive solutions to the European debt crisis coming out in the short term; much like our own situation here, the political realities dictate a lengthy, contentious struggle.
My Jan SPX iron condor continues largely "as is" with a P/L of -$1140 with delta = -$50 and theta = +$95. So our position's theta/delta ratio remains strong, but the 1350/1360 call spreads are inside of one standard deviation OTM, so that is keeping our condor in red ink. Tomorrow and Friday we will likely see volatile moves in both directions for the markets as various news tidbits flow out of the Euro Summit.
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The markets opened very strongly this morning, suggesting that all Euro worries were now past us. But S&P warned several European countries, including Germany, that their bond ratings might be downgraded. That news pulled the markets back, but they remained in positive territory for the day. SPX gained $13 to close at $1257 and RUT closed up $12 at $747. The SPX ran as high as $1267 in the morning; the 200 dma stands at $1265. A close above the 200 dma would be a bullish sign. Trading volume was flat with 3.1 billion shares of the S&P 500 stocks trading today. Volume on the NYSE was up 2% and was also up 2% on NASDAQ.
It was interesting to note that the VIX actually rose today, a little surprising on a positive market day. The VIX has not declined as much as one might expect since this mini-rally began last week - there is still a lot of concern about the Euro Zone debt issues and how that may impact the US markets. The ISM Services Index declined a bit in November to 52.0 from the previous month's 52.9.
My Jan iron condor on SPX stands at a P/L of -$1260 with delta = -$55 and theta = +$97. The 1350/1360 call spreads are inside one standard deviation OTM now, but the theta/delta ratio is still healthy.
