- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1500
Markets opened up strongly this morning, but chopped slowly sideways and lower as the day progressed. SPX ran up to $1203 before stalling. You may recall that $1200 was the peak hit in early and mid-September; SPX traded in the range of $1210 to $1225 in mid-October and $1220 was the support level for the bounce in early November. So this range of $1200 to $1220 may be difficult to break through decisively. SPX closed at $1195, up $3 and RUT lost $2 to close at $696. Trading volume was down with 2.9 billion shares of the S&P 500 trading today; trading volume was down 4% on the NYSE and flat on NASDAQ.
Consumer confidence raised to a level of 56.0 for November, up from the 40.9 level of the previous month. But the Case-Schiller housing price index fell another 3.6% in September - will housing prices ever stabilize? In a separate interview, Dr. Schiller, of the Case-Schiller Housing Price Index, said that the principal factor holding down housing prices was the reluctance of banks to make residential mortgage loans; he maintains that banks have tightened their requirements even further than required by the bank regulators. And the weak housing market represents a significant portion of the unemployment in this country.
So our equity markets are caught between European sovereign debt worries and our own economic concerns here at home - unemployment, high national debt, and a deadlocked Congress. It seems unlikely that we will see equities pull out of this sideways march anytime soon.
My Dec condor on RUT stands at a P/L of +$1,840 with delta = +$8 and theta = +$77. The Jan SPX condor stands at a P/L of +$440 with delta = -$11 and theta = +$67. As a reminder, these condor are twenty contract positions, so the Greeks are proportional to the number of contracts. So you have to scale my Greeks accordingly to match up with your positions.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1653
The markets bounced back strongly this morning based on positive news out of Europe, although most of it appeared rather tenuous. But the market was ready for some good news and the major indexes all posted huge gains. SPX gained $34 to close at $1193 and RUT closed up $32 at $698. Retail stocks were buoyed by early reports of Black Friday sales being up significantly. New home sales came in at 307k for October, up slightly from September's 303k. Trading volume in the S&P 500 stocks was up from last week at 3.0 billion shares, but still below the 50 dma at 3.4 billion shares.The volume data for NYSE and NASDAQ was up significantly, but that was in comparison to Friday's light session, so that wasn't meaningful.
SPX is now closing on the heavy congestion area of $1200 to $1220, where it hung up for several sessions in mid-October.
My iron condors are both almost perfectly delta neutral after today's bounce; the Dec iron condor on RUT stands at a P/L of +$1,820 with delta = +$8 and theta = +$70. I entered my Jan iron condor on SPX at 970/980 and 1350/1360; it stands at a P/L of +$700 with delta = -$4 and theta = +$54.
Will tomorrow see some profit taking after this huge rally? And, of course, we are still subject to the news and rumors out of Europe. That could push us dramatically one way or the other. So don't become complacent.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1724
SPX closed today almost exactly at yesterday's close. So support at about $1215 is holding thus far, with overhead resistance at $1290. Trading volume fell off today and the SPX opened and closed almost exactly at the same price, thus the classic doji candlestick, a sign of indecision or balance between the bulls and the bears. SPX closed at $1216, down less than a dollar; RUT gained $1 to close at $719. Given that next week is a shortened holiday week, continuing to trade sideways at lower volume may be what we can expect. Trading volume on the S&P 500 dropped to 3.0 billion shares; trading on the NYSE dropped 1%, but trading on NASDAQ decreased 21%.
RUT settled at $720.35. Thus, the Nov 660/670 put spreads and 790/800 call spreads expired worthless for a gain of $1,460 on 20 contracts, or 9% on the capital at risk. This brings the Flying With The Condor™ track record for this year to a 35% gain. The Dec condor position on RUT at 560/570 and 830/840 stands at a gain of $980 with delta = -$6 and theta = +$97. This is a great market environment for delta neutral trading, but directional traders are having a tough time.
Enjoy the weekend.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1582
Traders reacted negatively to several reports out of Europe: a disappointing bond auction in Germany, weak manufacturing data, and more. Markets will be open for half the day Friday, but many traders have left until Monday. Traditionally, this long weekend is seen as a time to rest and forget about the markets; but this year is different, traders fear what may happen in Europe while our markets are closed. Most of the broad market indicators suggest we are very oversold at this point after trading down strongly the past several sessions. SPX shed another $26 today to close at $1162 while RUT closed at $674, down $22. However, both yesterday and today, as the broad indexes dropped significantly, the VIX didn't rise much - down one point yesterday and up one point today. That is an interesting divergence that may point to higher prices next week. But who knows? If someone in Europe coughs, our markets will get pneumonia!
Initial unemployment claims are flat from last week, which is good, since we appear to finally be holding steadily below 400k. This week's claims came in at 393k. Continuing claims were up 68k at 3.7 million, essentially unchanged.
My Dec iron condor on RUT at 560/570 and 830/840 stands at a net gain of $840 with delta = +$24 and theta = +$99. We will see what happens next week. Unless some dire news comes out of Europe, I think we are poised for at least a short term rally. But let's forget about that and focus on family tomorrow. Happy Thanksgiving.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1695
Markets opened weakly this morning and the selling intensified as the day wore on. SPX lost $21 to close at $1216 while RUT lost $11 to close at $719. Trading volume rose again today with 3.6 billion shares of the S&P 500 trading hands, right at the 50 dma. Trading was also up on the NYSE and NASDAQ, 9% and 14%, respectively. The VIX rose over 36% but pulled back to close at 34.5%. SPX traded down as low as $1209 before recovering to close at $1216, just below the $1218 close about a week ago. Will support hold?
Economic data wasn't bad, so I don't think that was the underlying cause; the European debt crisis is overshadowing everything. Unemployment claims were once again under 400k, at 388k; continuing claims dropped to 3.6 million. Housing starts were flat at 628k and building permits increased from 589k to 653k. But the Philadelphia Fed survey dropped to 3.6 from the already weak 8.7.
I am allowing the 790/800 call and 660/670 put spreads of my Nov iron condor on RUT to enter expiration and expire worthless. Both spreads are over three standard deviations OTM. This results in a gain of $1,460 on 20 contracts or 9% on capital at risk. The Dec RUT condor position stands at a P/L of +$860 with delta = -$12 and theta = +$90.
So now we wait to see if the gloomy mood continues tomorrow; the SPX is now down over 3% for 2011. Those predictions of $1450 for year end are looking pretty optimistic.
