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The markets were trading weakly sideways most of the day but traded off strongly in the last hour based on Moodys downgrading several German banks and Fitch warning that US banks may be downgraded if the Euro Zone debt issues aren't handled promptly. SPX dropped $21 to $1237 and RUT closed at $730, down $13. Trading volume jumped up with 3.2 billion shares of the S&P 500 trading. Trading was up 14% on the NYSE and up 16% on NASDAQ. The VIX was down to 30% early in the day, but spiked up to 33.5% by the close.
The CPI rose 0.1% in October; industrial production rose 0.7% and capacity utilization rose to 77.8% in October from last month's 77.3%. These are pretty anemic numbers, but they aren't terrible either - pretty much the same picture that the economic data have been painting for the past couple of months.
The markets remain trapped in this trading range. Larry McMillan put it best, "The market has become a volatile, trendless entity." But watch out; at times like these, the markets often break out very strongly one way or the other.
My Nov condor stands at a P/L of +$1,120 with delta = $2 and theta = +$885. It appears likely that I will allow both the call and put spreads to go into expiration to expire worthless. The Dec position stands at a P/L of +$380 with delta = -$27 and theta = +$115.
I am out at the Traders Expo and hope to see many of you there. Please look me up.
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Today's close on SPX is almost exactly where we started this year. SPX closed at $1258, up $6. RUT gained $10 to close at $743. Trading volume was up from yesterday but still well below average. Over 2.7 billion shares of the S&P 500 traded today; the 50 dma is 3.5 billion shares. Trading volume was up 19% on the NYSE and was up 22% on NASDAQ. Even though some positive news was coming out of Italy today, European markets traded down; it was only after Europe's markets closed that our markets started trading higher, albeit weakly.
The Producer price Index (PPI) increased by 0.3% in October while retail sales increased 0.5% in October. The Empire Manufacturing Index edged up into positive territory at 0.61 for Nov (-8.48 in Oct). Although this data wasn't great, it wasn't terrible either. It appears consistent with the conclusion that we are not headed for a double dip recession, but we aren't recovering rapidly either. The bottom line for traders is that we remain in a sideways trading range.
My November iron condor on RUT stands nearly perfectly delta neutral with a P/L of +$1,120 with delta = -$4 and theta = +$406. The Dec condor stands at a P/L of -$140 with delta = -$41 and theta = +$129.
Did you notice AAPL bouncing up today? That was because I closed my AAPL spread for a loss yesterday...
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That infamous statement was commonly heard from stockbrokers who were trying to calm investors in 2008. Of course, history was on their side, but it has sometimes been many years before a bearish decline was worked off; in fact, we still have not reclaimed those 2007 highs. Well, this isn't your daddy's market. We recover dramatic downturns in the market in a matter of days, not years! SPX plunged $47 on Wednesday, but has now recovered about 75% of that loss in just two sessions! SPX tacked on another $24 today to close at $1264 with trading volume of 2.5 billion shares, a dramatic drop from the 3.5 billion shares traded Wednesday. RUT gained $19 to close at $745. Trading volume declined 19% on the NYSE and dropped 16% on NASDAQ. Wednesday's decline reaffirmed support at $1220. Resistance levels are at $1275 (Tuesday's high before Wednesday's collapse) and $1290 (the recent high of October 27). This extreme volatility is unnerving, but one has to be impressed with the strong underlying bullishness of this market. We may well be trapped in a sideways trading range for a while, but the bulls seem to be able to prevent the outbreak of a genuine bearish market. At least, they have turned back the attempts thus far. The decline in trading volume both yesterday and today is certainly not a strong bullish sign, but it is hard to argue with rising prices.
The only economic data today was the University of Michigan Consumer Sentiment Survey; it came in at 64.2 for November, up from the previous value of 60.9.
Hong Kong sold out all of their new iPhone4s models in three hours on Friday! I think AAPL is setting up to have a blow-out earnings announcement in January. I am looking at possible trades to take advantage of that prediction.
My Nov RUT iron condor at 660/670 and 790/800 stands at a net gain of $220 with position delta = -$24 and position theta = +$374, on 20 contracts. The put spreads are two standard deviations OTM and the call spreads are 1.2 standard deviations OTM. Normally I would close the call spreads at this point since they are less than two standard deviations OTM. But I am trying to nurse a small gain or break-even out of this position, so I will watch the call spreads closely and probably close them next week. The Dec condor at 560/570 and 830/840 stands at a P/L of -$200 with delta = -$37 and theta = +$105.
Have a nice weekend.
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The markets traded downward today on reduced volume, again based on worries about European debt issues. SPX lost $12 to close at $1252 and RUT closed at $733, down $12 on the day. Trading volume was down across the board with 2.3 billion shares of the S&P 500 trading today. Trading volume was down 11% on the NYSE and down 13% on NASDAQ. Volume hit the 50 day moving average on the big down day last Wednesday and has steadily dropped every day since then. Again, we are seeing signs of a market trapped in a sideways trading range with many traders waiting on the sidelines for a "sign". The absence of any significant economic reports probably helped this largely choppy, somewhat downward trading day. The VIX moved up during the trading day to 33% but closed at 31%, a bit above yesterday's close at 30%.
My Nov RUT iron condor position stands at a P/L of +$820 with position delta = +$19 and theta = +$390. The Dec condor stands at a P/L of +$440 with position delta = -$26 and theta = +$97.
So now we return to Euro watching...
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The markets bounced back a bit from yesterday's excesses. SPX gained $11 to close at $1240. RUT gained $7 to close at $725. So the $1220 support level on SPX stills holds; perhaps the new trading range is $1220 to $1290. The VIX pulled back to close at 33% today, not quite in bullish territory, but certainly "talked back from the edge". Trading volume fell off with 3.1 billion shares of the S&P 500 trading today; volume dropped 17% on the NYSE and dropped 12% on NASDAQ. It seems like we will remain trapped in these volatile trading ranges as long as the drama in Europe continues.
My Nov condor on RUT stands at a P/L of -$680 with delta = +$38 and theta = +$330. the Dec position stands at -$320 with delta = -$19 and theta = +$110. All of this volatile trading back and forth based on the latest news or rumors from Europe is painful for stock traders and directional options traders. But it works wonders for non-directional options spreads.
