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The combination of a mediocre jobs report and the ongoing political drama in Greece left stocks trading weakly downward today. The vote of confidence for Papandreou is scheduled for 6 pm EDT today. Regardless of the outcome of that vote, I think this market remains paralyzed by European debt concerns for quite some time, at least through the end of the year. SPX lost $8 to close at $1253 after trading as low as $1240 earlier today. RUT closed at $746, down $5. Trading volume dropped to 2.9 billion shares of the S&P 500 today; trading on the NYSE dropped 19% and trading volume dropped 8% on NASDAQ.
The nonfarm payroll report was a bit disappointing for analysts; an increase of 80k nonfarm jobs were reported with an additional 104k private payroll jobs. Unemployment remained essentially flat at 9.0%, as compared to last month's 9.1%. Albeit weak, this jobs report underscores other recent economic data, suggesting a painfully slow economic recovery rather than the feared "double dip". I believe that economic data is the explanation for the S&P 500 holding support at $1220 this week, rather than falling back into the $1120 - $1220 trading range of the past 2-3 months. This results in what I am calling "a cautious bull market". There appears to be an undercurrent pushing this market higher, but it is being held back by the Euro Zone drama.
The volatility index, VIX, returned to 30%, which was the lower end of its trading range over the past three months. It will probably be difficult for volatility to remain below 30% until some confidence grows in the European debt bail-out plan. News out of the G20 Summit wasn't encouraging.
My Nov RUT iron condor continues to limp along with a P/L of -$4,380 with position delta = -$90 and position theta = +$439. The Dec condor stands at a P/L of -$1,320 with position delta = -$48 and position theta = +$104.
Have a great weekend.
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The markets bounced back from yesterday's disaster caused by Greek politics. SPX closed up $20 at $1238 and RUT gained $19 to close at $733. RUT completely recovered all of yesterday's losses while the SPX recovered a majority of the losses. Trading volume dropped off significantly with 3.1 billion shares of the S&P 500 trading. Trading volume dropped 29% on the NYSE and dropped 16% on NASDAQ. I would use yesterday's close on SPX at $1218 as the support level to watch as we continue watching this European sovereign debt comedy of errors.
Many analysts were watching for something new in the FOMC report and Bernanke's news conference, but those were pretty much non-events. The Fed doesn't foresee worsening economic conditions, but they see very slow recovery and remain committed to an easy money policy. ADP reported 110 thousand new private sector jobs in October, but this was below analyst estimates.
My Nov RUT condor stands at a P/L of -$3,940 with delta = -$23 and theta = +$306. That huge theta should start to work our position into the black. The Dec RUT condor stands at a P/L of -$1,060 with delta = -$31 and theta = +$97.
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Lingering concerns about Europe and BF Global's bankruptcy appeared to worry traders today. But it could have been simply a case of many institutional traders selling to capture profits for their month-end numbers. In any case, SPX shed $32 to close at $1253 and RUT closed at $741, down $20. The VIX bounced back up to 30%, reflecting some fears about a possible turn back down to test previous lows. Trading volume fell off a bit, with 3.3 billion shares of the S&P 500 trading. Trading volume rose 4% on the NYSE and fell 3% on NASDAQ. Today's price action took the SPX back well below its 200 dma; this is a significant level because many institutions trigger their trading off the 50 and 200 dma.
I removed the hedge on my Dec condor this morning, but left the Nov hedge in place. Both positions remain underwater, but the Greeks of both positions are in good shape. The November position delta is +$18 and position theta = +$200. Delta and theta for the Dec position are -$39 and +$89, respectively.
I have to run; goblins are at the door!
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Papandreou's announcement that he would seek a public referendum on the EU debt bailout plan sent markets tumbling both in Europe and here. Markets recovered somewhat as the day wore on. There appear to be two schools of thought: 1) Greek voters turn the rescue plan down and a global meltdown of banking follows, or 2) The EU tosses Greece out of the EU and Greece defaults and the markets have already priced that in. I am inclined toward the latter opinion, but I am certainly not a global banking expert. SPX lost $35 to close at $1218, while RUT lost $27 to close at $714. The VIX popped up as high as 38% before settling back to 35%, for a five point jump from yesterday's close.
The area of about $1220 to $1230 is a congested support level first established back in early September after the August crash. The SPX struggled in that area for several days recently before breaking out to the upside. So far, that area of support is holding, but tomorrow may be a different day.
The ISM manufacturing index came out for October at 50.8, essentially flat from the previous month's 51.6. But the markets were completely focused on Europe and secondarily on the collapse of MF Global.
I removed the hedge on my Nov condor this morning. The spike upward in IV has hurt the P/L on both of the condor positions, but the position Greeks are actually pretty good. The Nov condor stands at a P/L of -$4,100 for 20 contracts with delta = +$8 and theta = +$244. The Nov 660/670 put spreads remain about one standard deviation OTM. The Dec condor stands at P/L = -$1020 with delta = -$19 and theta = +$95.
All eyes on Europe... again.
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Trading was very sluggish today with lower volume and virtually no direction. SPX closed at $1285, up less than a dollar. RUT closed down $4 at $761. There wasn't much economic news to chew on today. The University of Michigan consumer sentiment survey came in at 60.9, up a bit from the previous reading of 57.5. Trading volume was markedly down across the board with 3.4 billion shares of the S&P 500 stocks; trading was down 30% on the NYSE and down 35% on NASDAQ. The VIX actually opened up higher this morning at 26% but moved downward through the day to close at 24.5%. All signs appear to point to this rally having sustaining power, but the proof will come next week. We will have plenty of potentially market moving news events: the FOMC meeting and announcement, Bernanke's news conference, the G-20 Summit, and the non-farm payrolls report.
I rolled the 780/790 call spreads in my Nov RUT condor to 790/800; this position remains underwater with a P/L of - $3,590 with delta = -$27 and theta = +$119. My Dec condor at 560/570 and 830/840 is hedged and stands at a P/L of -$1400 with delta = -$11 and theta = +$50.
Have a great weekend. Be sure to take time to smell the roses.
