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Traders' concerns turned once again to the European Union and the sovereign debt issues that threaten to tear the union apart. Selling was even more intense today than on Friday after the disappointing jobs report. The SPX closed down $24 at $1319 and RUT closed at $834 for a loss of $19. Trading volume bumped up a bit with 2.6 billion shares of the S&P 500 trading; however, this is still below the 50 dma. Volume was up 8% on the NYSE and was up 10% on NASDAQ.
There were no economic data reports of any consequence today. I tire of the talking heads on CNBC "explaining" today's declines as due to worries about European debt issues when the same analysts told us last week that European debt was old news and the market had moved on. There is no explaining or predicting of human emotions and fear of the unknown.
My Aug iron condor stands at -$218 with a position delta = -$72 and position theta = +$108. I removed the hedge today. Only the 700/710 put spreads remain from the July iron condor on RUT; I will allow them to expire worthless.
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The jobs report (officially, the nonfarm payrolls report) reported an increase of 18,000 jobs in June. Analysts expected 80k. It seems a little surprising that the market reacted as strongly as it did; a weak economy that isn't creating jobs should not have been a surprise. Unemployment moved up a bit to 9.2%. SPX closed down $9 at $1344 and RUT closed at $853, down $6. We will continue to watch the SPX level of $1370 to see if this bull trend is going to resume. That was the high set back at the beginning of May. A pullback from there will suggest a broad trading range of $1260 to $1370. Pull up a longer term chart of SPX and you will see my point.
The market's explosive run upward caused me to close the 880/890 calls on my July iron condor on RUT yesterday. Today's pull back is frustrating, but you have to follow your rules or risk much larger losses. Assuming that the 700/710 puts expire worthless next week, my July condor has closed at a gain of $820 or 5%. My Aug condor has already been adjusted and is now flirting with forcing me to close the call spreads and re-position the spreads. It is now underwater by $758 and position delta = -$62 and position theta = +$43.
Some analysts recommended today's pull back as a trading opportunity. We'll see next week.
Have a great weekend.
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Last week's inexhaustible run upward was most unusual, so today's pause was very natural and probably expected by many traders. SPX dropped back by $2 to close at $1338 and RUT gained $2 to close at $842. Trading volume was down with 2.3 billion shares of the S&P 500 trading (well below the 50 dma of 2.9B). Trading volume decreased 3% on the NYSE and volume dropped 7% on NASDAQ.
Moody's downgraded Portugal's debt today and the market dropped but then immediately traded back up to roughly where it was before the announcement. This downgrade wasn't a surprise for traders so I'm not sure why the market dropped. Factory orders increased 0.8% in May after decreasing 0.9% in April, but most analysts were expecting a 1% increase.
My July iron condor on RUT stands at +$3,060 with delta = -$47 and theta = +$94. The Aug condor stands at a P/L of -$140 with delta = -$100 and theta = +$71. The delta of the short 890 calls = 18, so we are near the point of adjusting this position.
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The markets traded largely sideways today. Some of that may have been due to a relatively light economic news day. Some traders may be waiting to see Friday's jobs report before placing their trades. SPX closed at $1339, up $1 but RUT tacked on another $4 to close at $845. Trading volume in the S&P 500 was flat at 2.4 billion shares. Trading on the NYSE was up 2% and trading volume on NASDAQ was up 6%. Challenger reported a 5.2% increase in layoffs for June, up from a 4% decrease in May. This is focusing attention more on the ADP employment report and unemployment claims tomorrow, with the jobs report following on Friday. The ISM Services Index was basically flat at 53.3 for June, down from 54.6 in May.
My July iron condor stands at a P/L of +$3,160 with delta = -$43 and theta = +$74. The steady rise in RUT triggered my adjusting the Aug condor by buying Sept $890 calls; the Aug position stands at a P/L of -$588 with delta = -$52 and theta = +$44.
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Many analysts, including me, were doubtful this rally would continue after month-end. but we were proved wrong big time today - wow! SPX gained $19 to close at $1340 while RUT closed up $13 at $840. The Jun ISM Manufacturing Index came in at 55.3, up from last month's 53.5. This wasn't really much of a move upward, but analysts were expecting a decline, so this fed the Bulls' predisposition to keep the rally going. The University of Michigan Consumer Sentiment Survey came in at 71.5, down slightly from last month's 71.8.
The next significant resistance level on SPX is $1345, the peak hit at the end of May before the market collapsed hard from there. Trading volume was down even further today with 2.5 billion shares of the S&P 500 trading. Similarly, trading volume was down 11% on the NYSE and was also down 10% on NASDAQ. It will be interesting to see what happens next week after everyone returns from the holiday.
My July condor on RUT stands at a P/L of +$2,700 with delta = -$61 and theta = +$114; the 880/890 call spreads in this position are still over one standard deviation OTM, so this strong rally hasn't stressed the July position very much. The Aug iron condor on RUT stands at a P/L of -$380 with delta = -$93 and theta = +$78. The delta of the short 890 call stands at 18, so we will have to adjust this position next week unless the market pulls back. The theta/delta ratio also reaffirms the stress this market run is applying to this position - it has dropped below one.
Have a great holiday weekend everyone! Fly the flag proudly and enjoy those cookouts.
