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The markets were rather subdued most of the day, hovering around the open by a few dollars. But after the FOMC announcement, and then especially after Bernanke's news conference, the bulls began to run. SPX closed up $8 at $1356 while RUT ran $5 to close at $858, and that sets a 2011 high for a close on RUT. Trading volume was slightly down from yesterday with 3.2 billion shares of the S&P 500 stocks trading. That is just below the 50 dma at 3.3 billion shares. Trading on the NYSE was up 5% and NASDAQ trading volume was essentially unchanged from yesterday. The FOMC announcement didn't really have any significant new revelations, and I suppose that was what triggered the rally. Bernanke is holding firm that rates will remain low for "an extended period" and is willing to risk moderate inflation to stimulate the economic recovery. So the fuel continues to flow for a bullish stock market.
Gold hit new highs at $1530 per ounce and silver hit a 30 year high at $48 per ounce. Durable orders for March increased 2.5%. This increase in durable goods orders would normally have been seen as bullish news, but it was swamped by all of the attention given to the FOMC's announcement and the first of a series of news conferences by Bernanke.
My May iron condor on RUT moved into the red with a P/L of -$438 and a position delta = -$84 and theta = +$97. I still have 10 contracts of the 890/900 call spreads that are pressuring this position. The delta of the 890 calls hit 18 today. The June condor presented an excellent illustration of the power of a hedging adjustment. Yesterday, I bought July $900 calls to hedge the upside and the net P/L of the position was -$1,814. After another $5 increase in RUT today, that position's P/L is virtually unchanged at -$1,834 with position delta = -$40 and theta = +$45. So the hedge is doing its job for now, but more serious adjustments will be required if RUT continues its upward trek. After the news conference with Bernanke was over, it appeared that all of the talking heads and analysts have decided we have resumed the bull market advance. We'll see. Often the market surprises us when we all run to one side of the ship. But in the meantime, we delta neutral traders will simply trade what the market gives us.
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Yesterday's slow day appeared logical in light of the FOMC meeting starting today and issuing a statement tomorrow. But, just to shatter our predictions, the market took off to the upside today on strong volume. SPX traded up to its high at $1350 by noon and then traded largely sideways the balance of the day, closing at $1347, up $12. This is the first time SPX has been able to break through the high set in late February. RUT traded stronger than SPX in early April and although it closed up $9 at $853 today, it didn't reach the April highs. Trading volume on the S&P 500 was up sharply from yesterday's unusual lows with 3.3 billion shares, right at the 50 dma. Trading on the NYSE was up 29% and trading volume was up 40% on NASDAQ.
The Conference Board's consumer confidence index for April jumped to 65.4 from last month's 63.8. This report surprised traders and may have provided some of the bullish momentum today. The Case-Schiller housing price index reported a 3.3% decline.
My May iron condor on RUT stands at a P/L of +$42 with delta = -$56 and theta = +$86. The delta of the 890 calls is up to 13, so this position is reasonably solid at this point. But my June condor is feeling the pressure. I added some Jul $900 calls today to hedge the upside and the P/L = -$1,814 with delta = -$42 and theta = +$55. The delta of the Jun $900 calls = 21. So now we watch to see if the FOMC surprises the market in some way tomorrow or somehow fuels this bull market even further.
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AAPL's stellar earnings announcement boosted the markets today. Trading was choppy, but remained in positive territory all day, closing near the day's highs. The SPX closed at $1337, up $7 and RUT ran up $6 to close at $846. Trading volume was generally down today with 3.1 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE was down 15% and trading on the NASDAQ was down 10%. Initial unemployment claims dropped 13k from last week to 403k and continuing claims were flat at 3.7 million. Leading indicators were up 0.4% but this was down from last month's +1% gain. The Philadelphia Fed survey was disappointing; it dropped form 43.4 for March to 18.5 for April. But the market shrugged off this mediocre economic data and chose to focus on the positive earnings reports of late, especially AAPL and IBM that are seen as broad economic bellwethers.
My May iron condor on RUT is doing well with a net P/L of +$192, delta = -$45 and theta = +$82. I opened my June iron condor at 690/700 and 900/910 earlier this week, but the market has moved upward against my call spreads almost every day since then. My position remains underwater with a delta = -$72 and theta = +$78. The delta of the 900 calls is up to 16 and the fact that the theta/delta ratio is near one to one shows we are nearing a point of needing to adjust this position.
The exchanges will be closed tomorrow, so enjoy the long weekend!
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A slow news day made for a slow day in the markets. I suspect the upcoming FOMC meeting also has traders hesitant to take any strong positions in advance of that announcement Wednesday. New home sales for March came in at 300k, up from 270k last month. SPX closed down $2 at $1335 and RUT closed at $844, down $1. Only 2.3 billion shares of the S&P 500 traded today; that is a record low for 2011. The only time we saw lower trading volumes recently was during the holidays at the end of 2010. Trading on the NYSE dropped 14% and trading on NASDAQ decreased 22%.
My May iron condor on RUT stands at a P/L of +$722 with delta = -$29 and theta = +$51. My June condor continues to sit near the adjustment point with a P/L of -$660 and delta = -$77 and theta = +$76. Unless the NFLX earnings announcement pushes the markets south (apparently a disappointing outlook was given), I suspect tomorrow's market behavior will be similar to today - yawn.
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Traders opened the markets this morning in slightly positive territory and expanded the gains in the afternoon to basically return to where we started Monday morning before the S&P debt warning scared traders. SPX closed up $7 at $1313, the same as yesterday's opening price. RUT closed up $2 at $823. Trading volume declined from yesterday with 3.1 billion shares of the S&P 500 stocks trading; the 50 dma = 3.3B. Trading volume on the NYSE was down 20% and was down 7% on NASDAQ. Gold traded above $1500 for the first time today as traders continue to seek refuge from sovereign debt and global unrest. S&P's warning shot yesterday probably fueled this move to gold, but equity traders were unpersuaded.
Housing starts came in at an annualized number of 549k for March and housing permits came in at 594k; both figures were better than analysts expected.
My May iron condor on RUT is positioned at 720/730, 890/900, and 920/930 and continues to build gains with a P/L of +$612 and delta = +$10 and theta = +$46. This is a slow economic news week, so the markets will primarily be driven by earnings announcements. One of the biggest to watch will be Apple Computer, after the close tomorrow.
