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It looked like another modest, but upward trending day, but the bears showed up to play during the last few minutes of the trading session, pushing the major indexes to modest losses. SPX closed at $1310, down $4 while RUT lost $2 to close at $822. Trading volume dropped again today with only 2.5 billion shares of the S&P 500 stocks trading. Trading dropped 5% on the NYSE and dropped 10% on NASDAQ. The markets have been surprisingly bullish over the past few sessions given the number of worrisome
global events and the apparent inability of the US government to address
the spending/deficit issues. The equity markets are being propped up by
the Fed. The questions surround how this play ends. The FOMC has
announced that QE II will end by the end of the second quarter.
Increasing oil and food prices are causing more Fed committee members and Fed watchers to
begin to talk about tightening measures. In the meantime, the bulls
appear to be in charge, although trading volumes have been anemic,
suggesting many traders are wary.
My April iron condor on RUT is just churning out profits in this lackluster market. It now stands at a net gain of $1,900 with delta = +$16 and theta = +$61. My May RUT iron condor at 680/690 and 890/900 stands near break-even with a P/L of -$600, delta = -$55 and theta = +$88.The maximum possible gain on the April condor is $2,400. Some traders make it their practice to close credit spreads when they can confirm a majority of the gains. I have adopted the rule of closing spreads on the Friday before expiration if the spread is less than two standard deviations OTM. Otherwise, I allow the spreads to expire worthless. I prefer not to give away the $20 to $40 per contract plus the trading commissions unless I have to for safety's sake. In my experience, two standard deviations is a very safe margin. If you are trading many contracts, we are talking about several hundred dollars. That may not be much compared to the overall gains, but it is still one or two nice dinners at one of my favorite restaurants, like Picasso's in Las Vegas, or Wildfire in Chicago.
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Traders ignored the continuing unrest in the Middle East and Libya, the European debt crisis, and Japan's continuing woes and continued their buying spree this morning. The major market averages traded up until about noon and then slowly declined through the afternoon. But the day ended with gains across the board for all of the market indexes. SPX closed up $4 at $1314 and RUT closed at $824, a $7 increase. But all of these gains occurred on lower volume. 2.8 billion shares of the S&P 500 traded; this is not only down from yesterday but well below the 50 day moving average at 3.6B. Trading volume on the NYSE dropped 6% and trading decreased 8% on NASDAQ. Volatility declined slightly with the VIX closing at 17.9%. RUT rose intraday to hit $832 before pulling back to close at $824. RUT hit a temporary high of $830 in early March before dropping to a new low of $776 on March 15. Watching for a close above $830 in RUT would be one signal of a resuming bullish trend. Some analysts see today's strength in RUT as evidence of defensive moves into mid-cap stocks that tend to be primarily domestic companies with minimal global exposure.
My Apr condor on RUT is now positioned perfectly delta neutral with a P/L of +$1,840 and position delta = -$2 and position theta = +$66.
Have a pleasant and relaxing weekend.
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The markets traded downward until late morning and then began a gradual climb upward for the balance of the day. The SPX bounced up against resistance at $1300 right before the close and pulled back to close at $1298, up $4. RUT gained $3 to close at $811. A weak home sales report set a negative mood at the outset this morning. New home sales for February dropped 17% to 250k, down from January's 301k. Analysts were expecting 288k. News that Portugal's parliament had rejected the austerity plans also weighed on the afternoon's trading.Traders continue to be concerned about the global economy slowing due to higher oil costs. I think traders are also somewhat reluctant to "go all in" as we anticipate the Fed ending its quantitative easing program. In summary, there are many headwinds for this market that make the likelihood of resuming the strong upward trend less probable. On the other hand, the market has held up rather well in spite of Middle East unrest, a Libyan revolution, natural disasters and fears of a nuclear mishap. This leads me to expect the markets to continue to trade sideways or slightly upward.
My April iron condor on RUT is benefiting from this trading range; it now stands at a P/L of +$1,660, delta = +$14 and theta = +$68. So we will just continue to play what the market gives us. Don't fall asleep.
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The markets traded down at the open this morning but then revived and steadily traded upward throughout the balance of the day. The SPX gained $12 to close at $1312, above the resistance level at $1300 that had proven a barrier the last couple of sessions. RUT gained $6 to close at $817. Trading volume was slightly up from yesterday with 3.1 billion shares of the S&P 500 changing hands; this is still well below the 50 dma at 3.6B. Trading volume was up 1% on the NYSE and up 14% on NASDAQ. The VIX dropped down to 18%, the lowest level this month.
Orders of durable goods dropped 0.9% in February, down from a 3.6% gain in January. Analysts had expected a gain of 1.1%. Unemployment claims are basically flat from last week with a 5k decrease in initial claims at 382k and a 2k decrease in continuing claims at 3.7 million. This economic data coupled with European debt issues and the usual problems in the Middle East and Libya appeared to be ignored by traders today - a little surprising, to me at least.
My April iron condor on RUT at 700/710 and 900/910 stands at a P/L of +$1,500 and delta = +$17 and theta = +$92. I will be watching to see if SPX can hold above $1300 tomorrow and give us more confidence that the bullish trend has resumed.
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The markets opened upward a bit this morning, but immediately hit technical resistance and traded sideways and down the rest of the day. SPX hit $1299 right after the open, but never got close to $1300 again all day, closing down $5 at $1294. RUT closed at $809, down $4 on the day. Trading volume was very low with only 2.8 billion shares of the S&P 500 stocks trading today; this is the lowest trading volume in the S&P 500 this year. Similarly, trading on the NYSE was down 17% and trading volume was down 6% on NASDAQ. Traders continue to be focused on the unrest in the Middle East and Libya; oil traded above $105 today. The good news is that the markets have not broken down to test recent lows, but the bad news is that the bulls have not regained control of the markets. Based on today's volume, it appears most traders are on the sidelines watching and waiting.
My April iron condor on RUT at 700/710 and 900/910 is in excellent shape with both spreads about two standard deviations OTM. The current P/L is +$1,300 with a position delta of +$14 and a position theta = +$93.
So we continue to watch for signs of a renewed bullish trend or a continued correction. Or do we muddle sideways for a while?
