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Trading volume jumped up significantly today, but the overall market averages didn't change too much by the end of the day. SPX opened up well into the red this morning, but recovered early and traded sideways for small losses throughout the day. Then, in the last 15 minutes, it barely broke into the black, closing up one dollar at $1322. RUT traded similarly, but moved back into positive territory this morning and stayed there all day, closing up $3 at $813. CSCO's disappointing earnings announcement last evening certainly didn't help the tech stocks today; trading on the NASDAQ was up 31%. Trading in the S&P 500 was also up significantly, jumping to 3.8 billion shares, well above the 50 dma. Trading volume was up 10% on the NYSE. News out of Egypt near the close of trading regarding Mubarak's continued role in the government created some volatility as the market closed and it is unclear how that may affect the open in the morning as that news is analyzed. News reports on the reaction of the Egyptian people will be a critical part of that analysis. It is hard to predict the effect on the markets.
Initial unemployment claims fell dramatically to 383k, down from last week's 419k and well below the expectations of 410k. Continuing unemployment claims also dropped to 3.88 million from last week's 3.93 million. But that positive news didn't appear to move the markets.
My Mar iron condor stands at a P/L of +$200, delta = -$43 and theta = +$94. The call spreads are greater than one standard deviation OTM and the put spreads are over two standard deviations OTM, so this condor is in a pretty good position.
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The Dow was the only major index to post a gain today; the broader indexes all posted small losses. Markets opened up slightly down, attempted to move into positive territory by late morning, but then chopped sideways and lower the rest of the day. SPX closed down $4 at $1325 and RUT closed at $814, down $4 on the day. It appeared the markets were looking for something new from Bernanke's testimony before Congress, but nothing new was revealed, and it didn't appear to have much of an effect on the markets. Trading volume was up slightly with 3.1 billion shares of the S&P 500 trading today; this is still well below the 50 dma at 3.5 billion shares. Trading on the NYSE was up 6% and volume was up 6% on NASDAQ as well. Volatility jumped at the open but settled down to close under 16% at the close.
My Mar condor on RUT stands at a small gain of $140 with a position delta of -$37 and position theta = +$97. Is the market just pausing a bit or is the correction around the corner? It seems like too many analysts are preaching "correction" for that to actually occur. I trade both directionally and non-directionally, but one big advantage of non-directional trading is the freedom from predicting the market. That's a tough business.
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Traders were encouraged by some acquisition activity this morning and the markets opened up in positive territory and were strong all morning. The broad markets hit their highs just before noon, but they held most of the gains into the close. SPX gained $8 to close at $1319, a new 52 week high. RUT closed at $808 with a gain of $8; today's close on RUT matched the highs made in mid-January. However, today's market gains were made on lower volume. 3.1 billion shares of the S&P 500 changed hands, down a bit from Friday and below the 50 dma at 3.4B shares. Trading volume was down 3% on the NYSE and down 11% on NASDAQ. AAPL marked up a new 52 week high and prompted many to chatter about it being over-priced.
My Mar iron condor on RUT stands at a P/L of +$380, delta = -$31 and theta = +$76.
One measure of this bull market will be whether the support level at $1300 on SPX can hold if we have a minor pull back in the next week or two. That nearly straight-upward price chart on SPX does give one pause; no wonder so many analysts are predicting a correction. But the market does seem to have the ability to prove the largest number of analysts wrong at any given point in time. Which is why it is easier to play what the market gives me than what I am predicting.
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The markets opened up in the red this morning based on news of China's interest rate hike and continued concerns over the unrest in Egypt. China's interest rate hike renewed debate over the Fed's monetary policy, with some analysts arguing that quantitative easing should be discontinued. But as the trading day worn on, traders apparently became more comfortable and traded the broad indexes higher with the strongest gains occurring in the last hour of trading. SPX closed at $1325, up $6 and RUT gained $5 to close at $814. RUT set a new 52 week high with today's close. In fact, RUT has not been at these levels since late 2007. However, trading volume was down again today with 3.0 billion shares of the S&P 500 stocks changing hands, down from yesterday and well below the 50 dma at 3.5B. Trading on the NYSE was flat with no change from yesterday and volume was up 3% on NASDAQ. Setting new highs on lower volume isn't a healthy sign of a bull market, so be cautious. I am not suggesting sitting on the sidelines; on the contrary, "make hay while the sun shines". But be ready to bail out and protect your gains.
My March iron condor on RUT at 690/700 and 875/885 stands at a P/L of +$340 with delta = -$40 and theta = +$82. The theta/delta ratio is good at about 2:1 but this ratio will deteriorate if this bull run continues higher. With 37 days to go, we have plenty of time to get in trouble, so the trade must be managed carefully.
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The jobs report surprised and puzzled analysts this morning. The good news was an unexpected drop in unemployment from 9.4% to 9.0% - most analysts were expecting an increase to 9.5%. The bad news was a less than expected number of new jobs created of 36k - analysts were expecting 135k. Should we interpret this as good or bad news? Some analysts noted that the population estimates used in the unemployment rate calculations were revised this month and this accounted for the unexpected drop in the unemployment rate. The report also revised the last 12 months of jobs data to reduce the number of new jobs reported by 378 thousand. Judging from the choppy sideways day in the markets, most traders didn't take this jobs report as great news. SPX closed at $1311, up $4 while RUT gained a little over one dollar to close at $800. This is the fourth day SPX has managed a close above the support level of $1300, so that is positive for the bulls, but the market action has been anemic. Trading volume was flat to down with 3.0 billion shares of the S&P 500 stocks trading, down from 3.5 billion yesterday. Volume decreased 9% on the NYSE, while trading was up 1% on NASDAQ.
Those of you trading PCLN were given a shock today when they announced that earnings would be webcast on Feb. 23, an announcement previously scheduled for Feb. 17 before Feb options expiration. This caused the implied volatility (IV) in the Feb options to collapse and IV in March exploded. I had a Feb/Mar $420 call calendar that was doing well with a 32% gain until this morning when I closed it for a 127% gain! However, anyone holding long Feb options on PCLN is crying in their beer at this hour.
My Mar iron condor spread is doing well with a P/L of +$260, position delta of -$16 and position theta = +$77. The 875/885 calls are over one standard deviation OTM while the 690/700 put spreads are almost two standard deviations OTM.
