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The jobs report this morning caused traders to pull back and reconsider their bullish stance. However, by the last half hour of trading, the bulls had reaffirmed their optimism and started buying in earnest. The SPX closed at $1225, up $3 on the day. By contrast, RUT traded in positive territory all afternoon, setting a new high for the year at $756, up $5. Trading volume was down with an 18% drop on the NYSE and an 11% drop on NASDAQ. Trading in the S&P 500 stocks dropped below its 50 dma. Economic data was mediocre to disappointing today, led by a disappointing jobs report. Small increases in payroll numbers were reported but much smaller than expected. In addition, the overall unemployment rate increased to 9.8%. Factory orders fell 0.9% and the ISM Services Index remained essentially flat at 55.0 (up from 54.3 in October).
While the futures dropped significantly after the jobs report was released this morning, the market slowly recovered throughout the afternoon. From my perspective, this looks like a bullish market that is not going to be easily dissuaded.
My RUT Dec iron condor stands at a P/L of +$1,980 with a position delta = -$67 and position theta = +$156. The 790/800 call spreads stand just outside of one standard deviation and we only have two weeks remaining, but RUT is making new highs every day. The Jan condor on SPX remains underwater with delta = -$76 and theta = +$80. The roughly one-to-one ratio of theta to delta warns us that this position is weakening and nearing the point of either adjustment or repositioning. December is historically a slow, largely sideways month as everyone starts to take off for the holidays. So this bullishness of the past few days may be tempered somewhat over the next couple of weeks. However, 2010 has been anything but typical so far.
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Now we have two very strong successive bullish days in the market - what will happen tomorrow after the jobs report? Profit taking or a continued strong bullish run? The SPX tacked on $15 today, closing at $1222. RUT gained $8 to set a new 2010 high at $751. Volume remained strong, but approximately flat with the past two days in the market. 4.1 billion shares of the S&P 500 stocks traded, slightly less than yesterday but still above the 50 dma. Trading on the NYSE was down 2% and was also down 4% on the NASDAQ.
Initial unemployment claims increased by 26 thousand to 436k and continuing claims also increased from 4.217 million to 4.270 million. But this didn't seem to affect the markets. Pending home sales jumped by 10.4% in October, which is the largest month-to-month change in ten years. This buoyed home builder stocks and fueled the overall market as well.
My Dec iron condor on RUT stands at a P/L of +$1,260 with delta = -$72 and theta = +$214. In spite of RUT hitting new highs, the 790 calls remain one standard deviation OTM and have a delta of 9. I hedged my January iron condor on SPX today, resulting in a P/L of -$1,460, delta = +$16 and theta = +$20. Can this market make it three in a row?
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Traders continued to worry about the European debt situation today, driving the indexes lower from the open. Similar to yesterday, much of the losses were recovered before the close. An improvement in the consumer confidence survey helped, rising from 49.9 in October to 54.1 in November; in addition, the Chicago PMI rose to 62.5 from last month's 60.6. But the indexes still closed with losses for the day. SPX lost $7 to close at $1181 after trading as low as $1174. RUT closed at $727, down $5. Trading volume was up across the board with 3.8 billion shares of the S&P 500 stocks changing hands; volume was up 34% on the NYSE and up 36% on the NASDAQ. Both indexes continue to trade within the consolidation range of the past three weeks or so.
My Dec RUT condor stands at a P/L of +$820 with delta = +$33 and theta = +$163. The Jan condor on SPX stands at -$1600 with delta = -$9 and theta = +87. This position is still delta neutral and the put spreads are well over one standard deviation OTM, but today's increase in volatility hurt the position's P/L.
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The volatility of recent markets continues to amaze me. The major indexes all traded up to within striking distance of their 2010 highs within just a few hours of trading this morning. SPX closed up $26 at $1206, close to its April high of $1217 and its November high of $1223. RUT closed at $743, up $16. This actually exceeded the high closes in April at $742 and November at $737. Trading volume was still high, but slightly off of yesterday's record levels. 3.7 billion shares of the S&P 500 stocks traded today, down from yesterday but still above the 50 dma. Trading was down 9% on the NYSE and down 8% on NASDAQ.
The economic news was modestly positive with the ISM manufacturing index at 56.6 for November, about flat with October. Construction spending was up 0.7% on October, but economists were predicting a decline of 0.5%. ADP reported an increase in private employment of 93 thousand jobs. The FOMC released their Beige Book this afternoon, but it had no effect on the markets one way or the other. The volatility index dropped about 10% today.
My Dec condor on RUT stands at a P/L of +$1,320 with position delta of-$27 and position theta = +$199 with 15 days left to expiration. The 790/800 call spreads appear to be safe enough for now with a delta of 7, but a bullish run like we had in mid-Sept to mid-Oct could get there. The Jan condor on SPX stands at a P/L of -$1800, position delta = -$34 and position theta = +$95. The delta of the SPX $1280 calls hit 16 today so this position may require adjustment soon.
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The markets opened weakly in response to news of Ireland's bailout amid concerns about other European countries perhaps needing similar programs in the near future. SPX dipped as low as $1174 before rebounding to close at $1188, down less than $2. RUT also dove as low as $721 before recovering most of the losses to close at $732, down only $1 on the day. Trading volume was up as compared to Friday's half day of holiday trading, but remained below long term averages. 2.9 billion shares of the S&P 500 stocks changed hands but the 50 dma = 3.5 billion shares. The major indexes are marking pretty clear trading ranges over the past three weeks or so. The question is whether some event can cause a break out one way or the other? It seems like a good time for sideways strategies on your favorite stocks.
My Dec RUT iron condor at 660/670 and 790/800 is in nearly perfect position with a P/L of +$840, delta = +$7 and theta = +$185. The Jan SPX iron condor at 1060/1070 and 1280/1290 stands at a P/L of -$300, delta = -$18 and theta = +$67.
