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The collective market appeared to hold its breath this morning waiting on some significant news embedded in the FOMC announcement. Immediately after the announcement, the talking heads started reading the tea leaves and the markets gyrated back and forth, but all of the major indexes closed down a bit on the day (except the Dow which is essentially unchanged, up $7). SPX closed at $1140, down $3 while RUT lost $5 to close at $665. SPX is holding above the significant resistance at $1131 it broke yesterday and RUT is holding just below the highs it set in mid-June and late July. So, it appears the market has stalled here. The Fed announcement didn't appear to say anything new. Bernanke and company have been talking about additional "quantitative easing" for some time now, but it all appears to be talk so far. Plus, I read considerable debate questioning the Fed's ability to actually prop up the markets. Many believe the FOMC language is designed to instill confidence and nothing more. So we sit and wait for some news event to push the market one way or the other. But don't be deceived by this market recent run upward; 27 states reported higher rates of unemployment in August. We are not out of the woods yet.
Our Oct position remains in jeopardy, but the delta of our Oct $690 calls has pulled back to 29, so I have decided to hold the call spreads open for now. The Oct iron condor stands at a P/L of -$2055 with position delta = -$69 and theta = +$113. A stalled market such as this is perfect for condor traders; it is just unfortunate it chose to stall so close to my call spreads.
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The markets opened weakly this morning but then gathered strength and never looked back. There wasn't any economic data or other news to point to as the reason for the moves; some analysts saw the strong moves in Europe's markets as starting the trend. In any case, the move was typical of the market for the past several sessions: positive movement but on weak volume. The SPX closed at $1143, well above above its resistance level at $1131 and up $17 on the day. RUT closed at $670, up $19. Both indexes closed near their highs for the day. But trading volume fell across the board. The S&P 500 stocks traded 3.1 billion shares, well below the 50 dma. Trading on the NYSE dropped 37% and trading dropped 18% on NASDAQ. The FOMC will make its interest rate announcement tomorrow and we will receive some housing start data as well. We'll see if this bullish trend can continue. The light trading volume makes it hard to take this bull market very seriously.
My Oct iron condor position was stretched very thin by this move today. Even with help from the Nov $690 call hedges, the position is underwater by $2,500 with position delta = -$90 and position theta = +$97. The theta/delta ratio is adequate, but the delta of my short Oct $690 calls is up to 32 - time to get out of Dodge! Unless we get a pull back tomorrow, I will be closing and rolling call spreads.
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The markets opened downward this morning and chopped sideways and down for most of the day. Much of the loss was recovered late in the day. SPX closed unchanged at $1125, near its high for the day. RUT dropped $5 to close at $648. Trading volume was flat to down with the S&P 500 stocks trading flat at 3 billion shares. Trading on the NYSE dropped 2% and it dropped 13% on the NASDAQ. Initial unemployment claims reported at 450k, down three thousand from last week. Continuing claims were down 84k to 4.485 million. The PPI (producer price index) rose 0.4% in August, surprising analysts who expected a smaller increase.
Gold hit record highs today at $1,277 per ounce. To my mind, that demonstrates the high levels of fear and uncertainty still present among investors. A contrarian might see this as evidence that the bearish mood has run its course. But I think the equity markets will struggle to gain higher ground until we see significant improvement on the unemployment front.
My Sept RUT iron condor positions will all expire worthless this weekend; that closes Sept for a 15% gain. My Oct iron condor continues to torment me; the market is hovering right around the levels where I need to hedge this position and then remove the hedge. Today I sold the long Nov calls I bought yesterday. This position now stands at a P/L of -$685, delta = -$93 and theta = +$142. Theta is still larger than delta, but not by as much as I would like. The delta of the short Oct calls stands at 18, right at the edge of triggering the adjustment. So we continue to watch and see if the markets can break through resistance at this level or turn back downward. The way the bulls keep pushing the indexes back up each day is impressive. But if resistance continues to hold, sooner or later we will get some bad news that will push us back down to support levels.
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The markets opened with some enthusiasm this morning and SPX broke through its strong resistance at $1131, but it was short lived. The S&P 500 index pulled back and traded near unchanged for most of the day, closing at $1126, up less than a dollar. RUT traded up, pulled back and then traded mostly sideways, but managed to close up $4 at $651. Trading volume on this expiration Friday was expected to be high and it didn't disappoint; trading in the S&P 500 stocks jumped to 4.2 billion shares, well above the 50 dma at 3.5 billion shares. Trading on the NYSE was up 72% and volume was up 36% on NASDAQ. The University of Michigan consumer sentiment survey was down a bit from last month at 66.6 and the Consumer Price Index was up 0.3%, as predicted by most analysts. So the economic data didn't really surprise anyone, but it didn't give anyone the incentive for a buying spree either.
My Oct RUT iron condor spreads now stand at a P/L of -$125, position delta = -$104 and position theta = +$115. The delta of the short Oct $690 calls closed at 18, so we remain right at the edge of requiring an adjustment. So now we condor traders sit back and enjoy the weekend of time decay...
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The area of $1125 to $1130 is a key resistance level for the S&P 500 and the SPX traded as high as $1126 today but then closed at $1125, up $4 on the day. RUT has similar resistance levels, one broad one set in early August, at $655 to $665, and another resistance level at $670, set in late July. RUT traded down to $643 before running up to $654 and closing at $653, up $3 for the day. The early weakness in the markets was driven by several weak economic data reports. The Empire Manufacturing Survey reported out at 4.1, down from 7.1 last month. Industrial production gained 0.2% in August, down from the previous month's gain of 0.6%.Capacity Utilitization was flat at 74.7%. Trading volume was down with the S&P 500 stocks trading 3 billion shares. Trading on the NYSE was down 4% and volume was flat on NASDAQ.
The market jerked me around today. This morning the delta of my $690 calls in my Oct iron condor dropped to 16, so I sold my hedge options. Then a couple of hours later, I am back in the market buying more protection. The delta of the Oct $690 calls closed at 21. My position's P/L stands at -$615 with position delta = -$40 and theta = +$97. The theta/delta ratio is still strong, but RUT has been trading right around my adjustment trigger. But all you can do is follow your rules and trade what the market gives you.
By the way, I will be speaking at the Trader's Expo in Las Vegas on November 19. Consider coming out to this meeting; if you are there for my talk, catch me afterwards and I will buy you a drink.
