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The markets didn't display the classic "dead cat bounce" today after yesterday's bloodbath, but the major indexes traded modestly higher most of the day. But news that Moody's will be reviewing Spain's debt for a possible downgrade sent the markets lower in the last hour of trading. The Chicago PMI came in at 59.1, down form last month's 59.7 reading. The ADP employment report sees 13k more jobs, down from an increase of 57k last month. Most analysts have gloomy expectations for tomorrow's unemployment claims data and Friday's unemployment rate announcement. Softening of any of this data will confirm the fears of a double dip in the economy. Some of the market's influential analysts (Dennis Gartman, et al.) see the news from the G20 summit of cutting spending together with increased taxes as a lethal prescription likely to drive the world into a deeper recession. President Hoover is credited with the same policies creating the Great Depression in the thirties. Perhaps this recent rash of market weakness reflects that viewpoint.
The Russell 2000 Index (RUT) closed down $6 at $609, just above the support level at $607 set June 8th. If RUT breaks through this support level, the next stop is much lower at about $580. SPX closed at $1031, right in the support range of $1020-$1030 set back in Oct and Nov of 2009. Similar to RUT, a break-out below this level may not find support until around $980 from August of 2009. Trading volumes dropped from yesterday's high levels; trading on the NYSE dropped 13% and it was down 21% on NASDAQ. Trading the shares of the S&P 500 dropped back to 4.3 billion shares, below the 50 dma at 4.9 billion shares.
The Sept puts are nicely holding up the P/L of my Aug iron condor on RUT: P/L = +$180, delta = -$6 and theta = -$20. The delta of my short Aug 560 puts stands at 26. If that exceeds 30, I will close the put spreads and hold the long Sept puts. Play all of your positions very defensively; the mood of this market is decidedly bearish - I doubt that Friday's unemployment report will be greeted positively.
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The markets opened downward today and never looked back. The consumer confidence index took a plunge to 52.9 from 62.7. That news coupled with concerns over European sovereign debt financing tipped the markets over the edge. The Schiller Housing Index registered the first rise in housing prices in several months, but the index committee chairman said it was likely a temporary rise due to the federal housing purchase credit that expired at the end of April. So that lone piece of positive news was discounted. RUT closed down over $26 at $616 while the SPX closed at $1041, down $33. RUT closed just above its intraday low around $607 on June 7. SPX closed near the intraday lows set on February 5, May 25 and June 8. The last time SPX closed below $1041 was in November of 2009. Trading volume spiked with a 63% rise on the NYSE and a 53% rise on NASDAQ. Trading in the S&P 500 stocks topped 5.4 billion shares, well above the 50 day moving average (dma) at about 5 billion shares.
I adjusted my Aug condor with some Sept puts, and held its P/L to -$170 with a delta of -$20 and theta of +$4. The adjustment has killed most of my theta but this will hold the losses to a minimum while we wait to see if the index will bounce. If it breaks support and drops, I will close the put spreads and hold the long puts. If it bounces back up, I will sell the long put position.
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The major indexes traded upward a bit today, although the Russell 2000 Index traded up rather strongly by $12 to close at $645. This may be related to the fact that the components of the RUT will be reconstituted this weekend. SPX gained $3 to close at $1078. Trading volume increased significantly, increasing 20% on the NYSE and 71% on NASDAQ. Trading in the S&P 500 stocks jumped up to 5.5 billion shares, exceeding the 50 dma at 5 billion shares. The VIX dropped back 4% to 28.5%. It appears as though some of the anxiety in the market was diminished after seeing the final draft of the financial reform bill. Banks and financial services stocks did well today. GS ran up $5 to close at $140. The University of Michigan consumer sentiment survey also boosted the market with a reading of 76, its highest reading since January of 2008. But the major indexes continue to trade in a broad range established over the past month. If the decrease in VIX continues into next week, that will be helpful to anyone who established their iron condors this past week. So market analysts continue to watch for a trend, but so far, the market appears to be searching for its direction. Have a good weekend.
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Trading volume was very light today, dropping over 38% on the NYSE and volume was down 48% on NASDAQ. Trading in the S&P 500 stocks dropped from about 5.5 billion shares on Friday to 3.5 billion shares today, well below the 50 dma. Initially, it appeared that news from the G-20 summit would be reassuring to investors and the European markets did trade up today. U.S. investors had some good news with personal income rising 0.4% in May while personal spending rose only 0.2%. But the U.S. markets traded largely sideways and downward on very low volume. RUT dropped $4 to close at $642 while the SPX gave up $2 to close at $1076.
I established my Aug iron condor on RUT last week at 550/560 and 730/740 for a total credit of $4,600 on 20 contracts. At the close today that position remains near breakeven with position delta = -$7 and theta = +$79. This market appears to be locked into a sideways trading range for the time being - perfect for delta neutral trading strategies. But it is a nervous market. Watch your positions closely.
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The markets opened weak this morning and traded steadily downward, although with many swings back and forth through the day. The SPX dropped $18 to close at $1074 and the RUT dropped $11 to close at $633. This was the fourth successive drop in RUT and SPX. Trading volume was up today; trading on the NYSE increased 11% and it increased 8% on NASDAQ. The S&P 500 stocks traded about 4.1 billion shares, still below the 50 dma, but up substantially from recent sessions.
The bearish mood on the street is evident from the reaction to the economic data released today. Initial unemployment claims decreased by 19k to 457k and continuing claims dropped 45k to 4.548 million. Durable goods orders fell 1.1% in May, which was less than predicted. NKE and BBBY met their earnings forecasts and BBY increased its dividend by 7%. There is nothing stellar about any of these reports, but it isn't terrible news either. Yet the markets continued to trade lower. Personally, I think the persistent negative, anti-business, and anti-capitalist drumbeat from Washington is wearing down the very individuals and institutions capable of building jobs and digging our economy out of this hole. But, I would welcome your dissent if you see it differently.
Now we wait and see if the indexes break through the lows set in early June; if so, then maybe a new bear market has begun.
