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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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- Category: Dr. Duke's Blog
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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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After choppy trading up and down, the major indexes closed near the unchanged marks; RUT closed down $2 at $644 after trading down to the 200 dma and then bouncing back upward. SPX closed at $1092, a loss of $3 on the day. Trading volume was flat on the NYSE, NASDAQ and flat to slightly increased in the S&P 500 stocks. A 2.2% decrease in new home sales was reported for May this morning; that didn't help the market's mood, but it wasn't really a surprise after yesterday's disappointing existing home sales report. Similarly, the FOMC meeting report in the afternoon didn't really contain anything new, so that was also a market non-event.
A look at the RUT and SPX price charts shows a classic doji candlestick on RUT and a close replica on SPX. These patterns confirm what we already know - this market is seeking direction; the bulls and bears are struggling for control. Both indexes have been pulled back to the middle of their Bollinger bands since hitting the top of the band on Monday. It is hard to predict what news or series of events will tip this market in one direction or the other. Or maybe the choppy trading we saw today will be typical of the summer?
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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.
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The markets opened modestly higher this morning, but, similar to yesterday, the indexes were pulled back into negative territory quickly and the pace downward accelerated in the afternoon. SPX decisively broke through support at the 200 dma ($1111) to close at $1095, losing $18 on the day. RUT traded similarly, dropping $14 to close at $646. Both RUT and SPX have been pulled back into the trading ranges defined over the past several weeks. For RUT, that range is roughly $610 to $670, and $1040 to $1105 on SPX. Trading volume continues to be either flat or declining as it has been over the last several trading sessions. Volume on the NYSE was up only 3% and was flat on NASDAQ. Trading in the S&P 500 stocks continues to run around 3.5 billion shares, well below the 50 dma at 5 billion shares.
Weak home sales (down over 2%) certainly didn't help the mood in the markets, but it appeared as though the markets were following the Euro as it traded lower this afternoon. News of so-called "savage austerity" measures for several government budgets in Europe appeared to worry traders - although one could argue those measures will be beneficial in the long term. The home sales data also started much more serious discussions of the possibility of a "double dip" in real estate bleeding over into the economy. In general, the mood on the street appears pretty gloomy. All news is being viewed from a pessimistic bias. Trading may be confined within the range of the past few weeks for a while.
When I was evaluating my positions after the close yesterday, I was surprised to see how much of the potential profit for the July iron condor was available. This morning, I closed the RUT July 520/530 750/760 iron condor for $0.20 on each side, resulting in a net gain of $2,140, 73% of the maximum profit available at July expiration. This $2,140 gain represented a 13% gain on capital at risk. I may consider opening my August condors a little earlier than normal to take advantage of the current sideways trading range.
