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It was a wild ride in the markets today; after opening down, the markets recovered quickly but then traded back and forth all day, ending the day with minor losses. RUT traded as high as $672 and closed down $3 at $666; SPX closed unchanged at $1115 after trading from $1107 to $1119 during the day. Trading volume remains low with a 2% increase on the NYSE, and flat on NASDAQ. Trading in the S&P 500 stocks dropped to 3.5 billion shares, well below the 50 dma at 5 billion shares. RUT does not seem to be able to break out of its recent trading range from $615 to $670.
The economic news today was not reassuring for the bulls. Housing starts for May came in at 593k, well below the 680k expected by analysts. Similarly, building permits came in below expectations at 574k. The PPI declined 0.3% and capacity utilization rose to 74.7 from 73.7. Top that off with weak earnings forecasts from Nokia and FedEx and it was hard for the bulls to hold any momentum. On the other hand, the bears have not been able to hold any of the intraday declines.
My June RUT condor stands at a P/L of +$1,176 with delta = -$2 and theta = +$462. July is also in good shape with a P/L of +$1,440, delta = -$22 and theta = +$103.
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The markets opened strong this morning and steadily traded upward all day. The RUT and SPX have both reached critical areas on their respective price charts. SPX broke through the 200 day moving average (dma) at $1108 and closed at $1115. During much of May, the SPX traded in the range of $1100 to $1175. Today's close places the SPX right at the bottom of that range; tomorrow's price action will show whether it has truly entered a new trading range or whether it pulls back into the range of $1040 to $1105 of the past few weeks. The RUT chart is somewhat different in that RUT is well above its 200 dma at $634 and it has not yet broken out of its current range of $615 to $670. But RUT is similar to SPX in that it is sitting at the edge of the trading range - will it break out or pull back?
Trading volume continues to be rather weak and this does not bode well for a continued advance. Trading volume was up 2% on the NYSE and up 18% on NASDAQ, but the S&P 500 stocks traded about 3.8 billion shares, well below the 50 dma of 5 billion shares. I interpret this as a lack of conviction by the broad market that this rally has legs.
In the meantime, my condor positions are in excellent shape. The June 590/600 and 710/720 RUT iron condor stands at a P/L of +$1,096, delta = -$20 and theta = +$285. Normally, I wouldn't be in a condor position during expiration week, but the extreme volatility of the past few weeks has forced me to leave this trade open to salvage a gain. The put spreads are well outside of two standard deviations and the calls are just inside of two standard deviations, so this trade is well positioned.
My July 520/530 and 750/760 condor stands at a P/L of +$1540, delta =
-$26 and theta = +$88. This position is in excellent shape; if this rally continues, I will consider closing this position to lock in our current gains.
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The markets traded up again today on conflicting economic news, and the major indexes closed at the their highs for the day, just like yesterday. This action would normally be seen as very bullish, but trading volume dropped dramatically today with a 22% drop on the NYSE and a 16% drop on NASDAQ. Only 3.5 billion shares of the S&P 500 stocks traded today, down from 4.2 billion yesterday and well below the 50 day moving average at five billion shares. This makes me wonder about the strength of this rally. Economic news was mixed with retail sales disappointing by dropping 1.2%, but the University of
Michigan Consumer Confidence Survey came in at a two year high.
RUT closed up $9 at $649 while the SPX closed at $1092, for a gain of $5. Both indexes are now just above the midpoints of their recent consolidation ranges. Today's rally in RUT pushed both my June and July iron condors into positive territory. The June position now stands at a P/L of +$256 with position delta of +$50 and theta = +$247; July stands at a P/L of +$1140 with position delta of +$6 and theta = +$78. So now we wait to see what Monday brings; this market is very susceptible to headline risk at this point. So the weekend could bring some surprises. The decreasing trading volume of the last two days concerns me; this seems like a rally that lacks conviction.
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Sorry to be late with the blog, but my web site had some back room
problems this afternoon and I could not get into the admin pages.
This morning the SPX appeared determined to
break through the 200 day moving average at $1108, but just fell short
at $1106. From about noon on, the markets slowly traded downward, giving
back virtually all of the early gains. RUT was unique among the major
indexes in that it retained some positive gains, closing up $3 at $652.
SPX traded up to $1106 and then gave it all back, closing down $2 at
$1090. Moody's downgraded Greece debt this afternoon and that didn't
help, but the market was already trading down. Trading volume remains
low, which argues against the substance of any possible bullish
break-out like this morning's run upward. Trading volume was up 10% on
the NYSE, but flat on NASDAQ and also flat on the S&P 500 stocks. The market appears to be holding in this basing pattern.
My iron condor positions are sitting pretty with the June iron
condors on RUT standing at a P/L of +$756 with position delta = +$16 and
theta = +$368. The July position stands at a P/L of +$1,180 with
position delta = -$5 and theta = +$96. But I expect today's market
volatility will continue this week, so it would be a mistake to assume
these trades are safe.
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The markets opened up strong this morning and steadily rose throughout the day, with the major indexes closing at their intraday highs. Strong China export data may have helped shift the mood and the unemployment data showed modest improvement. Initial unemployment claims came in at 456k, down three thousand from last week, and continuing unemployment claims were 4.462 million versus the previous revised figure of 4.717 million. But this data takes on a different look if you graph the trend; initial unemployment claims peaked in March of last year, slowly declined to November and have been basically drifting sideways in the range of 440k to 460k since then. RUT closed at its high for the day at $640, a gain of $22. SPX also closed at its high for the day at $1087, a gain of $31. However, trading volume declined 14% on the NYSE and dropped 5% on NASDAQ. Trading in the S&P 500 fell back below the 50 day moving average to 4.2 billion shares.
My June iron condor on RUT at 590/600 and 710/720 stands at a net loss of $1544 with position delta = +$93 and position theta = +$326. This position still retains a profit potential of about $1300 if the RUT continues to trade in this sideways consolidation range. The July iron condor on RUT at 520/530 and 750/760 is now nearly perfectly delta neutral with a net gain of $700, position delta = +$2 and position theta = +$90. Today's strong gains on lower volume appear to support the postulate of the markets trading in a consolidation or basing pattern. For the SPX, that range is $1040 to $1107. For RUT, that range is larger, from about $607 to $670. A break-out to the downside on increased volume would signal a new bear market, while a break-out to the upside on increased volume would signal the end of the bull market correction. In the meantime, we may continue to see these large swings back and forth.
