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Consider the last three days of trading in the S&P 500. On Tuesday, SPX gained $25, but turned around and gave back $20 yesterday. Today, SPX closed at $2064, effectively unchanged (more precisely, down thirty five cents). RUT lost $6 to close at $1109. Volatility decreased a bit with the VIX closing at 14.4%. Trading volume was slightly up with 2.3 billion shares of the S&P 500 trading. Trading volume was only up 1% on th NYSE and was up 4% on NASDAQ.
SPX traded down to touch its 50 dma at $2054, but then executed a textbook bounce off support to close unchanged on the day. RUT broke its 50 dma during today's trading, but recovered to close precisely at the 50 dma of $1109. So we continue to watch a market that seems to be trapped in a sideways consolidation pattern. Perhaps traders will be treading water until after the presidential election? This scenario also conforms with historical patterns of lackluster trading through the summer (the "sell in May and go away" pattern). The Stock Traders Almanac has documented the historical strength of being long the market from November through April. $10,000 invested during those months would have grown to $838,486 for the past 65 years as compared to a $221 loss for May through October. This November, we will have the additional factor of a possible dramatic change in the White House. I can't predict who will be elected, much less how the market will react, but I think we have many forces that are uniting for a sideways market leading to November.
Initial unemployment claims rose this week to 294 thousand from last week's 274 thousand. Continuing unemployment claims also rose by 37 thousand to 2.161 million. That is the third week in succession of rising weekly claims; that may not be statistically significant yet, but I still find it concerning.
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AMZN is representative of this market. Some stocks like AMZN and FB are making surprising moves higher, but others are lethargic or being pummeled after a mediocre earnings announcement. But AMZN's influence was the key today. SPX closed today at $2084, up $26. RUT followed with an increase of $11, closing at $1129. VIX fell a point to 13.6%. Trading volume fell off a bit with 2.1 billion shares of the S&P 500 trading. Trading volume declined 5% on the NYSE, but rose 9% on NASDAQ.
As I look at SPX's chart, I have to wonder if we aren't locked in a sideways channel from about $2040 to $2110. Maybe the bulls and bears are at stalemate.
I'm at the Money Show in Las Vegas. It has been great to see many of my friends and clients. The program has been first class. I'm glad to say that my talk was full with people standing all around the room. But I need to get back to the meeting.
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Markets continued lower today, but trading volume declined. SPX closed at $2051, down $12 and RUT lost $9 to close at $1113. The VIX increased a half point to 16.1%. This decline seems to be slowing as though it will settle into support at $2040, where the market hesitated in the first couple of weeks of April, before moving higher. The 50 dma is also at $2041. In three of the last four trading days, SPX has traded down to lows for the day and then recovered into the close. Closes at the lows for the day are the scary signs of a pull back that may turn into a correction.
Trading volume fell off today with 2.3 billion shares of the S&P 500 stocks trading. Trading volume was flat on the NYSE and declined 3% on NASDAQ.
ADP's private payrolls report came out at 156 thousand jobs for April, down from March's 194k. If that is a sign of a weak jobs report Friday, this recent market decline could get worse. Factory orders were up 1.1% for March, a big improvement over February's 1.9% decline. The ISM Services survey increased slightly to 55.7 for April, up from 54.5.
I closed the SPX May condor in the Flying With The Condor™ service for a nice gain of 16%. The June condor is positioned delta neutral in the Russell 2000 Index and is up 5%.
Today's trading volume decline may carry into tomorrow as traders look to the jobs report on Friday.
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The jobs report came in this morning well under analyst estimates with 160 thousand jobs, down from last month's 208k. The markets opened lower, but recovered to post gains for the day.
SPX gained $7 to close at $2057, while RUT closed up $7 at $1115. Even more encouraging for the bulls was a drop in volatility with the VIX closing at 14.7%, down 1.2 points. SPX dipped down to touch support at $2040, but then bounced to close seventeen points higher. SPX also closed above the 50 dma at $2045, which often acts as support. Some analysts interpreted the market's strength in light of the weak jobs report as traders presuming that the Fed will delay raising interest rates as a result of the weak employment numbers.
Trading volume was flat to weak with 2.2 billion shares of the S&P 500 trading, well below the 50 dma at 2.4B. Trading volume fell 2% on the NYSE, but rose 2% on NASDAQ.
I conclude that the stalemate between the bulls and the bears is likely to continue.
Have a great weekend. If you are going to the Money Show in Las Vegas next week, let me know so we can get together.
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This market keeps traders on edge. I am starting to think that day traders may be better off than long term investors. At least, they may sleep better.
After Thursday and Friday's declines, Monday's rally was welcome. But then we gave it back today. SPX closed down $18 to $2063 and RUT lost $19 to close at $1122. The common denominator between Friday and today's trading was the late recovery. SPX dipped to $2055 today, but then recovered somewhat to close at $2063. That suggests that the bulls are still in the game; they haven't panicked and headed for the exits just yet. Maybe this is just a sideways consolidation market with high levels of price volatility. Many of us have been remarking on the exceptional price volatility for a couple of years now. Maybe it's time to admit this is part of the new world. Blame it on high speed computer algorithms or whatever, but it is what it is. If we are going to play this game, we have to accept the basic nature of the market.
The decline in implied volatility as measured by the VIX yesterday was given back today with VIX closing at 15.6%. Trading volume increased today with 2.5 billion shares of the S&P 500 companies trading. Trading increased 4% on the NYSE and increased 6% on NASDAQ.
We didn't have any significant U.S. economic news today. Tomorrow brings the ADP private payrolls number that many view as a precursor to the jobs report Friday. Sleep well...
