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The markets were subdued today, probably due to many traders taking an extended long weekend. The fact that markets remained closed in Europe may have influenced those decisions. SPX closed at $2037, up one dollar. RUT also closed up one dollar at $1073. Volatility rose a half point to 15.2%. Trading volume reflected the small market gains with only 1.7 billion shares of the S&P 500 stocks trading today. Trading dropped 17% on the NYSE and declined 12% on NASDAQ.
Pending home sales were encouraging, increasing 3.5% in February, a big improvement over January's 3.0% decline.
The balance of the week is loaded with economic data: Case Schiller housing prices, ADP private payrolls, Chicago PMI, ISM manufacturing index, and construction spending. And the week ends with the jobs report, aka, the non-farm payrolls report.
Until tomorrow...
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We had become accustomed to higher prices every day, but it had to slow down eventually. Yesterday's market shook off the Brussels attack, but pulled back a bit today for no apparent reason. SPX closed down $13 to $2037 and RUT gave up $22 to close at $1076. Volatility rose almost one point with the VIX at 14.9%. Trading volume was up slightly with 2.1 billion shares of the S&P 500 companies trading. Trading on the NYSE rose 8% and trading volume was up 11% on NASDAQ.
New home sales came in at 512 thousand for February (annualized); this is a small increase from January's 502k.
The 200 dma at $2017 should act as support for the SPX. The resistance level at $2050 has now been reinforced; it will be even harder to break through next time. RUT is back in the neighborhood of the August flash crash retest. Earlier this month, RUT thrashed in this area for about two weeks and never did break through the August flash crash levels at about $1105. We may be caught in this choppy market for a while.
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Equity and index options expire tomorrow at midnight. Many of you may think that today was expiration, but the options contract is a binding legal contract and the brokers need time to make all of the cash transfers and equity purchases and sales before the contracts expire. SPX settled at $2050.07 and RUT settled at $1097.85. I closed our SPX Mar 2050/2060 call spreads yesterday for $1.00; allowing them to enter expiration would have saved us some money; settlement at $2050.07 means one contract would have resulted in a $7 debit whereas we spent $100 to close one spread. But we would have been taking a big risk. Sometimes the difference between the Thursday close and settlement is large. It averaged $9 for SPX last year but ran as high as $23. If you are interested, download my SPX and RUT settlement spreadsheet.
SPX closed at $2050 today, up $9. RUT also continued to run, closing up $10 at $1102. Volatility continued to contract with VIX losing half a point to 14%.
SPX has now put the 200 dma in the rear view mirror. The high at $2078 from December 29th is the next resistance level. I am inclined to think the Fed induced euphoria will end by then. For example, here is a sobering stat: FactSet reports that the estimated profit margin for the first quarter for the S&P 500 is 9.3% - the lowest since 4Q 2012. If we exclude energy companies, it rises to 10% and that is the lowest since Q1 2014. Either way, that doesn't look like the economic strength one expects behind a bull market.
Enjoy your weekend. The tulips are sprouting outside. But we are expecting snow this evening. Let me go check why we are living here...
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The markets paused today with SPX rising only two dollars to $2052 and RUT losing three dollars to close at $1099. Volatility continues to contract with the VIX dropping about two tenths of a point to 13.8%.
Trading volume was down dramatically after expiration Friday with 2.0 billion shares of the S&P 500 stocks. Trading on the NYSE dropped 52% and trading volume dropped 44% on NASDAQ.
The only economic data released today were existing home sales for February at 5.08 million, down from 5.47 million homes.
SPX opened weakly this morning and traded down to $2043 before rebounding to close at $2052. It seems as though everyone assumes the bull market is returning. This is surprising since it wasn't long ago that the doomsday gurus were on every finance cable network. The reality is probably in between those extremes. The basic U.S. economic data simply don't support the idea of a booming market. But those same data don't support the dire predictions of recession either. Stay tuned.
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I admit to having greatly underestimated this bullish run. I keep studying the basic economic data, looking for the strong growth the market seems to imply. But I have made the mistake of discounting the role of the Fed and near zero interest rates. The market loves the Fed. The major indices opened weakly this morning, but it didn't take long for the bulls to reassert themselves. SPX ran up $13 to close at $2041 while RUT gained $17 to close at $1091. Volatility continues to contract with the VIX dropping to 14.4%. Trading volume rose again today with 2.6 billion shares of the S&P 500 companies trading. Trading volume on the NYSE rose 17% and trading on NASDAQ rose 11%.
Initial unemployment claims came in at 265 thousand this week, up slightly from last week's 258 thousand. Continuing unemployment claims rose from 2.227 million to 2.235 million. The JOLTS job openings report cited 5.541 million job openings for January, up from 5.281 million. The Philadelphia Fed manufacturing survey increased to 12.4 for March, up dramatically from February's -2.8.
I closed the March SPX condor today in the Flying With The Condor™ service for a gain of 7.5%. That brings our year to date performance to -2.3%. As of today's close, SPX is finally positive for the year, up 0.1%. We are still working off our February loss.
SPX has now cleared the 200 dma and is above the bearish trend lines drawn from the November and December highs. The next resistance level is the high of $2078 from December 29th. I still find it hard to rationalize new highs in the market above $2078 (12/29/15) and $2103 (12/1/15). But I have been wrong so far...
