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Yesterday, it seemed as though the market wasn't too happy with the ECB's announcement and Mario Draghi's news conference. But after some reflection, the bulls came out swinging this morning and never backed off. Apparently, negative interest rates are the friend of the bulls.
SPX closed up $33 at $2022. RUT closed at $1088 for a gain of $24. Volatility pulled back with the VIX dropping two points to 16.5%. Trading volume contracted a bit with 2.4 billion shares of the S&P 500 companies trading today. Trading volume dropped 9% on the NYSE and declined 8% on NASDAQ. SPX closed right at the 200 dma. I was surprised it didn't bounce off the 200 dma. We'll see on Monday. Breaking that level will confirm the end of the correction and send the doomsday folk to the back room.
There wasn't any significant economic data reported today. Traders will begin to focus on the FOMC meeting and announcement next week. We have long list of economic data coming out next week: PPI, CPI, retail sales, housing starts, building permits, and several others. But the Fed announcement is the biggy (technical term).
Have a great weekend. We are actually having some nice weather in Chicago.
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The markets appeared to be just treading water today as they anticipate the meeting tomorrow with Mario Draghi and the ECB.
SPX closed up $10 at $1989 and RUT increased $5 to $1073. Volatility relaxed a little with the VIX falling about a third of a point to 18.3%. Trading volume continued to decline with 2.3 billion shares of the S&P 500 trading today. Trading volume declined 12% on the NYSE and also dropped 9% on NASDAQ.
No significant economic news came out today. Will Draghi's actions tomorrow push our markets higher? Or will it serve as a reminder that the central banks are running out of bullets? It is hard to predict the direction, but it will likely move our markets.
SPX has run up against resistance at $2000. That level and the 200 dma at $2020 are the levels that need to be broken before we can be reasonably confident the downdraft so far this year has been curtailed. Many analysts have drawn a bearish trend line from the December highs, and that trend line is very close to the 200 dma. So that level on SPX is crucial to watch.
So we wait on Mario...
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The bulls have been on a strong run higher for the past couple of weeks. Today's slowing only seems natural. SPX broke through the magical $2000 level with a close at $2002, up two dollars on the day. RUT continues on a tear with a twelve dollar gain to $1094. When one thinks of the small caps as the "risk on" stocks, RUT looks very bullish. But RUT has far more to make up from the correction than does SPX. Even with the strong moves higher the past couple of weeks, RUT remains below the lows hit in the initial flash crash on August 24th.
Volatility was largely unchanged with the VIX at 17.2%. Trading volume pulled back today with 2.6 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE declined 20% and trading on NASDAQ dropped 6%.
URBN was trading very strongly the past few days, probably in anticipation of its earnings announcement this evening. I entered this trade and shared it with my trading group today: URBN Mar/Apr 25/28 diagonal call spread for $234. Due to the high volatility before the announcement, I was able to sell the Mar call for 39% of the price of the long April $25 call. Even though the earnings announcement is a dicey time to go bullish on any stock, we hedged our downside nicely by selling so much premium to significantly reduce the cost basis in the long April call. In after hours trading, URBN has traded up to $31.44, so it looks like we have a big winner.
Now the market debate has turned from "the sky is falling" to "how high can it go?" I think both extremes are wrong. The basic economic data don't support a strong bull market. But those same data don't justify all of the doom and gloom of the past few weeks either. We may also see some treading water in the markets as the FOMC meeting next week comes into focus.
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Markets opened lower, traded even lower, recovered, and then sold off in the last two hours of trading to close at the lows of the day. SPX lost $23 to close at $1979. RUT fell $26 to $1068. Volatility rose with the VIX adding 1.3 points to 18.7%. Trading volume fell again today with 2.5 billion shares of the S&P 500 trading. Trading volume declined 2% on the NYSE and declined 6% on NASDAQ.
No economic data were released today. Are traders pulling back a bit in anticipation of the Fed meeting next week? Most analysts believe additional interest rate hikes are off the table, but the market may be apprehensive.
I had hedged my March and April iron condor positions Friday, but removed those hedges today.
No significant, market-moving economic reports are due this week. Will the market remain weak until after the Fed meeting?
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The markets continued their climb higher today. SPX gained $7 to close at $1993. RUT tacked on $10 to arrive at $1076. Volatility continued to contract with VIX losing 0.4 points to 16.7%. Trading volume was slightly higher with 2.8 billion shares of the S&P 500 companies trading today. Trading volume on the NYSE was up 9%, but trading volume on NASDAQ was only up 1%.
Initial unemployment claims came in at 278k, essentially flat with last week's 272k. Continuing unemployment claims were also flat with 2.257 million, slightly higher than last week's 2.254 million. Factory orders increased 1.6% in January, up from the 2.9% decline in December. The ISM services index was flat for February at 53.4; January's number was 53.5.
The jobs report comes out before the market opens tomorrow. Will it matter to this bullish market?
I'm in Orlando for the Money Show. I have been impressed by the quality of the speakers. I recommend you check out the next Money Show. I have learned a lot over the past two days. If you are in the neighborhood, send me a note; we can meet, share a coffee, and discuss this market.
