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The markets continue to just ebb back and forth, as though waiting on something to happen. The minutes from the last FOMC meeting will be released tomorrow. Perhaps that will push the market one way or the other, but I doubt it. The Fed rarely gives a definitive peek of the future; they have to keep their cards close to the chest. SPX closed at $2097, down $6, and RUT lost $10 to close at $2115. Volatility increased a bit with the VIX closing at 13.8%, up almost one point. Trading volume remains pretty flat with 1.7 billion shares of the S&P 500 companies trading, but this is well below the 50 dma at 2.1B. Trading on the NYSE increased 3% but trading was down 1% on NASDAQ.
Housing starts came in at an annualized rate of 1.206 million for July, the highest since 2009. Building permits followed suit at 1.119 million.
I took a look at the price/earnings ratio of the S&P 500 companies today; it is running around 21, which is on the high side, but well below the highs around 30 from the dot com bubble. When one adjusts the data based on relative yields, the low interest rates make stocks look more attractive, so maybe the P/E ratio isn't too high after all.
I am inclined to believe the overall market is treading water in advance of news from the Fed about interest rates. In any case, the longer we trade sideways, the more likely we remain in a long term bull market that is just taking a breather. The bulls continue to repel any moves to push this market lower.
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SPX opened down this morning and hit a low at $2079. But from about 10 am ET on, SPX steadily climbed higher, closing up $11 at $2102. RUT gained $12 to close at $1225. But trading volume continues to be rather weak with 1.6 billion shares of the S&P 500 trading. Trading volume rose 2% on the NYSE and increased 1% on NASDAQ. We remain solidly trapped in the trading range of the past several months. Volatility remains sorta "luke warm" with the VIX at 13.0%, up two tenths of a point today. This isn't much of a rise in volatility, but it is unusual to see VIX up on a positive day in the markets. Hmmm...
The Empire manufacturing survey (from the New York Fed) surprised analysts, plunging in August to -14.9 from July's +3.9 reading. Several signs of a softening economy are starting to pop up - nothing too severe, but enough to raise my concerns.
My Oct iron condor on RUT still only consists of the put spreads at 1060/1070. My plan was to sell the call spreads when the market cycled back higher, but so far, the market hasn't cooperated. This is an excellent example of the downside of legging into a condor position.
I will now return to treading water.
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The markets opened slightly down this morning and then traded higher and looked like we might post small gains for the day. But in the last hour of trading, we gave it all back to close lower on the day. SPX lost $3 to close at $2083 and RUT lost $4 to close at $1205.Volatility was essentially flay with the VIX dropping a tenth of a point to 13.5%. Trading volume fell sharply with 1.9 billion shares of the S&P 500 trading. Trading on the NYSE dropped 20% and declined 21% on NASDAQ.
Initial unemployment claims increased slightly to 274k from 269k and continuing unemployment claims increased to 2.273 million from 2.258M. Retail sales increased 0.6% in July, an improvement over June's fat zero.
Are we stuck in this trading range until the Fed meeting? That's over a month away...
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Trading volume fell off dramatically today after dropping significantly yesterday as well. Trading in the S&P 500 stocks dropped to 1.7 billion shares today (well below the 50 dma = 2.14B). SPX finished eight dollars higher at $2092 and RUT also tacked on eight dollars to close at $1213. Volatility continued to come in with the VIX shedding six tenths of a point to close at 12.9%.
Today's move positions SPX right in the middle of the trading range of the past six months, but RUT is sitting at the bottom edge of that trading range. That may be a warning sign.
The Producer Price Index (PPI) increased 0.2% in July, down from June's +0.4%. Industrial production increased 0.6% , a nice increase from June's +0.1%. Capacity utilization remains flat at 78%. The University of Michigan's consumer sentiment survey came in at 92.9 for August, about the same as last month's 93.1.
I filled my RUT put spreads for October about three weeks ago, thinking I would sell the call spreads when the market cycled back toward the top end of the trading range. But instead, RUT has been hanging around the bottom edge of the trading range. That illustrates the risk taken when one legs into an iron condor position. My October put spreads are up about 3%, but I will feel better when this market makes a run higher so I can balance the position with the call spreads.
The price movement and the trading volume data seem like the market has gone into suspended animation until the Fed meeting in September. But that's a long time to wander sideways.
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I am tempted to use terms like roller coaster and wild swings, but I feel like I have been using terms like those for at least the past year! SPX closed today up $2 at $2086 and RUT closed down $2 at $1209. That sounds calm enough, but today's market was anything but calm. SPX plunged to $2052 shortly after the market opened, down $32 at the worst of it. Then SPX bounced all the way back to turn in a small gain on the day. What can I say? This market is not for the timid. I bought a few of this week's SPX 2060 puts yesterday and closed them this morning for a gain of about 220%. I didn't close them because I saw this bounce. I closed them to lock in an extraordinary gain. But imagine if I had held on for an even larger gain...
Trading volume bounced higher with 2.6 billion shares of the S&P 500 stocks trading. Trading volume increased 12% on the NYSE and increased 10% on NASDAQ.
The news I referred to yesterday for China, retail sales and industrial production, did come in slightly lower for July than in June, but apparently market analysts started to realize their panic was a bit over done as the day wore on. China's retail sales came in at +10.5% in July, down from June's +10.6%. Industrial production increased +6.0% in July, down from June's +6.8%.
The price volatility continues.
