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A more cautious tone took over the markets today as traders contemplated the possibility of China dragging the world into recession and Greeks rioted in the streets outside the parliament. Maybe the Greeks are headed out of the Euro after all. But does it matter? However, the economy of China does matter. Repercussions of a recession in China will be felt globally.
SPX dropped back by two dollars to $2107 and RUT declined $9 to close at $1265. Volatility was essentially flat with the VIX at 13.2%. Trading volume rose with 2.1 billion shares of the S&P 500 stocks trading. Volume on the NYSE rose 12% but trading volume on NASDAQ was essentially unchanged (down 0.3%).
It seems as though earnings announcements thus far have been neutral to encouraging, but we are early in the cycle. Intel and Netflix traded higher this evening after their announcements.
My August iron condor on RUT at 1100/1110 and 1360/1370 is almost perfectly delta neutral and up 12%. The September RUT iron condor at 1090/1100 and 1350/1360 stands at a net gain of 11%.
The results of the vote in the Greek parliament should be out this evening, so we will see what the futures look like in the morning.
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From watching the markets trade today, one would think all is well with the world. Whatever was ailing China's market last week is all gone? This may be easier when the government can simply tell traders not to sell stocks, but has the basic economic picture changed? The Greek debt crisis is thought to be over, but the Greek parliament has to agree to a tougher deal than what was offered before Tsipras backed out of negotiations and called for the referendum. So is this the last we hear of Greek debt? Notably, the yield on Greek treasuries is higher now than before the deal. Hmmm. My point is simple: remain cautious.
SPX gained $23 to close at $2100 while RUT gained $13, closing at $1265. The VIX shed almost three points, closing at 14.1%. SPX closed right at its 50 dma - quite a turnaround for an index that was trading below its 200 dma at the open Friday. Significantly, trading volume was light with 1.8 billion shares of the S&P 500 trading. Trading on the NYSE was up 1% and trading on NASDAQ increased 5%. Rather than declaring that the bulls are back in charge, I think it safer to say we are firmly back within the trading range.
We have several important earnings announcements this week that will influence traders' moods. JP Morgan Chase reports in the morning and Wells Fargo reports tomorrow evening; Goldman Sachs will report Thursday morning. And, of course, we have several earnings announcements that always draw a lot of speculation and trading: Netflix, Google, and Yahoo.
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China's market turned downward sharply yesterday and it boiled over to our markets today. Of course, the Greek drama still haunts us as well. Trading on the NYSE was stopped for over three hours today; early word blamed it on a software glitch. I would have thought that might push the market even lower, but nothing really changed after trading resumed this afternoon. Of course, stocks that trade on NYSE trade on other exchanges, so the markets weren't really disadvantaged. But it doesn't do much for individual investor confidence.
SPX closed down $35 or 1.7% at $2047, while RUT lost $19 or 1.5% to close at $1229. The NASDAQ Composite was down 1.8%. RUT and NDX are both well above the 200 dma, but SPX sliced through its 200 dma at $2056 today.
Trading volume didn't spike as one might expect on a day like this one, so it isn't clear that the bears have really gained the upper hand just yet. 2.2 billion shares of the S&P 500 stocks traded today, down from yesterday. Of course, trading volume was way off at the NYSE, but one might have expected NASDAQ to have spiked hugely higher on the NYSE outage. But it didn't; trading on NASDAQ declined 11% from yesterday.
But traders were spooked a bit by the uncertainties created by China, Greece and the NYSE technical glitch. The VIX popped up almost four points to 19.7%.
The Fed minutes from the last meeting came out today. The discussion appeared even more dovish than was previously thought from the formal announcement. Several members of the FOMC are concerned about the weak first quarter GDP number. I think the probability of increasing interest rates during 2015 is decreasing.
Alcoa began the earnings parade after the close with an earnings miss, but a revenue beat. The stocks was essentially unchanged in after hours trading.
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Traders were relieved that China's market appeared to stabilize yesterday, so markets opened stronger this morning, but uncertainty remains about the Greek debt negotiations. Many analysts worry about the global impact of China and Greek economic problems. The VIX momentarily topped 20% today, closing at 19.9%, up 0.3 points. SPX gapped open and ran up as high as $2074 but then slowly declined throughout the day, closing at $2051, up $5. RUT gained $5 to close at $1234. Trading volume was down slightly with 2.2 billion shares of the S&P 500 stocks trading. Trading volume was way up on the NYSE due to yesterday's outage, but trading declined 2% on NASDAQ.
Initial unemployment claims were released at 297k, up from last week's 282k. Continuing claims also rose almost 75 thousand to 2.33 million.
My iron condors on the Russell 2000 Index are doing well with the August position up 6% and the September position up 5% at the close today.
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Markets opened lower this morning and SPX sliced through the 200 dma and plunged to $2044 before bouncing. SPX traded higher in the afternoon and made a final push higher from about 2:30 ET until the close of trading. SPX closed at $2081, up $13 on the day and well above the 200 dma at $2055. RUT followed suit, but traded even more bullishly, closing up one dollar at $1248; RUT's 200 dma is at $1204. Volatility pulled back nearly a full percentage point, with the VIX closing at 16.1%. Trading volume spiked higher with 2.5 billion shares of the S&P 500 stocks trading today. Trading volume rose 26% on the NYSE and rose 23% on the NASDAQ.
The semi-official, or traditional start of the earnings announcement cycle starts Wednesday after the close with Alcoa. That string of announcements may take the attention off of Greece.
The only significant economic news was the May JOLTS job openings report at 5.363 million, up from 5.334 million. That doesn't look like stimulus for a buying spree. What about Greece? All of the articles I have read suggest Greece isn't offering anything new at the bargaining table, and the major powers in Europe are losing their patience with Greece. But we see a strong bounce here in our markets on stronger volume. Is this the beginning of a reversal higher?
