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I checked the S&P futures late last night and it looked pretty ugly based largely on the Greek election results. By this morning, it remained negative, but not quite so bad. Then we opened and the markets dropped down but then quickly recovered. Maybe Greece isn't such a big deal after all. The Greek vote increases the probability of Greece leaving
the EU, but that prospect doesn't appear to have the same fears
associated with it now as it did several years ago, or even last week. Greek politicians have been "kicking the can down the road" for many years, but now, ordinary Greek citizens are the ones suffering.
SPX dropped down to $2058 before bouncing and closing at $2069, down $8 on the day. RUT handled Greece even better, closing down one dollar at $1247. Volatility popped up at the open, but settled lower during tarding, with the VIX closing at 17.2%. Trading volume was up a bit from Thursday with 2.0 billion shares of the S&P 500 trading. Trading on the NYSE and NASDAQ were both up 17%.
The ISM manufacturing index reported 53.5 for June, up from May's 52.8. The ISM services index reported 56.0, up from 55.7.
Perhaps we should be focusing on this earnings announcement cycle rather than Greece. We have both good and bad news. The good news is that the number of negative pre-announcements for the S&P 500 has declined to 80 for the second quarter of 2015 from 85 last quarter and 86 the previous quarter. The number of positive pre-announcements for the S&P 500 has increased to 27 from last quarter's 20. But the bad news is this: the number of companies in the S&P 500 issuing negative guidance for this quarter (80) is still above the five year average of 78, and the number issuing positive guidance (27) remains below the five year average of 33. This parallels the economic data we have been seeing - not terrible, but not booming ahead either. We continue to muddle along.
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Now that Greece has officially defaulted and capital controls have been imposed on the Greek Banks, it doesn't seem like we are seeing European or global markets in disarray. The rumored "contagion" hasn't started yet. If the sky isn't falling, then what is going on with our markets? Has the Greek debt saga scared traders or is there something more bleak hidden within this downtrend of the past few days?
SPX bounced slightly today, but not enough to give traders any confidence. SPX gained $5 to close at $2063. RUT closed right at its 50 dma, up $7 at $1254. The VIX spiked higher this morning, but settled down to close at 18.2%, down 0.6 points. Trading volume rose a bit from yesterday's spike higher with 2.4 billion shares of the S&P 500 stocks trading. Trading volume rose 9% on the NYSE, but declined 1% on NASDAQ.
The Case Schiller housing price survey came in at +4.9% for April, essentially flat with March. The Chicago PMI reported 49.4 for June, up a bit from the previous 46.2. Analysts were predicting values of 50 to 51.
The small caps continue to trade stronger than the blue chips, which is a bullish sign. Whereas RUT closed today right at its 50 dma, SPX sliced through its 50 dma last Thursday and is hovering just above its 200 dma. SPX is trading right at the support level formed by the two pull backs in late March. The stronger pull back in early March bottomed at $2040. Breaking $2040 would raise my concern that this could turn into a true correction.
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Actually, I am losing patience with Greece and with all of the hand wringing about this miniscule problem in the world. The most valuable aspect of Greece is its object lesson for us.
In response to worries about Greece, the markets pulled back today with SPX losing $16 to close at $2109 and RUT pulling back $12 to $1284. Implied volatility jumped up over a point with the VIX closing at 13.3%. Trading volume edged up but remains below average. Trading in the S&P 500 stocks came in at 1.9 billion shares, up slightly from yesterday, but below the 50 dma. Trading volume on the NYSE increased 4% and trading on NASDAQ was nearly flat with a 0.2% rise.
The final estimate of first quarter GDP was released today at -0.2%, an improvement from the earlier estimate of -0.7%. We will get the first estimate of second quarter GDP growth on July 30th.
I closed our July iron condor on RUT today for a net gain of 19%. Our Flying With The Condor™ trade alert service now stands at a gain of 28% year to date, compared with +2.4% for the S&P 500.
Our watch of the Greek tragedy continues tomorrow (ironic that we know the ancient Greeks for those plays).
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It appears that our markets are simply not going to move until the Greek debt crisis is resolved. We have been hearing about deadlines for a deal for weeks, and the deadlines just seem to get postponed a few days. Is June 30 a solid deadline? I certainly hope so. The major indexes have retreated into their trading ranges of the past few months. SPX dropped $6 to $2102 but RUT only lost a dollar, closing at $1283. The theme of the small and mid-caps leading the market continues.Volatility increased nearly a full point to 14.1% on the VIX. That seems a little outsized compared to the market moves today - perhaps the traders losing patience are buying protection just in case this Greek saga does have some downside for our markets. Trading volume remains pretty flat with 1.9 billion shares of the S&P 500 trading (still below the 50 dma). Trading volume increased 7% on the NYSE, but decreased 2% on NASDAQ.
Initial unemployment claims reported at 271k, about flat with last week's 268k. Continuing unemployment claims increased by twenty two thousand to 2.25 million. Our unemployment numbers have stabilized very well. Unemployment numbers aren't increasing but we aren't seeing the hiring that goes with strong economic expansion. We aren't putting those people who have dropped out of the labor force back to work.
When the markets spiked upward last week, I closed the call spreads in my August 1100/1110 and 1350/1360 condor on RUT. Today, I rolled out a little farther and sold the 1360/1370 calls. This position now stands at a net gain of 2.5% with position delta = -$40 and position theta = +$66 on 20 contracts. Yesterday, I closed the July condor position for a 19% gain. The Flying With The Condor™service is now up 29% year to date.
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The markets seem to be locked into this low volume, sideways to slightly higher trading range. I say slightly higher because of the last few days, but we could easily give that back at any moment. The bears can't seem to gain control, but the bulls aren't really very enthused either. SPX managed to gain one dollar today, closing at $2124. RUT closed up $3 at $1296. Volatility continued to contract with the VIX losing half a point to close at 12.2%. Trading volume remains below average with 1.8 billion shares of the S&P 500 trading today. Trading volume was roughly flat on the NYSE and NASDAQ, declining about a half a percentage point on both exchanges.
Durable goods orders were disappointing once again with a decline of 1.8% for May, slightly better than the 1.5% decline in April. But this is going in the wrong direction! Our economic data on manufacturing, services, and employment remain weak. New home sales increased in May to an annualized 546 million. This is the highest level since 2008 - one more positive sign for the real estate market.
This latest push higher in the markets has been led by the small-caps and mid-caps. In and of itself, that is a bullish sign. Both NDX and RUT tested lower prices today before posting small gains. The prevailing wisdom is that the markets are waiting on a deal on Greek debt before running higher. I'm not convinced, but I'm not on CNBC. I think Greece has run out of negotiating time, so hopefully, that news item is about to be put to bed. The question is whether that will propel our markets on to new highs? Technically, we are at new highs now. Could we sell the news?
