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Janet Yellen testified before the Senate Banking Committee today, and appeared to be reluctant to commit to raising interest rates too soon. Markets took that as good news and traded higher. But is it good news? It suggests the FOMC chair still doesn't feel confident about the unemployment picture and has concerns about a deflationary spiral similar to what Japan has suffered through the past several years. Most Fed watchers are predicting the first interest rate hikes in September.
SPX traded up $6 to $2115, but RUT was less enthusiastic, closing at $1234, only up $2. Volatility continued its contraction with the VIX falling almost a full point to 13.7%. SPX and RUT both set new all-time highs. The NASDAQ composite also traded higher, but remains about eighty points below its all-time high.
The Case Schiller housing price index published its December numbers today, +4.5%, up from November's +4.3%. The Conference Board's consumer sentiment survey came in at 96.4 for February, down from the exuberant 103.8. Are gas prices that core to consumer expectations? Maybe.
The bulls remain firmly in charge, although the charts seem to suggest some slowing of the charge higher. In any case, being bearish is very contrarian at this point.
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Traders were largely on the sidelines today, probably waiting on Yellen's testimony before Congress. And it wasn't too surprising to see some pull back after such a strong day on Friday. SPX closed down $1 at $2110 and RUT was unchanged at $1232.
Trading volume was flat to down with 1.9 billion shares of the S&P 500 stocks trading; the 50 dma = 2.25B. Trading volume declined 7% on the NYSE and was flat on NASDAQ. Lower trading volume is normal after expiration Friday, but it is also consistent with traders taking a pause while waiting on Yellen's remarks. The market is anxiously looking for clues about when the Fed may begin to raise interest rates.
Volatility rose slightly with the VIX closing at 14.6%, up 0.3 points.
Existing home sales for January came in at an annualized rate of 4.82 million, down from December's 5.07 million.
I think it is safe to continue to play the bullish trend, but the higher the markets move, the more likely a correction becomes. Don't play without a safety net.
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Markets continue to steadily move higher, albeit on weak trading volume. SPX closed at $2097, down $2. What, not another all-time high? RUT was flat at $1228. The NASDAQ composite is nearing a break of the all-time high from back in the dot com era. Volatility continues to slowly contract (with one eye on Greece, I think) with the VIX closing at 15.3%, down 0.2 points. Take a look at the candlesticks for the last three days of trading on SPX. Each day SPX has pulled back to $2090, but then bounced to close higher. These long lower shadows of the candlesticks are confirming support at $2090. The markets aren't running full out to the upside, but there is slow, steady bullish pressure.
New unemployment claims dropped down to 283k from last week's 304k, but the number of continuing unemployment claims rose from 2.367 million to 2.425 million. We have been seeing a series of small ups and small downs in this data for several months; the good news is the stability; the bad news is that unemployment seems so stubborn in this recession. What's different this time?
The Philadelphia survey of manufacturing dropped from 6.3 in January to 5.2 for February.
I allowed my RUT Feb 1070/1080 puts to go into expiration to expire worthless. They are over 12 standard deviations OTM; assuming the world doesn't end tonight, this will close the Feb position for a gain of 18%. The March condor on RUT at 1020/1030 and 1290/1300 stands at break-even.
It is interesting to watch the Greek/Euro Zone debt debate. Our national debt now stands at 74% of GDP. It was 34% in 2007. When the Greeks first required a bail-out, their debt was about 110% of their GDP.
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The news out of Europe appears to be getting better with at least a temporary solution, and the markets responded accordingly. The Greek debt problem hasn't been solved, but who cares? Politicians are kicking the can down the road. SPX opened down this morning but started climbing at 10 am ET and never stopped. SPX closed at $2110, up $12, within a few cents of its intraday high. Many analysts had suggested $2100 would give resistance, but SPX motored through that level without hesitation. RUT followed suit, but not quite so strongly, closing up $4 at $1232. The VIX declined one full point to 14.3%. Today was expiration Friday, so we usually see some increased trading volume, but it wasn't significant with 2.1 billion shares of the S&P stocks, still below the 50 dma. Trading on the NYSE increased 2% and trading increased 11% on NASDAQ.
SPX settled at $2094.87 and RUT settled at $1228.33. This confirmed the closing of our February RUT 1070/1080 put spreads, resulting in an 18% gain.
For those of you that trade SPX and VIX options, be sure you note the new trading hours beginning in March. Those options will trade five days per week from 2:00 am CT until 8:15 am CT. Trading in the new hours will begin for VIX options on March 2nd, and begins March 9th for SPX. Check the CBOE web site for more information.
Enjoy your weekend.
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The bulls are still in charge. SPX closed slightly down less than a dollar, but holds at the all-time high of $2100. RUT continued to pile on with another all-time high, closing at $1228, up $3. The VIX opened higher this morning at 16.7%, but steadily declined to a close at 15.5%. As we observed last evening, the bulls are cautious and trading volume remains low and declining with 2.0 billion shares of the S&P 500 trading. Trading volume declined 4% on the NYSE and coincidentally, trading volume also declined 4% on NASDAQ.
The FOMC released the minutes from the last meeting this afternoon, but it didn't appear to have much effect on the markets. Most of the analysis I saw after the close blamed the weaker close of today's market on the Fed minutes, but if one takes a look at the one minute chart, he will see that the market rallied after the minutes were released. It is fair to say that markets were largely trading sideways before the announcement and SPX gained modestly after the announcement. The main news from the announcement is that the FOMC may begin to raise interest rates later than many believed, perhaps into the third or fourth quarter this year.
Housing starts for January came in at 1065 thousand, slightly less than December's 1087k. Building permits followed suit with 1053k, down slightly from 1060k. The PPI declined 0.8% in January, somewhat more than December's 0.3% decline. Capacity utilization was flat at 79.4%.
So we will watch as the market continues this slow grind higher. Unless Europe implodes, or something similar happens, it appears that the bulls will carry the market higher yet. Maybe I just jinxed that rally...
