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The markets were chopping sideways today, but the Fed announcement sent stocks lower. SPX traded off strongly in the last hour of trading today, losing $27 to close at $2002. RUT also traded off $20, closing at $1175. Volatility jumped in that last hour, with VIX closing the day at 20.4%, up over three points.
Trading volume spiked higher with 2.7 billion shares of the S&P 500 trading today. Trading volume rose 22% on the NYSE and rose 10% on NASDAQ.
Oil traded lower and the dollar continued to strengthen. This is fueling some concerns about currency effects on multi-nationals in coming weeks. But those effects didn't seem to hold back AAPL's performance. Did you see those iPhone sales numbers? It made me wonder what's wrong with me since I still have my iPhone 4s. Apparently everyone is trading up and I am two upgrade cycles behind.
It seemed as though the FOMC announcement spooked the markets, but it isn't obvious to me if that was really cause and effect. The Fed continues to emphasize that it will remain patient about raising interest rates, and the Fed's latest announcement appeared to strengthen their assessment of the economy. It seems that traders remain wary of a global slowdown and its effects on this economy. One thing's for sure - this is a dicey market to trade.
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Weak guidance comments in the earnings announcements of CAT and MSFT, plus a larger decline in durable goods orders spooked traders this morning. SPX opened down about $10 and within an hour or so, the losses had widened to about $35. SPX traded as low as $2020 before beginning to recover, closing at $2030, down $28. RUT closed at $1195, down $6. Volatility bounced up a bit, but not as much as I would have predicted, with the VIX closing up two points at $17.9%. Suddenly everyone is a bear.
The durable goods orders report for December dropped 3.4%, worse than the 2.1% decline in November. But other reports today were more positive. The Case Schiller housing price survey came in at +4.3% for November, down a bit from the previous reading of +4.5%. Similar to the University of Michigan numbers, the Conference Board's consumer sentiment survey hit a high note of 102.9 for January, the highest report since August of 2007. The annualized rates of new home sales for December came in at 481 thousand, up from the previous 431k.
AAPL and YHOO were both trading higher in after hours markets after their earnings announcements; maybe that will improve the moods on the street tomorrow.
My Feb iron condor on RUT continues in the black with a net P/L of +13%. We sold the AAPL 97/102 and 120/125 iron condor on AAPL in our trading group today as a play on the earnings announcement. So far, so good...
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The markets appear to be calming a bit today - no extreme moves and volatility is beginning to contract. SPX gained $10 to close at $2032. But RUT was weaker, closing at $1166, down $4. The VIX closed the day at 18.9%, down over a full percentage point. Trading volume fell off with 2.2 billion shares of the S&P 500 trading today. Trading volume declined 8% on the NYSE and declined 5% on NASDAQ.
The SPX chart now looks like a choppy sideways pattern is shaping up. A key question is whether SPX can break out above the 50 dma at $2045 or be pulled back closer to the low set by the last two pull backs around $1900. It is remarkable that we have seen three corrections or pull backs just since the beginning of December. One has to conclude that the bulls have sufficient strength to hold this market up, even if they appear to have lost the strength to drive it higher. And this also shows that the bears cannot really make a case for reversing the trend. Perhaps this balancing of power between the bears and the bulls is shaping up for a classic sideways market with higher than average choppiness.
The Stock Traders Almanac has developed two January indicators with good historic accuracy. One is the First Five Days indicator and the other is the January Barometer. The First Five Days indicator simply tells us that the full year will be bullish if the first five days are bullish; this indicator has proven prophetic 85% of the time and the January Barometer has a 77% batting average. The First Five Days "sorta" came out bullish with the first five days being up by less than a tenth of a percent. We have to wait until month end for the January Barometer. The Stock Traders Almanac also makes an interesting observation: there has not been a down market in the pre-presidential election year since 1939.
My February condor continues to plod along with a 4% gain thus far; we are now under thirty days to expiration, so this sideways market is working well for this position. The maximum gain is 19%, but we will likely close it early for less than that gain. We are well into earnings season, so we may see some market choppiness as traders attempt to translate individual company performance into overall market prospects.
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The markets calmed a bit after yesterday's exuberance. SPX pulled back $11 to close at $2052, while RUT stayed pretty flat, losing one dollar to close at $1189. Volatility was up just a tad at 16.7%. Trading volume fell off from yesterday with 2.2 billion shares of the S&P stocks trading; this is right at the 50 dma. Trading declined 8% on the NYSE and declined 16% on NASDAQ.
The last pull back began as SPX opened at $2063 on January 9th and then proceeded to drop to $1993 on January 15th. SPX closed yesterday right at that opening on January 9th as the pull back began, so I was interested to see if we could break out above that level, but it wasn't to be... At least it didn't happen today. Perhaps the bull trend is on hold for a bit as the market consolidates and chops sideways.
Existing home sales came in at 4.93 million for 2014, representing a 3.1% decline year over year. This was the first annual decline in four years.
Our February condor position on RUT closed at a net gain of 11% today. Delta for this position is less than a dollar per contract, so we are very well positioned at 27 days from expiration. Next week brings some closely watched earnings announcements with AAPL, AMZN, GOOGL, and FB.
Have a great weekend.
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The markets appeared to bounce off support established just after the first of the new year. But it is a tenuous conclusion, especially since the economic data to support this recent market weakness appear absent.
SPX closed up $27 at $2019 and RUT gained an even larger percentage, closing at $1177, up $22. The VIX pulled back over a point to close at 21.1%. Trading volume was up modestly with 2.6 billion shares of the S&P 500 stocks trading. Trading on the NYSE was up 9%, but trading volume was flat on NASDAQ.
The CPI declined 0.4% in December, while the PPI declined 0.3%, so inflation seems largely absent, at least according to the official data. Industrial production for December dropped 0.1%, in contrast to the 1.3% increase in November. Capacity utilization was flat at 79.7% for December (80% in November). The University of Michigan's consumer sentiment survey peaked at 98.2 for January, up from last month's 93.6, which we thought was high. This is an eleven year high for this survey with consumers probably buoyed by the large decrease in gas prices.
SPX settled at $1989.68, so both spreads in my January condor expired worthless, but the market required two adjustments to this position and both adjustments were expensive due to the extreme market whipsaws, overwhelming our potential profits. This position lost 6%, but our February position is already up 4%. For those of you trading Russell (RUT), it settled at $1150.75.
The markets will be closed on Monday, so enjoy your long weekend.
