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This time of year is historically bullish, e.g., the Santa Claus rally and so on. But we are in a tiring bull market. SPX was up over 30% last year and has climbed even higher this year, now up 12% year to date. It is only natural to expect some slowing, sideways consolidation trading. Traders will refer to the market "taking a breather" and so on. On Monday, it looked like a pull back or correction was starting, but the bears could not take advantage of that down day and the bulls took the reins back. When you think about it, even in October, once the bulls took control, we traded straight up - what a run! So the bulls are clearly in control, and this is their time of year, so they have historical trends on their side. On the other hand, this bull is tired; it has been a long run. Maybe this conflict of the historical bullish season of the year coupled with a tired market that needs to consolidate explains this market. Anyway, it's a thought.
SPX pulled back a bit, closing down two dollars at $2072. RUT dropped back $6 to close at $1173. Volatility remains pretty low with the VIX closing at 12.4%. Trading volume has remained pretty low for the past six weeks or so; volume on the S&P stocks has run below the 50 dma pretty consistently throughout November. Today was no exception with 1.9 billion shares of the S&P 500 trading (the 50 dma = 2.2B). Trading volume dropped 6% on the NYSE and increased 1% on NASDAQ.
The Challenger job cuts report came in 21% lower in November - much better news than October's 12% increase. Initial unemployment claims came in at 297k this week, down 17k. Continuing claims rose 39 thousand to 2.4 million. The unemployment data jump around a lot, but the trend is clearly downward, but at a slower than desired rate. Tomorrow's jobs report will be interesting, given a market that seems a bit nervous. Monday's weak retail sales news from the holiday weekend caused a sell-off, but it didn't last. The bulls came roaring back.
It seems like many of the guests on CNBC have been predicting a correction all year, but betting on the bulls has continued to be the winning play. We'll see...
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I was surprised we finally had a bit of a pullback in the markets, but it was very brief. SPX gained everything it lost yesterday, closing at $2067, up $13 (it lost $14 yesterday). RUT wasn't quite so strong with a gain of $14 to close at $1168. Volatility backed off a bit with the VIX losing almost one and one half points to close at $12.9%. Trading volume dropped off a bit from yesterday with 2.1 billion shares of the S&P 500 stocks changing hands. Trading volume on the NYSE dropped 12% and declined 3% on NASDAQ.
The only economic data today was a report on construction spending, up 1.1% for October, a nice improvement after the 0.1% drop in September.
My December iron condor on SPX remains hedged to the hilt and thus far, that is holding the net loss (assuming we closed today) to about -5%. I have not sold the put spreads for the January position; I considered it yesterday, but thought we might see more weakness before the market resumed its march higher.
The FOMC's Beige book will be released tomorrow. We may have some volatility surrounding that announcement.
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Today's market was typical of pre-holiday markets, with low trading volume and small price moves. SPX gained another $6 to close at a new closing high of $2073 and RUT gained $4 to close at $1191. Volatility is basically flat with the VIX at 12.1% (down one tenth of a point today). Trading volume on the S&P 500 isn't out yet, but trading was down 13% on the NYSE and down 11% on NASDAQ.
A host of economic data posted today with initial unemployment claims reported early due to the holiday with 313k claims, up from last week's 292k. Continuing claims dropped from 2.33 million to 2.32 million. Durable orders posted an improvement of 0.4%, a nice change from last month's decline of 0.9%. The Chicago PMI dropped off significantly to 60.8 from last month's 66.2. The University of Michigan consumer sentiment survey declined to 88.8 from 89.4. New home sales posted an annualized rate of 458k for October, up slightly from 455k.
There wasn't anything in this host of economic data that was particularly alarming or encouraging. Coupled with lightly staffed trading desks, the markets didn't really react.
Over bought indicators continue to build as this market heads higher. I don't see a correction in the immediate future, but it seems like we are overdue for some sideways cooling off. The markets will be closed tomorrow and only open for a half day of trading on Friday, so not much market movement is anticipated until everyone returns on Monday.
Happy Thanksgiving. Count your blessings - yes, even that crazy uncle.
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I hope you all had a wonderful Thanksgiving.
We have become accustomed to the markets rising every day, so what's going on? SPX clipped off $14, closing at $2053 while RUT traded even more weakly, gapping open lower and closing at $1154, losing $19 on the day. One would expect trading volume to pick up from the holiday-shortened session Friday, but trading in the S&P 500 stocks actually bumped up to 2.3 billion shares, popping up over the 50 day moving average, at 2.2 billion shares. Trading volume rose 19% on the NYSE and rose 78% on NASDAQ. The VIX gapped open higher this morning and closed one full percentage point higher at 14.3%.
The ISM manufacturing index reported today at 58.7 for November, a drop from October's 59.0. Today's market weakness appeared to be primarily driven by the weak retail sales over the Thanksgiving holiday, coming in 11% lower than last year. There were also weaker economic reports from China and Europe, raising the specter of a global economic slowdown. the Fed's Beige book comes out Wednesday, amid reports that the FOMC members are worried about deflation; if that is explicitly addressed in the minutes, we could see additional market weakness. Of course, this week's economic news builds up to the jobs report Friday.
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The Standard and Poors 500 stock index set a new all-time closing high today at $2069, up $6. It wasn't long ago that this would be news, but it almost seems like an everyday occurrence now. RUT came back to life today, gaining $15 to close at $1187. That is almost exactly where RUT closed on November 12th, and then traded downward from there while SPX continued higher. RUT remains well below its high March 4th at $1209.
Volatility continues to contract, albeit slowly. VIX closed down about a quarter point to 12.7%. Trading volume was higher Friday due to options expiration, so it wasn't surprising that trading volume fell back today with 1.8 billion shares of the S&P stocks trading. Trading dropped 27% on the NYSE and declined 16% on NASDAQ. Friday was the first time that S&P trading volume has been above the 50 dma since October 31st. We continue to see this market steadily march higher on low trading volume. This is surely the bull market no one believes in. I admit I don't understand it. Perhaps our premise that we can study the fundamentals and rationalize market price behavior requires reexamination? I would like to think I understand it...
There wasn't any significant economic news today, but tomorrow brings third quarter GDP, Case Schiller housing prices, and consumer confidence reports.
I spoke at the Traders Expo in Las Vegas last week. They recorded my talk and you may play the video on the Traders Expo e-show page.
