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Taking a look at the NASDAQ Composite or the Russell 2000 Index would lead to a clear conclusion: the market is in a consolidation phase. But SPX has continued to make new highs, closing today at another all-time high at $2040, up only a dollar, but it still keeps trading higher. RUT closed flat at $1180. Is SPX going to be pulled into a sideways consolidation phase by the other indexes, or drag them higher? Trading volume continues to be very weak with 1.6 billion shares on the S&P 500; the 50 dma is 2.2 billion shares. Trading volume was down 11% on both the NYSE and NASDAQ. Volatility continues to come in, with the VIX closing at 12.9% today.
There wasn't any significant economic data reported today. We will see retail sales, weekly unemployment claims, and the University of Michigan's consumer sentiment data later this week. I wouldn't expect any of those reports to trigger a big move either way. Maybe the slow, sideways trading on low volume continues.
I closed my SPX Nov 1810/1820 put spreads today for a nickel. That completes the November position for a net gain of $2,160 on 20 contracts or +12.9%.
The really big event comes on Friday. Bet you don't know what that is... I will send a book to the first person who answers correctly.
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Is this the pause that refreshes before the market seeks new all-time highs? Or are we going to consolidate sideways for a bit and work off this huge bullish drive of the past three weeks? Hard to say. SPX traded flat today, gaining less than a dollar to close at $2032. RUT gained a dollar to close at $1173. NASDAQ and RUT have both been trading sideways for the past several sessions while SPX just continued setting new record highs. If we go back to the charts when we were at the lows of this most recent correction, RUT and NASDAQ were the first indexes to recover and start posting positive gains. They led SPX out of the hole. Are they now slowing and leading SPX into a consolidation phase? Trading volume was down today with two billion shares of the S&P 500 trading; trading declined 5% on both the NYSE and NASDAQ.
The non-farm payrolls report came out before the bell this morning and posted 214 thousand new jobs, less than last month (240k) and less than what economists had predicted (250k). The unemployment rate ticked down a tenth of a percent to 5.8%. But the markets appeared to just yawn; they didn't trade strongly in either direction.
My November iron condor position only consists of the 1810/1820 put spreads at this point, so I am just watching those options decay. They are far enough OTM to be very safe (over four standard deviations), but I may close them soon just to free up margin for a new trade. The maximum return is 13.5% and we are essentially there. My December condor has been skirting along the edge of requiring hedging for the past week. Even though the market was flat today, I decided this morning to enter half of my normal hedge. That makes an ugly surprise on Monday less likely (more correctly, it will make the ugly surprise a bit less ugly).
Enjoy your weekend.
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Today's markets had one of those slow days with minimal progress in either direction on lower than average volume. That has been unusual lately as the markets just shoot higher day after day. SPX closed unchanged at $2018 after trading as high as $2024. RUT dropped off $3 to close at $1170. The VIX added almost three quarters of a point to close at 14.7%. Trading volume was down across the board with 2.0 billion shares of the S&P 500 stocks trading. Trading volume declined 15% on both the NYSE and the NASDAQ.
Today's candlestick on SPX was the classic doji, a sign of indecision or balance between the bulls and the bears. It wouldn't be surprising to see the indexes slow and trade sideways for a bit after such a strong rally over the last two weeks.
The ISM manufacturing index posted an increase to 59.0 for October from 56.6 in September. Construction spending was up slightly with a decline of 0.4% in September, up a bit from the -0.5% last month.
My November iron condor continues to build gains as the market heads higher. The remaining SPX Nov 1810/1820 put spreads are far OTM at this point with a little less than three weeks to go. My December iron condor on SPX is positioned at 1810/1820 and 2080/2090. Since we sold the put spreads on 10/21, our gains on that side have balanced recent losses on the call spreads so the entire position stands at a net loss of about 1%. If SPX continues higher, we will have to hedge our call spreads.
We have the jobs report coming up on Friday. We may see some more low volume, sideways trading days this week in advance of that report.
I sold the HLF 42/45 and 63/66 and the PCLN 1125/1130 and 1270/1275 iron condors today in anticipation of their earnings announcements (all with NovWk1 options). HLF looks like a winner at this point, but PCLN announces earnings in the morning before the market opens.
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One has to wonder what effect, if any, the election results will have on the markets. SPX appears to be slowing over the past two days, but any market needs a rest after such a torrid run higher. SPX closed down $6 at $2012 and RUT dropped $5 to $1165. But look at today's price action on SPX. It opened at $2016 and traded down as low as $2001 before recovering into the close. That price action tells me that there are still a large number of bulls who are waiting to step in and buy on any pull back. On the other hand, volatility has been edging up with the VIX opening Monday at 13.8% and closing today at 14.9%.
I watch for divergences between SPX and the VIX. Sometimes that gives us an early warning. SPX has traded slightly higher for the last three days with an open Friday at $2001 and a close today at $2012. That slightly bullish action on SPX together with a slight increase in volatility makes me think the market isn't quite sure which way the election will push prices.
Trading volume was mixed today with a slight increase in the trading volume of the S&P 500 up to its 50 dma at 2.1 billion shares. Trading on the NYSE increased 7% and trading volume decreased 5% on NASDAQ.
It's almost time to go watch the election returns.
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The Bank of Japan announced stimulus measures for their economy last evening and our markets gapped open strongly this morning and traded steadily higher all day. SPX traded up by $23 to close at $2018 and RUT tacked on $18 to close at $1174. SPX closed at its high for the day. And this all occurred on higher trading volume with 2.5 billion shares of the S&P 500 stocks trading. Trading increased 22% on the NYSE and increased 18% on NASDAQ. Who knew the Bank of Japan held such influence? Maybe the market analysts didn't have anything better to cite for this huge bullish day in the markets.
The Chicago PMI came out for October at 66.2, up from September's 60.5. The University of Michigan's consumer sentiment report came in at 86.9 for October, up slightly from 86.4. These are solid numbers, but wouldn't account for the "buying with both hands" behavior we saw today.
SPX's close at $2018 set another all-time high. This straight up recovery from the intraday low on October 15th has to be a record. SPX has gained $197 or 11% in 12 trading days since October 15th - wow! Will this continue next week? Is the election connected to this in some way, e.g., a sell the news market on Tuesday? I don't know. Much of the time, the rationale for market movements day to day eludes me. The economic data remain pretty flat and unemployment remains stubbornly high, so it is hard to build a case for the exuberance we saw today. RUT remains way behind the large cap stocks. RUT's close today gets it within about $10 of its high from early September, but it is still way short of the all-time closing high at $1209 set back in March.
The 1810/1820 puts are all that remain of my November iron condor on SPX and they are now very far OTM. It is hard to believe that I was hedging those positions very strongly just a couple of weeks ago.
I will be glad when this election is over. I have yet to see or read any rational ads or articles dealing with the issues that face us - just smear tactics back and forth. Apparently the politicians don't give us credit for any critical thinking skills. Maybe we are getting what we deserve.
Enjoy the weekend.
