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The rise in unemployment claims was blamed for today's slowdown in the market, but the signs have been there for several sessions. A period of sideways trading is natural and healthy for a market that has been on such a stellar run higher for the past several weeks. SPX closed at $2039, with a one dollar gain, but RUT traded off by $11 to close at $1175. It appeared as though RUT had broken out above its September highs yesterday, but today's trading firmly pulled it back below that resistance level.
Volatility rose with the VIX gaining about three quarters of a point to 13.8%. Trading volume remains low, but rose a bit from yesterday's levels with 2.1 billion shares of the S&P 500 stocks trading (but the 50 dma = 2.2B). Trading volume increased 7% on the NYSE and trading on NASDAQ rose 6%.
Weekly unemployment claims rose twelve thousand to 290 thousand from last week's 278 thousand. Continuing unemployment claims rose by 36 thousand to 2.39 million claims. JOLTS job openings decreased by 118 thousand to 4.74 million in September.
Guesses continue to come in, speculating about tomorrow's big event. The winner gets a free book!
Final hint: it is the origin of my nickname.
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The markets continued their low volume, sideways to slightly higher march today. SPX lost one dollar to close at $2038 and RUT gained $7 to close at $1186. Interestingly, NASDAQ also broke out higher today. Both RUT and the NASDAQ composite have been trading sideways since Halloween, while SPX continued higher. That comparative price action has suggested a consolidation of prices was beginning for the markets, but today's price action reversed with SPX slowing and RUT and NASDAQ gaining. Trading volume bumped up today with 1.9 billion shares of the S&P 500 trading, but this remains well below the 50 dma. Trading volume increased 10% on the NYSE and increased 7% on NASDAQ. Volatility was nearly unchanged with a tenth of a point increase to 13.0%.
We didn't have any economic news of any significance today. CSCO announced earnings after the close and beat estimates. But their weak outlook is giving some traders second thoughts. That may weigh on NASDAQ stocks tomorrow.
Many of you have been messaging me with guesses about the "big event" coming on Friday. Hint: it is shared between two countries.
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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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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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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.
