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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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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.
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With the FOMC announcement coming out tomorrow, one might have expected some slow sideways trading today, but the bulls were out in force. SPX broke through the 50 dma at $1967 and resistance at $1970 and didn't look back. It closed at $1985, up $23 on the day. RUT was also on a tear, trading up $32 to $1149. RUT broke through both the 50 dma and the 200 dma today, but still has a long ways to go to return to the September highs. Trading up another twelve points to $1161 would at least get RUT even on the year. By contrast, SPX is up 7.5% for the year.
Volatility continues to come in with the VIX falling to 14.5%. Trading volume moved higher, supporting the bullish nature of this market, with 2.1 billion shares of the S&P 500 trading today. Trading volume was up 4% on the NYSE, but surged 23% on NASDAQ. Was that a result of the big surge in TSLA today? Day traders must love that stock!
Durable goods orders decreased 1.3% in September, but that was a big improvement from last month's 18% drop. The Case Schiller housing price index dropped 0.2% in September, down from the 0.7% gain of August. The consumer sentiment survey from the Conference Board for October reported a value of 94.5, up from 89.0. There aren't any disasterous numbers here, but nothing that might generate today's strong rally either.
I sold an iron condor at plus and minus one standard deviation on BIDU as a play on its earnings announcement today, and so far at least, that looks like a winner. My November iron condor on SPX only consists of the 1810/1820 put spreads; I closed the call spreads a couple of weeks ago. This position is gaining value each day as the bulls push the markets higher. Assuming those spreads expire worthless (probability of 99% as of today's close), the November position will conclude with a 14% gain - not bad after that plunge on October 15th. My December iron condor only consists of the 1810/1820 put spreads, but that position is up 8% at today's close. I am waiting for this market to slow a bit before entering the call spreads to complete the condor.
So we await the FOMC announcement tomorrow. Presumably, QE will be pronounced officially over and the same language will be used about interest rates only rising well into 2015. I expect the market to collectively yawn, but...
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Today's FOMC announcement officially pronounced the end of the Fed's quantitative easing programs. All in all, the announcement was pretty standard fare. Of course, analysts are arguing whether the announcement was hawkish or dovish, or whether various phrases used in the announcement mean interest rates will rise in April or July of next year. It reminds me of a group of medieval soothsayers studying tea leaf residues.
The markets dropped quite a bit in the first few minutes after the announcement, but then stabilized. Apparently traders have decided the market can stand on its own. SPX lost $3 to close at $1982 and RUT also lost $3, closing at $1146. Trading volume was up a touch with 2.2 billion shares of the S&P 500 stocks trading. Trading on the NYSE increased 5% and trading volume increased 13% on NASDAQ.
Plot SPX with its Bollinger bands. It is amazing how quickly it has traveled across the band from the lower edge nearly to the upper edge in just a few days.
We won't know for sure how the market has reacted to the FOMC announcement until tomorrow. Everyone will be studying those tea leaves this evening.
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After such a huge run last week, it wasn't too surprising to see the markets tread water a bit today. SPX lost $3 to close at $1962, and RUT declined $1 to close at $1117. SPX opened weakly this morning and traded as low as $1951 before recovering to close near its high for the day. That trading action tells me the bulls are still in charge of this market. Volatility was unchanged today, with the VIX closing at 16.0%. Trading volume was mixed with an 8% rise on the NYSE, but an 11% decline on NASDAQ. The trading volume on the S&P 500 stocks was not yet available as I write this a bit earlier than usual (I have an appointment shortly).
The only economic data today was pending home sales, up 0.3% in September, an improvement over the one percent decline in August. Durable goods orders and the Case Schiller housing price reports will be issued tomorrow, and we get the FOMC announcement Wednesday afternoon.
My November iron condor on SPX stands at a net gain of 7% with the Nov 1810/1820 put spreads remaining open. I closed the call spraeds when the market hit its lows week before last. Our maximum return on the November condor is 13%, and that looks pretty safe at this point. I took that opportunity of a low market to open the SPX Dec 1810/1820 put spreads; that position stands at a net gain of 4%. I will be entering the call spreads to complete the December position soon.
We may see another slow day in the markets tomorrow as traders wait to hear from the Fed. Presumably, QE ends this month. But maybe the FOMC will surprise us with something. Or traders will spook themselves based on a minor word change in the announcement. Stay tuned.
