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As many have predicted, SPX is pausing to digest the $2,000 mark. This is only natural when you think about it. Many investors see this as the wake up call to take some of their profits off the table. If the bulls are correct, it will be a temporary pause. Two different interviews on CNBC today predicted corrections of 50% or more. Wow! think about that for a while - that would take us back to the middle of 2009. I think I will get my put buying machine tuned up.
SPX closed flat at $2000 and RUT retreated a couple of dollars to $1173. Volatility is close to unchanged at 11.8%. Trading volume is tepid with 1.3 billion shares of the S&P 500 trading - flat with yesterday. Trading volume declined 4% on the NYSE and declined 4% on NASDAQ.
I'm not sure what to think of the talk of such severe corrections. Much of this argument is based on concerns about the Fed's balance sheet as a result of the quantitative easing programs of the past few years. I'm not sure how the Fed will unwind its positions, or what the implications may be - we haven't been here before.
What is clear is that our country continues to go deeper in debt and interest rates are at record low levels. What happens when interest rates normalize? Interest payments on the debt will begin to crowd out other federal spending. Then the U.S. becomes like Greece. What is also clear is that the U.S. is no longer considered a friendly place for business. Much of it is moving off shore or, worse yet, is never starting up here in the first place. No wonder job creation is so sluggish.
Sorry to leave you on a sour note, but I don't think these issues are imagined, and they are serious.
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The Standard and Poors 500 Index is struggling to get past that large round number of $2,000. Today, SPX ran as high as $2005 but couldn't hold that high price into the close at $2,000, up $2. Technically, SPX broke the $2,000 mark by two cents, closing at $2,000.02. RUT is still playing catch up and gained $10 today to close at $1175. RUT remains far from its closing high at $1208 in early July. Volatility was flat with the VIX unchanged at 11.6%. Trading volume remains flat on the S&P 500 stocks at 1.3 billion shares, unchanged from yesterday, but trading bumped up 8% on the NYSE and increased 4% on NASDAQ.
All of today's economic data was positive with a huge gain in durable goods orders: a 22.6% gain in July as compared toJune's +2.7% gain. The Case Schiller housing price survey came in at +8.1% for June, a bit lower than May's +9.4%, but still pretty strong. The Conference Board's consumer confidence survey hit 92.4 for August, up from 90.3. I'm not sure why this survey of consumers seems to be disconnected from the survey by the University of Michigan.
My September SPX condor only consists of the 1830/1840 puts at this point. I tried to close those remaining puts for five cents today, but couldn't get it filled. I should have entered the order first thing this morning; I might have been filled as SPX spiked up to $2005. Maybe tomorrow.
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The S&P 500 Index (SPX) set a new all-time high today, closing at $1992, up $6. Yesterday's close fell a little short of the closing high on July 24th at $1988. RUT continues to trade much weaker than SPX or the NASDAQ composite, closing today at $1160, up $3. RUT closed above its 50 dma but almost touched the 200 dma intraday. By contrast, NASDAQ has set three all-time highs this week and SPX set a new all-time high today. Trading volume remains below average and was flat to mixed today with 1.6 billion shares of the S&P 500 stocks trading, up from yesterday's 1.5B, but well below the 50 dma at 1.9B. Trading volume was up 2% on the NYSE and down 6% on NASDAQ.
Initial unemployment claims dropped to 298k today, from last week's 312k. Continuing unemployment claims dropped to 2.5 million. Existing home sales increased to an annualized rate of 5.15 million for July, up from last month's 5.03M. The Philadelphia Fed survey increased to 28.0 for August from last month's 23.9.
I closed the 2040/2050 call spreads of my September SPX iron condor today. I will look for an opportunity to sell new Sep call spreads if the market pulls back; otherwise, I will allow the 1830/1840 put spreads to expire worthless for a 15% gain for September.
I am thinking the markets may pull back a bit or at least pause when SPX crosses the big $2000 mark. But who knows? Nothing has stopped this bull yet. Valuation arguments are the current debate.
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Markets continued to trade higher today, so the hated bull market continues to move higher and befuddle everyone, and the arguments about market valuation continue. SPX broke through $2,000 this morning, but couldn't hold it, closing at $1998, up $10. RUT also traded higher, up $5 at $1165. Volatility continues to be relatively low at 11.7%, up two tenths of a percent.
Trading volume has been trending consistently lower as this year has progressed and today was no different. Trading in the S&P 500 stocks declined to 1.3 billion shares, well below the 50 dma of 1.9 billion shares. Trading declined 4% on the NYSE, but rose 6% on NASDAQ.
New home sales were released for July today, coming in at an annualized rate of 412 thousand, down a bit from last month's 422 thousand.
My Sep iron condor on SPX now only consists of the 1830/1840 put spreads and at +13%, is nearing its maximum gain of 15%. If the market starts to sell off, I may close those put spreads; otherwise, I will allow them to continue to decay in value and increase our gains. I will probably enter my October condor later this week.
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Markets continued to trade higher today, but the low trading volumes that have characterized this market throughout 2014 continue. SPX, RUT and the NASDAQ composite all gapped open higher this morning. NASDAQ set a new all-time high both yesterday and again today. SPX traded upward $10 to close at $1982 and RUT closed at $1162 for a gain of $4. RUT is now above its 50 dma, but remains well below its early July high. However, SPX is within striking distance of its July closing high of $1988. Trading in the S&P 500 stocks dropped slightly to 1.6 billion shares. Trading volume on the NYSE declined 1%, as did trading volume on NASDAQ. The 50 dma on SPX trading volume has dropped from 2.4 billion shares to 1.6 billion in the last four months.
Volatility dropped slightly with the VIX closing at 12.2%, down about one tenth of a point.
The Consumer Price Index (CPI) increased 0.1% in July, down from last month's 0.3% increase. Housing starts for July were up with an annualized rate of 1093k, up from June's 945k. Building permits increased to 1052k from last month's 973k. Traders will be studying the FOMC minutes that will be released tomorrow for clues of the timing of higher interest rates. But all signals from Yellen have been for low rates well into 2015. She will be speaking at Jackson Hole Friday and we may see the markets move a bit, depending on the interpretation of her speech.
My Sept iron condor on SPX at 1830/1840 and 2040/2050 stands at a net P/L of +$2,540 on 20 contracts or +16%. The trade remains largely delta neutral (-$41 on 20 contracts) even with the recent moves higher. I chose to use SPX because RUT has been much more volatile this year.
This most recent correction is following a similar pattern to those of the past 18 to 24 months - down in a relatively short period of time, but then fully recovering those losses in an equally short period of time.
