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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, 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.
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The Standard and Poor's 500 Index continued higher today and closed up $8 at $1955. RUT was more subdued, gaining $2 to close at $1143. SPX has a strong area of resistance from $1950 to $1960 and today's action solidly broke $1950. RUT remains below its 200 dma, so it certainly hasn't turned strongly bullish.
After I wrote yesterday's blog, Investors Business Daily moved their market indicator to Confirmed Uptrend from Market in Correction. That surprised me because I am not fully convinced we are out of the woods. One negative indicator for the past two days is lower than average trading volume with the S&P 500 stocks trading 1.5 billion shares both days; the 50 dma is 1.9 billion. Today's trading on the NYSE was down 6% and trading on NASDAQ was down 3%. That doesn't sound like charging bulls. Volatility continues to fall with the VIX losing a half point to 12.4%, so I must be the only trader who is worried..
Unemployment claims increased to 311k from last week's revised 290k figure; the four week moving average increased to 296k. Continuing unemployment claims increased 25k to 2.544 million.
I am tentatively entering some bullish trades, but I am watching them very carefully. If we have passed the bottom of the correction, it was certainly a mild one with a 4% correction on SPX. On the other hand, we are 45 points higher from the low on August 7th. Is it significant that I don't feel like we have gained $45?
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SPX traded up $17 to close at $1972. RUT outperformed SPX by gaining $17 (1.5% vs. 0.9%) to close at $1158. SPX is now solidly above resistance in the range of $1950 to $1960. RUT did trade more strongly than SPX today and finally closed above the 200 dma, but it remains below its 50 dma. RUT has a lot of ground to make up if it is going to catch up with the blue chips. Volatility fell another point with the VIX closing at 12.3%.
Trading volume was lower across the board today - not too surprising after an option expiration Friday. But the lower trading volume in general this year underscores the reticence about this bull market. Traders are now looking forward to Yellen's talk this week and will be scouring the Fed minutes for signs of rising interest rates. Other traders are arguing how best to value this market - the usual arguments between the bulls and bears when the market is trading higher and climbing the proverbial wall of worry.
There was no economic news today; we get the CPI tomorrow and the FOMC minutes Wednesday. I find it interesting how few of us feel good about these strong market advances. Hmmm...
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The markets have been trading higher for the past several days, but still have not broken through key resistance levels. SPX gained $13 today to close at $1947. RUT gained $9 to close at $1142. Consistent with these gains, volatility has declined, with the VIX dropping over one point to close at 13% today. Trading volume wasn't much higher today with 1.5 billion shares of the S&P 500 stocks trading; this was flat with yesterday. Trading on the NYSE increased 5% and trading volume increased 3% on NASDAQ.
SPX traded as high as $1948 just before noon but then just wandered sideways the balance of the day. Resistance in the range of $1950 to $1960 remains an obstacle to calling an end to this correction. We need to see a close above those levels.
The Labor Department's job openings report (JOLTS) hit 4.67 million for June, the highest number of openings since February of 2001. One problem with this report is that it doesn't distinguish between full time and part time jobs; I am concerned that ObamaCare is driving companies to offer new employment as part time jobs. Retail sales were reported for July today at an increase of 0.1%, down from June's +0.2%. Most recent economic data have been positive and are not trending lower, but we are far from the robust growth that has characterized all past recoveries from recession. The economy remains very weak.
I closed the SPX Aug 1920/1930 put spreads today; assuming the 2020/2030 calls expire worthless this weekend, that will result in a 3% loss. But my SPX Sept 1830/1840 and 2040/2050 condor currently stands at a net gain of 13%, so that is helping a lot. Probably the main risk for this market is unexpected news from one of the global hot spots. Absent that, I am inclined to think we will continue to see modest gains.
