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The markets opened in positive territory this morning, but then turned downward, hitting a low just before noon ET. Then the classic "buy the dip" behavior began and everyone breathed a sign of relief. But someone gave the bear signal just after 2 pm ET, and the market traded off. SPX lost $9, closing at its low of the day at $1970. RUT has been consistently weaker than SPX, but today was an exception. RUT attempted to break out above the 200 dma, but could not hold it, closing up $2 at $1142.Volatility bumped up with the VIX closing up 0.7 points at 13.3%. Trading volume spurted higher, underscoring the market weakness. Trading in the S&P 500 was above 2.3 billion shares, well above the 50 dma. Trading volume increased 7% on the NYSE and increased 18% on NASDAQ.
A sideways consolidation would be healthy for this market and SPX has been trading in a tight channel for all of July. As long as the support range of $1950 to $1960 holds, we should be OK. A break below $1950 could be the beginning of something ugly.
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Last week's trading appeared to give the bears hope and the markets opened lower this morning. But that was the end of it. The bulls took over and drove the market higher with SPX finishing the day at $1979, up one dollar. RUT remains weaker than the blue chips, closing down $5 at $1140. The VIX popped up this morning as the market traded lower just after the open, but pulled back as the market recovered, ending the day just a tenth of a point lower at 12.6%.
Trading volume was lower on Friday's weak market, but volume picked up today with 1.9 billion shares of the S&P 500 stocks trading. This is right at the 50 dma. Trading volume was up 6% on the NYSE and up 4% on NASDAQ.
All of the technical indicators are on the side of the bulls. many analysts, including myself, have serious doubts about the economic underpinnings of this market, but the reality is that the bulls are dominating the market. Today's "buying the dip" was just one more example. Whether I think it makes sense is irrelevant. So I am trading the market from a bullish bias, but I am very cautious. A pull back or more serious correction remains very probable, and the longer this bull market runs, the more likely the occurrence of that pull back.
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SPX came out of the gate pushing higher this morning and basically traded sideways the rest of the day. SPX closed up $10 at $1984, just shy of its all-time high of $1985 on July 3rd. RUT has been weaker than SPX lately, but matched SPX's enthusiasm today, gaining $10 to close at $1156. As one might expect in the midst of all of this bullish euphoria, the VIX declined about six tenths of a point to close at 12.2%. I readily admit that I don't see the economic underpinning for this bull market at these levels, but you have to play what you see (but I suggest you hedge yourself just in case).
The Consumer Price Index (CPI) was reported today at +0.3% for June, down slightly from the +0.4% the previous month. The annualized rate of existing home sales was 5.04 million in June, up from May's 4.91 million.
Apple is down fifty cents in after hours trading following its earnings announcement. I think that's the smallest move after an earnings announcement from Apple I have ever seen. Apple is now a boring blue chip stock...
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The Standard and Poors 500 Index (SPX) made a new all-time high today, closing at $1988, up $1. This is the third day in succession that a new all-time high has been achieved (based on closing prices). In short, it remains a strong bull market. RUT is trading weaker with a close down $2 to $1156. RUT seems to be just trading along its 50 dma as SPX marches higher, but SPX's climb higher is slowing a bit.
Trading volume on the S&P 500 stocks was also above its 50 dma for the third day in succession. So these are the classic new highs on higher trading volume. Volatility is relatively low with the VIX at 11.8%, but it rose a bit today (about three tenths of a point).
Today's economic news was positive with initial unemployment claims declining 19 thousand to 284 thousand and continuing claims dropping by eight thousand to 2.50 million. New home sales declined modestly in June to an annualized rate of 442k from 406k in May.
I have not met anyone who is cheerfully trading this bull market. It seems that very few students of the market are comfortable with this bull market, including me. But what can you do? You have to trade what you see. I am having good luck with diagonal call spreads. The short call premium gives you a little breathing room in case of a pull back. I am also adding a put to some of these positions, rendering it similar to a collar trade. We may not see much action in the markets tomorrow. Next week brings a lot of economic data and more likelihood of some larger price moves one way or the other.
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If Friday wasn't sufficiently convincing, today's market action confirmed the strong hold on this market by the bulls. SPX opened this morning and traded lower, hitting $1966 around 11 am ET. But support is in the $1950 to $1960 range; it didn't even challenge support. SPX recovered most of those losses, closing at $1974, down $5 on the day. RUT closed at $1147, down $5. Volatility rose a bit with the VIX tacking on a quarter point to 12.8%.
No economic news of any significance was scheduled for today. CPI and existing home sales come out tomorrow.
There are certainly plenty of solid economic reasons for this market to not be this strong, but...
