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The markets slowed a bit today after a solid four days of trading significantly higher. SPX lost $2 to close at $1910 and RUT closed down $6 at $1137. Trading volume remains weak with 1.7 billion shares of the S&P 500 stocks trading today, slightly lower than yesterday. Volume rose 1% on the NYSE and declined 3% on NASDAQ.
Volatility rose about two tenths of a point today with the VIX closing at 11.7%. I wouldn't bet the farm on this, but I find the VIX chart over the past three days interesting. It is only three days, but one could easily draw a slightly rising trend line for VIX, while SPX is also rising - a potential divergence in the making? I have seen this happen before, preceding a pull back on SPX. But I am not in the "sky is falling" camp. I think Fed support and solid corporate earnings will hold this market in at a least a sideways trend. However, after such strong trading for the past few days, a little pull back lower wouldn't be surprising.
GDP growth for the first quarter and unemployment claims will be reported tomorrow. The risk for the market would be a negative GDP number - that might spook some traders.
In the meantime, my RUT June condor at 1040/1050 and 1220/1230 stands at a net gain of $3,540 on 20 contracts or +23% with position delta = +$11 and position theta = +$100. We have a nearly perfectly delta neutral position with about 3 weeks until expiration. I have an internal debate at a point like this between closing early for a large percentage of the gains or allowing the trade to appreciate even further. As long as the trade remains delta neutral, I am inclined to let it run; a large one day move in either direction will cause me to push the exit button.
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Traders returned from the long weekend in an optimistic mood. Trading volume remains relatively low, but all of the major market indexes rose. SPX closed up $11 to a new all-time high of $1912. RUT wasn't to be out-done, rising $16 to close at $1142; this close may be significant in that it is above the 50 dma at $1140; RUT broke down through the 50 dma on March 26th. RUT has been trading weakly for a long time. Volatility was roughly unchanged with the VIX increasing less than two tenths of a point to 11.5%. Both SPX and RUT gapped open higher this morning, a very bullish sign. Trading volume naturally increased from Friday's light holiday trading volume with a 16% increase on the NYSE and an 18% increase on NASDAQ. The S&P 500 stocks traded 1.8 billion shares today, an increase from Friday, but well below the 50 dma of 2.2 billion shares. So we are continuing to see a bullish market on low volume. But NASDAQ composite and RUT appear to have turned the corner and are now recovering. NASDAQ gapped open this morning and rose $51 to close at $4237. Unlike RUT, NASDAQ has left its 50 dma in the dust ($4017).
Durable goods orders increased 0.8% in April, but the March numbers were revised upward significantly, so analysts were encouraged that business appears to be investing in capital goods like manufacturing equipment. The Conference Board's consumer sentiment survey increased to 83.0 for May from 81.7 in April. Case-Schiller's housing price survey came in at an annualized rate of 12.4% for March.
The market's exuberance contributed to my SNDK diagonal spread needing to be closed today for a 22% gain; the stock price was running through my window of profitability, but a 22% gain in one week isn't too bad. My June iron condor position on RUT is now up 23% - very nice.
We'll see if this strong bullish move can continue. It doesn't seem likely to me, but maybe that assures us that the move will continue.
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This market is like an old fashioned see saw, back and forth between the bulls and the bears. Today it was the bulls' turn as SPX gained $15, closing at $1888. RUT didn't gain as much, closing up $6 at $1104. Volatility declined with the VIX closing down one point at 11.9%. That was the lowest close for the VIX all year. Trading volume fell off with 1.7 billion shares of the S&P 500 stocks trading. Trading on the NYSE declined 9% and trading volume dropped 4% on NASDAQ. Perhaps the exodus for the long weekend is already beginning.
The minutes from the last FOMC meeting were released today and investors were reassured that the discussions about raising interest rates were couched in terms of later in 2015. But that is what the Fed has been telling us all along, so there wasn't anything new in the minutes. It seems like Wall Street starts fretting about the Fed even more now that they have been much more transparent. We get the weekly unemployment numbers tomorrow, but those aren't likely to be market-moving.
So, will the markets sell off a bit tomorrow? It is the bears' turn...
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SPX closed at a new all-time high, $1901, up $8. RUT finally broke out above the 200 dma at $1118, closing at $1126 for a gain of $12. That underscores the huge differences in SPX and RUT recently. SPX makes a new all-time high and RUT finally breaks out above the 200 dma - wow! As one might expect, the VIX dropped almost one percentage point to close the day at 11.4%, the lowest reading for 2014. Trading fell off to 1.4 billion shares of the S&P 500 stocks changing hands today, not too surprising before the long holiday weekend. Trading volume decreased 12% on the NYSE and dropped 16% on NASDAQ.
The only economic news for today was the report of new home sales for April, an annualized rate of 433 thousand, up from last month's 407k.
Now the question is whether the markets can hold these new highs next week. I am doubtful, but we'll see. I am not in the "sky is falling" camp, but I don't think we have sufficient economic recovery to justify a sky-high market either.
BTW, that SNDK spread I recommended on Monday is up 20% this week. You would have paid for your annual membership in The No Hype Zone in one week...
Enjoy the holiday, but remember its true meaning. Thank a veteran this weekend.
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Almost on cue, the market Gods gave the baton to the bears today to wipe out yesterday's gains. SPX lost $12 to close at $1873. RUT closed down $17 at $1098. Significantly, both indexes remain above key support levels. SPX bounced off the 50 dma at $1868 and RUT bounced off the February low at $1093. RUT remains below its 200 dma. Trading volume increased today with 1.9 billion shares of the S&P 500 stocks trading, but this remains below the 50 dma at 2.2 billion shares. Trading on the NYSE rose 13% and trading volume on NASDAQ increased 12%. The VIX increased a half point to 13%.
For the past several weeks, RUT and the NASDAQ composite have traded much weaker than the SPX and the DJIA. NASDAQ closed down $29 today at $4097, but is still well above the 200 dma at $4007 and the solid support around $3998 established by lows in mid-December, early February and mid-April.
Market watchers blamed remarks by some of the FOMC members for the decline, and one has to wonder if someone will find something remarkable in the FOMC minutes that will be released tomorrow. I doubt that, but I didn't think that Plosser or Dudley's comments today gave us any new information either. Maybe it is another case of "we have to explain the market's move somehow".
The market continues to basically trade sideways in a pretty tight range. Trading volume should begin to decline later this week in anticipation of the long weekend.
