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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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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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The markets opened a little weak for a few minutes this morning, but then traded up all day with SPX gaining $7 to close at $1885. RUT also gained on the day, closing up $12 at $1114. Volatility was unchanged with the VIX at 12.4%. the NASDAQ composite tacked on $35, almost 1%. But before we hang too much on those numbers, it is important to note that trading volume dropped off with 1.7 billion shares of the S&P 500 trading today, well below the 50 dma of 2.2 billion shares. Trading volume fell 17% on the NYSE and decreased 9% on NASDAQ. We have a long weekend coming up, but it seems too early for everyone to be checking out. I think the safest conclusion is to say that we remain trading sideways in a narrow range. And this is consistent with the classic "Sell in May" pattern for the summer. Many focus on the "sell", but this isn't a period of decline; the typical historical trend has been sideways, range bound trading. Even if the bears take their turn tomorrow, I expect SPX will remain in the range of $1850 to $1900.
My Jun RUT iron condor at 1040/1050 and 1220/1230 stands at a net P/L of $2,340 on 20 contracts or +16% with delta = +$54 and theta = +$62. I also entered a diagonal call spread today on SNDK, long the Jun 90 call and short the MayWk4 92 call. SNDK has been in a strong bullish trend for quite a while and this has been reinforced after its recent earnings announcement. Diagonal call spreads work well with slightly bullish to sideways patterns. The next several weeks should be a good time for that class of trade.
This is going to be a slow week for economic data and trading will most likely slow as we approach the three day holiday weekend. I don't expect any fireworks. So today's low volume sideways trading may be typical of the week.
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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.
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The markets bounced back a bit today, seemingly reaffirming the sideways trading range of the past few weeks. SPX gained $7 to close at $1178. RUT also gained $7 to close at $1103. Volatility backed off a bit with the VIX declining almost one point to 12.4%. Trading volume was flat to down from yesterday with 2.1 billion shares of the S&P 500 trading. Volume rose 1% on the NYSE and dropped 16% on NASDAQ.
SPX has been successfully using the 50 dma as support, bouncing off both yesterday and today. But the 50 dma is steadily rising, compressing SPX between its all-time highs and the 50 dma. Sooner or later, something has to give. RUT has been trading much weaker than SPX, trading way below the 200 dma. Over the past few days, it appears RUT is bouncing off the support set by the low in early February around $1093. The market is clearly weak, but the key question is whether the markets will consolidate and thereby relieve some of the excesses from the strong bullish gains of the past several months or whether we will see a stronger correction. I am starting to worry that it may be the latter.
The weakness in RUT worries me a bit, so I closed my May put spreads yesterday. SPX settled at $1870.76 and RUT settled at $1094.72. The May call spreads will expire worthless, resulting in an 11% gain for my May iron condor position on RUT.
Have a great weekend.
