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The markets opened in positive territory this morning, but almost immediately headed south and didn't hit bottom until late afternoon. SPX traded as low as $1850 and recovered a bit to close down $9 at $1857. RUT traded down harder, but recovered somewhat, closing down $16 at $1178. Trading volume was lower than triple witching Friday across the board, so that comparison isn't terribly useful. But in absolute terms the trading volume in S&P 500 stocks today was just slightly below the 50 day moving average.
I think the most significant data point I saw today was in volatility. VIX really didn't spike up as we might expect as the market traded off this morning. VIX opened at 14.7% and only moved to 16% before starting to soften, closing at 15.1%. In fact, thirty minutes before the close, VIX was very close to where it opened.
Earlier today, as the market traded lower, I took that opportunity to close my Apr RUT 1270/1280 call spreads for a 13% gain. Later in the day, especially after seeing volatility remain relatively low, I sold the Apr RUT 1100/1110 put spreads just above the 200 dma. If RUT rebounds, I will sell more call spreads.
As I watched RUT trade lower today, I couldn't help thinking about my losses last week on my RUT Mar 1200/1210 call spreads. This sell-off just came a couple of days late. Timing is everything.
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The tug of war between the bulls and the bears appears to be pretty well balanced. Today's market action reinforced that conclusion with SPX hitting a high of $1884 within a few minutes of the open this morning - a new high for the year. But the bulls couldn't hold that high for long. SPX has slowly traded off all day to close at $1866, down $6 on the day. RUT traded to its intraday high at $1208 later in the morning, but this was short of intraday highs set in early March. RUT also traded off all afternoon, closing down $5 at $1194. Trading volume was higher today, not unusual for a triple witching expiration Friday. Preliminary numbers put NYSE volume up by 91% and NASDAQ up by 34%. Volatility rose a half point with VIX closing at 15.0%.
There was no economic news to push stocks one way or the other today, and that may have contributed to today's largely sideways to slightly weaker trading.
I closed the RUT 1200/1210 call spreads in my March iron condor yesterday; assuming the 1120/1130 put spreads expire worthless this weekend, that will net out to a 40% loss for March - ouch! But my RUT April 1270/1280 call spreads have already gained 11%; I am waiting for a good opportunity to enter the balancing Apr put spreads and further boost the income from this position.
I am writing this blog early today because I have to pick up my wife from the airport later. So I do not have the trading volume for the S&P 500 stocks and the settlement value for RUT has not yet been posted. SPX settled at $1893.30. RUT probably settled near $1200 but we'll see.
Enjoy your weekend.
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To my surprise, Putin played nice this morning and the markets were relieved and rallied almost non-stop all day. SPX gained $13 to close at $1872. RUT traded even more strongly, closing up $17 at $1205. But trading volume was weak with 1.8 billion shares of the S&P 500 trading (the 50 dma = 2.4B). As expected, volatility dropped off with VIX losing a little more than a point to close at 14.5%.
RUT's stronger behavior over the past few days seems to suggest the classic "risk on" trade is in play. Of course, that is fuel for those pointing to a bubble and a needed correction. But so far, those bears have been run over.
The real estate market continues to heal; housing starts for February came in flat at 907 thousand. Building permits surged from January's 945k to 1,018k in February. The Consumer Price Index (CPI) came in flat at +0.1%. That sure doesn't compute for me. It seems like all of my personal budget costs are higher, from food to fuel. But the CPI suggests prices have only risen 1% over the past 12 months. It isn't surprising that one of the articles in the news today was titled, "Feds Claim CPI Up Less Than 1%". I think we have lost faith in our government telling us the truth. Maybe like 6% unemployment?
Tomorrow's big market event is Yellen's first news conference. It is likely to continue the stock market's love affair with the Fed.
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The FOMC announcement and the first news conference for the new FOMC Chair, Janet Yellen was the big news today. The markets basically treaded water all day, waiting on the FOMC announcement. The announcement wasn't surprising: The reduction of Fed stimulus continues and interest rates will continue to be near zero for the foreseeable future. No really new news could be found there. But the news outlets focused on the markets' spike downward for a few minutes during Yellen's news conference. It was a tempest in a teapot, but I suppose it made for "exciting new commentary". I find it fascinating that many people apparently expect the Fed to predict where all economic data will fall, and on what date, and therefore what action the Fed will take at that time.
SPX dropped as low as $1850 this afternoon, but rebounded to close at $1861, down $11. RUT traded off by $9 to close at $1196. Volatility increased a bit with the VIX closing up a half point to 15.0%.
Trading volume rose with 2.1 billion shares of the S&P 500 stocks trading today, but it remains below the 50 dma of 2.4B. Trading on the NYSE rose 17% and volume increased 3% on NASDAQ.
SPX has hit highs of $1874 three times in the past five sessions and pulled back. That appears to be a moderately strong resistance level. But breaking out above $1880 would be the definitive signal of a resumed bull market. We remain at a tipping point for the markets.
My RUT Mar 1170/1180 and 1200/1210 iron condor remains on the edge; I am only trying to moderate the loss at this point.
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Crimea votes to secede and Russia immediately recognizes the new country (with 20k troops on the border). And the markets rallied this morning - a little surprising. SPX opened this morning and hit its high for the day ($1862) within just a few minutes, but it didn't trade off much, closing up $18 at $1859. RUT gained $7 to close at $1188. Putin will speak to the Duma early tomorrow morning our time; that may be a market-moving event - hard to predict.
Most market analysts attributed today's rally to short covering. But it didn't fade away in late trading, so that may not be the full explanation. It seems to me that both the bull and bear camps have good cases to make. The bulls have the Fed on their side and can point to reasonable market P/Es. The bears have the "too far, too fast" argument for a correction, weak economic data, and, to counter the S&P P/E argument, the S&P 500 dividend yield is very low (average is 4.4% and we are at 1.9%). The Fed's stimulus programs may tip the scale for the bulls.
The Empire manufacturing survey reported 5.6 for March, up from February's 4.5. Industrial production increased in February from January's -0.2% to a positive 0.6%. Capacity utilization increased slightly in February to 78.8% from 78.5%.
Watch the S&P futures in the morning. I expect they will be moving, based on Putin's saber rattling or more conciliatory pose. Did you see the video of the Russian TV newscast with the anchor threatening to turn "the U.S. into radioactive ashes" with a photo of a mushroom cloud as a back drop? And you thought our right wingers were radical?
