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The broad markets continue to basically trade sideways. SPX toyed with support at $1840, but bounced back and closed at $1849, down $4 on the day. RUT also lost $4, closing at $1151. But RUT has traded much weaker than SPX. RUT has sliced down through $1182, the high set in January, then through $1165, the high from December, and finally broke through the 50 dma at $1163. Today's candlestick on RUT had moderately large upper and lower shadows, suggesting some indecision between the bulls and bears. As long as support holds on the broader market as represented by $1840 in SPX, this may be a sign that RUT is beginning to find a bottom.
Trading volume was up a bit, but mixed today with 2.5 billion shares of the S&P 500 stocks trading. Trading also rose in the NYSE by 8%, but trading volume declined 7% on NASDAQ.
Initial unemployment claims dropped by ten thousand to 311k and continuing claims decreased by 53 thousand, so that is encouraging. The third estimate of fourth quarter GDP came in a little higher at 2.6% (why can't we wait until we get it right and announce it once?). Pending home sales dropped 0.8% in February, a further decline from January's -0.2%.
The situation in the Ukraine doesn't appear to be improving, so I suppose that could push the markets lower. But if the stalemate continues, the markets may simply move on - hard to predict.
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Positive durable orders data this morning set the market off to the upside. When I first looked at my screens this morning, it was a rare moment: every Asian index was green, every European index was green and all of the U.S. futures were green. But that only lasted until about 1:00 pm ET, then a slow decline began. Late in the afternoon, it looked like the tide was turning back upward, but then the bottom fell out and SPX and RUT both closed at their lows for the day. SPX lost $13 to close at $1853, while RUT fared much worse, closing at $1155, losing $23 on the day.
For all of that carnage in the small caps, the VIX only increased about one point to 14.9%. The VIX is based on SPX options, so the sell off was in the small caps - classic risk off behavior. SPX also closed at its low for the day, but didn't come close to breaking support at $1850, whereas RUT broke support at $1165 and broke through the 50 dma at $1163, closing $8 lower at $1155.
A somewhat contrary indicator for all of this downward price action was trading volume; only 2.3 billion shares of the S&P 500 stocks traded today, still below the 50 dma at 2.4B. However, trading on the NYSE increased by 10% and trading volume increased 8% on NASDAQ.
The early market action was driven largely by the positive durable orders report which increased 2.2% in February, a big change from January's 1.3% drop. However, if you subtracted defense and aircraft, core business equipment spending dropped 1.3% in February.
The conventional wisdom tied the market losses to Western countries making noise about increasing the sanctions against Russia over Crimea and the Ukraine. The Ukraine bogeyman keeps spooking this market. But today, there was an absence of bulls coming in to buy the dip. Will they show up tomorrow, or is it time to start clearing out trades? The last Putin scare took SPX down to $1840 and RUT to $1173, so RUT has already set a lower low...
I will be watching those futures in the morning very carefully.
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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 markets bounced back today, but it wasn't rip roaring. SPX gained $8 to close at $1866 while RUT closed unchanged at $1178. Volatility continued to drop with the VIX losing a little over one point to close at 14.0%.
Trading volume fell off from yesterday's average volume reading with 2.2 billion shares of the S&P 500 stocks trading. Trading volume dropped 7% on both the NYSE and NASDAQ.
The Case Schiller home sales price index came in at an annualized rate of +13.2% for January, down only slightly from the previous month's +13.4%. The Conference Board's consumer confidence survey for March came out at 82.3, up markedly from the February number of 78.3.
The markets opened strongly this morning with SPX trading as high as $1872 in the first hour, but then gave all of that back by noon, recovering in the afternoon to close modestly up for the day. RUT traded similarly but traded much lower by noon, so the afternoon recovery just brought RUT back to even for the close. SPX is trading within a narrow consolidation range of $1840 to $1880. A break-out above $1880 or down below $1840 would be a significant signal for traders. Recent candlesticks on SPX have long shadows, meaning that as bulls pushed prices higher, the bears pulled them back down, and as bears pushed prices lower, the bulls came in and pulled the prices up before the close. It is hard to tell which way this market may go, but the bulls and bears appear to remain pretty well balanced to date.
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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.
