- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1697
Just when you think you have the market figured out, it will surprise you. After weak trading for most of the last week, I thought the most likely course would be quiet trading until the FOMC announcement on Wednesday. But the S&P 500 Index (SPX) opened up very bullishly this morning and hit its high for the day about 30 minutes later. It closed the day at $1787, up $11. RUT rallied upward by $13 and closed at $1120. Trading volume bumped upward with 2.2 billion shares of the S&P 500 stocks trading today. Trading on the NYSE increased 4% and trading volume increased 21% on NASDAQ.
It appears that the Fed watchers have decided nothing will be said about starting to reduce the FOMC's stimulus programs on Wednesday and so the buying spree may safely continue. However, it is interesting that the VIX actually moved up a third of a point to 16% today in an up market. So the markets may be trading upward, but many traders are feeling at least a little bit nervous.
The Empire manufacturing survey came in at +1.0 for November, up from the -2.2 report from October. Industrial production increased 1.1% in November and capacity utilization increased to 79% in November from the previous month's 78.2%. All in all, the economic data reported today were pretty good, but not sufficient for this strong market rally. I think market action now is almost always about the Fed.
I only have the RUT Dec 1030/1040 put spreads still open from the Dec condor. I will decide whether to close them on Wednesday before the FOMC announcement. The 1040 options are now four standard deviations OTM, so they are very safe in ordinary times, but with the Fed meeting...?
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1820
Trading volume fell off today and the market averages didn't move much when all was said and done. SPX closed unchanged at $1775 and RUT gained $4 to close at $1107. Volatility continues to inch higher with the VIX gaining two tenths of a point to close at 15.8%. Trading in the S&P 500 dropped off to 1.9 billion shares. Trading volume on the NYSE dropped 14% and trading on NASDAQ declined 15%. SPX continues to hover in that support range of $1770 to $1780 while RUT appears to be tracking along its 50 dma at $1106.
The only economic news was the PPI report for November, declining 0.1%.
I closed the remaining 1150/1160 call spreads in my December iron condor position on RUT. This results in a current P/L of +$3,430 on 20 contracts or 21% on capital at risk. I will close the 1030/1040 put spreads next week before the Fed announcement. Who knows where that announcement may take the market?
Enjoy your weekend.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1742
Today was a mixed day on Wall Street with some stocks continuing their climb higher, but the broad market averages pulled back a bit. SPX closed down $6 at $1803, but RUT traded down even more with a decrease of $10 to $1120. Trading volume was mixed with two billion shares of the S&P 500 stocks trading, down just a bit from yesterday. Trading dropped 6% on the NYSE but increased 12% on NASDAQ. The VIX tacked on almost a half point to close the day at 13.9%.
SPX and RUT have both appeared to have set up a sideways trading channel defined on the lower end by the highs set in late October which were tested last week, and the upper end defined by the highs set the day after Thanksgiving. This corresponds to $1123 to $1147 on RUT, and $1780 to $1810 on SPX. Today's close on SPX at $1803 isn't too far from the high set at $1814, so SPX remains close to the upper end of that channel, but RUT's close at $1120 has broken the lower end of RUT's trading range. Yesterday's disparity in RUT trading down more strongly than SPX continued today. It would appear traders are taking some risk off the table and selling their higher beta stocks.
My RUT Dec iron condor continues to benefit from the sideways to downward movement of the past few days. The current P/L is +$2,820, or +18%, with delta = -$48 and theta = +$184 on 20 contracts. The FOMC meeting is next week. Will the markets just tread water until then?
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1859
SPX closed down $7 today at $1776. But RUT climbed $2, closing at $1103. Maybe RUT was making up for some of its extreme move downward yesterday. In any case, SPX's move today broke a significant support level at $1780, and closed just above the highs set in late October. Many analysts have been saying that their bullish opinion on this market would only change if SPX broke support at $1780. Now, both SPX and RUT have broken the lower support levels of the sideways channel of the past few weeks. But tomorrow could tell a different story. Trading volume was pretty flat with 2.1 billion shares of the S&P 500 stocks trading. Trading volume rose 1% on the NYSE and dropped 2% on NASDAQ. The VIX rose only a tenth of a point to 15.5%.
Economic news was mixed. Retail sales came in unexpectedly strong with a 0.7% rise in November. But unemployment claims increased 68 thousand to 368k. Continuing unemployment claims rose by 40 thousand to 2.8 million. I have embedded a very telling chart from today's Investors Business Daily below the blog. The normal practice of the Labor Department is to exclude the unemployed workers from the count if they have given up looking for work, and this tends to result in lower unemployment numbers the unemployed "drop out". If one does include these workers into the total number of unemployed, the unemployment rate has been constant to about 11% throughout this recession. This correlates well with my perception, based on people I speak with in my neighborhood, at work and so on. The economic recovery we hear about is largely propaganda or naive ignorance.
My Dec RUT iron condor at 1030/1040 and 1150/1160 stands at a net P/L of +$3,390, or +21% with delta = +$4 and theta = +$167.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1872
As I expected, the enthusiasm from Friday was muted significantly today. SPX gained $3 to close at $1808, but RUT lost $2 to close at $1129. VIX dropped off about a third of a point to 13.5%. Trading volume was flat in the S&P 500 stocks, coming in right at the 50 dma at 2.1 billion shares. Trading volume on the NYSE declined 2% and volume dropped off 5% on NASDAQ.
In one report I read today, the percentage of bullish investment advisers was at the highest level of the year. That has been a reliable indicator of the tops of bullish markets in the past. When everyone thinks the market is going higher, we are often very close to the top of the trend.
It seems like almost all of the market commentary concerns the FOMC and when they might start reducing their stimulus programs. The majority of the Fed watchers are expecting the tapering to begin in March, but who knows?
Today's market action was pretty bearish, in my opinion. SPX toyed with the idea of a new closing high, but couldn't quite make it. However, Russell actually declined - not by a lot, but weaker than the S&P 500. This contrast of SPX and RUT that we saw today is not isolated. A similar pattern has repeated several times over the past few weeks.
My Dec iron condor on RUT stands at a net P/L of +$2,090 or +13% with position Greeks on 20 contracts at delta = -$96 and theta = +$128.
Another consideration for traders of this market: When will trading volume begin to dry up in anticipation of Christmas and New Year's? One might expect that to result in more sideways consolidation trading, but the bulls were very much in charge during Thanksgiving week, in spite of low trading volume. Stay tuned.
