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Markets traded down again today, but this time on higher trading volume. SPX closed at $1795, down $6 while RUT closed at $1124, down $5. As one might expect, volatility is rising with the VIX closing up about a third of a point today at 14.6%. VIX broke 15% intraday. Russell's price action was particularly negative with a gap open downward this morning. Trading in the S&P 500 stocks increased to 2.2 billion shares, above the 50 dma at 2.1B. We haven't seen many S&P 500 volume numbers above the 50 dma recently. Trading on the NYSE increased 10% and trading volume on NASDAQ increased 8%. A gap open toward the downside plus higher volume combine for a significant bearish signal. However, we have seen this market reverse several times this year as the bulls suddenly took over control and pushed higher.
Economic data was sparse today. Some market analysts speculate the market weakness is due to concerns about the Fed tapering stimulus sooner rather than later. But if the markets had surged higher, I am sure they had the answer in the other coat pocket.
My Dec iron condor on RUT stands at a net P/L of +$1,680 or +12% with position delta = -$141 and position theta = +$141 on 20 contracts.
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Markets tumbled today as reports of Black Friday sales began to come in, and the early reports were weak. SPX was actually flat on the day with about 30 minutes to go into the close, but dropped $5 in that last half hour, closing at $1801, down $5. RUT behaved a bit differently, trading steadily lower as the day progressed, and hit its low of the day just a few minutes before the close at $1129, down $14. The fact that RUT traded off so much more strongly than SPX is a bearish sign, but one data point doesn't define a trend, or, in this case, a correction. Looking at the percentage increases in trading volume from Friday is meaningless because of the holiday, but the absolute trading volume in the S&P 500 stocks came in today at 1.9 billion shares, well below the 50 dma at 2.1B.
Volatility increased about a half point with VIX closing at 14.2%. The ISM manufacturing index came in at 57.3 for November, up from the previous month's 56.4. Construction spending for October increased 0.8%, an improvement over September's 0.3% decline. All in all, more mediocre economic data.
I hedged my Dec iron condor with the RUT Jan14 1135 calls over the holiday weekend just in case the bullish trend continued strongly this week as traders returned from the holiday. I sold those calls this morning. The position stands at a net P/L of -$180 or -1% with position delta = -$173 and position theta = +$199 on 20 contracts.
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SPX set a new all-time high Friday on low trading volume, so I was anxious to see what might happen today: fall back below $1800 or head higher? It wasn't either; SPX lost only $2 to close at $1802. RUT was unchanged at $1125. Trading volume also remained low with 2.0 billion shares of the S&P 500 trading. Trading rose 3% on the NYSE and rose 4% on NASDAQ. So, you have a choice of how to interpret the data. If you are a convinced bull, then we are just taking a breather and you would note that SPX remained above the pivotal $1800 mark. But if you are a skeptic or outright bearish, then you hang your hat on the low levels of trading volume. It is hard to be too enthusiastic about break-outs on low volume.
I saw a survey this morning that showed 51% believing the Dow will break $17,000 before year-end - Wow! Is that a classic contrarian signal?
The pending home sales were reported as declining 0.6% in October, which probably is pretty normal for this time of year. And it is a big improvement over the 4.6% decline in September. Tomorrow brings the building permits report, the Case Schiller Housing Price Index and consumer confidence.
My Dec condor is plodding sideways with a net P/L of +$600 or 4.3% with position delta on 20 contracts of -$140 and position theta of +$155.
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Today was probably the beginning of the trader exodus before the holiday. But they were buying as they walked out the door. SPX traded unchanged, closing at $1803, but RUT surged upward $10 to close at $1135. Volatility is unchanged with the VIX steady at 12.8%. Trading volume remains below average, but was up slightly with 2.1 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE increased 12% and increased 3% on NASDAQ. The net result was a mixed bag, with SPX trading flat and RUT setting a new all-time high.
Traditionally, the period between Thanksgiving and New Year's has been bullish. This year, it seems most analysts are predicting at least a minor pull back, if not a serious correction. So it will be interesting to see if the market shows any weakness after traders return next week. For now, it all looks very bullish.
Building permits issued for September and October were released today at 974k and 1034k, respectively. The Case Schiller housing price index turned in another hot month with prices increasing on an annualized basis of 13.3%. The Conference Board's consumer confidence index dropped again in November to 70.4 from the previous 72.4.
We will probably see trading volume drop off significantly tomorrow and the exchanges will close early on Friday, so most traders won't be back until Monday.
Do you have your turkey? (I know you have him. I meant the one for dinner Thursday.)
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The markets set new all-time highs today with SPX closing up $9 at $1805 and RUT gaining $5 to close at $1125. Both closes break previous highs set earlier this year. And, perhaps more significantly, RUT has finally caught back up with SPX. But, on the other hand, these new highs are being set on low trading volume. Trading in the S&P 500 stocks dropped to two billion shares and trading volume on the NYSE declined 8%. But trading on NASDAQ increased 2%.
The VIX declined to 12.3%, down almost a half point. No significant economic news was reported today. In my opinion, the hard economic data doesn't support this bull market. It is premised on FOMC support. So I suppose we should party while we can. But watch for when the Fed even hints at pulling out. That could get ugly, but that may be well after the new year, so Merry Christmas!
Enjoy your weekend.
