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It was a banner day on Wall Street for the bulls. The one minute chart was near ideal: a slow steady climb all day long with the major indexes closing at or near the highs of the day. SPX gained $14 to close at $1796 and RUT closed at $1120, up $20. Today was unusual in one respect - RUT outperformed SPX, gaining 1.8% as compared to SPX's 0.8% gain. However, trading volume didn't underscore the move, with 2.2 billion shares of the S&P 500 stocks trading (this is just at the 50 dma). Trading on the NYSE was up 5%, but trading volume on NASDAQ was down 2%.
Traders breathed a sign of relief and the VIX declined almost three quarters of a point to 12.7%.
Initial unemployment claims edged down another week to 323k, but continuing unemployment claims rose 66 thousand to 2.9 million. The Producer Price Index (PPI) dropped 0.2% in October, as compared to a 0.1% drop last month. The Philadelphia Fed survey collapsed in November to 6.5 from the previous report at 19.8.
Today's price action is all too familiar to traders this year. From the high on Monday to the low yesterday, the market dropped $25, but then over half of that loss was recovered in one day. A trader could have successfully bought all pull backs this year and been very successful. But the problem has been determining when the pull back is over - the reversals have been very sudden and dramatic. There have not been any slow consolidations presaging a reversal. If a trader had simply bought the SPX January 2nd and then closed his eyes and ears, he would be sitting pretty today. But you don't see many, if any, traders with smiles - this year's market has been a very tough market to read and trade. Today's price action is just one more example.
My Dec iron condor stands at a net P/L of +$740 on 20 contracts or +5.4% with position delta = -$113 and position theta = +$149.
What will happen tomorrow? Are the bulls now firmly in charge? That is hard to predict. I will be watching to see if SPX can set a new all-time high and hold it into the close.
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The markets opened down this morning and chopped sideways until early afternoon when they moved into the red and stayed there. SPX traded down $4 and closed at $1788, while RUT lost $6, closing at $1101. This pattern of RUT trading weaker than SPX is continuing. Trading volume was flat to lower with 2.1 billion shares of the S&P 500 stocks trading. Trading volume was down 2% on the NYSE and decreased 5% on NASDAQ.
Volatility moved up a bit again today with the VIX closing at 13.4%, up about one third of a point.
No economic data were reported today. Tomorrow brings retail sales, existing home sales and the CPI.
My Dec iron condor stands at a net P/L of +$1,800 or +13% with position delta = -$38 and position theta = +$136 (20 contracts).
It appears that the bears are gaining more control in this market over the past couple of days. But the pullbacks this year have generally been taken as opportunities to buy. So I would be cautious about playing to the downside.
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This market just can't stop trading higher. Analysts keep predicting a correction, but the market keeps trading higher. But I often fall into the trap of thinking the market is a rational entity, but, of course, that isn't correct. SPX added another $8 today, closing at $1798 while RUT added $5 to close at $1116. This was another all-time high for SPX, but RUT is still trying to catch up. Volatility dropped a bit with the VIX trading down to 12.2%, not far from the 11.8% low of early August. Trading volume was basically flat with 2.3 billion shares of the S&P 500 stocks trading. Volume rose 3% on the NYSE, but dropped 4% on NASDAQ.
Economic data isn't driving this market; it's the Fed stimulus. Today's economic data were pretty weak, but it didn't matter. The Empire Manufacturing survey came in at -2.2, down from the previous +1.5. Industrial production declined 0.1% in October, as compared to September's +0.7%. Capacity utilization was flat for October at 78.1%.
SPX settled at $1790.90 and RUT settled at $1111.25. That finalized my November condor position on SPX at a loss of 8%, bringing the year to date record for Flying With The Condor™ to +6.2%. My Dec condor on RUT at 1030/1040 and 1150/1160 stands at a net gain of $560 on 20 contracts or +4.1% with position delta = -$92 and position theta = +$124.
Have a great weekend.
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Was today's minor pull back just a blip on the bullish screen or the beginning of the correction everyone is predicting? Hard to tell. But it is rare that the market does what everyone is expecting. SPX dropped off $7 to close at $1792 and RUT fell $9 to close at $1107. The VIX rose almost one point to 13.1%. That remains a low level of volatility, but it bears watching. Trading volume fell today, which serves to lend less credence to the drop in the indexes. Trading in the S&P 500 stocks dropped to 2.1 billion shares while trading on the NYSE decreased 13%. Trading on NASDAQ dropped 4%. SPX traded sideways all day until about 3 pm ET, when it began to fall. It recovered only slightly (about $3) a few minutes before the close.
I always compare the advances or declines on SPX versus RUT. And lately, that signal has generally been bearish. SPX has been setting new all-time highs, but RUT has not set a new high for about three weeks. Today, both indexes pulled back modestly, but RUT pulled back more (0.4% vs. 0.8%). It is fair to conclude that the market's bullishness is at least moderating.
The only economic news today was the NAHB Housing Market Index, which came in unchanged for November at 54.
My Dec iron condor stands at a net P/L of +$1,160 or +8.4% with position delta = -$62 and position theta = +$140 (20 contracts).
The drop in the markets this afternoon was attributed to Carl Icahn's bearish comments at a conference. This is one more indicator of the general nervousness of this market. It moves on the most trivial of data.
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SPX tacked on a few more dollars to set a new all-time high, closing at $1791, up $9. But RUT lost a dollar to close at $1111. This is beginning to be a familiar pattern with SPX leading the bull charge while RUT lags behind. This is not a bullish indicator. RUT has led this bull market trend all year, but has lagged behind for the past couple of weeks. RUT set new highs in October around $1123, but has yet to return even close to those levels as SPX sets new all-time highs toward the end of October and through today. All of this adds up to a dangerous time; we are overdue for some type of breather. That breather may be more or less benign. It could be simply a period of sideways choppiness or it could be an ugly correction. The longer the market trades higher and higher, the higher the probability of a severe correction.
Trading volume was mixed today with the trading of the S&P 500 moving slightly higher at 2.2 billion shares, while trading volume on the NYSE dropped 6%. But trading on the NASDAQ increased 9%. The VIX is almost unchanged, dropping about two tenths of a point to 12.4%. That low VIX reading tells me that the large institutional players aren't concerned about this market as yet. But I think they should be.
Initial unemployment claims were flat with 339 thousand and continuing claims were precisely the same as last week at 2.874 million. Tomorrow brings the Empire manufacturing survey, industrial production and capacity utilization reports, but normally those reports don't cause significant market moves. But it is hard to predict what might move this market.
Happy birthday to Prince Charles (and me). As usual, his birthday made the news, but mine...
