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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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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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SPX broke out to new all time highs today with a spurt of $14 to close at $1782. RUT ran up $11 to close at $1112, but RUT's all time high remains quite a bit higher at $1123. Trading volume in the S&P 500 stocks bumped up to the 50 dma at 2.1 billion shares. Trading on the NYSE increased 9% and trading volume on NASDAQ increased 2%. The VIX dropped back down to 12.5%.
Most of the talking heads attributed today's big rally to Macy's excellent earnings announcement causing analysts to think holiday sales will be strong. But that announcement occurred before the market opened this morning and SPX opened down at the open. It was only after noon that the markets began to trade upward. SPX appeared to be trading in a tight consolidation range from about $1745 to $1772 until today's break out. Does today's move mark a new leg in the bull rally? Or will we see the market sell off tomorrow? Hard to say, but I would want to see an open tomorrow above today's close at $1782 to start playing the all out bullish trades.
The earnings parade continues with CSCO this evening and WMT tomorrow after the close.
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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...
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The Standard and Poors 500 Index (SPX) is what I principally watch as a measure of the broad stock market. Everyone talks about the Dow, but that is only 30 stocks. The 500 stocks in SPX give us a better overall view of the market. SPX opened downward this morning and tried to bounce but instead slid downward until later in the afternoon when it recovered somewhat but still closed down $4 at $1768. RUT closed unchanged at $1101. Volatility moved up about one third of a point to 12.8%, so we seem to be in a relatively complacent sideways market that is just treading water for now. One wonders when the next shoe drops and we see a spurt one way or the other. But it is nice to see some calm seas for a change.
There were no economic reports of any consequence today. Trading volume increased a bit from yesterday with 2.0 billion shares of the S&P 500 stocks trading, but this remains below the 50 dma at 2.1B. Trading increased 17% on the NYSE and volume increased 10% on NASDAQ.
This is a good time to be trading non-directionally and just watch time decay work for you. But stay alert. I don't think the era of high price volatility is over.
