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SPX traded lower through the middle of the day, but then recovered sufficiently to close with a $5 gain at $1762. However, RUT continued its slide downward with a loss of $4. closing at $1096. One positive sign was RUT's low on the day at $1087, almost ten points lower than its close. That suggests some buying strength around support at $1088, the high set in early October. Trading volume fell off today with 2.3 billion shares of the S&P 500 trading. Trading volume fell 3% on the NYSE and dropped 14% on NASDAQ.
Due to the government shutdown, the jobs report has been delayed until next Friday. The ADP report came out a couple of weeks ago at a modest 130,000 jobs, so expectations have been lowered for the federal report.
My November iron condor on SPX is doing well with a net loss of $1,900 or -9% with position delta = -$79 and position theta = +$122. However, due to previous adjustments, the best outcome for this position is a loss of $660 on 20 contracts or -3.9%.
Enjoy this nice fall weekend. We are starting to rake leaves in this neighborhood.
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The markets opened and traded down this morning, but had moved back into positive territory by the afternoon. However, a sell off in the last hour of trading wiped out all of the earlier gains. SPX lost $7 to close at $1757 and RUT closed at $1100, down $5. Trading volume jumped up in this sell off with 2.4 billion shares of the S&P 500 stocks trading. Trading on the NYSE increased 15% and trading volume increased 20% on NASDAQ. Perhaps fund managers were taking profits at month end? Volatility was largely unchanged with the VIX at 13.8%, up a tenth of a percent. Today's drop on increased volume after yesterday's drop after the FOMC announcement is one more bearish signal for this market. Apparently, the Fed's pessimistic assessment of the economy was regarded as bad news this time, instead of the "bad news is good news" reaction we have seen recently.
The Chicago PMI jumped markedly from 55.7 to 65.9 for October. One might have expected that report to buoy the markets, but it didn't. Unemployment claims came in at 340k, down ten thousand from last week, but continuing claims rose by 38k.
$1750 was a weak resistance level for SPX on the way up. I will be watching that level for possible support. Otherwise, the top around $1730 from late September is the next solid support level.
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SPX tacked on another ten dollars today, closing at $1772. RUT is moving up at a slower pace lately, adding $4 today to close at $1122. Volatility is pretty tame, but the VIX rose a tenth of a point today to close at 13.4%. The bottom line: the markets are overbought by any measure, but they continue higher. The poor bears keep shorting this market but then are forced to cover their shorts. The FOMC meeting started today. It will be interesting to see how the announcement tomorrow affects the market, if at all. I suppose the most likely scenario has the FOMC reaffirming their stimulus for the foreseeable future, signaling that the party will continue, and the markets trade higher.
Consumer confidence continues to erode with a 71.2 for October, down from 80.2. But the real estate market continues to heal with the Case Schiller price index increasing 12.8% in August. The Producer Price Index (PPI) surprised me again with a decline of 0.1%; it seems to me that prices are increasing in my part of the world, but neither the CPI or the PPI are showing any sign of inflation. Retail sales for September dropped 0.1%. All in all, it was a pretty dismal set of economic data, but the markets traded upward anyway... interesting.
The last minute spurt of SPX has pushed my November condor to the edge. Tomorrow will be "fish or cut bait" time.
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The markets have been showing signs of weakness for several days, most notably RUT's lack of leadership while SPX traded higher. That trend continued this morning with RUT trading lower even as SPX traded upward. But then SPX weakened and traded down to about $1764 before the FOMC announcement at 2 pm ET. Then SPX traded even lower to its low of the day at $1757. But it recovered somewhat before closing down $9 at $1763. In stark contrast, RUT traded lower all day, hitting its low around 2:45 pm ET at $1104 before closing at $1106, down $16.
Volatility spiked during the trading day but settled at the close with VIX at 13.7%, down only two tenths of a point. RUT's comparative weakness is a bearish sign for the market. Trading volume was flat with 2.1 billion shares of the S&P 500 trading. Trading volume increased 2% on the NYSE and was flat on NASDAQ.
The consensus expectation for the FOMC announcement was a continuation of stimulus, given the weak economic data reported since the last meeting. I had expected SPX to spike upward after the announcement, and thought I would hedge or close my Nov call spreads. But after watching RUT lead lower all day, I decided it was safe to leave my November iron condor in play. It remains underwater, but the delta of the 1800 calls is now down to 16, so much of the pressure has been relieved.
The question for traders is whether this is merely a brief consolidation phase in the bull market or a trend reversal. That question causes me to reflect on the advantages of non-directional trading...
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The markets managed to stay in the black today, but it wasn't pretty. SPX gained $2 to close at $1762 while RUT managed to remain unchanged at $1118. Volatility, as measured by the VIX, increased just two tenths of a point to close at 13.3%. SPX traded lower all morning but then revived during the afternoon only to give it all back in the last hour of trading. RUT was weak all day and this could be foretelling some overall market weakness. RUT has consistently led the bull market this year. Trading volume fell off with 2.1 billion shares of the S&P 500 stocks trading. Trading volume increased 3% on the NYSE but fell 19% on NASDAQ.
Industrial production figures for September came in at a gain of +0.6%, up slightly from the previous reading of +0.4%. Wow. Capacity utilization increased slightly in September from 77.9% to 78.3%. Pending home sales fell again in September by 5.6%, an increase over August's -1.6% drop. Obviously, none of these reports excited the bulls. But we may see a quiet market during the next two days until the FOMC announcement on Wednesday afternoon.
I was unsure whether to bet on AAPL into the earnings announcement. The Ichan effect could have been thought to give it a bullish push, but I finally decided to close my AAPL spreads to be safe. That appears to have been a good call at this moment, but AAPL hasn't dropped much. Maybe it will bounce tomorrow.
