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The occasional downright silliness of financial news was illustrated well today as the various CNBC hosts kept worrying about whether the twenty week streak of positive market increases on Tuesdays might end today - really? And in another breath we would ridicule the natives in darkest Africa for being afraid of a mirror.
SPX opened the day positively, but soon traded downward. FOMC member Esther George's speech was released sometime during the day after the market had already turned down, but her comments advocating cessation of the Fed QE programs seemed to drive markets lower. But much of those losses were recovered before the close. SPX closed at $1631, down $9 and RUT also lost $9 to close at $982. Trading volume decreased with 2.5 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE decreased 8% and volume was off 10% on NASDAQ. The VIX closed unchanged at 16.3% - not too high but not too low either.
So far, SPX is holding support in the $1630-$1635 area. If it breaks through to the downside, watch the next support level at $1600, strengthened by the 50 dma at $1603.
The reaction to George's comments does illustrate the fear permeating this market that the Fed's removal of stimulus will tank the markets. There is a clear belief that one needs to be the first to sell and preserve all of these gains of the bull market of the past six months the minute the Fed begins to pull out or even talks about pulling out. It also underscores how difficult it is to predict the market's reaction to the jobs number Friday morning. A strong number may cause the market to sell off and a weak number may be tolerated.
My June condor stands at a P/L of -$1,420 with delta = -$54 and theta = +$215. As we head into the last couple of weeks of this trade, the time decay is starting to build nicely. The call spreads are outside of one standard deviation OTM and the put spreads are over two standard deviations OTM. We may be able to salvage a small gain from this position in spite of several adjustments and hedges, but it is early to count those chickens.
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I'm not quite sure how we arrived here, but traders seem to have nothing on their minds other than reading tea leaves for when the Fed will begin to taper off their stimulus programs. The markets opened upward this morning, but then sunk into the red after the weak ISM manufacturing report at 10 am ET. But traders regained their confidence in the Fed's free lunch program around 2 pm ET and started buying again, pushing the major indexes into positive territory. SPX gained $10 to close at $1640 and RUT closed up $6 at $991. Trading volume was flat from Friday with 2.6 billion shares of the S&P 500 stocks trading. Trading volume on the NYSE was up 1% and trading on NASDAQ was up 6%. The VIX closed at 16.3%, unchanged on the day.
The ISM manufacturing report came in at 49.0 (recall that numbers below 50 indicate contraction). Some history is in order: this measure hit its low around the mid thirties in November of 2008 and climbed to a peak in February 2011. The last time it moved through the area of 49 was on its way up in May 2009. So this anemic manufacturing report doesn't bode well for the economy. But this brings up an interesting conundrum as we look forward to the jobs report Friday. Will a poor jobs report be interpreted as good news for the markets because it will suggest continued Fed QE? And will a positive jobs report be considered bad news because it suggests a tapering off of the QE?
My June condor position stands at a P/L of-$1,980 with a position delta of -$87 and position theta = +$206. The 1030/1040 call spreads are over one standard deviation OTM and the 890/900 put spreads are over two standard deviations OTM, which is excellent given all of the correction talk.
Today's choppy trading may be typical of this week as everyone tries to predict what is coming in the jobs report Friday morning.
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The Standard and Poors 500 Index (SPX) jumped up at the open and traded as high as $1662, but a sell-off in the last hour of trading took its toll. SPX closed at $1654, up $6. RUT closed up $7 at $994. Volatility decreased less than a half point to 14.5%. Trading volume was flat with 2.3 billion shares of the S&P 500 trading (the 50 dma = 2.4B). Trading on the NYSE was down 4% and trading volume on NASDAQ was up 1%.
Initial unemployment claims came in about ten thousand higher at 354k while the continuing unemployment claims rose 63k to 2.986 million. First quarter GDP was revised downward one tenth of a percentage point to an annualized growth rate of +2.4%.
I noticed today that the last six trading sessions on SPX had long shadows on the candlesticks - three were higher and three were lower. On those days, traders took the index either higher or lower during the day, but were pulled back before the close. This suggests a great deal of indecision to me. Traders are nervous about the Fed pulling back from stimulating the market and are jumping one way or the other almost every day based on the latest data or the latest rumor.
My June iron condor position on RUT stands at a P/L of -$2,230 with position delta = -$101 and position theta = +$161.
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The stock markets sold off pretty strongly starting around 2pm ET this afternoon. Some of the selling might have been associated with some index rebalancing, but the reality is that the charts have looked pretty weak the past couple of weeks. SPX lost $24 to close at $1631 and RUT closed down $10 at $984. Trading volume spiked upward with 2.8 billion shares of the S&P 500 stocks trading; trading volume on the NYSE increased 22% and trading increased 6% on NASDAQ.
Support on SPX is around $1635, so today's close was either right at support or SPX has already broken support - we'll see on Monday. The next strong support level on SPX is around $1600. Similarly, RUT's close was very close to support at $985. The next support level on RUT is at $975.
The markets traded more positively this morning after the Chicago PMI surprised traders with a report at 58.7, up from last month's 49.0. The University of Michigan's consumer sentiment values were revised to 84.5 for May, the highest sentiment reading since July 2007. However, traders may be starting to worry early about next week's jobs report.
The Jun iron condor position on RUT closed at a P/L of -$1,620 with delta = -$48 and theta = +$165. The 1030/1040 call spreads are about one standard deviation OTM and the 890/900 put spreads are two standard deviations OTM. Several adjustments have taken their toll on this trade, but it still retains a maximum gain of about 5% with three weeks to go.
Enjoy your weekend.
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Yesterday's sell off continued today with SPX losing $12 to close at $1648 and RUT closing down $10 at $987. Volatility increased almost a half point to 14.8%. On the SPX chart, there is strong support at $1635 and it may be significant that three times in the past few days, SPX has traded down into the $1635-$1640 range. Today SPX traded down to $1640 before rebounding into the close. On the upper side, $1670 is the resistance level that must be broken to move higher. Corresponding support on RUT is in the range of $970-$975 and resistance is at $1000.
Trading volume was pretty much flat today with 2.3 billion shares of the S&P 500 trading. Trading volume on the NYSE increased 1% and trading on NASDAQ increased 2%.
My June iron condor on RUT stands at a P/L of -$2,360 with position delta = -$81 and position theta = +$176. I will be watching the $1635-$1640 range on SPX to see if this minor pull back gets more serious. By my measure, not much has changed, but traders are getting nervous about the Fed's support of this market.
