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SPX continued its run to the upside, adding $6 to close at $1585. One
week ago, SPX bounced off support at $1540 and started a bullish run the
next day that continues through today's market action. SPX is nearing
the highs around $1595 set about two weeks ago. RUT closed up $6 at
$940.The markets hit intraday peaks around 2 pm ET and declined from
there but still held onto gains for the day. SPX hit a high of $1593
before turning back. Volatility remains relatively low with the VIX at
13.6%. Trading volume edged up with 2.8 billion shares of the S&P
500 stocks trading today. Trading volume increased 5% on the NYSE and
increased 13% on NASDAQ.
Initial unemployment claims decreased 16 thousand to 339k and continuing unemployment claims decreased 93k to three million. Meanwhile, we hit a new record of 8.9 million on disability.
My
May iron condor on RUT is up 6% with position delta = +$20 and position
theta = +$57. If RUT climbs a few more points, we will be perfectly
delta neutral with three weeks to go.
As I look at the SPX price
chart, it is interesting that we are duplicating the run SPX made
earlier in April, when it bounced off $1540 and headed higher to hit
$1595 and then turned down. Now we are retracing the steps higher. Will
SPX break out to new highs or be pulled back into the trading range?
The nervous profit taking we saw this afternoon may grow. Stay tuned.
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SPX took a time out and rested today, closing unchanged at $1579. However, RUT gained $5 to close at $934. Trading volume was slightly up with 2.7 billion shares of the S&P 500 trading. Trading on the NYSE was up 1% and volume rose 1% on NASDAQ. VIX was essentially unchanged at 13.6%.
Durable orders declined 5.7% in March, not a good sign. The other ominous news concerned corporate earnings. Midway through the earnings announcements for this quarter, about 69% of companies reporting are beating the earnings estimates, but only 39% are beating revenue estimates. My interpretation is that companies have trimmed all their fat and that has helped secure their earnings, but now the general poor state of the economy is starting to take its toll on sales. The GDP numbers Friday will be watched closely. On a more positive note Goldman Sachs announced that they expect global growth to exceed 3% this year and predicted further gains for the equity markets.
My May RUT iron condor stands at a P/L of +$1,100 (+6%) with a position delta of +$27 and position theta of +$49. See you tomorrow...
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It appeared that CAT's earnings announcement unsettled some traders, but they seemed to get over it as the day progressed. SPX began the day weakly, but revived in afternoon trading to finish with a $7 gain at $1563. RUT added $2, closing at $915. But trading volume fell off with only 2.2 billion shares of the S&P 500 trading. Trading volume fell 15% on the NYSE and dropped 4% on NASDAQ. Volatility declined a bit with VIX ending the day at 14.4%, down almost one percentage point.
A strong support level on the RUT price chart is being established at $900. The lower shadows of the candlesticks have touched $900 several times before bouncing back upward. If you draw a trend line on the SPX chart through all of the lows since mid-November, then today's close at $1563 gets us back above the trend line. But that doesn't mean this correction or pullback is over. One could argue that SPX is still in a sideways trading range from roughly $1540 to $1595. So until it breaks through one of those levels, it is hard to be very confident about a trend in either direction. Of course, the longer we chop along largely sideways, we accomplish the same thing as a more severe correction.
My May iron condor position on RUT stands at a P/L of +$640 or +4% with position delta = +$46 and position theta = +$38. Will the positive NFLX announcement push the market higher? That seems doubtful, but we'll see.
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The strength of today's market impressed me. First of all, SPX opened at yesterday's close to start the day and then steadily climbed to close up $16 at $1579, only a few cents off of the intraday high. Similarly, RUT gained $15 to close at $929. Volatility dropped a full point to 13.5% and trading volume expanded with 2.6 billion shares of the S&P 500 trading today. Trading increased 11% on the NYSE and moved up 1% on NASDAQ.
Traders were spooked by an Associated Press tweet of a terrorist attack at about 1:10 pm ET, and that dropped the SPX $15, but that tweet was quickly discovered to be the result of a hacking incident at AP. Markets fully recovered within five minutes.
New home sales came in at 417k in March, up from 411k in February. The FHFA Housing Price Index increased 0.7% in February after a 0.6% rise in January. This further underscores the noticeable improvement in the real estate markets. But builders are struggling to take advantage of the improving demand picture. Builders, like other small businesses, are finding it difficult or impossible to get bank financing.
SPX is quickly closing in on its recent closing high at $1593 on April 11. That will be a crucial resistance level to watch as the bulls drive forward. It is hard to see anything bearish in this market - volatility keeps dropping and stocks keep trading higher. It isn't hard to find bearish arguments on CNBC and in other financial news, but the markets are trading higher. The lone dissent at this point is the Investors Business Daily with their Big Picture still holding a market posture of "Market in Correction". But that could change this evening; it is updated around 7 pm ET each evening.
My May iron condor position on RUT stands at a P/L of +$860 or +5% with position delta = +$21 and position theta = +$65. Both spreads are nearly two standard deviations out of the money (OTM), so this position is looking pretty solid with about three weeks to go until expiration. But this is a volatile market; that could change quickly.
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SPX closed yesterday right at a major support line, the 50 day moving average (DMA). Today's market action seems to suggest it has bounced off support and all is well. But it is hard to take any confidence in this volatile market. It seems to just whip back and forth in an effort to frustrate as many traders as possible. SPX tacked on $14 to close at $1555 and RUT joined the party with a close at $913, up $11. VIX pulled back almost three points to 15%. Trading volume was flat on the S&P 500 stocks at 2.8 billion shares, still above the 50 dma. In fact, SPX volume traded above the 50 dma every day this week - unusual.
SPX settled at $1545.35 and RUT settled at $901.94. So the 990/1000 call spreads of my April condor will expire worthless this weekend. I was feeling more conservative and closed the 880/890 put spreads last Friday. They were over two standard deviations OTM, but this market makes me nervous, so I closed them anyway. As it turned out, those spreads would have expired worthless as well, so the Two Sigma Rule worked once again. But playing it safe now and then isn't a bad thing. That brings my April position to a net loss of $400 or -4% for April. That brings my Flying With The Condor™ to a net return of -4% for 2013, as compared to a net gain of 9% on the S&P 500. This is the first time in quite a while that I have fallen behind the S&P 500, but I am regaining the ground and should be back in the black with the May position. I removed the hedge on the May condor today (840/850 and 1010/1020) and it stands at a net P/L of -$100 with position delta = +$61 and position theta = +$44. This trade is positioned well with the call spreads about two standard deviations OTM and the put spreads well over one standard deviation OTM with less than thirty days to go.
Enjoy your weekend. I thought I would start on some of my tasks in the yard this weekend, but it was in the high thirties as I headed to the office this morning - good grief!
