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The Standard and Poors 500 Index pulled back to support with a close at $1409, down $7 and RUT closed at $821, down $1. But trading volume fell off dramatically with 2.3 billion shares of the S&P 500 stocks trading. Trading volume fell 22% on the NYSE and dropped 19% on NASDAQ. Volatility rose almost a full percentage point with VIX closing at 16.6%.
The ISM manufacturing index reported out at 49.5, a large decline from last month's 51.7. Construction spending rose 1.4% in October, a bright spot in recent economic reports. The ADP private payroll numbers are due out Wednesday and the non-farm payroll report, aka the jobs report, comes out Friday morning before the markets open.
My Dec iron condor on RUT has been adjusted several times now and stands at a net P/L of - $4,020 on 20 contracts (-18%) with delta = -$134 and theta = +$147. I will roll up the 690/700 put spreads to salvage a portion of this trade later this week.
Based on my reading of the political tea leaves, the probability of going over the fiscal cliff seems greater every day. Even if everyone declares a deal accomplished, it won't substantively address the economic problems facing us. We won't be able to avoid a second recession in 2013. In case you are one of those who believed the President's "fairness" rhetoric, consider this factoid. If we confiscate all of the wealth of the Forbes 400, it will pay off the debt we are generating for only one year. We are generating 4 billion dollars of new debt each day...
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The rumor mill and sound bites continue to be the principal drivers for this market, to the chagrin of anyone trying to trade. SPX closed at $1416, up $6 and RUT traded up to $823 for a gain of $10. VIX closed today down about a half point at 15.1%. Trading volume was flat with 2.4 billion shares of the S&P 500 stocks trading. Trading volume was down 3% on the NYSE and up 3% on NASDAQ.
Economic news continues to be flat to modestly positive; this recovery is taking forever to get us back out of the woods. I fear we may hit another recession before we have fully recovered from the last one. Initial unemployment claims remain essentially flat at 393k and continuing unemployment claims were reported at 3.3 million. Third quarter GDP growth was revised upward to an annualized rate of 2.7%, a pleasant surprise. And pending home sales grew 5.2% in October, continuing the glimmer of hope for real estate.
SPX has been flirting with resistance at $1410 for the past several sessions and closed right at resistance yesterday. Today SPX opened there and never looked back, closing at $1416. During today's trading, SPX almost reached the 50 dma at $1422 (it traded as high as $1420). But this market is extremely volatile. SPX almost traded down to the 200 dma yesterday; in two days of trading, we almost spanned the distance between the 200 dma and the 50 dma. Every news article quoting someone in D.C. is moving the market. And to think we have about thirty days of this craziness to endure!
My Dec iron condor on RUT stands at a net loss of $4240 or 20% with position delta = -$144 and theta = +$98. Even if the current spreads expire worthless, I am looking at an 8% loss for December. This month's trading has been characterized by whip saws back and forth - the minute I hedge, the market turns; then when I remove the hedge, the market turns again. I angered the trading gods somehow...
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Today marked the third day SPX hit at or near resistance at $1410 and then closed lower. SPX traded as high as $1409 today before being pulled back in the last two hours of trading to close at $1399, down $7. RUT traded stronger than its big brother all day and closed down $1 at $808. The VIX increased less than half a point to 15.9%. Trading volume on the S&P 500 increased a bit from yesterday to 2.4 billion shares, but is still running below the 50 dma. Trading on the NYSE was up 11% and trading volume on NASDAQ was up 10%.
Durable goods orders were flat for October. The Case Schiller housing price index increased 1.5% in October. The Conference Board's consumer confidence survey increased a bit to 73.7 for Nov, up from 73.1. So economic data was flat to modestly positive; but if that buoyed the market, it didn't last long.
The European finance ministers appear to have worked out a new debt refinancing deal for Greece, although the accord must still be ratified by several government Parliaments. But it is very doubtful that any of these deals are going to save Greece. The question I am wondering about is: what are the global ramifications of Greece defaulting on all of this debt?
My Dec condor stands at a net P/L of -$890 with delta = -$114 and theta = +$89. The 830/840 call spreads remain under pressure with delta of the 830 calls at 24, but the position is hedged with long Jan 830 calls.
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The markets traded down this morning, but reversed course later in the day and made a significant push upward in the last hour of trading. SPX closed at $1410, up $11 while RUT closed up $6 at $814. Trading volume of the S&P 500 stocks remained beneath the 50 dma and was essentially unchanged from yesterday at 2.4 billion shares. Trading on the NYSE was up 4% and trading volume was down 2% on NASDAQ. The VIX traded up as high as 17% this morning, but settled to 15.5% by the close.
New home sales came in flat for October at 368k. Tomorrow brings unemployment claims and a second estimate of third quarter GDP.
SPX closed at resistance at $1410, where it closed last Friday and where it opened Monday. This was a strong support level in late October before the market broke through support and traded down strongly. Do the bulls have the momentum to break through resistance here? Unfortunately, this market is being jerked back and forth by whatever sound bites come out of D.C., so it is exceedingly difficult to predict the short term trend. One could even argue that an agreement to avoid the fiscal cliff is priced into the $60 rise of the past couple of weeks.
My Dec iron condor on RUT is feeling the pressure with a P/L of -$2,560 with delta = -$202 and theta = +$137. I may have to close and roll my call spreads tomorrow. We'll see.
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The market bullishness of Friday didn't continue into today's trading, but it certainly didn't sell off either. SPX opened at $1409 and traded as low as $1398, but recovered much of that loss to close at $1406, down $3. RUT gained $2 to close at $809. The VIX stands roughly unchanged at 15.5%.
SPX has been trading upward for the last several sessions, although we
appear to be bumping up against resistance at $1410; that level served
as solid support in late October before the plunge after the election
broke through to the downside. It is difficult to draw a good trend line
on this chart. Even though the last several sessions have been very
bullish, I am cautious. The potential for negative news out of either Europe or D.C. is very high. In my opinion, this market is on thin ice.
We didn't have much in the way of economic reports today, which may have accounted for the lack of direction in the markets. Durable orders and Case Schiller both report tomorrow.
My Dec iron condor on RUT stands at a P/L of -$1,170 or -6% with delta = -$117 and theta = +$95. I hedged this position during Friday's strong move upward. Given the economic situation facing us, it is surprising that I am hedging call spreads.
