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SPX is trading back and forth across that strong support/resistance level at $1410. Out of the last nine days of trading, SPX has been just above $1410 three times and just below six times. SPX traded over a wide range today, $1398 to $1416, and closed at $1409, up $2. RUT dropped $2 to close at $821. Trading volume surged upward to 3.1 billion shares of the S&P 500 stocks today. Trading on the NYSE was up 19%, but trading on NASDAQ was only up 1% - that NASDAQ number seems odd given today's huge downward move in AAPL. VIX dropped almost a full point to close at 16.5%.
ADP reported 118k new jobs, down from last month's 157k. This may be a bleak forecast of Friday's jobs report. The ISM services index was basically unchanged at 54.2 and factory orders dropped to an increase of 0.8% in October after rising 4.5% in September.
From my take on the various news reports, it seems we are starting to accept this fiscal cliff scenario as more and more likely. Now we are starting to see reports assuring us that it won't be so bad. The White House is insisting on raising taxes on the wealthy and offers vague promises for spending cuts sometime in the future. As we add 4 billion dollars to the national debt each day, Nero fiddles. The great irony is that Obama's tax increase will do nothing to solve our fiscal problems; it only makes the envious feel better.
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SPX closed at $1407, down $2. This is slightly below the $1410 support level. It is probably too early to declare that support level broken, but it is something to watch at tomorrow's open. RUT traded as low as $816 but recovered to close at $822, up $1 on the day. Trading volume was flat to slightly up with 2.5 billion shares of the S&P 500 trading, up slightly from yesterday but still under the 50 dma. Trading on the NYSE was up 1% and volume was up 7% on NASDAQ. VIX moved up a half point to close at 17%.
There was no significant economic news today, but it probably would not have mattered anyway. Everyone in the market is focused on the fiscal cliff posturing. As far as I can tell, the negotiations have yet to start.
My Dec iron condor stands at a net loss of $3,960 with position delta = -$94 and position theta = +$214. Tomorrow's ADP report may give us a preview of Friday's jobs report, but, absent an extreme surprise, I doubt that it will move the markets much. So grab your popcorn and watch the political fiscal cliff show. But remember: this is like professional wrestling, don't take it too seriously.
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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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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 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.
