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Many traders have already left the offices for the Thanksgiving holiday, so the trading volume dropped off markedly today. However, markets traded upward modestly. SPX closed up $3 at $1391. RUT ran up $5 to close at $798. VIX increased slightly to close at 15.3%.
SPX broke through and closed above the 200 dma Monday, then dropped below the 200 dma yesterday but rallied to close above the 200 dma. Today SPX opened at yesterday's close and traded up slightly. The point of this review is this: the 200 dma has been decisively broken, but a bigger question remains. Has this recent down trend been reversed? I'm not so sure. The real test will come after the holiday weekend. Each trading session this week has been on successively weaker volume.
My December iron condor on RUT stands at a P/L of +$400 (+2%) with delta = -$111 and theta = +$110. The 830 call is now at a delta of 16, so we are nearing a decision point on adjusting this condor position. The exchanges will be closed tomorrow and open for half a day on Friday. We will have a better sense of where this market is going next week.
Enjoy the holiday weekend with your families as you focus on your many blessings.
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SPX opened this morning at Friday's close and ran strongly, breaking out above the 200 dma at $1382 and closing at $1387 for a gain of $27. RUT gapped open and ran up $15 to close at $792. But RUT has farther to go to find its 200 dma at $807. This spurt places RUT at the lower edge of its downward trend line. Most of the market's recent push upward appears to be based on the politicians "playing nice". But an increase in existing home sales also helped markets with an increase of 90k homes sold in October. The NAHB housing market index was released for November at 46, up 15% from the previous month. So the euphoria of today's market is based on a housing recovery and the prospect of a compromise that avoids the fiscal cliff.
The VIX dropped 1.2 points to 15.2%.
Before you start watching reruns of Happy Days, remember that nothing of substance has happened yet. In fact, many politicians are now clamoring for another stimulus package as part of the fiscal cliff solution. Spending one's self out of debt - that's an idea we haven't tried...
Perhaps the market can put together some gains for the rest of this year, but the prospects of a recession next year appear more and more unavoidable. My Dec iron condor stands at a net gain of $560 or +3% with a position delta of -$89 and position theta of +$103.
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SPX spent much of today modestly underwater, but the last two hours of trading became ugly. SPX gave up $19 to close at $1355 while RUT closed at $773, down $16. Trading volume of the S&P 500 stocks jumped up to 3.0 billion shares and trading volume increased 16% on the NYSE. Trading increased 17% on NASDAQ. VIX increased to 17.9%, reflecting increasing concern on the street that the fiscal cliff cannot be avoided.
Retail sales dropped 0.3% in October and the PPI decreased 0.2% in October. Since neither of these reports were really very negative, one has to assume the selling is related to Obama's recent statements taking a hard line on tax increases. Many on the left appear to think taking the country over the fiscal cliff is good politics.
My Dec iron condor on RUT stands at a net gain of $820 or +5% with position delta = +$59 and position theta = +$55 (on 20 contracts). The pressure is increasing as the markets fall; the theta/delta ratio is near 1:1 and the delta of the 720 put is 16. If the carnage continues tomorrow, we will need to adjust this position.
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Conciliatory remarks coming out of the politicians in Washington boosted markets today. Am I the only one that finds this ludicrous? Hope springs eternal. SPX closed up $7 at $1360 and RUT also rose $7 to close at $776. Trading volume was probably up due to options expiration, with 3.1 billion shares of the S&P 500 stocks. Trading volume on the NYSE was up 21% and trading was up 9% on NASDAQ. VIX dropped almost two points to close at 16.4%.
Industrial production numbers were reported for October today and they decreased 0.4%. Capacity utilization also dropped to 77.8% from September's 78.2%.
SPX settled at $1353.46 for November and RUT settled at $768.02 for November. The 860/870 call spreads in my November position expired worthless, confirming a 15% gain for November and a 35% gain year to date for the Flying With The Condor™ service. Recent drops in the market resulted in my re-positioning the Dec iron condor on RUT to 690/700 and 830/840. This position now stands at a net gain of $660 or +4% with position delta = -$31 and position theta = +$99.
Enjoy your weekend.
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The S&P 500 Index spent most of the day in positive territory, but sold off during the last hour of trading to close at $1375, down $6. RUT dropped $5 to close at $789. Trading volume jumped back up from the post-holiday numbers with 2.6 billion shares of the S&P 500 stocks trading (this is right at the 50 dma). Trading increased 36% on the NYSE and increased 30% on NASDAQ. VIX closed unchanged at 16.7%.
The SPX chart is looking a little scary with this afternoon's sell-off. With the past four trading sessions, up until about 3 pm ET this afternoon, SPX was holding support roughly at the 200 dma pretty well. I was encouraged. But the close below the 200 dma and just above support at $1370 is on the edge of a large area of "no man's land", i.e., not many obvious levels of support until you get down to about $1330. Hmmm...
My Dec iron condor on RUT is doing fine with a gain of $1,580 (10%) with delta = +$37 and theta = +$51.
I will be watching the market even more carefully than usual tomorrow.
