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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 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.
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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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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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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.
