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Virtually everyone in this country is focused on the election today. Will the results move this market? The market continues to chop sideways; the bulls view it as a consolidation phase in a larger bull market trend. The bears portray the past few weeks as the beginning of a new downward market trend. The market's current direction is clearly at a tipping point. I really don't know what effect, if any, this election may have on the markets. A true free market capitalist (there aren't many of us left) would view a win by conservatives as positive (sometimes "conservative" has nothing to do with the party; I voted for a democrat today who is trying to reform our corrupt county government). But Wall Street has been addicted to the same government hand-outs that blind many voters. The Fed has been propping up this market for several years now. So it wouldn't be surprising to see the market sell off at the prospects of giving up that support. Living independently is always difficult and it will always be tempting to invite government to solve our problems. But you pay for that help with a loss of your freedom. There is a thinly disguised hook in that government program. Remember when states were free to specify the speed limits on their highways?
The markets opened with little fanfare today, but rallied pretty strongly before hitting resistance. SPX closed $11 higher at $1428 after moving as high as $1433. RUT traded upward $6 to close at $826. Trading volume was rather low yesterday, and by that comparison, trading volume bounced upward today, but the 2.5 billion shares of the S&P 500 stocks that traded today just moved us back up to the 50 dma. Trading volume increased 18% on the NYSE and increased 19% on NASDAQ. Economic news was sparse today. The VIX dropped almost one percentage point to close at 17.6% - still a relatively high number and another measure to suggest we are at the tipping point.
My November iron condor position on RUT is up $2,060 (+13%) with delta = -$60 and theta = +$236. My Dec condor is up $560 (+3%) with delta = -$52 and theta = +$79.
If you haven't exercised your responsibility to vote yet, get to it. In spite of what I perceive as the erosion of our freedoms, this remains the only nation in the world where we can live as free as we do here. Voting is a privilege many people don't have.
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Remember the see saw from the playground at school? This market reminds me of that childhood toy. Yesterday, SPX opened at $1412 and ran to $1428. This morning, SPX opens at $1428 and trades down to close at $1414, almost where we started yesterday. RUT fared even worse, losing $13 to close at $814, almost a 2% drop. Today's move keeps the broad market averages solidly in this sideways consolidation pattern of the past week to ten days. As you might expect, volatility bounced back up with VIX closing the day at 17.6%. Trading volume dropped off from yesterday with 2.7 billion shares of the S&P 500 stocks trading today. Trading volume dropped less than 1% on the NYSE and dropped 3% on NASDAQ.
The non-farm payroll report was the big news of the day, reporting 171k new jobs, better than economists expected, but the unemployment rate ticked up to 7.9%. The jobs report appeared to start trading off on a positive note this morning, but that quickly faded. I suppose the jobs report had something for everyone; bulls could look at it as "somewhat better" or "on the right path", while the bears saw "a weak economic recovery" and "no improvement in the unemployment picture". SPX moved into the red within an hour of the open, and ticked steadily down after 1:00 pm ET.
My November iron condor on RUT stands at a P/L of +$2,220 (+13%) with position delta = -$3 and position theta = +$134 (on 20 contracts). My December position on RUT at 710/720 and 880/890 stands at a P/L of +$1,020 (+6%) with position delta = -$23 and position theta = +$63.
Enjoy your weekend.
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The markets appear to be trading sideways at this point, unsure which way to turn. SPX closed down $1 at $1412 while RUT lost $4 to close at $813. VIX remains essentially unchanged at 17.8%. If we draw a downward trend line on RUT's chart from its peak on September 14 to today, the upper edge of the band today is at about $835 and the lower edge of the band is around $805. Interestingly, the 50 dma is at $832 and the 200 dma is at $806. So the question facing traders is this: Is this downward trend just a consolidation within a larger bullish trend? Or is it the beginning of a new bearish trend? Trading below the 200 dma will confirm the bearish trend scenario and breaking out above the 50 dma will confirm the resumption of the bullish run. In the meantime, we are dawdling here in "no man's land".
GDP for the third quarter came in today higher than expected at a +2.0% annualized growth rate, a big improvement over the second quarter's 1.3%. But that apparently didn't impress traders one way or the other. Bulls couldn't capitalize on the news, but neither could the bears. The University of Michigan's consumer sentiment survey came in at 82.6 for October, a slight decrease from September's 83.1, but probably well within the margin of error.
My November iron condor position remains at a gain of about 9% with 20 days until expiration.
We are having classic fall weather here in Chicago. Enjoy your weekend with family and friends. It is easy to become distracted as we trade all week; remind yourself what's important this weekend.
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The last time the NYSE was closed for two days due to weather was for a blizzard in 1888. The markets opened today to very little fanfare and basically traded sideways. I believe we dodged a bullet. If a significant world event had occurred, e.g., if the Israelis had attacked Iran, or more bad news erupted out of the European economic mess, we could have seen a huge crash this morning as panicked traders headed for the exits. But fortunately, all was calm financially while the weather was anything but calm. SPX closed unchanged at $1412 but RUT gained $5 to close at $819. Is the small cap index trying to tell us something? VIX jumped up almost a full point to close at 18.6%.
SPX is treading water at a solid support level around $1410, the range it held most of the month of August. RUT shows a much better defined down trend on the chart from the peak in early September to breaking the 50 dma and bouncing off the 200 dma a few days ago. We can't be sure we are "out of the woods" until both SPX and RUT break out above their 50 dma. But absent any significant news, we may be trading sideways until after the election. This may be great news for you non-directional traders.
My November iron condor on RUT stands at a P/L of +$1,340 with delta = -$14 and theta = +$201. I established new Nov call spreads at 860/870 today to re-balance this position. I had been waiting on a strong market day, but gave up on that. The Chicago PMI came out today basically flat. ADP employment reports tomorrow with the jobs report coming Friday, so we still have the opportunity for some market moving data this week.
Don't let the goblins get you!
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SPX jumped upward at the open today but quickly lost steam and basically traded sideways. SPX closed up $4 at $1413 while RUT gained $3 to close at $817. Trading volume was mixed with the volume of the S&P 500 stocks essentially flat at 2.6 billion shares. Trading on the NYSE was up 7% but trading on NASDAQ was down 4%. VIX ended the day without much change at 18.1% - a dicey area, but not too bad.
Initial unemployment claims came in lower at 369k and continuing claims
were essentially flat. Durable orders showed a gain of 9.9% for
September and pending home sales rose a bit at 0.3%. But this didn't seem to affect the market much one way or the other.
SPX is holding support at $1410 rather well. For most of August, SPX traded between $1400 and $1420, so this is a pretty solid support area. The 200 dma is down at $1377; that could be a logical stopping point if we break support here.
My Nov condor position stands at a gain of 9%; I am looking for a stronger market to re-establish my call spreads. The 750/760 put spreads are pretty safe with a short strike delta of 12. Both AAPL and AMZN disappointed analysts with their earnings announcements, but neither stock is down very much in after hours trading. If that holds, maybe these results won't drive a bearish response in the overall market tomorrow.
