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I know I pointed out that we bounced off support yesterday, but today, SPX gains $14 to close at $1447 and RUT tacks on $10 to close at $844. What stimulated that huge move? Spanish government officials announced a new budget that will focus on spending cuts and reform. So yesterday the Greeks were rioting and Spanish bond yields went over 6%, and the market tanked. Today, Spanish officials say the right things and everything is now rosy? Good grief! How do you trade this market? My theory is that the high frequency trading algorithms are pushing these extreme market moves. The program picks up a few key words in a news story, triggers a large buy and then it snowballs. That sure makes it a stressful day for us ordinary humans trying to trade in this environment. It certainly isn't too surprising that a lot of individual investor money remains on the sidelines. Between Madoff and the computers, it's a spooky place.
Initial unemployment claims dropped to 359k, which is a move in the right direction, but all of the other economic news was negative. Durable orders dropped 13%; GDP for the second quarter only gained 1.3% on an annualized basis (down from 1.7%) and pending home sales dropped 2.6% after a 2.4% gain last month.
SPX solidly bounced off support and pushed itself back well into the upward trend band, but trading volume fell off to 2.2 billion shares of the S&P 500. Trading on the NYSE was down 16% and trading on NASDAQ dropped 1%.
My Oct condor position stands at a P/L of -$980 with position delta = +$47 and position theta = +$106.
So what happens tomorrow? Draghi is photographed frowning and the market plummets?
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The market opened weakly this morning, based on worries out of the Euro Zone. The Greeks were rioting in the streets, protesting the government's austerity measures necessary to receive their bail out funds. Meanwhile, yields on Spanish bonds exceeded 6% as investors worry about that economy needing a bail out as well. New home sales here in the states didn't help. They came in at an annualized rate of 373k; that was a 0.3% decline from July and analysts were expecting 380k.
SPX dropped as low as $1431 by mid-morning, but then struggled back upward a bit to close at $1433, down $8. RUT dropped $5 to close at $834. SPX now stands where it was after Draghi's press conference on Sept. 6 and before Bernanke's QE III announcement Sept. 13. After the run up on 9/6, SPX established support at $1430; today's action appeared to suggest that the $1430 support level held.
If the rally since early June is based on quantitative easing and now the consensus is turning to a conclusion that the Fed is out of ammo, and worries about Europe are returning, then we have a lot of ground that could be lost. Maybe that Goldman Sachs prediction around $1285 isn't that far off after all? That could be ugly.
I hedged my October iron condor on RUT today and it stands at a P/L of -$1,095 with position delta = -$7 and position theta = +$32. The small delta reflects the effects of the hedge, but you will see that theta was also reduced - that's the trade-off. But amid all of the worries in this market at this time, having such a small delta is comforting.
Be careful out there.
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The major market indexes continue to basically trade sideways, but when one backs up and looks at the longer term trend, it still looks like a bull market. The S&P 500 is up about 16% this year, which is much, much better than last year's flat performance. But many traders, including me, are nervous. There are many reasons to worry about this market, but it seems to be climbing the proverbial wall of worry. SPX dropped off $3 to close at $1457 and RUT lost $4 to close at $852. Trading volume was naturally down a lot after expiration Friday with 2.2 billion shares of the S&P 500 trading; trading on the NYSE was down 51% and trading volume on NASDAQ was down 27%. The VIX is holding up rather well; it closed essentially unchanged today at 14.2%.
RUT is starting to give back much of Bernanke's rally from last week, but SPX is holding most of those gains intact. There wasn't any economic data of import today; some talking heads claimed today's market weakness was due to Europe's economic woes returning to the forefront. But I couldn't find any news stories behind those suppositions. Maybe traders are just feeling the same way I am - there is so much bad stuff either going on (like Europe) or in the near future (like the fiscal cliff), I just find myself half expecting the other shoe to drop at some point. But so far, that has been dead wrong.
My October RUT iron condor stands at a net P/L of -$400 with delta = +$7 and theta = +$105. So this position looks pretty good - unless that crash I fear comes to pass...
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The markets rose this morning on positive housing and consumer confidence numbers, but then the averages slowly declined all afternoon to close at or near lows for the day. SPX lost $15 to close at $1442 and RUT closed at $839, off $13 for the day. Trading volume picked up with 2.7 billion shares of the S&P 500 trading. Trading on the NYSE was up 20% and trading volume on NASDAQ was up 15%. The VIX increased a little over one point to close at 15.4%.
The Case Schiller housing price index increased 1.2% in July and consumer confidence came in at 70.3, up from 61.3. These numbers boosted the markets, but the euphoria was short-lived. SPX traded as high as $1463 before starting its slow descent. SPX has nearly given back the huge gains after Bernanke's announcement of additional Fed easing last week. RUT has now given back all of those gains, closing today near the $840 support level that was established after Draghi's press conference on September 6. SPX is sitting just above its support in the region of $1430-$1440. If we draw a trend line for this latest market rally that started in early June on the SPX chart, the bottom edge of this upward trend is $1430. So $1430 on SPX is a significant "line in the sand". Breaking $1430 could signal a break in this uptrend.
My Oct iron condor on RUT stands at a net P/L of -$940 with delta = +$57 and theta = +$94. Our theta/delta ratio is still strong, but the put spreads are beginning to be pressured. So the debate intensifies: is this bullish uptrend for real, or is a significant market correction around the corner?
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This was a slow week for the major market averages. SPX basically traded at $1460 all week. Today, SPX ran as high as $1467 before being pulled back to close unchanged at $1460. RUT closed unchanged at $856. Trading volume popped up on this expiration Friday with 3.5 billion shares of the S&P 500 trading. Trading volume on the NYSE increased 90% and trading on the NASDAQ increased 29%. VIX remains pretty low at 14%.
My September iron condor on RUT ends this weekend with the expiration of the 790/800 put spreads. That position ended up with a loss of $4,680 or 27%. This pulls our year to date record for the Flying With The Condor™ back to +30%, still an excellent record as compared with a gain of 16% for the S&P 500. The Oct condor stands at a P/L of -$920 with delta = -$24 and theta = +$113.
Enjoy your weekend.
