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SPX has stalled around $1405 for several trading sessions now; volume has diminished. One gets the impression that the market is waiting on something. Which way will it tip? SPX closed at $1406, up $2 and RUT gained $7 to close at $804. Trading volume remains weak with 2.1 billion shares of the S&P 500 trading. Trading volume on the NYSE dropped 12% and trading on NASDAQ decreased 3%.
The CPI came in unchanged for July. But the Empire State Manufacturing survey dropped by 5.9% in July after a 7.4% gain last month. Capacity utilization remains tepid at 79.3%.
Perhaps the market is waiting on definitive economic news to push it one way or the other. Most of the news lately has been pretty mediocre, similar to today's economic news - not enough to inspire traders to invest, but not so dreadful as to make them sell either. If Bernanke and company tell us they aren't going to step in to bolster this economy, that could be the tipping factor; my sense is that many traders are gambling that Ben will come to the rescue and that is holding up this fragile market.
If you study the price charts, it is a bit disconcerting that RUT has not been able to even match its highs from early July, much less May. Normally the mid-caps lead bull markets. SPX is stalled at its May highs and has not even threatened the April highs. But one can draw a nice upward trend on SPX since the low in early June. But it is a stretch to find a corresponding upward trend on the RUT chart. RUT has been very choppy and largely traded sideways.
My Sept iron condor stands at a net gain of +$640 with delta = -$85 and theta = +$79. If you have some bullish trades that are going well, enter some tight stops; this market worries me. If you are trading non-directionally, stay alert and trade what the market gives you.
I may not get to my blog tomorrow since I have to prepare for my trading group webinar tomorrow evening.
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SPX ran up to $1410 today, but was promptly pulled back to close unchanged at $1404. RUT lost $3 to close at $797. The market appears to have stalled and the longer it sits right here, the more likely a pullback becomes. Today's SPX candlestick was closer to a dojo than an evening star, the former indicative of indecision and the latter a classic signal of the top of a trend. VIX jumped up a bit today, closing at 14.9%, up over one point. But this is still a relatively low level of volatility. Trading volume jumped up from the very low levels of Monday, but remains relatively low at 2.1 billion shares of the S&P 500, but the 50 dma = 2.6B. Trading volume increased 17% on the NYSE and increased 16% on NASDAQ.
Retail sales for July increased 0.8% - a big change from last month's 0.7% decrease. PPI came in at +0.4% for July; the CPI is due tomorrow. For now, inflation appears well contained. I must admit to surprise - how can all of this printing of money have not led to inflation? I am not an economist, but maybe it is difficult to have inflation when the economy is struggling so badly that the pundits argue with each other about whether we are in recession already or about to enter a recession.
I hope you are invested in GOOG and AAPL; they are having strong rallies as the overall market slogs sideways.
My Sept iron condor on RUT at 650/660 and 850/860 stands at a net gain of $580 with position delta = -$66 and position theta = +$92 on 20 contracts.
A reminder for those of you with index option positions: for options with am settlement (most of the broad index options), Thursday will be the last day you may close your positions. If you are in doubt about the settlement specifications for your option, check the web site of the exchange that creates your option, e.g., CBOE for SPX.
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The Standard and Poors 500 stock index (SPX) traded down a bit to $1396 during Friday's trading, but recovered to close at $1406, up $3. So SPX remains right at the resistance set back in May. RUT lost $1 to close at $802. Trading volume fell off with only 2.0 billion shares of the S&P 500 stocks trading. Trading on the NYSE dropped 11% and trading volume on NASDAQ decreased 7%.
There weren't many headlines or economic reports to move the markets Friday, so the debate about this market continues. The one camp sees no basis for the recent rally and expects a significant pullback any day. The other camp simply points to the chart and the pattern of higher highs and higher lows. SPX has been trading sideways since reaching this $1405 area earlier this week. A decisive break-out above $1407 would be very bullish. The bears tried to sell the market earlier Friday and traded SPX down to $1396, but could not hold it. So significant bullish support remains. Is this based on expectations that the Fed will announce another round of quantitative easing in September?
My Sept RUT iron condor position stands at a P/L of +$340 with position delta = -$80 and position theta = +$79 on 20 contracts.
Enjoy your weekend.
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Many traders, including me, have been expecting a big sell-off, but this market has held up pretty well. Even with the past few days of sideways trading, each time the bears tried to pull the markets down, they were rebuffed. Today was no different with SPX trading as low as $1397, but recovering to close at $1404, down $2 on the day. RUT lost $2 to close at $799. Trading volume continued to drop from last week's low levels with only 1.8 billion shares of the S&P 500 stocks trading today. The only time this year that trading volume has been that low was the half day of trading before the July 4th holiday. Trading volume on the NYSE was down 13% and trading on NASDAQ was down 14%.
The VIX hit a historic low today; it closed at 13.7%. VIX has not closed at a lower value in all of 2011 and 2012. This seems to suggest a very high level of complacency - contrarians may regard this as a danger signal.
My September iron condor on RUT stands at a P/L of +$480 with delta = -$80 and theta = +$89. Dropping IV has improved the position a bit. The call spreads are about one standard deviation OTM. This position is now 38 days from expiration; at this point, time is beginning to be on our side. If the news headlines continue to cooperate, maybe this market uptrend will continue higher. But I think it is fragile; be careful out there.
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We traders have become jaundiced over the past few years. The markets have been extremely volatile. We jump on the run upward and it turns and runs us over the next day; and then while we are still licking our wounds, it turns back upward. So it isn't too surprising that the current topic of discussion is whether this rally is sustainable, or simply: Is it safe to get on board? Today's market just chopped sideways without much net progress in either direction. SPX gained $1 to close at $1403 while RUT gained $3 to close at $803. Trading volume fell off to 2.2 billion shares of the S&P 500; trading volume dropped 11% on the NYSE and dropped 10% on NASDAQ. VIX was unchanged at 15.3%.
SPX appears to be trapped just below the resistance set in early May around $1405. By contrast, RUT is not even close to its May highs at $826. I find it hard to rationalize further moves higher, but you can't argue with the tape. That is why I closed the call spreads of my August condor even though we still had a $50 cushion to the upside. In a similar vein, I entered a contingent stop order to protect the profits in a GOOG put spread that is up about 30%.
Initial unemployment claims came in about six thousand lower at 361k, while continuing unemployment claims actually increased by 53k to 3.3 million. One more mediocre economic data report to put on the pile; it truly is the slowest economic recovery on record... and the market is trading higher.
My September iron condor on RUT stands at a P/L of -$160 with delta = -$87 and theta = +$87. The 850/860 call spreads are about one standard deviation OTM with a delta of 15, so it is tight but not yet close to an adjustment.
