- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1866
Maybe traders woke up today and realized Bernanke may not pull the trigger on QE III this week? Or maybe they just think the market was getting a little ahead of itself before we have a definitive announcement. The FOMC meets tomorrow and Wednesday with the statement issued Wednesday afternoon. SPX dropped $1 to close at $1385 and RUT lost $4 to close at $792. But trading volume fell off dramatically with 2.3 billion shares of the S&P 500 stocks trading (the 50 dma is 2.7B). Trading on the NYSE and NASDAQ both dropped 29% (curious coincidence). I think this indicates a fair amount of uncertainty before the FOMC announcement. In spite of minimal market movement, the VIX moved up 1.3 points to close at 18%.
We did not have any significant economic data or reports issued today, but the balance of the week is loaded: Tuesday has the Chicago PMI, consumer confidence, and Case Schiller; Wednesday brings the ISM Index, ADP employment data and the FOMC announcement; Thursday has the weekly unemployment claims data and Friday has the granddaddy of economic reports: the U.S. Nonfarm Payrolls Report. So seeing a slow day in the market today and probably also tomorrow makes sense in light of some of the market-moving data due later in the week.
My Aug iron condor on RUT stands at a P/L of +$2,360 with position delta = -$30 and position theta = +$29. With 17 days to go, our 650/660 put spreads are far OTM and the 850/860 call spreads are about one and a half standard deviations OTM. Absent a major market move, this position will likely expire worthless. But time will tell. Large market moves have become common the past couple of years.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1797
Thursday's large upward move continued Friday. The SPX opened at Thursday's close, moved higher, broke through resistance at $1375 to close at $1386, up $26. RUT followed suit with a gain of $19 to close at $796. Trading volume didn't follow suit; trading in the S&P 500 was flat with Thursday's levels. Trading volume on the NYSE was down 2% and volume on NASDAQ was up 8%.
The markets have been displaying the traditional higher highs and higher lows of a bullish trend since early June, but it has been a very choppy ride. Can this run of the past few days be sustained? That is hard to predict, but I see entirely too many headwinds to allow a bullish market to continue for long. But I have been wrong before; all one can do is follow his rules.
I attended the Invest Like A Monster trading conference in Chicago yesterday. Talks by Jon Najarian, Jeff Macke and Rick Santelli were the highlights - it was a great conference. Be sure and sign up for the next one; it was first class in every respect. You won't be disappointed. See OptionMonster.com for more information about the next conference.
My Aug iron condor on RUT stands at a P/L of +$2,080 with delta = -$30 and theta = +$61, so this position is holding up well so far with one adjustment to date.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1926
The big news for today's market was AAPL's disappointing earnings announcement. But the overall market seems to be stabilizing (famous last words?) and maybe that helped stop the slide in AAPL.
SPX closed at $1338, flat on the day. RUT traded down $2 to $769. It appears as though the 50 dma on SPX is acting as support with price action touching it yesterday and today. Trading volume was down a bit with 2.8 billion shares of the S&P 500 trading. Volume was down 3% on the NYSE and was up 1% on NASDAQ. VIX relaxed by a little over one point to close at 19.3%.
Based on yesterday's weakness, IBD downgraded to "Market In Correction" last evening.
New home sales came in at 350k for June, down from May's 382k. Existing home sales will be posted tomorrow. Many voices are claiming to see the bottom in real estate. But that seems to depend largely on where you are in the country.
My Aug RUT condor stands at a P/L of +$2,080 with delta = +$8 and theta = +$54.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1841
The ECB president, Mario Draghi, committed to doing whatever was necessary to preserve the Euro, and that buoyed the markets significantly. Every major index finished the day higher. SPX gained $22 to close at $1360 and RUT closed at $777, up $8. Trading volume was up with 3.2 billion shares of the S&P 500 stocks trading today (the 50 dma = 2.8B). Trading on the NYSE increased 14% and volume jumped 10% on NASDAQ. VIX dropped almost two points to 17.5%.
I find it fascinating how what may well be hollow promises can move a market this much. I think Europe is a long ways from solving their debt issues, but maybe I'm just a cranky old fart. My wife assures me I am, but that doesn't mean I'm wrong.
New unemployment claims dropped 35k to 353k and continuing claims reported at 3.3 million, down 30k. Durable orders increased 1.6% for June (flat from May), while pending home sales dropped 1.4% in June. All in all, not terrible data. This data doesn't support the excessive gloom and doom heard earlier this week, but we aren't out of the woods either.
My Aug iron condor on RUT at 650/660 and 850/860 stands at +$2,360 with delta = -$2 and theta = +$31. Will this rally continue tomorrow or will another news item take us down? The only predictable aspect of this market is volatility; maybe that is the new normal due to high frequency trading?
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1911
Spain's bond yields hit 7.3% and Europe's debt problems have returned to center stage. While reviewing the various news sites I monitor today, I was surprised by the number of "dooms day" articles. According to the headlines, the middle class is disappearing, everyone's in poverty and the next great depression has begun. I admit that the global economic picture isn't pretty and our economy is right behind Europe on the same path. But it just appears like the tone of all of the financial press just turned on a dime. It all strikes me as a combination of mob psychology and yellow journalism; of course, thinking for yourself has gone out of style since everyone has become so afraid of being accused of being politically incorrect. SPX opened lower this morning and proceeded down to $1338 before bouncing to close at $1351, down $12. RUT closed at $779, down $13. Trading volume dropped from the high levels of expiration Friday with 2.6 billion shares of the S&P 500 trading. Trading on the NYSE was down 17% and trading on NASDAQ was down 10%.
SPX sliced through support at $1357 (this level was support twice in April and resistance once in June) and almost reached support at $1335, the low from just a few days ago. But the markets bounced strongly and stopped the bleeding, at least for today. Support should also be found at the 50 dma at $1333. By contrast, RUT's chart is much more ugly. RUT has gapped downward the last two trading sessions. RUT's low today at $775 is near both the 50 dma at $777 and the 200 dma at $774. In fact, the 50 dma is threatening to cross the 200 dma - not good. As you might expect on a day like this, VIX spiked upward to 20.5% but pulled back to 18.6% by the close of trading.
My Aug iron condor on RUT stands at a P/L of +$1,840 with delta = -$5 and theta = +$75. With today's price move, this position would have become much more profitable, but the spike in IV tempered that rise (remember: condors are negative vega positions). So, return to your bomb shelter and wait for the next dose of bad news. But our condors are doing well...
