- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1726
After six successive downward trading sessions, the markets finally had a positive day. SPX opened at $1335 and traded steadily upward all day. In fact, today's trading was the least choppy that I have seen in quite a while. SPX closed at $1357, up $22 and RUT closed up $11 at $801. The VIX dropped almost two points to close the day at 16.7%. That's pretty low and suggests relatively low levels of fear in the market. I am a little surprised we have put the European debt scare behind us so quickly. But today's rally occurred on much lower volume. Only 2.3 billion shares of the S&P 500 traded today; trading on the NYSE declined 17% and trading volume on NASDAQ dropped 22%.
China's GDP announcement this morning encouraged traders; it came in at an annualized rate of 7.6% for the first quarter and that was a bit better than analysts expected. The PPI came in at +0.1% for June and the University of Michigan customer sentiment survey came in at 72.0 for July, down a bit from last month's 73.2.
Those data points don't seem like the impetus for a $22 rally on SPX, but it is what it is.
I applied the Two Sigma Rule to my July RUT iron condor positions today and both spreads passed and will remain open. But the calls are just outside two standard deviations so I will watch them closely. We may close them next week. The July position stands at a net gain of $2,720 with delta = -$7 and theta = +$23. The August iron condor on RUT stands at a P/L of +$180 with delta = -$80 and theta = +$91. As evidenced from the delta/theta ratio, the call spreads are a little tight at about one standard deviation OTM. A possible adjustment may be in the works if the market continues upward as bullishly as it did today.
Assuming the July spreads expire worthless next weekend, our Flying With The Condor™ service will be up 35% for this year, as compared to the S&P 500 index, which is currently up 8% for the year.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1788
Is this market finding support or simply grinding lower? That is the big question. SPX closed down $7 at $1335 and RUT lost $3 to close at $790. Trading volume bumped up today with 2.7 billion shares of the S&P 500 trading (the 50 dma is 2.8B). Trading rose 8% on the NYSE and also rose 5% on NASDAQ. The VIX opened at 18.8%, moved up to 19.5%, but then settled down to 18.3% after the markets recovered this afternoon.
SPX traded down to $1325, but rebounded to close at the 50 dma at $1335. And this occurred on higher volume. Can I interpret this as the market finding support? Or am I just whistling in the dark?
Initial unemployment claims dropped 26 thousand this week to 350k, while the number of continuing claims remained essentially flat at 3.3 million (down 14k). These mediocre numbers may have contributed to the negative mood of trading this morning, but somehow, the markets overcame that weak opening.
My July iron condor stands at a net gain of $2,620 with delta = -$10 and theta = +$75. I will apply the Two Sigma Rule tomorrow to determine if either spread should be closed; at this point, we may end up allowing both spreads to go into expiration to expire worthless. The Aug position stands at a P/L of +$860 with delta = -$47 and theta = +$77.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1616
The S&P 500 opened higher this morning and then began to deteriorate, steadily dropping all day long. SPX closed at $1341, down $11. RUT also shed some points, closing at $795, down $10. Trading volume remains somewhat subdued, but rose from the lower levels Monday and over the holiday week. About 2.5 billion shares of the S&P 500 traded today, up a bit from yesterday, but still below the 50 dma of 2.8B. Trading volume jumped 19% on the NYSE and rose 18% on NASDAQ. The VIX rose almost a full point to close at 18.7%.
SPX has a solid support level at $1335 and the 50 dma at $1337. So it was encouraging for the bulls to see the SPX hit a low of $1336 and then bounce to close at $1341.
My July condor on RUT stands at a P/L of +$2,580 with delta = -$14 and theta = +$64. Both July spreads are well over two standard deviations OTM. The Aug position on RUT stands at a P/L of -$40 with delta = -$80 and theta = +$88. The Aug 850/860 call spread is now about one standard deviation OTM, so the pressure has been relieved (for now).
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1749
Markets traded largely sideways today until the release of the FOMC minutes this afternoon. After traders saw no mention of QE III being in the works, the markets sold off. A mini-rally in the last few minutes of trading pushed markets close to where they started the day. SPX closed at $1341 for no change on the day and RUT dropped $3 to close at $792. Trading volume was flat with 2.5 billion shares of the S&P 500 trading; trading on the NYSE dropped 1% and trading on NASDAQ dropped 4%.
The VIX spiked up to 19.2% this afternoon as the market tanked, but recovered to close at 18%, essentially where it started the day.
SPX traded down and bounced off the 50 dma (just as it did yesterday), so this is looking like a pretty solid support level.
If you watch CNBC, you may be thinking the "end is near" because it seems like they have uncovered every bearish commentator they could find. But the chart doesn't suggest that. We have been largely trading in a broad sideways channel since mid-May. Now when we were looking at the chart on May 20, when it had steadily and steeply declined since May 1, that was scary. This market certainly isn't in a bullish trend, but it is far from a bearish trend as well. That is why I focus on the key support levels for the S&P 500. When these are broken, we know we are in for some tough times in the market. However, it is true that the current market is fragile. Some unexpected bombshell out of Europe could easily tip us over the edge, especially if we continue to see mediocre earnings reports such as Alcoa's.
My July iron condor on RUT at 610/620 and 850/860 stands at a net gain of $2,660 on 20 contracts with delta = -$11 and theta = +$44. The Aug position at 650/660 and 850/860 stands at a net gain of $320 with delta = -$60 and theta = +$92. We have the unemployment claims report tomorrow, but I doubt that report will be either good enough or bad enough to do much with this market.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1676
The heat appears to have even affected the markets. They are just slowly trading sideways and somewhat downward - much as we are inclined to slow down a bit and take it easy in the summer heat. SPX closed down $2 at $1352 and RUT closed at $805, down $2. Trading volume was flat with 2.1 billion shares of the S&P 500 trading. Trading volume increased 7% on the NYSE, but was flat on NASDAQ.
Today was a slow day for economic data reports; in fact, this week will be pretty slow until Thursday's unemployment claims numbers. Surprisingly, the VIX increased a bit from Friday, but closed at 18%, still a pretty low level.
I am watching the 50 dma at $1338 for SPX. That should act as support. On the other hand, breaking through the recent highs at $1375 would be a bullish sign. However, I am inclined to think neither will happen. I don't see any news with the potential to really kick this market into rally mode. Some unexpected surprises out of Europe could push us downward, but I think the best bet is that we continue to "muddle along".
My July iron condor on RUT stands at a net gain of $2,300 or +15% with position delta = -$39 and theta = +$93. The August position stands at a P/L of -$1,040 with delta = -$104 and theta = +$93. The Aug 850 call is riding right along the edge with a delta of 18.
Now go get something cold to drink and relax on the patio. Think about AAPL - up again today in a weak overall market.
