Posts Tagged ‘SPX’
Friday, August 27th, 2010
Watching yesterday’s market action, I realized that we are indeed in a bearish trend. I noted this a week or so ago in my article referencing technical indicators that were recently violated to the downside.
As the S&P 500 Index (SPX) continues back toward its July lows, which are just above the 1,000 mark (1,010.91, to be exact), many technical analysts – including me – are concerned about a continuation back to that level. There currently doesn’t seem to be much technical support from the current SPX price down to the July low.
Ever since the dreaded “death cross” that occurred in July, I have been monitoring the price action of the SPX (partially to check the validity of the cross). After the cross occurred, which you can see in the chart below, the index actually rallied.
The 200-day simple moving average (in yellow) crossed above the 50-day simple moving average (green) early on. The exponential 200-day (red), crossed the 50-day later in the month. Regardless of which trendline you prefer, the index will view these cross points as levels of potential resistance.
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Tags: Economy, Moving Averages, S&P 500 Index, SPX, Technical Analysis
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Buy, sell, hold?
The days of reckoning are upon us! So earnings season officially kicks off today with Alcoa’s (NYSE:AA) report. CSX Corporation (NYSE:CSX) and Novellus Systems (NASDAQ:NVLS) are on today’s schedule as well. As I write this at 6:00 a.m. Monday morning, futures in the S&P, DJX and Nasdaq are lower after a week’s worth of gains.
I wanted to take a couple of quick minutes today to highlight some things to remember and consider during earnings season as you make your decisions to buy, sell or hold. These things are also important to remember if you plan on employing an options strategy. Some high-profile companies that are scheduled to report this week are:
- INTC, YUM and FAST on Tuesday
- MAR on Wednesday
- AMD, JPM and GOOG on Thursday
- BAC, GCI, C and GE on Friday
There are many others reporting; the above issues are simply some of the more heavily followed. If you are wondering when a company of interest reports earnings, check out the OptionsHouse Research tab to locate the next earnings date under the “Events Calendar.” If none is posted, go to the company’s website, as some corporations may announce changes close to its report date or wait to disclose their exact earnings date.
Now that you know the relevant earnings date for your stocks, here are some factors to examine when deciding how to proceed:
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Tags: AA, AMD, BAC, buy sell hold, C, CSX, DJX, Earnings, fast, GCI, GE, GOOG, INTC, JPM, mar, NVLS, SPX, YUM
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Wednesday, June 23rd, 2010
The S&P 500 Index has been chugging along to the upside since hitting its most recent low of 1,042 on June 8. At the time, that low was exactly at the lower two-standard-deviation Bollinger band, possibly indicative of an oversold condition. As of Tuesday’s close, we were trading in the middle of these bands.
Since the June 8 low, the broad market ETFs such as the SPY and the DIA have been moving higher on lower and lower volume, which could mean a lack of conviction on the part of market participants. That weakness is maybe beginning to rear its ugly head in the past two days’ price action.
When the SPX began moving lower back on April 26, the price of the index shifted lower during the last 30 minutes of the trading day, accelerating the moves south from early in the day and confirming direction. From June 8 until Monday, the prominent market action was to move higher in the last 30 minutes of the day, leading the market to a net gain in that period. But that trend may be changing yet again and the reluctance of traders to hold positions overnight could be one cause of this.
I remember as a market maker and specialist, one of the main ways (and really the only one way) I had for analyzing short-term market direction was to “read the tape” and watch order flow. In other words, I would look at price action and make determinations as to whether to be long or short delta (direction) at different moments during the day and overnight. While this is not foolproof, it really makes sense when you think about it in the most basic of terms. (more…)
Tags: bollinger bands, DIA, market trends, options trading, selloff, SPX, SPY, stock market update, Stock Trading, Technical Analysis
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*Data courtesy of Bloomberg
So the second-quarter earnings season has basically ended and the S&P 500 Index (SPX) just had its worst monthly performance in almost 50 years, dropping 8.2% in May. In terms of earnings numbers for the overall index and the 500 companies that comprise it, the results were not horrific compared to past monthly earnings results and the movements of the index in response to that data.
Of the 496 companies currently contained in the index, 467 have reported results for the last quarter as of June 2, 2010. Overall year-over-year growth was 53.68% with 345 of the companies posting positive growth and 114 reporting negative growth. The biggest jump in terms of year-over-year growth was in the materials sector, which collectively saw a 367% jump in earnings. The worst sector was telecom, which saw negative earnings growth of 4.22%. Additionally, 82% of the companies in the S&P surprised analysts’ expectations to the upside.
So far, with the index at 1079, the trailing price-to-earnings (p/e) ratio of the S&P is 15.73 times and the one-year forward-looking p/e ratio is 13.27 times, according to Bloomberg data. Total earnings per share (EPS) in the index are currently $81.31, and Bloomberg analysts expect next year’s EPS to come in around $95.59.
These are the facts (and the estimates), but the truth of the matter is that we don’t know what the future will bring. (more…)
Tags: earnings season, Jobs, Non-farm payrolls, P/E Ratio, S&P 500 Index, SPX, Unemployment
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Seeing as how the broad market has been moving lower for about six days now (the Dow Jones was very flat on May 17th), some traders who may have a longer-term vision or believe there will be a bounce from here may be able to use elevated volatility to their advantage. The CBOE Market Volatility Index (VIX) is a general indicator of implied volatility in the options on the S&P 500 Index (SPX). With the VIX up at almost 45%, which is a new 52-week high, options are relatively high priced compared to where they have been for the past year.
What this means for investors is that they have to be extra careful when purchasing options (calls specifically). Long options have a positive vega and volatility (reflected in the VIX) tends to decrease as stocks move higher and increase as stocks move lower (as a general rule). These fluctuations in volatility can be helpful or hurtful so traders need to be hyper-aware of their surroundings…
I say this because often, when markets are selling off sharply, some traders will want to take a long position as they hope for a rebound. After six days of selling in the Dow Jones and a two-plus standard deviation move, this thesis may be becoming more common as an increasing number of traders appear to be looking for a bounce. Of course we don’t know if and when this bounce will come and with the Dow and S&P falling below key technical levels, there could be even more risk to the downside. Typically, during market pullbacks, volatility is screaming higher. (more…)
Tags: CBOE Market Volatility Index, implied volatility, S&P 500 Index, SPX, Vega, VIX
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The SEC announced Tuesday the creation of temporary “circuit breakers” to be placed on ALL stocks in the S&P 500 Index (SPX) after a 10-day comment period and through December 10, 2010. The circuit breakers will pause trading in the stock for five minutes if the price moves by 10% or more in a five-minute period.
The NYSE has a “broad market” or index-based circuit breaker, which pauses or halts trading when an entire group of stocks, specifically the Dow Jones Industrial Average, drops by 10%, 20%, or 30%. All of these moves trigger different actions depending on the time of day that the selloff occurs.
The issue here is that the circuit breaker is based on the entire basket of 30 stocks contained in the Dow and while the average is supposed to be a proxy for the much broader markets, there are more than 6,500 publicly-listed companies on U.S. exchanges.
As we all know, diversification should reduce risk. If you were to purchase a group of 30 stocks in your account, the chances of one of them being down 10% or more is greater than the chances of all of them being down the same amount (of course this works when stocks are moving higher as well). The point is that while diversification helps the portfolio or index as a whole, it has minimal effect or control on the individual components within. You could have the entire group of stocks only down 10% collectively, but have an individual stock that is down 30%, 40%, or more. (more…)
Tags: Circuit Breakers, High Frequency Trading, Limit Order, Market Order, SPX, Stop-Loss
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One thing the S&P 500 Index (SPX) seems to have lacked of late is strong afternoon momentum. If you were to look at intraday charts of the SPX going back to late April (26th), you would see the index has favored weakness into the close (in the last 30 minutes of the trading day). In fact, about 77% of the time during the past few weeks, the price of the index has moved lower as the session’s closing bell approaches.
If you look at market breadth and momentum, they too are faltering late in the day. From my experience, this is a sign of fear in the markets and is more indicative of a bearish overall sentiment as opposed to bullish. It indicates investors’ reluctance to take on new long positions into the close.
Some of this might be due to the geo-economical and political issues swirling in Europe and some might be due to the technicals themselves. Regardless, this may be a trend to pay attention to as it could lead to lower numbers in the SPX over the near term. (more…)
Tags: CBOE Market Volatility Index, S&P 500 Index, Simple Moving Averages, SPX, Technical Analysis, VIX
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Alcoa (AA) officially kicks off earnings season with its numbers release due out on April 12 this year. However, other key earnings reports starting this week will include Bed, Bath and Beyond (BBBY), Monsanto (MON), Family Dollar Stores (FDO) and Salesforce.com (CRM), amongst others. These announcements will likely set the tone for the markets and earnings season to come.
For many investors, earnings are the realization and confirmation of a company’s fiscal health and well-being, or an indicator of potential problems. Traders, analysts and experts alike often discuss price-to-earnings ratios (p/e ratio) and other factors when determining whether to buy, sell or hold a position.
The p/e ratio, price-to-earnings ratio, often referred to as “earnings multiple” or simply “multiple”, is simply the price of that stock divided by how much they earn. P/E ratios are not only stock specific, but certain types of companies and their respective sectors also posses p/e characteristics that investors use to measure expected performance. (more…)
Tags: AA, AMZN, BBBY, CRM, FDO, MON, Price-to-Earnings Ratio, SPX
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Thursday, March 11th, 2010
The SPX has seen unusually high activity in the December 2010 1075 puts over the past two days. Yesterday near the close of the trading day, 18,000 contracts were lifted in these puts. Today another 16,000 are on the tape with over 200 million in premium spent, buying about 20 million dollars in VEGA exposure. VEGA is the dollar sensitivity due to a 1 point change in the implied volatility level.
This trading also created over 1 billion dollars worth of delta to sell, which to me is the most incredible part of this activity. The futures market was able to buy the amount of deltas needed to be sold to hedge this trade without a material decline in the overall market. This trading is likely coming from an institutional portfolio manager looking to hedge his downside exposure to a long stock portfolio.
Tags: SPX
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Monday, November 16th, 2009
The popular CBOE SPX Volatility Index (VIX 22.93% -0.43) is down again today on the market’s move higher. We have warned and attempted to inform our customers about some of the risks and unique characteristics of the VIX in prior blog entries. Here is one more.
Each day, the VIX derives its value from the interpolated implied volatility surface of the midpoint of 30-day options in the SPX. The VIX index settles its options on the Wednesday morning that falls 30 days prior to the actual expiration of SPX options. This is the only day that the VIX is the actual 30-day measure of LAST TRADED implied vol. Every other day is a market estimation of an interpolation.
Because of the nature of the settlement, typically there is huge volume in the SPX options on the expiration morning of the VIX options, this is called the SPX carpet bomb, where VIX participants buy or sell every out-of-the-money strike in SPX to replicate the exposure to volatility in SPX that their expiring VIX contracts provided. This carpet bomb can produce huge swings in the VIX calculation from the prior day’s closing estimation of the index. The bid-ask width of SPX options in VIX index points can vary but is typically around 3 points.
This means if the settlement of the VIX occurs predominately on the bid side of the SPX options because of carpet bombing sellers in the SPX, the VIX could move from the prior day’s midpoint down 1.5 points or more! If all these offers move the bids lower, the impact could be even greater. If this seems complicated and full of uncertainty – it is – especially now that the VIX index itself is trading with an elevated volatility. The current 30-day historical (actual) volatility of the VIX is currently measured at more than 100% volatility.
The VIX is a very non-standard contract that is especially complicated and not for investors who simply want to have exposure to an increase or decrease in the volatility level. Regular options can provide that type of exposure.
Photo by Picture Perfect Pose
Tags: CBOE SPX Volatility Index, SPX, SPX Carpet Bomb, VIX
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