The Standard and Poors 500 Index (SPX) closed Friday at 3023, up 12 points. Friday’s close represented a gain for the week of 0.9%. Although it was a bullish trend for the week, it was a choppy path higher as each day brought a new report or rumor about the trade negotiations with China.
Trading volume for the S&P 500 companies only broke above the 50-day moving average (dma) on one day this week, and Friday’s trading came in significantly below average. The lower volume continues to stand as a caution flag for this market. The bulls are buying, but they are also nervous and taking profits when they are available.
VIX, the volatility index for the S&P 500 options, declined significantly Wednesday through Friday, closing the week at 12.7%. Volatility hasn’t been this low since July. The market is calming in spite of all of the China trade and impeachment talk.
The Russell 2000 Index (RUT) continued to track higher this week, closing Friday at 1559, up 1.1% on the week.
The NASDAQ Composite index broke through resistance this week and closed Friday at 8243, up 57 points, capping off a strong week’s performance of 1.3%. Watch for the next resistance level at July’s high of 8330. NASDAQ trading volume was below average all week, but managed to touch the 50 dma on Friday.
It is worth noting that both the Russell 2000 and the NASDAQ Composite outperformed the S&P 500 index this week. That is a strong bullish signal.
This week’s trading was generally bullish, but each day brought a new twist, sometimes higher and sometimes lower. The trade negotiations with China continue to hang over the market. We are fortunate the U.S. economy is strong enough to persevere through these tariffs.
I am continuing to be somewhat cautious in this market. It is certainly a bullish market, but the bulls are nervous and it doesn’t take much to cause them to hit the sell button. I am picking my stocks carefully and favoring the solid blue chips like AAPL, COST and JPM. My iron condor trades on SPX are doing very well, gaining 27% in October and 16% for the November position. Stay alert. Whenever possible, use trailing stops to protect your gains.