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The Standard and Poors 500 index (SPX) finally found support and began to trade higher this week, closing Friday at 4,067, up 61 points or 1.5% on the day, and up 3.5% for the shortened holiday week. Trading volume continues to run along the 50-day moving average (dma) and closed below average on Friday.
VIX, the volatility index for the S&P 500 options, declined 11% this week, opening the week at 25.5% and closing Friday at 22.8%. In spite of this week’s decline in volatility based on three positive trading sessions, we will have to continue this bullish run much farther before returning to the 19% volatility levels of mid-August before this latest decline began.
I track the Russell 2000 index with the IWM ETF. As one might expect, IWM outpaced the blue chips this week. IWM closed Friday at 187.40, up 2% on the day and up 3.7% for the week.
The NASDAQ Composite index fell between the S&P 500 stocks and the Russell 2000 stocks this week, closing Friday at 12,112, up 250 points or 2.1% on the day and also up 4.0% for the week. However, NASDAQ’s trading volume remained below the 50 dma all week.
Powell’s comments at Jackson Hole on 8/26 started the decline that finally found support this week. However, three data points do not make a trend. Remain cautious.
The S&P 500, NASDAQ, and the Russell 2000 all posted very similar chart patterns this week, trading down after the holiday weekend, but then consistently higher each of the remaining three days of the week. Now the market waits for the next FOMC meeting on September 20-21. The consensus appears to be settling at a third 75 basis point rate hike and the market appears comfortable with that prospect. Personally, I don’t understand the apparent change in perception for a lower probability of a “hard landing” for the economy. The seemingly unending debt spiral of our government will have unpleasant consequences and both political parties are on board this train. Remember Greece? We are currently at those levels of debt to GDP.
I continue to think it wise to limit your exposure to this market until after the September FOMC meeting. I have had success with short term earnings trades on GME and DOCU and opened the AAPL iron condor for newsletter subscribers. I also opened an OTM Jan 2023 call butterfly on LNG to play the increasing price of natural gas. However, I remain largely in cash.
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The Standard and Poors 500 index (SPX) put in a tough week, declining 2.8% with a close today at 3924, down 42 points on the day or almost three percent. Trading volume spiked up above the 50 day moving average (dma) midweek but declined back below average today. This bearish pullback for August was almost entirely carried at below average trading volume. This suggests that the large institutional players are not convinced that it is time for wholesale closing of large portions of their holdings.
VIX, the volatility index for the S&P 500 options, moved over a wide range today, opening this morning at 25.6%, declining to 23.2% as the market traded higher this morning, and then closing at 25.5% after this afternoon’s selloff.
I track the Russell 2000 index with the IWM ETF. This was a rough week for IWM dropping nearly four percent on the week. IWM closed today at 180.09, down 0.8%. IWM found support yesterday and again today at 178.50, the lows of
mid-July.
The NASDAQ Composite index was no exception to the selling pressure this week, closing 154 points to 11,631. Today’s close ended the week down 3.2%. NASDAQ’s trading volume remained below the 50 dma all week and declined even a bit further during today’s sell off.
The markets ended their recovery on August 17th and tried to recover a few days later, but Powell’s comments at Jackson Hole last Friday started a new downward trend, down over 8% through today’s close. The S&P 500, NASDAQ and the Russell 2000 all posted very similar chart patterns this week, with their intraday lows on Thursday and Friday finding support at nearly the same prices. That observation, together with lower trading volume may signal a slowing of this recent trend lower. Perhaps we will trade roughly sideways until the Fed meeting.
Consensus on the street was looking for the Fed to slow or even end its rate hikes for 2022, but Powell’s comments have shifted that consensus to an expectation of another 75 basis point move at their next meeting on September 20-21. Market participants are worrying about a “hard landing” for the economy, and by extension, much lower stock prices.
I think it wise to limit your exposure to this market until at least after the September FOMC meeting. A few exceptions may be found in the oil and gas sector, e.g., CVX and LNG. Watch your trades closely, if you trade at all.
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The Standard and Poors 500 index (SPX) hit resistance at the 200-day moving average (dma) on Tuesday and steadily declined to close today at 4228, down one percent for the week. However, the S&P 500’s trading volume remained below the 50 dma all week. Today’s decline triggered a small increase in trading volume.
VIX, the volatility index for the S&P 500 options, opened the week at 20.7%, declined a bit but then rose today to close the week at 20.6%. It may be a minor observation, but VIX peaked at 21.3% today and pulled back a bit to close the week. Closing at the low of the day for a stock or index is often worrisome while pulling back from an intraday low is encouraging. In the same way, VIX is most concerning when it spikes and closes at its high for the day.
I track the Russell 2000 index with the IWM ETF. IWM gapped open lower this morning and closed down 2.2% at 194.65. Historically, the small to mid-cap stocks lead both market rallies and bearish pull backs and that certainly played out this week with a strong decline for IWM.
The NASDAQ Composite index gapped open lower this morning and closed at 12,705, down 260 points or two percent for the day and down 2.2% for the week. NASDAQ broke another resistance level on Friday around 12,985 that was established back in early May. NASDAQ’s trading volume declined all week.
The bullish trend triggered by the FOMC announcement two weeks ago hit resistance this week and began a modest decline. The Russell 2000 broke out above its 200 dma and then pulled back. The S&P 500 index bounced off its 200 dma, but NASDAQ did not even approach its 200 dma before pulling back.
Trading volume remained weak and generally below the 50 dma during this entire bullish streak. Above average trading volume accompanying a bullish or bearish trend is always a strong endorsement of the trend.
I will be maintaining a cautious stance this week, but I guess that is nothing new for me.
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The Standard and Poors 500 index (SPX) fell out of bed after Powell’s remarks Friday at Jackson Hole. SPX closed down 141 points at 4,058, down 3.4% for the day and down 3.2% for the week. However, the S&P 500’s trading volume remained below the 50 day moving average (dma) all week. Even Friday’s decline didn’t spike a significant increase in trading volume.
VIX, the volatility index for the S&P 500 options, opened the week at 22.4%, declined to 21.8% on Thursday, but then spiked up to 25.6% on Friday.
I track the Russell 2000 index with the IWM ETF. IWM closed at 188.98 on Friday, down 3.2% on the day but down much less on the week at -1.6%. Earlier in the week, IWM appeared to find support at the 2021 lows, but Friday broke that support level.
Similar to the other broad market indices, the NASDAQ Composite index closed at 12,142, down 498 points or four percent for the day and down three percent for the week. NASDAQ’s trading volume remained below average all week and didn’t even reach the 50 dma on Friday after Powell’s speech rattled the market.
The markets essentially traded sideways this past week until Friday when traders hit the sell button after Powell’s remarks appeared to suggest plans to continue rate hikes that could cause consumers and businesses significant pain.
Friday’s market decline was significant, but trading volume remained weak and generally below the 50 dma. Monday’s follow through will be instructive. Unless we see a bounce or at least a sideways move Monday, I will be moving further into cash.
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This month’s CPI and PPI reports encouraged traders and the Standard and Poors 500 index (SPX) gapped open on Wednesday and traded higher to close Friday at 4280, up 3% for the week. However, the S&P 500’s trading volume declined steadily all week, remaining below the 50-day moving average (dma).
VIX, the volatility index for the S&P 500 options, opened the week at 21.7% and closed Friday at 19.5%. VIX has been steadily trending lower since its recent peak in June. Friday’s close is the lowest level of volatility since April.
I track the Russell 2000 index with the IWM ETF. IWM closed at 200.36 Friday, up 4.01 points or 2.0% on the day and up 4.3% for the week. Friday’s gain broke through the 200 dma. Historically, the small to mid-cap stocks lead market rallies and that certainly played out this week with a strong run for IWM.
The NASDAQ Composite index closed Friday at 13,047 , up 267 points or 2.1% for the day and up 2.7% for the week. NASDAQ broke another resistance level on Friday that was established back in late April and early May. NASDAQ’s trading volume ran at or above the 50 dma all week but fell below average on Friday.
The current bullish trend began after the FOMC announcement two weeks ago and was fueled by a strong jobs report for July. The market paused for the CPI and PPI reports this week and traded strongly higher based on signs of a slowing rate of inflation. All of the broad market indices have now broken through the highs of the failed June recovery.
I will be actively looking for bullish trade candidates this week.
