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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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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) barely held onto a sideways trend last week, closing Friday at 4145, down 6.75 points. The week opened at 4112, so we maintained a positive return for the week at +0.8%. The S&P 500’s trading volume remained below the 50 day moving average (dma) all week.
VIX, the volatility index for the S&P 500 options, opened the week at 22% and closed Friday at 22.4%. Volatility continues to decline, but I remain on alert.
I track the Russell 2000 index with the IWM ETF. IWM closed at 190.80 Friday, up 1.45 points or 0.8% on the day and up 3% for the week. Friday’s gain broke through the resistance level set by the June recovery high at 190.
The NASDAQ Composite index closed Friday at 12,658, down 53 points or -0.5%, but remained up almost 3% for the week. NASDAQ broke through its failed June recovery high on 7/29 and confirmed that over the last three days of last week. NASDAQ’s trading volume climbed Wednesday and Thursday, but dropped below the 50 dma on Friday.
The post-FOMC bullish trend continued last week, in part fueled by a strong jobs report on Friday. NASDAQ broke through the highs of the failed June recovery on 7/29 and was joined by the Russell 2000 on Friday. However, that resistance level is still holding for the S&P 500 index and the Dow Jones Industrial Average.
The administration continues to try to tell us we are not in a recession, but the facts are clear. Two subsequent negative growth rates in GDP have always been considered the basic definition of a recession. I see no signs of inflation abating anytime soon. The CPI numbers will be reported on Wednesday. That report will be critical to a continuation of this market’s bullish trend.
I am carefully picking a few trades that take advantage of the bullish trend, but I remain cautious and will close or hedge several positions in advance of the CPI report on Wednesday morning.
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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.
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The Standard and Poors 500 index (SPX) put up a very bullish chart after the FOMC announcement on Wednesday, closing higher and finishing the week up over 4%. SPX closed today at 4130, up 58 points or 1.4%. SPX has yet to break above the failed June recovery high. The S&P 500’s trading volume climbed every day this week and broke above the 50-day moving average (dma) on Thursday.
VIX, the volatility index for the S&P 500 options, opened the week at 24% and closed today at 21%. That decline is certainly a welcome move, but color me nervous.
I track the Russell 2000 index with the IWM ETF. IWM followed the other indices higher after the Fed announcement. IWM closed at 187.25 today, up 1.32 points or 0.7% on the day and up 4% for the week. However, IWM remains nearly two percent below the failed June recovery high at 190.
The NASDAQ Composite index followed the lead of the other broad market indices today, closing at 12,391, nearly two percent higher on the day and almost 5% higher for the week. NASDAQ broke through its failed June recovery high today. NASDAQ is the only broad market index to achieve that mark. NASDAQ’s trading volume climbed all week but remains below its 50 dma.
Several analysts have declared that we have seen the market bottom and the bullish trend is returning. This week’s post-FOMC run was impressive and the markets have recovered their 50 day moving averages. Although NASDAQ has broken through the highs of the failed June recovery, the S&P 500, the Russell 2000 and the Dow Jones Industrial Average remain short of that high.
I found it surprising that Powell’s comments on Wednesday, explaining the need for two sequential 75 basis point discount rate hikes, rendered Thursday’s second negative GDP number inconsequential. The market consensus appears to be that Powell has taken strong action against inflation and the Fed will now wait patiently to see the rate hikes take effect. Therefore, happy days lie ahead and the bulls will take charge. Ignore that pesky GDP number.
The next FOMC meeting is in late September. I had a horrible thought as I looked at the calendar. What if the Feds announce another rate increase in September, bursting the current expectation that they were done raising rates? That surprise would occur just in time for October, the month of nasty market crashes.
The Covid lockdowns destroyed small businesses in this country. I believe that is core to the weak GDP numbers. I see no signs of inflation abating anytime soon. I hope I am wrong, but I fail to see the underlying economic strength necessary for a bullish stock market.
