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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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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.
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The Standard and Poors 500 index (SPX) gapped open and traded higher today, closing up 73 points at 3863 for an increase of 1.9%. That almost made up for the losses from earlier in the week, resulting in a weekly decline of 0.5%. Trading volume increased this week but remained below the 50-day moving average (dma). Below average trading volume remains a negative factor for this market.
VIX, the volatility index for the S&P 500 options, closed down over two points today at 24.2%, down over 8% for the week. Volatility seems to be on a see saw, remaining around 25% at best week after week. To my mind, that connotes nervous institutions.
I track the Russell 2000 index with the IWM ETF. IWM gapped open and rose today, closing up at 173.09, a 2.1% increase. But IWM remained down over 0.7% for the week. IWM remains well below its 50 dma.
The NASDAQ Composite index followed the lead of the other broad market indices today, closing up 201 points or nearly two percent higher, but is down almost one percent for the week. NASDAQ, like all of the broad market indices, remains well below its 50 dma. NASDAQ’s trading volume was flat this week and well below its well 50 dma.
We seem to be just chopping sideways at this point. The bulls and bears are relatively well balanced. Inflation remains a central concern but the Fed’s moves to raise interest rates as the cure for inflation is another major worry for traders. This week’s CPI and PPI numbers continue higher and the FOMC’s July meeting will almost certainly raise the discount rate; it is only a matter of how much. Will the Fed cure inflation by causing a recession?
I remain largely in cash; my only active trades are the SPX condors of the Flying With The Condor™ service, up 26% this year. I opened a calendar spread on AAPL to play the implied volatility rise in advance of its earning announcement on 7/28. That is working out very well for us.
I remain cautious. It is safer on the sidelines.
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The Standard and Poors 500 index (SPX) initially traded higher yesterday, but then retreated, closing down 37 points at 3962 for an decline of nearly one percent. But the week remained positive, trading up 2% from the week’s open at 3884. The S&P 500’s trading volume remained below the 50-day moving average (dma) all week. Lower than average trading volume remains a negative factor for this market.
VIX, the volatility index for the S&P 500 options, closed down yesterday at 23%, down over 7% for the week. Volatility seems to be on a see saw, remaining in the mid-twenties plus or minus a couple of points week after week. To my mind, that connotes nervous institutions.
I track the Russell 2000 index with the IWM ETF. IWM declined yesterday, closing at 179.51, a decrease of nearly two percent. But IWM remained up by 2.5% for the week. IWM finally recovered its 50 dma this week.
The NASDAQ Composite index followed the lead of the other broad market indices yesterday, closing down 226 points at 11,835, nearly two percent lower. NASDAQ finally recovered its 50 dma this week. NASDAQ’s trading volume remains below its 50 dma.
The markets have recovered much of the previous losses and have finally recovered the 50 day moving averages, but we are far from where we started the year. Traders are worried about the effects of increasing inflation on the economy on the one hand and equally worried about the Fed raising interest too far and too fast and possibly pushing the economy into recession.
I remain largely in cash; my only longer term trades are the SPX condors of the Flying With The Condor™ service, up 25% this year. The calendar spread we opened on AAPL to play the implied volatility rise in advance of its earning announcement worked out very nicely.
I remain cautious. Don’t expose too much capital to this market.
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The Standard and Poors 500 index (SPX) took a breather today from the recovery that began on July 1st, closing at 3899 with a slight decline of three points for a decrease of -0.08% for the day. SPX opened the shortened holiday week at 3793, resulting in a gain of 2.8% for the week. The index may be running into resistance at the high of the last attempted recovery in late June around 3921. Trading volume was anemic all week, running well below the 50-day moving average (dma). Declining volume during a recovery from the low for the year doesn’t show much conviction.
VIX, the volatility index for the S&P 500 options, opened this week at 27% and closed today one point lower at 26%. The market may be showing signs of life, but traders remain unconvinced.
I track the Russell 2000 index with the IWM ETF. IWM closed today essentially unchanged at 175.59, down 0.01% from yesterday’s close, but IWM managed a 4.1% gain for this four-day trading week. Seeing a strong rise out of the Russell 2000 index is encouraging but Russell is running into resistance from the highs set by the last recovery attempt, just as we see in the other broad market indices.
The NASDAQ Composite index followed the lead of the other broad market indices today, closing at 11,635, essentially unchanged from yesterday but up 6.1% for the week. However, before we get too excited, note the trading volume decline for the week. Today’s volume was a disappointing 3.6 billion shares, well below the 50 dma at 5.3 billion.
This reminds me of the film, Groundhog Day, where the day kept repeating itself. Several times this year I have thought the correction was over and the market was returning to at least a slightly bullish track. But each mini recovery has been followed by a lower low. So here we are again. The market has been trading steadily higher since the first of July but we have seen this movie before. Every one of the broad market indices are closing in on the last attempted recovery high. Will this time be different?
