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After trading sideways for over a month, the Standard and Poors index (SPX) dramatically fell out of bed this week, closing at a low on Wednesday of 4063, down 2.7%. The market recovered somewhat on Thursday and then gapped open and traded higher Friday. However, even Friday’s strong move higher of 1.5% was not enough to result in a positive week for the S&P 500, down 1.3% for the week. Wednesday’s low almost reached the 50-day moving average (dma). Trading volume reached the 50 dma early in the week but declined Thursday and Friday.
VIX, the volatility index for the S&P 500 options took a wild ride this week, opening Monday at 17%, spiking to 28% on Wednesday and closing today just under 19%. VIX appears to suggest the market’s temper tantrum is over…
The Russell 2000 index, as measured by the IWM ETF, opened the week at 225.03 and hit a low on Wednesday of 211.85. IWM gapped open this morning and closed at 221.02, up 2.4% on the day, but down 1.9% for the week. IWM remains below its 50 dma at 222.98.
The NASDAQ Composite index closed at 13430, up 305 points or 2.3%, but the index remains down 1.9% for the week. The damage to this index has been significant, losing 8.3% since April 29th. Today’s close leaves NASDAQ well below its 50 dma at 13540. NASDAQ’s trading volume remained below the 50 dma all week and declined even farther today.
This week’s report of the consumer and producer price indices resulted in talk of runaway inflation and spooked the market. The reaction in the markets this week may have been excessive, but the potential of excessive inflation is real. The government has been printing money throughout this pandemic and talk of additional spending in the form of minimum wage increases and infrastructure spending are on the front page. Just as the pandemic stimulus bills contained little to support those actually hurt by the pandemic, I fear the same for an infrastructure bill.
The rotation out of high tech into classic industrial stocks is evident as we compare the S&P 500 with the NASDAQ Composite. But we cannot ignore the high-tech stocks that make up the NASDAQ. They now make up a large portion of our economy. NASDAQ has corrected by 8% and that will have ripple effects in the economy. In summary, there are many negative factors that cannot be ignored. On the positive side, it is remarkable that we have now had four pullbacks since the first of the year and each time the bulls have taken the opportunity to buy the lows. I worry about the possibility of the bulls losing heart.
This week’s market has taken its toll on my “slightly bullish perspective” on the market. I will be watching very carefully as next week unfolds.
The IBD market assessment reaffirms what we traders are feeling. That assessment moved from Confirmed Uptrend to Uptrend Under Pressure to Uptrend Resumes and then back to Uptrend Under Pressure in 7 trading sessions. We are being whipsawed in and out of this market.
The cash basis of my trading accounts moved significantly higher this week, from 47% to 75%. I didn’t open many new trades this week and was cautious when rolling out current income positions. I continue to focus on stocks whose price charts show them to be weathering these transient storms well. There is nothing wrong with cash.
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The markets have plateaued for the past eleven trading sessions. The Standard and Poors index (SPX) closed Friday at 4181, down 30 points on the day, but SPX opened the week at 4185, so the index was essentially flat for the week. Trading volume finally reached the 50-day moving average (dma) Thursday and Friday.
The volatility index for the S&P 500 options, VIX, closed Friday at 18.6%, up one point on the day and also up one point on the week.
The IWM ETF, based on the Russell 2000 group of companies, has traded higher for the past couple of weeks, but that ended Thursday and Friday. IWM closed Friday at 224.89, down 3.10 points.
The NASDAQ Composite index closed at 13942, down 120 points, and down about 0.8% for the week. NASDAQ’s trading volume trended higher this week but remains well below the 50 dma.
Recent talk of increased taxes and new taxes seems to have stalled the bullish market trend, resulting in the flat, sideways trend of the past couple of weeks.
I remain with a slightly bullish perspective on the market. The market dipped a couple of times last week but recovered quickly. After all the talk of corrections since the first of the year, I took those recoveries as an encouraging sign.
The cash basis of my trading accounts hasn’t changed much this week, moving from 44% up a bit to 47%. I continue to trade, but cautiously. I am closing as many trades as I open. I closed my SBUX trade early and could have made more money if I waited until Friday, but I am locking in gains when I can and closing out trades at the first sign of trouble.
With a sideways market, it is crucial to only trade stocks that are bucking the trend. Look for charts of stocks that are up on down or flat market days. Be cautious and disciplined. Cash positions minimize your risk.
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The markets have been on a strong bullish run higher since late March with the Standard and Poor’s 500 Index (SPX) closing today at 4185, up 15 points on the day or 0.4%. The S&P 500 is up nearly 8% since it started this run on March 25th. Trading volume for the S&P 500 companies has risen slowly this week but remains below the 50-day moving average (dma) at 2.50 billion shares.
Volatility for the S&P 500 options, quantified by the volatility index, VIX, continues to decline as the market heads higher, closing today at 16.3%.
The IWM ETF, based on the Russell 2000 group of companies, tracked steadily along its 50-day moving average (dma) this week. I would prefer to see these stocks leading the bullish charge, but they are at least solidly tracking higher. IWM rose 0.9% this week, a bit softer than the S&P 500 at +1.5% for the week.
The NASDAQ Composite index closed at 14052, up 14, and up 1.4% for the week. NASDAQ’s trading volume slowly rose this week, closing today at 4.5 billion shares. However, this level of volume remains well below the 50 dma at 6.0 billion shares.
This week’s news reports seemed to paint the picture of two distinct and opposite perspectives on the pandemic and its effects on the economy. It appears that more and more people and local authorities are rebelling against continued lockdowns and rigid mask and social distancing mandates. The governmental authorities here in Illinois are still adamant about remaining largely locked down and wearing masks everywhere. However, as my wife and I ventured out for dinner a couple of times this week, we witnessed increasing impatience with these restrictions. Businesses are scooting those table closer together and getting back to normal. But it is all being done quietly as the signage and welcoming comments remain along party lines.
I have not changed my market position very much this week. The cash basis of my trading accounts remains similar to last week at 58%. I find it hard to become very confident about this market. The run upward for the past month has been impressive. However, it is hard to ignore the closed businesses I see in my community. I don’t think it is prudent to put too much cash at risk too quickly. I have been jerked around several times this year and I don't want to take another hit.
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The markets have been on a strong bullish run higher since late March but the broad market averages have been drifting sideways for the past eight trading sessions. The Standard and Poors index (SPX) closed today at 4180, up 45 points, but SPX opened precisely at 4180 this past Monday. Trading volume continues to run below the 50-day moving average (dma), but it did move slightly higher a couple of days this week.
The volatility index for the S&P 500 options, VIX, moved as low as 15% one day last week, but VIX increased this week, bouncing between 17% and 20%, and closing today at 17.3%.
The IWM ETF, based on the Russell 2000 group of companies, has tracked within a channel defined by 215 and 226. IWM recovered its 50 dma today and closed up 4.18 at 225.76. These small to mid-cap companies should be leading the bullish trend, but they remain rather sedate. On the other hand, they aren’t being sold off aggressively either.
The NASDAQ Composite index closed at 14017, up 198 points, but that resulted in NASDAQ being essentially unchanged for the week. NASDAQ’s trading volume continued to just trend sideways, well below the 50 dma.
Talk of increased taxes and new taxes put a damper on the markets this week. But the effects were rather subdued, resulting in a sideways, lethargic market. The market has hit a plateau, which is normal in a bullish trend. It is important to note that we have had several opportunities in the past couple of months for the bears to take control, but it hasn’t happened. The bulls are not aggressively buying, but they are holding the broad indices largely unchanged.
I found a larger number of good stock charts this week and that increased my market disposition to slightly bullish. I entered more trades today and that shifted the cash basis of my trading accounts from last week’s 58% down to 44% today. Stocks seem to be prone to short runs higher followed by quick pull backs, and then it starts over. Many of my losses in the first quarter would have recovered if I had ignored my stops – but that would be a fool’s errand.
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The Standard and Poor’s 500 Index (SPX) continued its run higher today, closing at 4129, up 32 points on the day or 0.8%. This was a strong week for the market, rising 2.4% and setting a new all-time high today. Trading volume for the S&P 500 companies continues to decline. Today’s volume came in at 1.85 billion shares, much lower than the 50-day moving average (dma) at 2.50 billion shares. Trading volume has been steadily declining since mid-March.
As one would expect with such a strong bullish run, volatility for the S&P 500 options, quantified by the volatility index, VIX, opened the week at 18.2% and steadily declined to today’s close at 16.7%.
The only bearish news this week came from the Russell 2000 group of companies that populate the IWM ETF. IWM declined this week to close today at 222.59, down 1.7% for the week. The 50 dma at 221.69 appears to be holding as support.
The NASDAQ Composite index appears to be recovering from its recent funk, closing today at 13900, up 71, and up 2.2% for the week. NASDAQ’s trading volume continues its steady decline since mid-March and is even more pronounced than the decline of trading volume in the S&P 500. Today’s volume on NASDAQ came in at 3.26 billion shares, almost half of the 50 dma at 6.31 billion shares. By comparison, SPX trading volume was about 75% of its 50 dma.
Last week’s jobs report was a big boost for this market. That report, combined with continuing distribution of the Covid 19 vaccine and more states reopening their economies, appears to be bringing out the bulls. The market is always discounting the future, and this market sees a much-improved future. I started opening more positions and selling more puts; my cash basis is down to 53%.
