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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 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%.
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The Standard and Poor’s 500 Index (SPX) gapped open Friday morning and closed trading at 3975, up 65 points on the day or 1.7%. SPX opened the week at 3916, so the net gain for the week was 1.5% - SPX recovered the entire week’s losses on Friday. 2021 has been rough year so far with three pull backs: one ended January 29th; one ended March 4th and this last one ended Thursday? In all three cases, it appears that the 50-day moving average (dma) was the level for the market to find support and recover. Throughout this series of pull backs, the S&P 500 index trading volume has remained generally below average with few exceptions. That suggests that traders have not yet thrown in the towel and began significant selling. Instead, it appears to represent a rotation out of high tech into more cyclical industrial and commodity stocks.
VIX, the volatility index for the S&P 500 options, closed Friday at 19% after hitting 21.5% intraday. Friday’s close matched Monday’s close and both are the lowest levels of implied volatility observed this year.
IWM, the ETF based on the Russell 2000 group of companies, closed Friday at 220.61, up 3.95 or 1.8%. But IWM remained down 2.9% from its open on Monday. On the positive side, IWM recovered the 50 dma that it broke on Wednesday.
The NASDAQ Composite index closed Friday at 13,139, up 161 points on the day but down 1.1% for the week. NASDAQ broke down through its 50 dma last week and remained well below it on Friday (13,426). NASDAQ’s trading volume remains well below average and has only broken the 50 dma once since March 5th (on quadruple witching last Friday).
This has been a rough ride for traders this year. The S&P 500 has pulled back three times now, but each time it has found support at the 50 dma and bounced back higher. However, the real damage has occurred in the NASDAQ Composite with the rotation out of high-tech stocks. Friday’s market action was very encouraging, and in normal times, I might have invested heavily, but I didn’t. The whipsawing back and forth over the past couple of months has me a little gun shy (a term from hunting with bird dogs). I am now 88% in cash. On the positive side, the 50 dma on the SPX price chart has proven itself as the solid line in the sand, and the VIX is as low as it has been all year. But I am still worn out.
I will be watching the market carefully on Monday to see if it makes sense to begin to dip my toes in the water. I hope the crocodiles are gone.
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The Standard and Poor’s 500 Index (SPX) gapped open Thursday morning and closed trading at a new all-time high of 4020, up 47 points on the day or 1.2%. SPX gained 1.3% for the week, so most of the week’s gain occurred yesterday. If we assume that Thursday’s rally finally put an end to this most recent market pullback, then maybe traders can take a breath and start to put money to work again. This has been the third pullback this year with the 50-day moving average (dma) acting as the support level in each case. The S&P 500 index trading volume has remained below average since March 12th except for quadruple witching on March 19th.
VIX, the volatility index for the S&P 500 options, gapped open lower on Thursday morning and proceed to decline all day, closing at 17.3%. One must back track on the VIX chart to late February of 2020, just before the March correction, to find volatilities in this range.
IWM, the ETF based on the Russell 2000 index, closed Thursday at 223.74, up 2.80 or 1.3%. IWM recovered its 50 dma on Wednesday but remains well below its recent high of 233.98 on March 15th.
The NASDAQ Composite index closed Thursday at 13480, up 233 points or 1.8% on the day. NASDAQ gapped open Thursday morning and finally recovered its 50 dma. Similar to the S&P 500, NASDAQ’s trading volume continues to decline and has only broken out above the 50 dma once since March 5th (on quadruple witching March 19th).
2021 has been a rough ride for traders. It’s too bad we didn’t have New Year’s Eve parties to celebrate when we could. We have been licking our wounds most of the last three months. The S&P 500 has now pulled back three times, but Thursday’s trading appears to have turned the corner with a much smaller pull back and a bounce off the 50 dma. The NASDAQ Composite has yet to recover all of its losses due to the rotation out of high-tech stocks.
This morning’s jobs report was a huge surprise to traders with over nine hundred thousand new jobs added to the economy. That should help fuel the reopening of our businesses, or at least, those who have survived. Thursday’s market action was encouraging, and I cautiously added a few positions. But I remain 67% in cash. I think the jobs report may be the catalyst to push this market higher. I am anxious to see the market open on Monday.
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The Standard and Poor’s 500 Index (SPX) closed today at 3913, down 2 points on the day. SPX opened the week at 3943, so the net loss for the week was 0.8%. From the intraday low on March 4th, the low of this pullback, SPX has increased 5.9%. Trading volume on the S&P 500 has continued to trend below the 50-day moving average (50 dma), but spiked higher today, as a result of quadruple witching, the simultaneous expiration of stock index futures, stock index options, stock options, and single stock futures that occurs once a quarter.
VIX, the volatility index for the S&P 500 options, closed today at 21% after hitting 23% this morning and then pulling back just under 20%. VIX has been running at a baseline in the low twenties since the March 2020 correction.
IWM, the ETF based on the Russell 2000 group of companies, closed today at 226.54, up 1.70. But IWM remained down 2.9% from its open on Monday. On the positive side, IWM remains well above its 50 dma.
The NASDAQ Composite index closed today at 13,215, up 99 points on the day but down 0.8% for the week. NASDAQ broke down through its 50 dma on Thursday and remains well below it today. NASDAQ’s trading volume continues its steady decline and remains well below average. The rotation out of high tech into industrials has hurt the NASDAQ Composite index.
We continue to see many mixed signals on the market. We have suffered through two quick dips since the end of January. The decline in early March tried to test the February low but didn’t quite make it. This week’s pullback has traders spooked again.
On the positive side of the ledger, we have the passage of the stimulus bill, progress with the distribution of the Covid vaccine, and several states beginning to reopen their economies. The FOMC this week upgraded their assessment of the economy, but it remains to be seen how quickly we can recover. Many small businesses won’t be reopening as the states reopen.
I continue to trade cautiously and stop out positions to lock in gains whenever possible. We may be in for a choppy ride.
