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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 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%.
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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) 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.
