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The Standard and Poors 500 index (SPX) closed today at 5567, up 30 points or +0.5%. Today’s performance capped off a strong week at +1.8%. Trading volume ran below the 50-day moving average (dma) all week, with the exception of Monday.
VIX, the volatility index for the S&P 500 options, opened the week at 13.0% and declined the rest of the week to close today at 12.5%.
I track the Russell 2000 index with the IWM ETF, which closed today at 201, down one point or -1.5%. IWM opened the week at 204 for a weekly loss of 1.5%. IWM continues to trade a very choppy and non-directional pattern.
The NASDAQ Composite index closed today at 18,353, up 164 points
or 0.9%. NASDAQ opened the week at 17,774 for a weekly gain of 3.3%. NASDAQ set new all-time highs for each of the past three days. Trading volume ran below the 50 dma all week with the exception of Monday’s spike.
The broad market indices have traded in a sideways channel since June 12th, but that changed markedly this week with nearly a 2% gain for the S&P 500 and the NASDAQ Composite was up over 3%. But the IWM chart, representing the small cap stocks of the Russell 2000, is downright ugly, trading without any direction.
This underscores the below average trading volume of the large blue-chip stocks. To have the strong gains we saw this week post with weak trading volume suggests that the large institutional players are largely on the sidelines.
When I read the articles from the market analysts, they all seem to be waiting for signals from the FOMC about coming interest rate reductions. Weak trading volume suggests the large institutions are far from being “all in”. When we see the Russell 2000 come to life, that will be the signal that the institutional traders are beginning to load up on some risk. Until then, we will continue to see the strong price volatility we have seen in June. No one wants to lose the gains of the past few months and they are nervous that the end is coming.
Be careful out there.
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The Standard and Poors 500 index (SPX) closed today at 5347, down 6 points or +0.1%. However, SPX was up nearly one percent for the week. SPX set a new all-time high on Wednesday, and the index chopped sideways the balance of the week. 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 13.1% and spiked up to 14.3% on Monday, but declined the rest of the week to close today at 12.2%. This level of volatility is moderately high for a bullish market; this market is nervous and ready to sell to preserve gains on any pretext.
I track the Russell 2000 index with the IWM ETF, which closed today at 201.2, down 2.3 points or -1.1%. IWM opened the week at 207.5 for a weekly loss of 3.0%. IWM broke down through its 50 dma today. SPX and NASDAQ are setting new market highs, but the Russell 2000 index is declining.
The NASDAQ Composite index closed today at 17,133, down 40 points or -0.2%. NASDAQ opened the week at 16,866 for a weekly gain of 1.6 percent. Trading volume ran below the 50 dma all week, similar to the S&P 500 index.
The market continues to be obsessed with real or imagined signals from Powell and the other members of the FOMC. Nearly all of the large moves in the market this year, higher or lower, have been triggered by perceptions of the Fed’s plans for interest rates. The street sees rate reductions as a return to easy money, economic expansion and a strong stock market. That promise is always appealing. The CME FedWatch now rates the probability of a rate reduction in the FOMC meeting in September at 71%. That estimate is up from 47% the previous week. That appeared to trigger Wednesday’s strong move higher. This bullish move is being led by a small number of high-tech stocks. While the S&P 500 and the NASDAQ were setting new all-time highs, the small cap stocks of the Russell 2000 index broke down through the 50 dma.
This bull market is fragile. If the large players were really confident, we would see strong buying of the high beta stocks of the Russell 2000. This market is riding on the backs of the so-called Magnificent Seven. That is probably the explanation of the below average and declining trading volume on SPX and NASDAQ.
It doesn’t make sense to sit on the sidelines but keep the fragility of this market in mind. Keep a close watch on your positions.
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The Standard and Poors 500 index (SPX) closed today at 5303, up six points or +0.1%. SPX opened the week at 5233, gaining 1.3% for the week. SPX set a new all-time high on Wednesday, but trading volume has remained below the
50 day moving average (dma) for the past two weeks.
VIX, the volatility index for the S&P 500 options, opened the week at 13.3% but declined all week, closing today at 12%. Normally a declining VIX would accompany a bullish move higher, but below average trading volume doesn’t fit that scenario.
I track the Russell 2000 index with the IWM ETF, which closed today at 208, nearly flat on the day, up 0.07%. IWM opened the week at 206 for a weekly gain of one percent. Normally, the Russell 2000 leads bull markets. Russell is off its high as the S&P 500 hits an all-time high?
The NASDAQ Composite index closed today at 16,686, up 12 points or +0.07%. NASDAQ opened the week at 16,400 for a weekly gain of 1.7 percent. Trading volume spiked well above the 50 dma on Tuesday and stayed high all week.
The old adage, “sell in May and go away” doesn’t seem to fit this year. The S&P 500 stocks are up 5.4% in May. But traders remain skittish, spiking up or down on the latest comments from Powell or one of the other members of the FOMC. Many of the comments appear to be pushing interest rate cuts later in the year, a far cry from three cuts in 2024 that was once the prediction, or the dream, of many on Wall Street.
May has been a great month for the bulls so far, but I have trouble believing the economy is on a solid foundation. I have always attempted to rationally analyze the market, which I suppose reflects my training in the sciences. But I often find myself trading what the market gives me, not what I think the market should be doing. Whether I think our economy is great right now doesn’t really matter. The bulls are running. I am on the train.
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The Standard and Poors 500 index (SPX) closed today at 5305, up 37 points or +0.7%. SPX was unchanged for the week. SPX set a new all-time high on Tuesday, but the index lost all of that and more on Thursday. Trading volume continues to run well below the 50 day moving average (dma).
VIX, the volatility index for the S&P 500 options, opened the week at 12.3%, spiked as high as 13.4 on Thursday, but closed today at 11.9%. Even Thursday’s spike on the VIX was less than I would have expected for that sudden sell-off.
I track the Russell 2000 index with the IWM ETF, which closed today at 205, up 2.2 points or 1.1%. IWM opened the week at 208 for a weekly loss of 1.4%. IWM really took it on the chin on Thursday, almost reaching its 50 dma. Even today’s bullish move higher barely recovered half of yesterday’s loss. The Russell 2000 isn’t leading the bulls.
The NASDAQ Composite index closed today at 16,921, up 185 points or +1.1%. NASDAQ opened the week at 16,702 for a weekly gain of 1.3 percent. Trading volume ran above the 50 dma all week, in contrast to the S&P 500 index.
The current market appears to be largely driven by comments from Powell or one of the other members of the FOMC. Toward the end of 2023, many Wall Street analysts convinced themselves that the Fed would be reducing interest rates this year, starting in the first quarter. All of the large and sudden moves in the broad market indices this year have been driven by comments or rumors that rate reductions were not imminent. The scare this week came from comments of one of the FOMC members that a rate increase might be in order if inflation isn’t curtailed soon. The street sees rate reductions as a return to easy money, economic expansion and a strong stock market. That promise is always appealing.
May has been a strong month in spite of Thursday’s temper tantrum. But this market remains very volatile and twitchy. It doesn’t take much to tip it one way or the other. Neutral to bullish trades are still working but keep the stops close.
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The Standard and Poors 500 index (SPX) closed today at 5128, up 64 points or +1.3%. SPX opened the week at 5114, gaining 0.3% for the week. The FOMC meeting, announcement and press conference on Wednesday encouraged traders and the market spiked on Wednesday and continued higher yesterday and today. SPX gapped open by 59 points this morning and recovered the index’s 50-day moving average (dma). Trading volume moved higher this week, but barely made it to the 50 dma today.
VIX, the volatility index for the S&P 500 options, closed today at 13.5%, down over one point or -8%. VIX opened the week at 14.8% but spiked as high as 16% during the week.
I track the Russell 2000 index with the IWM ETF, which closed today at 201.9, up two points on the day or one percent. IWM opened the week at 198 and gained 2% this week.
The NASDAQ Composite index closed today at 16,156, up 315 points or +2%. NASDAQ gapped open higher this morning by 306 points, almost 2%. NASDAQ opened the week at 16,007 for a weekly gain of one percent. Trading volume barely reached the 50 dma earlier this week, and steadily declined after Wednesday, closing 25% below the 50 dma today.
The markets have been very nervous for several weeks, fearing a hard landing for the economy if the Fed continued to raise the discount rate. Many analysts were hoping for a rate reduction but that didn’t happen. However, during the press conference, Powell suggested more rate hikes may not be necessary, although he also cast doubt on any reductions until inflation has clearly declined. That message seemed to resonate with the market, spiking on Wednesday afternoon, although it couldn’t hold those highs. But after sleeping on the news, traders turned in a solid gain on Thursday and then the markets gapped open strongly this morning.
The S&P 500, NASDAQ and the Russell 2000 indices all recovered their 50 day moving averages today.
I ventured out yesterday and today with some bullish trades, but I still have a lot of cash on the sidelines. Be careful out there. Election years are usually bullish, but the economy is fragile, and the federal debt is out of control. Traders are nervous.
