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The Standard and Poors 500 index (SPX) closed today at 5006, down 24 points or 0.5%. SPX opened the week at 5027, setting up a weekly loss of 0.4%. Trading volume ran below the 50-day moving average (dma) most of the week; even when the CPI report disappointed the market on Tuesday and SPX took a tumble, trading volume didn’t spike higher. The bulls managed to push the S&P 500 stocks back to Monday’s levels by the end of trading on Thursday. That is an impressive recovery.
VIX, the volatility index for the S&P 500 options, opened the week at 13.5% and closed today at 14.2%. VIX nearly reached 18% on Tuesday but steadily declined the rest of the week to its close today at 14.2%.
I track the Russell 2000 index with the IWM ETF, which closed today at 202, down three points on the day (-1.4%) and up one percent for the week. IWM matched its December high at 205 on Thursday but pulled back a bit today. These are high beta stocks and you can see that with the extreme downward move on Tuesday and then an equally strong move over the next two days.
The NASDAQ Composite index closed today at 15,776, down 131 points or 0.8%. NASDAQ opened the week at 15,980, for a weekly loss of 1.3%. NASDAQ declined significantly on Tuesday and could not recover all of that loss this week. NASDAQ’s trading volume ran below the 50 dma all week with the exception of Thursday. Surprisingly, when the market dropped so far on Tuesday, NASDAQ’s trading volume barely reached the 50 dma.
The strength of this bullish run since early November is a sight to behold. The CPI report on Tuesday morning triggered a strong sell-off, but the immediate bullish response was remarkable. By today’s close, the market had nearly recovered all of Tuesday’s losses. The inconsistency of the strong recovery was average to below average trading volume on both the S&P 500 and the NASDAQ Composite.
VIX nearly hit 18% on Tuesday but it was short-lived. The institutions and large funds have gotten over their disappointment that a reduction in interest rates isn’t imminent.
The relative weakness of the Russell 2000 index continued through the end of January, but even Russell is on board with the bulls. Yesterday’s close in IWM was nearly at the high from 2024. This recovery is a strong endorsement of this bull market.
I find myself thinking that this market has gone too high too fast, but the trading in the Russell 2000 and the rapid recovery after Tuesday’s sell-off has convinced me of the bullish strength underlying this market. I am jumping on board and will make hay while the sun shines - but I am keeping a close lookout for rain clouds.
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The Standard and Poors 500 index (SPX) closed today at 4959, up 52 points or 1.1%. SPX opened the week at 4893, setting up a weekly gain of 1.3%. Trading volume ran above the 50-day moving average (dma) most of the week. After a disappointment on Wednesday that rates were not likely to be raised by the FOMC at the next meeting, the bulls got over it and opened today's trading with a gap opening and a very strong showing.
VIX, the volatility index for the S&P 500 options, closed today at 13.9%. Even with the market’s large pullback on Wednesday, VIX didn’t exceed 14.5%. The bulls didn’t even blink.
I track the Russell 2000 index with the IWM ETF, which closed today at 194, down a full point on the day (-0.5%) and down one percent for the week. IWM remains 5.4 percent below its December high at 205. These are the high beta stocks that should be leading a true “risk on” bullish run.
The NASDAQ Composite index closed today at 15,629, up 267 points or +1.7%. NASDAQ opened the week at 15,455, setting up a weekly gain of 1.1%. NASDAQ really tanked on Wednesday, making it difficult to fully overcome that loss this week. NASDAQ’s trading volume ran below the 50 dma all week with the exception of Wednesday. NASDAQ remains well below its all-time high of 16,121.
The odds on the street were for no change in the discount rate by the Fed on Wednesday, so the market was essentially wandering sideways until Powell was asked if the rates would be lowered at the next meeting in March. That led to a seventy nine point decline on Wednesday. But something changed the next day as traders made up most of that loss. Then SPX gapped open this morning and just ran strongly into the close.
The lack of a strong increase in VIX on Wednesday’s loss was the clue. The institutions and large funds were not concerned about Powell’s comment and the bulls drove the market higher.
I continue to worry about the relative weakness of the Russell 2000 index. These are the high beta stocks that tend to lead strong bull markets. The weak trading volume on the NASDAQ Composite is another cautionary signal. Trading in the S&P 500 stocks rose this week, but not as much as one would expect in a strong bull market.
I am booking gains in this bull market but I am cautiously watching for signs of a correction. This just seems too good to be true.
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The Standard and Poors 500 index (SPX) closed today at 4840, up 59 points or 1.2%. SPX opened this holiday shortened week at 4772, setting up a weekly gain of 1.4%, with most of that gain coming today. Trading volume ran at or slightly above the 50-day moving average (dma) this week. Today’s trading volume seems somewhat weak for a gap opening higher this morning and such a strong gain.
VIX, the volatility index for the S&P 500 options, opened the week at 14.1%,
rose on Wednesday’s decline, but then dropped yesterday and today to close
at 13.3%.
I track the Russell 2000 index with the IWM ETF, which closed today at 192, unchanged for the week. This is a much weaker chart than SPX or NASDAQ. IWM hit its December high at 205 on 12/27 but remains over six percent below that high. These are the high beta stocks that should be leading a true “risk on” bullish run.
The NASDAQ Composite index closed today at 15,311, up 255 points or 1.7%. Surprisingly, this remains well below NASDAQ’s all-time high at 16,212, set on 11/22/2021. NASDAQ opened the week at 14,564, setting up a strong weekly gain of 2.7%. Nasdaq gapped open higher the last two mornings, but the trading volume remained rather low, similar to the S&P 500.
The market continues to view any and all positive economic data as supporting the Fed decreasing the discount rate. That makes me very wary of the trading action after the FOMC announcement on 1/31 because I don't see that happening. The Fed has been very clear about reaching two percent inflation rates before lowering the discount rate.
The S&P 500 set a new all-time high today, but NASDAQ remains about six percent below its all-time high. And the Russell 2000, as measured by IWM, remains over six percent below its high from December.
The Russell 2000 normally leads strong bull markets; these are the high beta, “risk on” stocks the large funds play when they see the opportunity to “pile on”. The relatively weak trading volume on both the S&P 500 and the NASDAQ Composite should caution us to not get too carried away with bullish euphoria. Given the extreme debt levels and current political dysfunction in our country, there is a non-zero probability of a significant market correction in our future.
Pick your winners carefully. Remain cautious.
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The Standard and Poors 500 index (SPX) closed today at 4891, almost unchanged with a decrease of three points or -0.07%. SPX opened the week at 4853, setting up a weekly gain of 0.8%. Trading volume ran at or slightly above the 50-day moving average (dma) this week. Today’s trading volume came in below the 50 day moving average (dma). The S&P 500 index appears to be slowing a bit after strong gains over the past two weeks.
VIX, the volatility index for the S&P 500 options, closed today at 13.3%. VIX opened the week at 13.8%, declined to a low on Wednesday of 12.4% and rose over the last three trading sessions. The slight rise over the last few days probably reflects some concern that this bullish run is slowing.
I track the Russell 2000 index with the IWM ETF, which closed today at 196, unchanged for the day and up less than one percent for the week. This is a much weaker chart than SPX or NASDAQ. IWM remains four percent below its December high at 205. These are the high beta stocks that should be leading a true “risk on” bullish run.
The NASDAQ Composite index closed today at 15,455, down 55 points or -0.4%. NASDAQ opened the week at 15,393, setting up a slight weekly gain of 0.4%. NASDAQ’s trading volume was slightly above the 50 dma on Monday and ran below that average the rest of the week. NASDAQ remains well below its all-time high of 16,121.
Traders appear to have finally accepted that the Fed will not be reducing interest rates at this coming meeting January 30-31. The trading action after the FOMC announcement on 1/31 may be volatile.
The S&P 500 continues to set new all-time highs, but NASDAQ remains about four percent below its all-time high. And the Russell 2000, as measured by IWM, remains over four percent below its high from December.
The relative weakness of the Russell 2000 index is a significant cautionary signal; these are the high beta stocks that tend to lead strong bull markets.
The weak trading volume on both the S&P 500 and the NASDAQ Composite is another cautionary signal.
A less quantitative concern is the frequency of significant market corrections in the markets after an extremely strong run higher. In fact, that is why we use the term, correction. The idea is that the market went too high, too quickly. It is helpful to remind ourselves that the S&P 500 has not only set a new all-time high; this index has also risen 19% in only three months.
Don’t misunderstand. I am not sitting on the sidelines touting the coming crash. I am playing this market, but I am cautious and very particular in evaluating the opportunities.
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The Standard and Poors 500 index (SPX) closed today at 4784, essentially flat, up less than four points or 0.08%. SPX opened the week at 4704, setting up a weekly gain of 1.7%, recovering last week’s losses. Trading volume ran just below the 50-day moving average (dma) all week. This level of trading volume seems lackluster for a bullish week of recovery.
VIX, the volatility index for the S&P 500 options, opened the week at 14.0% and steadily declined all week to close at 12.7%.
I track the Russell 2000 index with the IWM ETF, which closed today at 193. This is a much weaker chart than SPX or NASDAQ. IWM opened the week at 193, so while SPX and NASDAQ were recovering last week’s losses, IWM was unchanged. IWM hit its December high at 205 on 12/27 but remains 5.9% below that high. That is not a bullish sign.
The NASDAQ Composite index closed Friday at 14,973, up three points or 0.02%. NASDAQ opened the week at 14,564, setting up a strong weekly gain of 2.8%. With the exception of Monday, trading volume ran below the 50 dma all week.
Traders concluded after the December FOMC meeting that the Fed was planning to begin reducing interest rates during the first quarter. Then the CPI came out this week with an increase of the annual rate of +3.2% up to +3.4%. The initial response was a large decline on Thursday, but the market recovered intraday.
The Santa Claus rally, developed by Yale Hirsch of the The Stock Trader’s Almanac, follows the trading of the last five days in December together with the first two trading days in January. Santa Claus didn't visit Wall Street this year, declining 1.1%. The Stock Trader’s Almanac also follows the First Five Days of January and the January Barometer for the full month of January. The First Five Days indicator also failed this year with a decline of 0.4%. Now we wait on the January Barometer to give us a clue for the nature of this year's market. The strongest bullish signal occurs when all three January indicators are positive. When we see a positive gain for the entire month of January, we have an 84% track record of this preceding a bullish year.
Another Stock Trader’s Almanac measure to watch is whether the December lows are broken during the first quarter; when that happens, the probability of a bearish year increases.
The S&P 500 has now recovered all of last week’s losses and set a new high. NASDAQ has recovered much of its losses but remains below the previous highs. The Russell 2000 isn’t even close to recovering its recent losses. I am not feeling very confident that the bulls can carry this market. Be cautious.
