- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 906
The Standard and Poors 500 index (SPX) gapped open higher this morning and took off to close at 4450 for the day, up 54 points or 1.2%. SPX opened the week at 4345, setting up a weekly gain of 2.4%. Today’s close technically broke the resistance level set by the high on 6/16, but we will have to wait until after the holiday next week to confirm that break-out. Trading volume ran below the 50-day moving average (dma) all week and barely touched the 50 dma today.
VIX, the volatility index for the S&P 500 options, closed today at 13.6%, down from 14.4% on Monday. This week’s volatility trend was almost identical to last week, starting at 14.4% on Monday and closing the week at 13.4%.
I track the Russell 2000 index with the IWM ETF, and IWM had a spectacular week, closing at 187.3, up 0.9 points or 0.5% today, but up nearly 4% for the week. IWM gapped open higher at the opening of trading three times this week. But that’s where the good news ends. IWM remains below its high from mid-June and almost 6% below its high from early February. We expect the small cap stocks of the Russell 2000 to lead both bull and bear markets, but it is running significantly behind in this latest rally in SPX and NASDAQ.
The NASDAQ Composite index closed at 13,788 today, up 197 points or +1.5% on the day and up 2.4% for the week. But NASDAQ couldn’t break its high from 6/16. NASDAQ’s trading volume ran below average all week with the single exception of Tuesday.
After last week’s dismal performance, it was surprising to see this week’s market essentially regain all that was lost last week. The reasoning seems a bit obscure to me. Powell spoke to Congress this week and he made it clear that the Fed isn’t through raising the discount rate. It almost seems like the market has its rose-colored glasses on and believe all is well.
Today’s big rally was set off by this morning's favorable PCE report which suggested that the inflationary forces are weakening – maybe. But notice today’s trading volume; it was very weak. That could be due to the beginning of a long weekend for many traders on Wall Street. It could also show a lack of conviction in this bullish rally.
I opened several trades on Thursday and that was rewarded today. But I remain nervous. I sound like a broken record but be cautious. Keep a cash cushion on the sideline.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 894
The Standard and Poors 500 index (SPX) closed today at 4348, down 34 points on the day or -0.8%. This decline began last Friday and continued during this shortened four-day week to post a 1.1% weekly decline. Trading volume ran below the 50-day moving average (dma) all week but spiked higher today.
VIX, the volatility index for the S&P 500 options, closed today at 13.4%, down from 14.4% on Tuesday. Today was the first day VIX has shown some life since June 13th.
I track the Russell 2000 index with the IWM ETF, which declined significantly this week, closing today at 185.2, down -1.5% on the day and down 2.5% for the week. The small cap stocks of the Russell 2000 really fell out of bed this week, gapping open lower every day this week. IWM’s 50 dma is running below its 200 dma and IWM's closing price today is trading just above the 200 dma at 178. This is the most negative signal for the current market.
The NASDAQ Composite index closed at 13,493 today, down 138 points or -1% on the day and lost 1.1% for the week. NASDAQ remains above its August 2022 high, but it gave up about half of that margin this week. NASDAQ’s trading volume was flat and slightly declining all week but spiked much higher today.
This was an ugly week for the markets. To my view, it seemed as though the market had ignored the obvious message from Powell last week that at least one more rate hike may be coming this year (and maybe two). That reality dawned on the market this week. The spike in trading volume both last Friday and again today suggest the large institutional traders are taking their profits from this latest rally.
The small cap stocks of the Russell 2000, as measured by the IWM, are really on life support. Traditionally these high beta stocks lead bull markets higher and bear markets lower. As SPX and NASDAQ were trading higher last week, IWM tracked sideways. As SPX and NASDAQ were declining this week, IWM was taking a loss approximately double that of its big brothers. That is a worrisome sign for the short-term future.
The VIX finally came to life today, although it only rose 4%. Many analysts see a low level of volatility as a sign of an impending correction, but it also may be viewed as an overall lack of anxiety.
Keep a close eye on your investments. Be prepared to increase your cash levels if warranted.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 847
The Standard and Poors 500 index (SPX) closed today at 4299, up 5 points on the day or +0.1%. SPX closed the week at a gain of 0.4%. Trading volume has returned to its track under the 50-day moving average (dma).
VIX, the volatility index for the S&P 500 options, closed today at 13.8%, down 10% for the week. We haven’t seen volatility this low since January of 2020, just before the Covid lockdown correction. Should we be concerned?
I track the Russell 2000 index with the IWM ETF, which closed today at 185, up 1.5 points or +0.8% on the day. IWM closed the week with a gain of 2.3%. The small cap stocks of the Russell 2000 are now moving more in line with the S&P 500. It has traded strongly higher over the past two weeks, including two gap openings higher, but it remains well below the highs of February.
The NASDAQ Composite index closed at 13,259 today, barely up on the day but up almost two percent for the week. SPX and NASDAQ have now broken their February highs, but NASDAQ solidly broke out above its August 2022 highs this week. NASDAQ is leading this latest market rally. However, NASDAQ’s trading volume fell off significantly this week, closing the week with 3.5 billion shares traded versus the 50 dma at 4.6 billion.
NASDAQ’s price action has been much stronger and steadier since early May, having now broken the August highs from last year. The S&P 500 is threatening those highs but has not managed to break through as yet. Trading volume on both indices is weak. This bullish trend is a welcome relief but a lot of money is waiting patiently on the sidelines.
Market volatility, as measured by the VIX on the S&P 500, is now at lows unmatched since January of 2020, just before we slid off the Covid shutdown cliff in March. Low levels for VIX certainly show large institutional investors complacency, but we don’t have any clear signals of a strong, “risk on” posture either. It would take very little to crush this rally, e.g., another bank failure?
My trades are doing well; the Flying With The Condor™ service is up 26% on the year, and the trading group meeting last evening reviewed 12 positions we had opened since the previous meeting in May. One contract entered in each position would be up $1,114 over the past month.
However, I will continue to watch this market very carefully. The party could end quickly.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 862
The Standard and Poors 500 index (SPX) closed today at 4410, down 16 points on the day or -0.4%. SPX broke the August 2022 high on Monday and closed the week with a gain of 2.4%. Trading volume ran barely above the 50-day moving average (dma) all week, but spiked higher to 4.0 billion shares today, much higher than the 50 dma at 2.4 billion shares.
VIX, the volatility index for the S&P 500 options, closed today at 13.5%, down from 14.4% on Monday. This low reading for the VIX is surprising, given the sell off this afternoon.
I track the Russell 2000 index with the IWM ETF, which traded sideways this week, closing today at 185.9, down 1.5 points or -0.8%. IWM opened the week at 185.2, for a weekly gain of 0.4%. The small cap stocks of the Russell 2000 have been trading sideways for the last eight trading sessions. These high beta stocks are not leading this market. That is not a good sign.
The NASDAQ Composite index closed at 13,690 today, down 93 points or -0.7% on the day, but rose 2.7% for the week. NASDAQ remains well above its August 2022 high, broken last week. NASDAQ’s trading volume grew steadily all week, spiking today to 8.1 billion shares versus the 50 dma at 4.8 billion.
SPX and NASDAQ have now both broken out above the August highs from last year. Trading volume has run above average on both indices this week and spiked dramatically higher today as the markets sold off during the last three hours of trading. This trading volume spike on a price decline is a classic distribution day, suggesting the large institutional traders were taking their profits.
However, market volatility, as measured by the VIX on the S&P 500, remains at very low levels. The sell off this afternoon suggests some fear on the part of the large players, but they aren’t hedging themselves (which would lead to a higher VIX). Maybe they are already hedged? I closed some positions this morning for nice gains rather than wait another week to add to the profits. This afternoon’s sell off suggests I may have been prudent to take some risk off the table.
My closing remarks are the same as last week. I continue to watch this market very carefully. The party could end quickly.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 858
The Standard and Poors 500 index (SPX) closed today at 4282, up 61 points on the day or +1.5%. SPX opened the short week at 4227, closing the week at a gain of 1.3%. For a significant change, trading volume managed to stay above the 50-day moving average (dma) all week. Is this the turn higher?
VIX, the volatility index for the S&P 500 options, opened the week at 17.6%, and closed today at 14.6%, down 17% for the week. We haven’t seen volatility this low since July of 2021.
I track the Russell 2000 index with the IWM ETF, which closed today at 182.02, up 6.4 points or 3.6% on the day. IWM opened the week at 176.7 for a 3% gain for the holiday shortened week. Normally the small cap stocks of the Russell 2000 lead bullish runs, but this index has a long way to go. IWM broke its 50 dma yesterday and broke out above the 200 dma today, but it must tack on a full 9% to return to its February highs.
The NASDAQ Composite index closed at 13,241 today, up 140 points or +1.1%. NASDAQ opened the week at 13,109, resulting in a nearly identical weekly gain of +1.0%. NASDAQ and the S&P 500 have broken their February highs, although NASDAQ is well ahead of SPX. Unlike SPX, NASDAQ’s trading volume was relatively low again this week, managing to break above its 50 dma only on Wednesday.
Price action in the markets has been choppy for the past several weeks and the broad market indices have been trapped in a sideways trading channel. The market’s attention was focused on the debt limit negotiations. The market celebrated the bipartisan deal, although the debt problem is just being kicked down the road.
I will be watching next week’s market action very carefully for any cracks in the new enthusiasm. Concerns about inflation, higher interest rates and the next bank failure may raise their ugly heads next week.
I am unsure that all is well in our economy, so I am going to be cautious about jumping on this bandwagon.
