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The Standard and Poors 500 index (SPX) closed today at 4516, up 8 points on the day or +0.2%. SPX opened the week at 4426 for a weekly gain of 2%. All in all, it was a positive week, but trading volume dropped back below the 50-day moving average.
VIX, the volatility index for the S&P 500 options, continued its track lower all week, opening at 16.2% and closing today at 13.1%. It was unusual to see VIX track lower yesterday as the market fell, but apparently the large institutions were confident in this market. I can’t say I agree.
I track the Russell 2000 index with the IWM ETF, which closed up a little over two points at 191 and posted a 3.8% gain on the week. IWM solidly broke through its 50 dma today, although it did pull back a bit late in the day.
The NASDAQ Composite index closed today at 14,032, down 3 points or essentially unchanged on the day. NASDAQ opened the week at 13,695, resulting in a strong weekly gain of +2.5%. NASDAQ solidly broke out above its 50 dma this week and is approaching its July high around 14,400. NASDAQ’s trading volume remains below its 50 dma.
The trader’s most basic tactic is determining the trend of a stock or an index and then playing his prediction. But this market has been entirely too volatile for that approach. We had some nice gains in July, only to give it all back as we entered August, and now the market appears to be trying for a comeback run.
Perhaps this volatility will be the order of business until the FOMC meeting and announcement later this month. I remain very tentative and unwilling to devote much capital to this market. I recommend a cautious stance.
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The Standard and Poors 500 index (SPX) closed Friday at 4370, with a small decline of less than one point. However, this culminates a steady decline of 4.8% since the high on July 31st. 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 15.9% and closed yesterday at 17.3% after an intraday spike to 18.9%. VIX has appeared to be lower than one might expect after the steady decline in the S&P 500 index over the last two weeks. Are all the large players already hedged?
I track the Russell 2000 index with the IWM ETF. IWM closed up Friday, closing at 196.9 after finding support at the 200 dma. However, IWM has booked a significant loss of 6.2% since its high on 7/31. The Russell 2000 stocks are leading the market lower – not a good sign.
The NASDAQ Composite index closed Friday at 13,291, down 26 points for a 0.2% loss. NASDAQ wins the race to the bottom, now down 7.4% since its recent high at 14,358 on 7/19.
IBD moved their market assessment from Uptrend Under Pressure to Market in Correction on Thursday. VestorVest’s market analysis is now Bearish and they recommend not buying any stocks at this time.
Fitch’s downgrade of U.S. debt about two weeks ago continues to haunt the markets, as does the concern about future bank failures. PacWest (PACW) is one of many banks that has experienced significant withdrawals of deposits and is rumored to be on the brink of failure.
All of the broad market indices are down significantly:
The S&P 500 is down 4.8% since its high July 31
The NASDAQ Composite is down 7.4% since its high July 19
The Russell 2000 is down 6.2% since its high July 31
This could be a comparably minor market correction, but the underlying U.S. economy is not healthy. Our level of debt has reached record levels; the cost of servicing that debt is growing rapidly with rising interest rates. Unfortunately, our politicians are turning a blind eye to our fiscal problems. It is hard to imagine how this situation may be sustainable. The public’s focus has been on the effect of rising interest rates on their personal debt and our government’s debt situation is completely analogous. The path out of this situation may be quite painful.
I have closed all of my positions except some Jan 2024 covered calls on blue chip, dividend paying stocks and long term OTM iron condors on the S&P 500 index. I am watching this market very carefully. I fear we have not yet seen the bottom.
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After dropping over one percent yesterday, the Standard and Poors 500 index (SPX) traded up today, closing at 4582, up 45 points or +1% on the day, but posted a weekly gain of 0.9%. Trading volume ran under the 50-day moving average (dma) all week, except for Thursday’s down session.
VIX, the volatility index for the S&P 500 options, spiked above 15% during yesterday’s bear market, opened today at 14.0%, and moved down to 13.3% at the close of trading today.
I track the Russell 2000 index with the IWM ETF. IWM traded down with the rest of the market yesterday but closed up 2.5 points at 196.4 today. IWM opened the week at 194.6 for a 0.9% weekly gain.
Similar to the S&P 500 index, the NASDAQ Composite index fell out of bed yesterday, but recovered today, closing at 14,317, up 1.9% on the day and up 1.7% for the week.
The FOMC meeting was the center of attention this week, raising the federal discount rate by 25 basis points to a current rate of 5.25% to 5.50%. The markets didn’t respond much in either direction after the announcement on Wednesday. After sleeping on the news, traders woke up in a very negative mood on Thursday and the markets declined significantly.
The prevailing talking heads claimed the markets realized that inflation pressures were coming down after the Personal Consumption Expenditures report came out this morning, so the market recovered yesterday’s losses. I find these pat answers a little simplistic. Those rising interest rates will increase the pressure on stressed banks and will continue to slow economic growth. The latest estimate of GDP growth for the second quarter is a positive 2.4%. But I expect the third quarter numbers will show the results of that continuing pressure.
I entered some bullish trades today, but I remain cautious longer term. I see too many negatives in our economy to be bullish.
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The Standard and Poors 500 index (SPX) was trading sideways earlier this week, but the downgrade of U.S. debt spooked traders and the market lost 2.3% this week, closing today at 4478, down 4 points or 0.5%. Trading volume continues to run at or below the 50-day moving average (dma).
The effects of the Fitch debt downgrade pushed VIX, the volatility index for the S&P 500 options, higher on Wednesday and Thursday, rising above 17% both days, but VIX opened and moved lower today, reaching 14.6% before spiking higher to close at 17.1%. Are we whistling in the dark?
I track the Russell 2000 index with the IWM ETF. IWM traded down with the rest of the market but with a smaller move lower. IWM closed at 194.2 today down 0.4 points or -0.2%. The weekly loss was 1.4%, less than SPX’s loss of 2.3%.
Similar to the S&P 500 index, the NASDAQ Composite index closed at 13,909, down 50 points today for a 0.3% loss. But NASDAQ had a tough week, losing 3.0%. The trading action yesterday and today seemed to show the index finding support just below 13,900 (today’s low at 13,898 and yesterday’s low at 13,881).
I find it interesting that the debt crisis of our country has been given little or no attention in the financial media. It is almost as though those stories are not allowed. The scary facts are that our debt to GDP ratio is approximately the same as Greece’s debt ratio was several years ago. Their solution required significant hardships for the Greek citizens, and also help from the European Union. But who is in a position to help the United States?
The downgrade of our debt only occurred two days ago, and the story is already fading. We are behaving like an addict, making excuses, and refusing to admit we have a problem.
The discussion that has replaced the debt crisis is whether the combination of inflation and Fed rate hikes will result in a “hard landing”, code for a painful recession. Unfortunately, our leadership in Washington largely consists of feckless people who have never had to run a business, pay the bills, and balance the books. It is becoming harder to kick the can down the road.
IBD moved their market assessment from Confirmed Uptrend to Uptrend Under Pressure on Wednesday. Be cautious about entering new positions. Cash is king.
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After setting a new high for this year on Wednesday, the Standard and Poors 500 index (SPX) paused yesterday and today, closing today at 4536, essentially unchanged on the day, but still posted a weekly gain of 0.6%. Trading volume exceeded the 50-day moving average (dma) starting Tuesday and spiked higher today, although I am unsure why – maybe taking profits?
VIX, the volatility index for the S&P 500 options, opened the week at 13.8% and was largely unchanged all week, closing today at 13.6%. This moderately high level of volatility may hint at continued put demand for hedging.
I track the Russell 2000 index with the IWM ETF. IWM traded down the past two days, closing down 0.6 points at 194.5 today, but IWM maintained a positive week’s gain at +1.7%. IWM touched its high for the year on Wednesday but could not hold it, trading lower the balance of the week.
Similar to the S&P 500 index, the NASDAQ Composite index set its high for the year on Wednesday, but then traded off sufficiently to turn in a weekly loss of 0.8%. NASDAQ’s trading volume ran at or above average all week.
In light of continuing inflation, increasing interest rates, and fear of more bank failures, this week’s trading was rather calm. With the current positive numbers in employment and housing, it is hard to be bearish. But high rates of inflation and rising interest rates are taking their toll. Here in the Western suburbs of Chicago, we have a large number of empty storefronts. The national debt continues to grow, and rising interest rates are raising the servicing costs for that debt.
Consumers are being squeezed in a similar manner. The interest rate on the
TJ Maxx credit card recently rose to 32%, close to loan shark territory. Presumably, people learned the lesson to avoid adjustable-rate mortgages back in 2008, but for anyone holding much personal unsecured debt, the pressure is building.
The broad market averages remain moderately bullish, but I don’t see much enthusiasm with traders. My clients are pulling in their horns.
I booked some quick gains playing the earnings announcements of NFLX and TSLA this week. Normally I would consider those trades rather risky. In this market environment, being in a quick “in and out” trade somehow doesn’t seem so bad.
I remain cautious.
