Powell’s speech this morning calmed traders and sent the markets soaring. The Standard and Poors index (SPX) closed at 4509, up 39 points or 0.9%. Today’s run set another all-time high and completed the week’s track record with a gain of +1.3%. Trading volume never touched the 50-day moving average (dma) at any time this week.

VIX, the volatility index for the S&P 500 options, spiked into the mid-twenties last week as the market traded lower, but proceeded to decline this week and closed today at 16.4%. However, it would be a mistake to put your portfolio on autopilot and take a nap. This remains a nervous and twitchy market.

I have plotted the prices of the IWM ETF below to track the Russell 2000 index. The owners of Russell have priced everyone out of Russell 2000 index and option data. That is why I plot the IWM prices. IWM has been extremely choppy for the past six months and declined severely in mid-July. IWM almost matched those July lows on August 19th while breaking down through the 200 dma. IWM has traded below the 50 dma since July 13th and flirted with that key moving average on Wednesday. IWM decisively broke out above the 50 dma in today’s strong market, closing up 2.8% at 226.41.

The NASDAQ Composite index broke out above its 50 dma last Friday and continued a strong run this week, closing today at 15,130, up 184 points or 1.2% for the day and up 3.8% for the week. NASDAQ’s trading volume has consistently run under the 50 dma since July 20th.

The overall market trends of the S&P 500 and NASDAQ have tracked higher this year, but it has been a rough ride. In eight months we have experienced eight mini-corrections of 2-6%. In each case the downturn only lasts a few days and bounces back in a classic V pattern. Many traders are betting on a strong economic recovery, but the fears of runaway inflation are weighing on the market. Powell’s speech at Jackson Hole soothed the market’s fears and caused a strong bullish run today. But it is anyone’s guess how long that lasts before we see another twitch. Historically, strong bull markets require the leadership of the small to mid-cap stocks, typical of the Russell 2000 index. I am encouraged by Russell's strong performance today and this week. Russell has an uphill climb to get back in sync with its big brothers, but this is the best it has looked all year. Maybe we are turning the corner?

I continue to trade cautiously. I started the week 70% in cash and ended the week at 62% cash. I was a little more aggressive this week, but I have too many scars from these
mini-corrections tripping my stops and then leaving me behind.