Dr. Duke's Blog

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Written by Dr. Duke

Created: 22 November 2024

The Standard and Poors 500 index (SPX) closed today at 5,969, up 21 points or +0.4%. SPX opened the week at 5,874, gaining 1.6% for the week. Trading volume ran along the 50-day moving average (dma) all week.

VIX, the volatility index for the S&P 500 options, opened the week at 16.6% and closed today at 15.2%, slightly higher mid-week, but VIX declined today.



I track the Russell 2000 index with the IWM ETF, which closed today at 238.7, up four points or +1.9% on the day. IWM opened the week at 229.2 for a weekly gain of +4.1%. IWM led the broad market averages higher this week. IWM trading volume declined slightly as the week worn on.

The NASDAQ Composite index closed today at 19,004, up 61 points or 
+0.2%. NASDAQ opened the week at 18,718, setting up a weekly gain of 1.5%. NASDAQ’s trading volume ran above the 50 dma all week except for Wednesday.

The markets reversed course from last week and traded higher this week. The S&P 500 stocks rose 1.6% this week; the NASDAQ Composite tacked on 1.5%. But the Russell 2000 index was running hard, up 4.1%. Russell’s gain is very encouraging as this index consists of smaller high beta stocks. These are the stocks the large funds turn to build their returns when they anticipate smooth sailing ahead. Conversely, they are the first stocks to be sold when the storm clouds are feared.

As you may recall from last week’s newsletter, I was seeing some signs of a possible recovery this week after the ugliness last week. However, I am a little scarred from the last couple of months of a very choppy market. I am focusing on the large cap tech stocks for a safe vehicle for this apparent bull run.

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Written by Dr. Duke

Created: 15 November 2024

The Standard and Poors 500 index (SPX) closed today at 5,871, down 79 points or -1.3%. SPX opened the week at 6,009, losing 2.3% for the week. Trading volume spiked up on the day following the election and declined the rest of that week and into this week, although it spiked up above the 50-day moving average (dma) today.

VIX, the volatility index for the S&P 500 options, opened the week at 15.3% and declined steadily through Thursday’s close at 14.3%, but rose today to 15.1%.

I track the Russell 2000 index with the IWM ETF, which closed today at 228.5, down 3.5 points or -1.5% on the day. IWM opened the week at 240.5 for a weekly loss of -5.0%. IWM steadily declined every day this week. IWM trading volume ran at or above the 50 dma all week but spiked higher Tuesday and today.

The NASDAQ Composite index closed today at 18,680, down 428 points or -2.2%. NASDAQ opened the week at 19,355, setting up a substantial weekly loss of 3.5%. NASDAQ’s trading volume has run well above the 50 dma since the day of the election through today.

The markets traded higher after the election but cooled substantially this week. At least part of that decline belongs to FOMC chairman Powell’s comments. He said the Fed may not feel as pressured to reduce interest rates further this year since the economy is doing so well. Boston Fed President Collins piled on, saying a December rate cut is “not a done deal”. That took the steam out of this post-election bull run.

Weekly losses for the S&P 500 stocks, the NASDAQ Composite and the Russell 2000 index came in at  -2.3%, -3.5% and -5.0%, respectively. In spite of these large declines, IBD’s recommended stock market exposure remains at 80-100% today.

This week was just one more example of how difficult it has been to trade this market. Just when you think a bullish trend has begun, the rug gets pulled out from under you. The S&P 500 index gapped lower at today’s opening and traded lower by 1.3%, with a large spike in trading volume. Could this be capitulation as many traders throw in the towel? NASDAQ also gapped open lower today and dropped 2.2% before finding support at its July high. NASDAQ’s trading volume has exceeded its 50 dma all week. The Russell 2000, as measured by the IWM, appeared to find support at its mid-October high concurrently with a spike in trading volume.

This gives me some hope for a recovery next week, but I may be grasping at straws.

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Written by Dr. Duke

Created: 08 November 2024

The Standard and Poors 500 index (SPX) closed today at 5,996, up 22 points or +0.4%. SPX opened the week at 5,725, gaining 4.7% for the week. Trading volume spiked up on the day following the election and declined the rest of the week, although it remained above the 50 day moving average (dma).

VIX, the volatility index for the S&P 500 options, opened the week at 22.5% and declined after the election, closing the week at 14.9%. The combination of the election and the FOMC meeting greatly reduced market uncertainty.

I track the Russell 2000 index with the IWM ETF, which closed today at 238.1, up 1.7 points or +0.7% on the day. IWM opened the week at 218.5 for a weekly gain of 9.0%. IWM gapped open the day after the election with a gain of 12.4 points or 6%. The IWM trading volume spike on 11/6 exceeded even that of the correction in early August.

The NASDAQ Composite index closed today at 19,287, up 17.3 points or 
+0.09%. NASDAQ opened the week at 18,220, setting up a substantial weekly gain of 5.9%. NASDAQ’s trading volume ran above the 50 dma all week, but its largest spike was on the second day following the election.

Wow! To say the market was energized by the election results is an understatement. IBD immediately upgraded their recommended stock market exposure to 
80-100% after Tuesday’s election results.

The FOMC met Wednesday and Thursday and that certainly added to this week’s market uncertainty. The committee unanimously recommended a twenty five basis point reduction in the federal discount rate, resulting in a range of 4.50% to 4.75%.

The net result of both of these events was a strong bullish run in the markets and a significant reduction in market volatility with the VIX declining to 14.9% after opening the week at over 22%.

Weekly gains for the S&P 500 stocks, the NASDAQ Composite and the Russell 2000 index climbed 4.7%, 5.9% and 9.0%, respectively. This is in line with the average beta values of the stocks populating those indices. Higher beta stocks run faster in bullish markets as compared to the S&P 500 stocks. But they also outperform the S&P in the run lower in bearish markets. High beta stocks are the classic “risk on” and “risk off” stocks.

We closed last week boarding up the windows of our portfolio. This week we find ourselves relieved and out searching for opportunities. We closed our QQQ iron condor for a nice gain of 19% before the election. I plan to open a new one next week.

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Written by Dr. Duke

Created: 01 November 2024

The Standard and Poors 500 index (SPX) closed today at 5,729, up 23 points or +0.4%. However, SPX opened the week at 5,834, losing 1.8% for the week. Trading volume spiked up with the severe downturn on Thursday. SPX appears to have found support at its 50 dma (50 day moving average).

VIX, the volatility index for the S&P 500 options, opened the week at 19.1%, but spiked to 23.4% on Thursday and recovered a bit today at 21.9%. Today’s poor jobs report, coupled with the election, appears to have traders on edge.

I track the Russell 2000 index with the IWM ETF, which closed today at 219, up 1.2 points or +0.6% on the day. IWM opened the week at 221 for a weekly loss of 0.9%. IWM appears to have found support at its 50 dma.

The NASDAQ Composite index closed today at 18,239, up 145 points or 
+0.8%. But that overlooks the strong decline yesterday, gapping open at 18,427 and closing at 18095, a decline of 2.8%. NASDAQ opened the week at 18,648, setting up a smaller weekly loss of 2.2%. NASDAQ’s trading volume was above average all week.

Last week wasn’t pretty, but Thursday was downright ugly. One of the few reassuring signs was SPX finding support at its 50 dma. IBD’s recommended stock exposure declined from 80-100% to 60-80% on Thursday’s market collapse.

This morning’s jobs report was extremely poor, but the market rallied anyway. But that may have been more of a sign that institutions viewed Thursday’s severe decline as an overreaction. But the markets could not hold this morning’s rally and gave most of it back before the close.

Large institutional traders appear to be spooked on three fronts. Number one has to center on this morning’s jobs report with only 12 thousand new jobs. Certainly, the hurricane damage and the strikes are caveats, but the report also shows signs of a weakening economy.

Number two is the elephant in the room, Tuesday’s election. Making it even worse this time, voters on both sides have legitimate fears about the repercussions of this election’s outcome.

If that wasn’t enough, we can’t ignore the FOMC meeting that begins Wednesday and their report on Thursday.

Any one of these upcoming events would cause a rise in uncertainty for traders, but this is quite a coincidence of negative possibilities. Stay calm. I started doing the equivalent in my portfolio of boarding up the windows as the hurricane approaches. Do a little reading on two topics, married puts and trailing stop losses. Both are relatively simple. It is like buying insurance for the first time. You may spend a bit more than you should, or you may feel you didn’t buy enough, but you will be protected more than you would have been.

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Written by Dr. Duke

Created: 26 October 2024

The Standard and Poors 500 index (SPX) closed Friday at 5,808, down less than two points or -0.03%. SPX opened the week at 5,858, losing nearly one percent for the week. Trading volume was flat this week.

VIX, the volatility index for the S&P 500 options, rose slightly this week, opening Monday at 18.8% and closing Friday at 20.3%. I think the election is creating some anxiety.

I track the Russell 2000 index with the IWM ETF, which closed Friday at 219, down almost a point or -0.4% on the day. IWM opened the week at 226 for a weekly loss of 3.1%. Unlike the S&P 500 and NASDAQ, this index took it on the chin, starting with a large decline on the previous Friday.

The NASDAQ Composite index closed Friday at 18,519, up 103 points or 
+0.6%. NASDAQ opened the week at 18,456, setting up a small weekly gain of 0.3%. NASDAQ matched its July high this week but could not hold it. NASDAQ’s trading volume was roughly flat this week.

I have to admit that this market has frustrated me this week. It gave me some hope last week but has challenged me every day this week. NASDAQ touched its July high on Friday but traded much lower immediately. The Russell 2000 index turned in an ugly week with a three percent loss. That is a bad sign. Those are the high beta stocks.

IBD’s market assessment continues to be “all in” with its recommended stock exposure of 80-100%.

Maybe I will increase my confidence next week, but it may require putting the election behind us to calm me and this market.

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Written by Dr. Duke

Created: 18 October 2024

The Standard and Poors 500 index (SPX) closed today at 5,865, up 23 points or +0.4%. SPX opened the week at 5,830, gaining 0.6% for the week. The S&P 500 index closed today at an all-time high. Trading volume slowly declined this week.

VIX, the volatility index for the S&P 500 options, declined steadily this week, opening Monday at 20.8% and closing today at 18.0%. Historically, this level of volatility is moderately high for a bullish market. Is the election creating some anxiety?

I track the Russell 2000 index with the IWM ETF, which closed today at 226, down a half point or -0.2% on the day. IWM opened the week at 221 for a weekly gain of 2.2%. Unlike the S&P 500 and NASDAQ, this index is not yet up to its 
all-time high from 2021.

The NASDAQ Composite index closed today at 18,490, up 116 points or 
+0.6%. NASDAQ opened the week at 18,427, setting up a small weekly gain of 0.3%. NASDAQ closed at an all-time high on Monday and almost reached that level today. NASDAQ’s trading volume was roughly flat with a slight decline this week.

The markets are essentially bullish with both the S&P 500 index and NASDAQ hitting all-time highs this week. But volatility remains moderately elevated and the Russell 2000 index has not yet matched its previous all-time high. This week’s trading was largely sideways and choppy. The S&P 500 traded within the channel formed by 5800 and 5875.

The Russell 2000 index traded strongly higher since October 10th but pulled back a bit over the past two days. Russell remains the only broad market index that has not set a new all-time high. IBD’s market assessment is “all in” with its recommended stock exposure of 80-100% and the Stock Traders Almanac triggered its seasonal buy signal last week.

I remain cautious, although I am unsure of the root cause. The choppy nature of the recent market is a factor and maybe the hateful drama during this election cycle may be coloring my vision of the markets.

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Written by Dr. Duke

Created: 11 October 2024

The Standard and Poors 500 index (SPX) closed today at 5,815, up 35 points or +0.6%. SPX opened the week at 5,738, gaining 1.3% for the week. Trading volume slowly declined this week.

VIX, the volatility index for the S&P 500 options, declined slightly this week, opening Monday at 20.8% and closing today at 20.5%. This level of volatility seems high for a rising market. Is the market apprehensive of the upcoming election?

I track the Russell 2000 index with the IWM ETF, which closed today at 221.3, up four points or +2% on the day, and up +1.2% for the week. The strong rise in IWM today is a bullish signal.

The NASDAQ Composite index closed today at 18,343, up 61 points or 
+0.3%. NASDAQ opened the week at 18,080, setting up a strong weekly gain of +1.5%. NASDAQ’s trading volume was flat this week.

One would think that the announcement of a 50-basis point rate reduction by the FOMC three weeks ago would have effectively ended all of that Fed noise. But it appears the market is obsessed. One example this week: the CPI posted another lower number and the annual rate of change for CPI is now +2.4%. I wasn’t long ago that it was over 3%. But the market slumped after the CPI announcement because the monthly change of 0.2% was "above forecasts". It was one more example of this market being very difficult to please. Maybe the uncertainty of the election is bubbling up. That may explain why we have a 20% VIX while the market is trading higher.

The most positive news this week was the Russell 2000 index finally waking up with a strong day, rising over two percent. These are the classic high beta stocks that the institutions and hedge funds use to boost their results in bull markets.
The S&P 500 set a new all-time high today but NASDAQ remains below its 
all-time high from July 10th. IBD’s market assessment stands at its most bullish level, with stock exposure of 80-100%. The Stock Traders Almanac has triggered its seasonal buy signal.

I’m unsure why I am uneasy.

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Written by Dr. Duke

Created: 20 September 2024

The Standard and Poors 500 index (SPX) closed today at 5,730, down 11 points or -0.2%. SPX opened the week at 5,615, gaining 2.0% for the week. Trading volume spiked today for triple witching expiration.

VIX, the volatility index for the S&P 500 options, opened today at 16.3% and closed at 16.2%.

I track the Russell 2000 index with the IWM ETF, which closed today at 222, down two points on the day, but up +1.8% for the week.

The NASDAQ Composite index closed today at 17,948, down 66 points or 
-0.4%. NASDAQ opened the week at 17,574, setting up a strong weekly gain of 2.1%. NASDAQ’s trading volume spiked today due to triple witching expiration.

This week’s trading was all about the FOMC. Monday through Wednesday at 2:00 pm ET was roughly a sideways market, waiting on the Fed. The announcement of a 50-basis point rate reduction appeared to be just what the market wanted, but the market traded down after the announcement.

Yesterday was an altogether new story. It was as though sleeping on the rate reduction convinced the market that all was well. SPX gapped open by over 85 points and then tacked on another eleven points.

However, the market woke up with a hangover this morning and decided Thursday’s party was a bit excessive. The market opened lower and traded down significantly. SPX tried to get back to its opening late in the day but couldn’t make it happen. SPX closed for an eleven-point loss.

The positive summary is that the S&P 500 set a new all-time high on Thursday and didn’t trade down too badly today, closing roughly at Thursday’s open.

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Written by Dr. Duke

Created: 13 September 2024

The Standard and Poors 500 index (SPX) closed today at 5,626, up 30 points or +0.5%. SPX opened the week at 5,442, gaining 3.4% for the week, about the same magnitude as its loss last week. Trading volume declined over the last three trading sessions this week.

VIX, the volatility index for the S&P 500 options, steadily declined this week, opening the week at 21.3% and closing today at 16.6%. I would normally consider this to be moderately high volatility but after the August correction, this feels low.

I track the Russell 2000 index with the IWM ETF, which closed today at 217, up five points or +2.5%. IWM gapped open higher twice this week, posting a gain of 4.3%.

The NASDAQ Composite index closed today at 17,684, up 114 points or 
+0.7%. NASDAQ opened the week at 16,836, setting up a strong weekly gain of 5%. NASDAQ’s trading volume remained at or below the 50 dma all week.

This week’s trading was almost the exact opposite of last week. The S&P 500 gained 3.4%, but NASDAQ and the Russell 2000 were hot at +5.0% and +4.3%, respectively.

 I believe the market has presumed a rate reduction from the Fed next week. As I see interviews and reports on the financial networks, the argument I hear is not whether they will announce a rate reduction, but whether it will be a reduction of 25 or 50 basis points. The year over year CPI numbers now stand at +2.5%. While that is moving in the right direction, Jerome Powell has been very firm about a target of 2%. If the Fed holds pat next week, it could be ugly.

I closed my September SPY condors for +12.2% and the September SPX iron condors for +16.7% today, but I will wait until after the Fed announcement to open the November positions for those services. On the other hand, if the FOMC reduces rates by 50 basis points next Wednesday, we may see new market highs.

I will close our QQQ iron condor before the announcement next week. Be cautious; take risk off the table where you can. We could have some rough seas.

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Written by Dr. Duke

Created: 06 September 2024

The Standard and Poors 500 index (SPX) closed today at 5,408, down 95 points or -1.7%. SPX opened the week at 5,624, closing down 3.8% for the week. Trading volume was above the 50-day moving average (dma) Tuesday and Friday but below average on Wednesday and Thursday.

VIX, the volatility index for the S&P 500 options, closed today at 22.4%, up 2.5 points. VIX opened Tuesday at 15.8% and spiked up over 20% and stayed in that neighborhood the balance of the week.

I track the Russell 2000 index with the IWM ETF, which closed today at 208, down four points or -1.9%. IWM was down almost five percent this week.

The NASDAQ Composite index closed today at 16,691, down 437 points or 
-2.6%. NASDAQ opened the week at 17,585, setting up a weekly loss of 5%. NASDAQ’s trading volume remained at or below the 50 dma all week.

I often make the mistake of looking for rational explanations for the market moves. When SPX dropped significantly earlier this week, the explanation by the talking heads was that the ADP private payrolls number at 99k was “below expectations”. Today’s explanation was that the jobs report at 142k jobs, up from last month’s 89k was “weak”. Last month was weak; this month was up.

Last week, I relayed the Stock Trader’s Almanac citation to you that September is historically the weakest month of the year for the stock market. Maybe I should have paid attention.

Today’s market decline seemed extreme to me. In particular, if one watched the SPX one minute chart today, it was uniformly down all day. That is unusual; normally, there is an ongoing tug of war with several ups and downs.

Based on my assumption of an extreme in trading today, I held several positions. We’ll see if that was a mistake.