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The Standard and Poor’s 500 Index (SPX) bounced off of its 50-day moving average (dma) on Tuesday, recovered and then tested that support level again today, closing at 3811, right at the 50 dma at 3808. Trading volume in the S&P 500 companies increased steadily all week. I believe this shows some selective selling in anticipation of additional pullbacks next week.

VIX, the volatility index for the S&P 500 options, closed today at 28%. Both yesterday and today, VIX spiked as high as 31%. Volatility ranged quite a bit today, from as low as 25% to a high of 31%. Traders are nervous.

IWM, the ETF based on the Russell 2000 group of companies, closed at 218.31 today, down 2.3% for the week. IWM continues to show support at 215, bouncing from that level Tuesday and again today. That makes 215 a good “line in the sand” to watch.

The NASDAQ Composite index closed today at 13,192, down 72 points on the day but down 3.8% for the week, exceeding the losses of both the Russell 2000 index (-2.3%) and the S&P 500 index (-1.9%). NASDAQ’s trading volume declined steadily this week, remaining below the 50 dma.

We close another bearish week for the markets with all of the broad market indices losing 2% or more of their value. The markets are holding at key levels of support this week, but a pullback or correction appears more and more likely. Perhaps we will retest those early February lows.

I am continuing to sell these elevated levels of volatility, but I am also closing positions aggressively when they move against me. Several stocks continue to post strong gains. Deere (DE) is a good example, posting gains this week after its earnings announcement on Monday. I sold the Feb(2/26) 345 put on Wednesday for a 1.2% yield in two days. It will expire worthless tomorrow. But I chose not to roll it out to next week. A weekend can be a long time in this market.

Watch your positions very closely. It is a nervous market.

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The Standard and Poor’s 500 Index (SPX) closed Friday at 3907, down 7 points on the day, but down 0.8% for the week. I am watching the support level formed this week and last week around 3875. If SPX breaks support, it could be headed lower. SPX’s trading volume ran below the 50-day moving average (dma) all week.

VIX, the volatility index for the S&P 500 options, closed Friday at 22%. As one might expect for a flat market week, VIX was in a narrow range this week of 21% to 24%.

IWM, the ETF based on the Russell 2000 group of companies, closed at 225.19 Friday, down 1.9% for the week. IWM has shown weak support at 219 and stronger support at 215. A break below 215 would be a warning signal.

The NASDAQ Composite index closed Friday at 13,874, up 9 points on the day but down 2% for the week, close to the losses of the Russell 2000 index. NASDAQ’s trading volume ran slightly above and below average all week, and closed Friday almost precisely at the 50 dma.

This was a bearish week for the markets with the Russell 2000 index (the basis of IWM) and the NASDAQ both losing about two percent and the S&P 500 index losing almost one percent. The only positive signs were some weak signs of recovery on Friday.

Market analysts are in two camps. One remains bullish and the other is nervous, expecting a pullback or possibly a correction soon. Of course, the usual doomsday gurus are being interviewed on the financial networks. I find it hard to take them too seriously. It’s the “boy cried wolf” problem. I doubt the end of the world scenario, but a pullback or correction would not be surprising at all.

I am continuing to sell these elevated levels of volatility, but I am also closing positions aggressively when they move against me the least bit. Several stocks continue to post strong gains. Watch your positions very closely. It is a nervous market.

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Alfred E. Neuman’s infamous quote seemed appropriate as we set new all-time record market highs with the economy in tatters. The Standard and Poor’s 500 Index (SPX) closed trading today at 3714, up 15 points. Incredible as it may seem, the S&P 500 marched 4.2% higher this week. The only sobering sign was watching trading volume steadily decline all week.

VIX, the volatility index for the S&P 500 options, reached 37.2% last week and closed today at 20.9% in about ten days. If one ignores VIX and just watches the market indices, you would think a return to 20% volatility was the all-clear signal. When you can sell puts of solid blue chips stocks for close to one percent yield per week, these are dangerous levels of volatility. Don’t be deceived.

IWM, the ETF based on the Russell 2000 group of companies, closed at 221.65 today, down 3.03. But the incredible news is that today’s close culminated a growth rate of 6.5% for this week. This is the classic ultra-strong bull market where the high beta stocks outperform the blue chips as investors scramble for higher gains. It sounds a little frothy, doesn’t it?

The NASDAQ Composite index closed today at 13,856, up 79 and setting another all-time high. NASDAQ outperformed the S&P 500 with a weekly growth rate of 4.8%. NASDAQ’s trading volume has declined since last week and dipped below the 50 dma today.

What a difference a week can make! Last week’s market had all of the signs of tipping over the edge into a downtrend or at least a pullback. This week saw every index gaining 4% or more. The Russell 2000 gained 6.5%. These aren’t strong gains; they are extraordinary gains.

This underscores the need for caution. I am not suggesting burying all of your cash in the backyard. But I am very carefully positioning my stops and closing trades when they trip the stop – no exceptions and no dreams of recovery. In my opinion, this is an excellent time for selling options. But be conservative. Trade only solid blue chip stock options. Don’t use any margin and close at the first sign of trouble.

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The Standard and Poor’s 500 Index (SPX) continued its steady climb higher this week, closing today at 3935, up 18 points and up 1.1% for the week. It seems too good to be true, especially when one looks at the weak economic data. However, SPX is continuing this march higher with steadily declining trading volume. One should not bank too heavily on higher prices being achieved on lower volume.

VIX, the volatility index for the S&P 500 options, closed today at 19.97%. I was surprised when I expanded the chart and found that today is the first day VIX has closed below 20% since its close at 17.1% on 2/21/20, just before the market went off the cliff.

The NASDAQ Composite index closed today at 14,095, up 70 points today and up 1.1% for the week, identical to the gains of the S&P 500 index. NASDAQ’s trading volume advanced all week but suddenly retreated to close at the 50 dma today. Did everyone leave early for the long weekend?

This market is whipping traders back and forth. Consider the S&P 500 index price chart over the past three weeks. SPX lost 4% during the week ending 1/29, but then gained it all back with a 4% gain last week. SPX continued its run higher this week, although at a somewhat slower pace of 1%. It isn’t surprising that traders are nervous and the “sky is falling” crowd are all carrying their “end of the world” posters.

The S&P 500 volatility index, VIX, closed below 20% today for the first time since February 21st of last year, just before the March correction. An old adage about VIX goes, “When the VIX is low, it’s time to go”. This is based on the observation that volatility cycles between the lows and highs as the market cycles. However, the same disclaimers apply here as predicting market highs and lows. The VIX may be lower than it has been in nearly a year, but it could go lower. At a minimum, it is wise to be cautious and watch the market very carefully.

I am carefully positioning my stops tighter, closing trades when they trip the stop, and closing early when I can lock in gains and take some risk off the table.

Enjoy the long weekend.

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The Standard and Poor’s 500 Index (SPX) closed trading Friday at 3714, down 73 points on Friday and down 3.6% for the week. The close occurred at the fifty-day moving average (dma), often a key inflection point for the market. Trading volume spiked up above the 50 dma for the last three days of the week, underscoring the losses.

VIX, the volatility index for the S&P 500 options, closed Friday at 33.1% after spiking as high as 37.5% on Wednesday and earlier Friday morning. These are dangerous levels of volatility.

IWM, the ETF based on the Russell 2000 group of companies, closed down 3.16 points to 205.56 on Friday, down 4.4% for the week. As expected, IWM’s high beta stocks are outperforming the S&P 500 stocks to the downside as the market declined this week. However, IWM remains well above its 50 dma at 196.36.

The NASDAQ Composite index closed Friday at 13,071, down 266 for the day, and down 4.5% for the week. The recent market leaders are leading the market lower this week. NASDAQ’s trading volume remained well above the 50 dma all week but declined in the latter part of the week.

The concerns I have written about in the last several newsletters continue and the “sky is falling” cries are becoming more shrill. So far, I have simply been closing positions that hit their stops, so the majority of my trades remain open. I have not panicked as yet. One positive sign was the slight recovery of the S&P 500 on Friday. Go back and look at the S&P price chart in late February and early March last year and you will see several closes at the lows of the day. Those are serious bearish signals.

Be cautious about entering new trades until we see some evidence of the markets finding support.