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This is the key question that keeps coming up since the first of the year. The Standard and Poors 500 Index (SPX) broke down through the 200-day moving average (dma) on March 8th, but immediately turned back higher and closed this past Thursday at 2855, a market high since the September and October highs before the corrections last fall. In total, SPX had gained 504 points or 21% since the low point on December 24th. But then the market tumbled Friday and, even more ominously, closed at its low for the day at 2801, down 54 points or 1.9%.

Before we panic too much, let’s check the trading volume. Volume rose slightly this week, but it barely exceeded the 50 dma, even on Friday with this perceived run for the exits. I conclude that we are seeing some minor profit taking, not wholesale unloading of positions by the large institutional trading firms.

The S&P 500 volatility index, VIX, increased slowly this week and spiked Friday up to 17.5% before pulling back to close at 16.5%. This level of volatility doesn’t reflect panic mode at all, but it is moderately cautionary. Economic data and corporate earnings remain very positive, but the trade negotiations with China worry traders. The growing economic slowdown in Europe has raised concerns about possible negative effects on our economy.

The Russell 2000 Index (RUT) continues to trade more weakly than the broad market. RUT never did break through the 200 dma, and after Friday’s sell off, Russell has even broken below its 50 dma. Russell closed Friday at 1506, down 56 points or 3.6%. By contrast, the S&P 500 declined 1.9% on Friday. Russell’s weakness is the principal bearish signal for the current market.

The NASDAQ Composite index closed Friday at 7643, down 196 points or 2.5%. NASDAQ remains well above its 200 dma at 7490, but remains far off of the September and October highs around 8100. Trading volume in the NASDAQ stocks rose steadily this week and spent the last four days of the week above the 50 dma.

Corporate revenues and earnings reported during this earnings cycle have been excellent, but traders are worried about the Mueller probe, the China trade negotiations, and slowing economic conditions in Europe. With the release of the Mueller investigation report Friday, we may put some of these anxieties to rest, although I expect much of the political turmoil to continue. The trade negotiations with China may be making progress, but that isn’t clear. I think this remains the primary concern for market analysts. All of these factors will result in continued market volatility.

In volatile markets, the best advice is cautionary. When you face a choice in your investments, take the conservative alternative.