Category: Dr. Duke's Blog
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The Standard and Poors 500 Index (SPX) opened the week at 3184 and closed Friday at 3221, up 16 points on the day and 1.2% for the week. SPX gapped open higher Friday morning and held its gains through the day. Trading volume spiked higher, but this was probably due to the expiration of several index option and futures contracts, viz., this quarter’s quadruple witching.

The strength of the market this week was primarily due to increased optimism concerning our trade negotiations with China. Those reports are very preliminary with few solid details, so that remains a possible source of volatility for the markets.

VIX, the volatility index for the S&P 500 options, opened and closed the week at 12.5%. This isn’t a record low, but it does suggest that the large institutional traders are relatively calm. In the absence of any surprising news, volatility is likely to remain low this week as many traders are on holiday.

IWM, the ETF based on the Russell 2000 group of companies, mimicked SPX’s price action pretty closely this week, opening at 164 and closing up 1.2% at 166. IWM gapped open higher each morning this week. You don’t see that every day.

The bulls didn’t forget the NASDAQ Composite index this week, closing the week at 8925, up 1.5% on the week. NASDAQ displayed a strong gap opening higher Friday morning. Trading volume on NASDAQ came in above the 50 dma every day this week, and then spiked yesterday, primarily as a result of quadruple witching.

This week’s market delivered a strong performance with each of the broad market indices gaining 1.2% to 1.5%. If we take a longer term view of this year’s market, we find three major trading sessions. The first was a strong bullish market from the first of the year until early May.. Then the market traded roughly sideways through early October, and blasted higher for the balance of the year. The price action of IWM this week reinforced the overall bullish nature of this market. The high beta stocks are finally seeing some action as bullish traders begin to take on more risk. Speculation about the China trade negotiations will continue to deliver periods of price volatility. Threats from North Korea may send the markets a surprise as the new year approaches. I am bullish, but I also remain cautious. Keep a close eye on this market and keep your stops tight.

Merry Christmas and best wishes for a prosperous and happy new year.