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The Standard and Poor’s 500 Index (SPX) closed today at 3341, up a couple of points on the day but down almost one percent on the shortened holiday week. It appears as though the 50-day moving average (dma) provided support to the sell-off that started last week. The index nearly touched the 50 dma on Tuesday and Thursday, and then broke through the 50 dma today, but recovered decisively to close above support. It is hard to take much encouragement from today’s bounce; it has been a volatile week for the market. The question remains whether this is just a temporary step on an overall trend lower, or just part of a sideways cooling off period. Trading volume for the S&P 500 companies spiked up above the 50-day moving average (dma) on Tuesday but has declined the rest of the week. That decline in trading volume was a welcome relief, suggesting there was little interest in a strong move to cash.

The volatility index for the S&P 500 options, VIX, spiked higher on Tuesday, but dropped back at the close and has declined steadily all week – again, an encouraging sign. VIX closed today at 26.9% after hitting an intraday high of 36% on Tuesday. Much of the anxious edge has subsided this week.

IWM, the ETF based on the Russell 2000 group of companies, traded along its 50 dma all week, closing today at 149.15, down only one point today, but down 1.3% for the week. IWM traded more weakly than the broad market indices this week, as one would normally expect. The fact that IWM didn’t fall off the cliff is encouraging because these are usually the first stocks to be sold when the panic starts.

The NASDAQ Composite index closed today at 10,854 for a loss of 66 points. However, NASDAQ was relatively flat this week, closing down 0.4% for the week. The talking heads were talking sector rotation today, but NASDAQ remains reasonably solid. Trading volume was below average all week and the index essentially traded sideways. NASDAQ remains almost ten percent above its 
pre-correction high. For all the talk of NASDAQ being the poster child for this frothy market, it didn’t sell off as strongly as one might have expected.

As everyone around me knows, I have been worried about this market for quite a while now. The prices just didn’t seem consistent with the economic damage we continue to witness. Many of my stops tripped last week, but I have added new positions this week. I am not bullish, but I am doing my best to extract some quick profits where I can find them. In my opinion, the market remains over priced. There are opportunities if you have the freedom and expertise to find them.

I recommend you watch this market very diligently. It turns on a dime. I played the Peloton earnings announcement last evening and closed the trade only a few minutes after the market opened this morning for a 58% gain. If I had waited, nearly all of those gains would have been gone by noon.

This market is volatile and very nervous. If you can’t watch it throughout the day, you would be well advised to stay largely in cash and wait on the sidelines. There is nothing wrong with taking a pass right now.