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The Standard and Poor’s 500 Index (SPX) closed yesterday at 3298, up 52 points or +1.6%. That sounds great if we stop there, but SPX barely recovered Monday’s opening at 3286, so we were only up 0.4% for the week. Of course, we should be thankful for that. With all of the turmoil going on in this country, market volatility is to be expected. The June 8th high at 3232 provided support on Wednesday, and Thursday and Friday’s trading built on that base. However, we have yet to recover the 50-day moving average (dma) that was broken last week. The S&P 500 is now trading in a channel defined by the June high on the lower edge and the February 
pre-correction high on the upper edge. Trading volume for the S&P 500 companies opened the week above the 50 dma, but remained below average all week.

The volatility index for the S&P 500 options, VIX, opened the week at 28%, and closed Friday at 26%. It would be a mistake to count this decline as encouraging. Traders remain nervous and poised over the sell button.

IWM, the ETF based on the Russell 2000 group of companies, succumbed to the bearish pressure this week, closing up 1.6% at 146.41 on Friday, but remained down 1.9% for the week. The small to mid-cap stocks of the Russell 2000 are often the first to be sold in a bear market and the first to be bought in a bull market. Hence this week’s trading is a concern. IWM never did recover its 
pre-correction high.

The NASDAQ Composite index closed yesterday at 10,914 for a gain of 241 points or 2.3%. Even more positively, NASDAQ was up 2.9% for the week. It has not recovered its 50 dma, broken last week, but it is only 111 points away and remains 1,097 points above its pre-correction high at 9817. NASDAQ trading volume was at or below the 50 day moving average all week.

Markets hate uncertainty and is being fueld by the coronavirus epidemic, economic shutdowns, political turmoil, rioting and looting in our large cities. The market reflects those anxieties. This market is volatile and very nervous. Trading this week supports the thesis that we aren’t seeing the beginning of a bear market trend. Bullish support continues to hold support. NASDAQ remains well above its pre-correction high. Thursday and Friday’s market strength is encouraging. However, the light we think we see may be the train coming at us.

Remain vigilant and largely in cash.