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We have been dealing with higher than normal levels of volatility in the market all year: Covid-19, the economic shutdown, riots and looting in our major cities, and record setting levels of political rancor. Then we learn that the President has tested positive for Covid-19 and market volatility popped up even more on Friday.

The Standard and Poor’s 500 Index (SPX) closed yesterday at 3348, down 32 points or just under 1%. SPX had traded higher until the news about President Trump hit Friday and we gave back most of those gains, closing the week essentially flat, up 0.4%. With the exception of Wednesday, trading volume for the S&P 500 companies remained below average all week. Lower trading volume on Friday was actually good news, suggesting the market wasn’t too concerned about the news about the President.

The volatility index for the S&P 500 options, VIX, opened the week at 27.2%, and was pretty steady and somewhat lower until Friday when it spiked up to 28% on the news about the President. But VIX calmed a bit and closed at 27.6% Friday.

IWM, the ETF based on the Russell 2000 group of companies, had a much better week than the other large-cap market indices, opening the week at 148.37 and closing Friday at 152.85, up 4.48 points or 3% for the week. The Russell 2000 companies are small to mid-capitalization stocks that tend to lead bull markets higher and bear markets lower. The fact that IWM could tack on 3% in a week when the S&P 500 only managed less than one half of one percent is a notable bullish sign.

The NASDAQ Composite index closed yesterday at 11,075 for a loss of 251 points or 2.2%. Unlike the Russell 2000, NASDAQ was essentially flat for the week, opening at 11,084 and closing at 11,075, down 0.08% for the week. With the exception of Wednesday, NASDAQ trading volume was at or below the 50-day moving average all week. It is worth noting that trading volume was barely below the 50 dma on Friday after the bad news hit the market.

The news that President Trump had contracted Covid-19 was certainly a scary event for the country, and especially on top of all of the other turmoil. However, I take some comfort from the market’s reaction Friday. Losses on the large blue-chip market indices were minimal and trading volume was below average. Traders didn't hit the panic button.

The Russell 2000 companies traded higher all week and had a strong day on Friday, gaining almost a half of one percent on Friday alone. Those small to mid-cap stocks are the stocks we watch to see if we are going over the cliff. They are the canaries in the coal mine. The opposite is also true. These are the so-called “risk on” stocks.

All of these measures support the thesis that the market still has strong bullish support. But the market consensus is also very anxious and concerned. If you are able to accept moderate levels of risk, there are opportunities out there. But scale back on the amount of capital at risk in your trades and stop them out quickly.

Remain vigilant. This volatility isn’t going away anytime soon.