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The markets continue to take a pause after the strong run higher since the beginning of November. The Standard and Poor’s 500 Index (SPX) just traded sideways to slightly lower this week, closing today at 3558, down 24 points for the day and down 1.2% for the week. To keep it in perspective, SPX gained over 333 points or ten percent since the first of the month. So, we have lost very little of those gains. That is significant. Trading volume for the S&P 500 companies declined steadily this week and ended the week well below the 50-day moving average (dma).

The volatility index for the S&P 500 options, VIX, was unchanged this week, opening at 23.7% on Monday and closing today at precisely 23.7%. But stay awake. This remains a heightened level of volatility.

IWM, the ETF based on the Russell 2000 group of companies, traded slightly higher this week, opening the week at 176.49 and closing today at 177.50, up about one half of one percent. That was a small gain, but the stocks of the Russell 2000 tend to be the high beta stocks that lead markets higher as the institutions shift to “risk on” mode.

The NASDAQ Composite index just treaded water this week opening at 11,847 and closing today at 11,855, essentially unchanged for the week. NASDAQ’s trading volume was much stronger than that of the S&P 500 companies, increasing almost every day this week.

After a strong bullish run since the first of November, it would not have been surprising to see traders taking profits, but the market has essentially held its gains. The strong behavior of the Russell 2000 index is particularly encouraging. The largest risk we face in this market derives from the external events and rumors. Each day seems to bring news or rumors about Covid-19, the development of the vaccines and, of course, the sorting out of the election results. But the market held up rather well this week as some states chose to lock down once again. As the old saying goes, the beatings will continue until morale improves. I don’t know how many small businesses will survive. Barring some surprises next week, I think the bulls will remain in control. Volatility has declined but remains relatively high from a historical perspective. Watch your positions diligently.