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The Standard and Poor’s 500 Index (SPX) continued its steady climb higher this week, closing today at 3935, up 18 points and up 1.1% for the week. It seems too good to be true, especially when one looks at the weak economic data. However, SPX is continuing this march higher with steadily declining trading volume. One should not bank too heavily on higher prices being achieved on lower volume.

VIX, the volatility index for the S&P 500 options, closed today at 19.97%. I was surprised when I expanded the chart and found that today is the first day VIX has closed below 20% since its close at 17.1% on 2/21/20, just before the market went off the cliff.

The NASDAQ Composite index closed today at 14,095, up 70 points today and up 1.1% for the week, identical to the gains of the S&P 500 index. NASDAQ’s trading volume advanced all week but suddenly retreated to close at the 50 dma today. Did everyone leave early for the long weekend?

This market is whipping traders back and forth. Consider the S&P 500 index price chart over the past three weeks. SPX lost 4% during the week ending 1/29, but then gained it all back with a 4% gain last week. SPX continued its run higher this week, although at a somewhat slower pace of 1%. It isn’t surprising that traders are nervous and the “sky is falling” crowd are all carrying their “end of the world” posters.

The S&P 500 volatility index, VIX, closed below 20% today for the first time since February 21st of last year, just before the March correction. An old adage about VIX goes, “When the VIX is low, it’s time to go”. This is based on the observation that volatility cycles between the lows and highs as the market cycles. However, the same disclaimers apply here as predicting market highs and lows. The VIX may be lower than it has been in nearly a year, but it could go lower. At a minimum, it is wise to be cautious and watch the market very carefully.

I am carefully positioning my stops tighter, closing trades when they trip the stop, and closing early when I can lock in gains and take some risk off the table.

Enjoy the long weekend.