The Standard and Poor’s 500 Index (SPX) gapped open Thursday morning and closed trading at a new all-time high of 4020, up 47 points on the day or 1.2%. SPX gained 1.3% for the week, so most of the week’s gain occurred yesterday. If we assume that Thursday’s rally finally put an end to this most recent market pullback, then maybe traders can take a breath and start to put money to work again. This has been the third pullback this year with the 50-day moving average (dma) acting as the support level in each case. The S&P 500 index trading volume has remained below average since March 12th except for quadruple witching on March 19th.
VIX, the volatility index for the S&P 500 options, gapped open lower on Thursday morning and proceed to decline all day, closing at 17.3%. One must back track on the VIX chart to late February of 2020, just before the March correction, to find volatilities in this range.
IWM, the ETF based on the Russell 2000 index, closed Thursday at 223.74, up 2.80 or 1.3%. IWM recovered its 50 dma on Wednesday but remains well below its recent high of 233.98 on March 15th.
The NASDAQ Composite index closed Thursday at 13480, up 233 points or 1.8% on the day. NASDAQ gapped open Thursday morning and finally recovered its 50 dma. Similar to the S&P 500, NASDAQ’s trading volume continues to decline and has only broken out above the 50 dma once since March 5th (on quadruple witching March 19th).
2021 has been a rough ride for traders. It’s too bad we didn’t have New Year’s Eve parties to celebrate when we could. We have been licking our wounds most of the last three months. The S&P 500 has now pulled back three times, but Thursday’s trading appears to have turned the corner with a much smaller pull back and a bounce off the 50 dma. The NASDAQ Composite has yet to recover all of its losses due to the rotation out of high-tech stocks.
This morning’s jobs report was a huge surprise to traders with over nine hundred thousand new jobs added to the economy. That should help fuel the reopening of our businesses, or at least, those who have survived. Thursday’s market action was encouraging, and I cautiously added a few positions. But I remain 67% in cash. I think the jobs report may be the catalyst to push this market higher. I am anxious to see the market open on Monday.