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Last week’s strong bullish run higher continued with The Standard and Poors index (SPX) closing the week at 4362, up 77 points or +1.8%. The pace accelerated Thursday and Friday with two gap openings higher each morning. SPX did not post a neutral or negative day all week. In addition, new all-time highs were set every day this week. That must be a record. However, this week’s steady march higher occurred on below average and steadily declining trading volume.

VIX, the volatility index for the S&P 500 options, opened the week at 16.1% and steadily declined to close today at 15.1%, a new low for 2020. Intraday trading took VIX down as far as 14%.

The IWM ETF, based upon the Russell 2000 index, was the black sheep among the broad market indices this week, closing the week at 229.19, down 1.3% for the week. We watched IWM lead the markets higher, but it appears to be sending a different signal this week. Maybe some players are taking profits by selling their high beta stocks.

The NASDAQ Composite index posted a strong bullish week, although not as steady and consistent as the S&P 500. NASDAQ opened the week at 14417 and closed at 14639, for a 1.5% increase on the week. NASDAQ also posted two 
all-time highs this week with a gap opening higher this morning. Similar to the S&P 500, NASDAQ’s trading volume steadily declined this week after trying to reach above average values on Wednesday.

The market made strong gains this past week and a review of the first six months of 2021 illustrates a remarkable period of time in the markets. The S&P 500 index of companies has gained 15.6% this year. Even more remarkable is the 4.3% gain since June 21st. That period comprises ten trading sessions, but only one down day occurred within those sessions.

When I review that performance, I find the results testing my credulity. Why does it seem like the market has not performed as well as those numbers suggest? The answer is that traders have been whipsawed in and out of this market. We have experienced five pull backs during this six-month period. That probably sets a record.

Don’t be misled into thinking you just aren’t sufficiently savvy to navigate this market. The editors and staff at Investors Business Daily (IBD) have been studying the markets and advising traders for many years. They publish a daily market commentary, The Big Picture, that includes a discussion of that day’s markets and ends with a market assessment, such as Confirmed Uptrend or Market In Correction. Normally those assessments don’t change quickly. IBD has shifted its assessment seven times this year. I don’t know if that is a record, but I am confident it is close.

Where does this market discussion leave us? Last week, I gave my own market assessment: schizophrenia. Traders have been spooked repeatedly. They are determined to avoid losing the gains that were achieved in 2020 (that was my best year ever). Consequently, it doesn’t take much to push the sell button. The state of the economy makes us even more cautious. It is as though we have emerged from our bomb shelter to find a devastated landscape. The economy is rebuilding, but none of us have seen anything like this in our lifetimes, so it is hard to get our footing and invest confidently.

I have often had a mental image of myself in the markets as a mouse scurrying about on the ground amid a herd of elephants. That image reminds me to stay alert and remain focused on the risk. It is easy to be crushed when that herd of elephants stampedes.

The bottom line? I remain cautious but I can’t just hide under the bed and avoid these opportunities. I am focused on risk management even as the market seems to be setting records daily. I started the week 60% in cash and ended the week at 48%. I am cautiously returning to the table while limiting any potential downside damage.