The Standard and Poors index (SPX) made three new all-time highs this week, closing Friday at 4468, up 7 points on the day and up 0.7% for the week. The trading volume of the S&P companies ran below the 50-day moving average (dma) all week.
VIX, the volatility index for the S&P 500 options, opened the week at 17.1% and closed Friday at 15.5%. Historically, this doesn’t correspond to an “all clear” signal but it has not moved much lower this year.
I follow the prices of the IWM ETF to track the Russell 2000 index. The owners of Russell have priced everyone out of Russell 2000 index and option data. That is why I plot the IWM prices. IWM has been extremely choppy for the past six months and declined severely in mid-July. IWM closed Friday at 221.13, down 0.9% on the day and down 0.8% on the week. IWM has yet to recover its 50 dma at 224.54.
The NASDAQ Composite index traded sideways this week and closed Friday at 14823, up seven points or +0.04% on the day, but down 0.2% for the week. It gave some of that back on Friday, closing at 14836, down 0.4% on the day but remained up 0.5% for the week. NASDAQ’s trading volume traded almost perfectly sideways and ran below its 50 dma all week.
The S&P 500 and NASDAQ continue to trade higher this year, but with frequent and sudden pullbacks. As a consequence, it has been a frustrating market to trade. The bulls are banking on the economy recovering strongly from the economic lockdowns and the fear of inflation has been the principal concern for traders. The bearish behavior of the Russell 2000 is my principal concern with this market. I continue to trade cautiously but I am venturing out with a few more positions.
I started the week 74% in cash and ended the week at 58%.