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The Standard and Poors index (SPX) set new all-time highs this week on Thursday and Friday, closing the week at 4605 for a weekly gain of 1.1%. It is hard to overstate how strong this recovery has been since the last pull back. Trading volume has reinforced this bullish run, starting below the 50-day moving average (dma) on Monday, but then exceeding the 50 dma in increasing magnitude all week.

VIX, the volatility index for the S&P 500 options, opened the week at 16.1% and closed Friday at 16.3%, essentially unchanged for the week. VIX moved higher Tuesday and Wednesday but declined over the last two trading sessions of the week. Historically, this level of volatility remains moderately high. Some are suggesting this represents low volatility based on the averages since the beginning of the pandemic. I continue to view this level of volatility with caution.

I track the Russell 2000 index with the IWM ETF. The owners of Russell have priced everyone out of the 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 that trading pattern continues. While the S&P 500 has moved up over 7% since the bottom of the pullback on October 4th and set two new all-time highs this week, IWM remains two percent below its recent high. IWM has not even recovered the high it set on Monday. The market’s high beta stocks are not leading this charge. This is bearish.

The NASDAQ Composite index is matching the performance of the S&P 500 this week, setting two all-time highs and closing at 15498 on Friday, up 50 points. NASDAQ’s trading volume ran above the 50 dma all week but peaked on Tuesday and declined thereafter.

The S&P 500 and NASDAQ are on fire, but the Russell 2000 continues to lag behind. When I read and listen to the daily news, I don’t come away optimistic and bullish on our economic future. But the markets are setting new all-time highs. This doesn’t seem consistent. I admit to a bit of stubbornness. I prefer to think of it as tenacity. I do not understand the economic underpinnings of this market and I remain very cautious. A correction appears to be a rational expectation.