The Standard and Poors index (SPX) looked good last week, closing near previous all-time highs. This week opened with traders worrying about the upcoming FOMC meeting and what they would say about inflation. After the announcement and press conference Wednesday, SPX spiked back to match last Friday’s closing high. Apparently, traders liked what they heard. But they must have changed their minds upon further reflection. Thursday’s trading gave back much of Wednesday’s gains. Then the market gapped open lower on Friday and traded down to the 50-day moving average (dma) before bouncing modestly to close at $4621, down 1% on Friday and down nearly two percent for the week. The fact that SPX did not break the 50 dma was the only bright spot this week.

Once each quarter the stock index futures, stock index options, stock options and single stock futures all expire on the same Friday. We call this quadruple witching and the fourth quarter event occurred Friday. Consequently, SPX trading volume spiked to the second highest level this year, 4.4 billion shares, with the 50 dma at 2.3 billion shares.

VIX, the volatility index for the S&P 500 options, closed at 21.6% today, after opening at 19.3% on Monday. Last week, I would have tentatively suggested this most recent pull back was behind us, but Friday’s decline in the market and the accompanying rise in volatility suggest otherwise. If I put on my rose-colored glasses, VIX has essentially tracked sideways, but that is weak even for an optimist.

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. The Russell 2000 index has been the canary in the coal mine for these recent pull backs, declining quite consistently over the past six weeks. IWM closed yesterday at 215.14, up 1.96 or +0.9%. Even with yesterday’s move higher, IWM finished the week down 1.5%.

The NASDAQ Composite index closed Friday at 15,170 , down 11 points, essentially unchanged. NASDAQ opened the week at 15,621, setting up a loss of 2.9 percent for the week. Trading volume ran close to the 50 dma this week, before spiking for quadruple witching on Friday with 8.0 billion shares traded; the 50 dma is 5.1 billion shares.

Last week in the markets gave me some hope that the pullback was behind us, and we could begin to see the commonly occurring year end rally, often called the Santa Claus rally. This week certainly put a dent in that expectation.

Wednesday’s strong market recovery after the Fed meeting was sufficient to push Investors Business Daily (IBD) to move from Market In Correction to Confirmed Uptrend. I wonder if they have misgivings about that move. On Friday, they moved their market assessment to Uptrend Under Pressure. I’m not the only person being whipsawed by this market.

One of the fundamental measures of a stock or market index’s health is its position relative to its 50 dma. The S&P 500 index is 0.4% above its 50 dma. That is barely above the 50 dma, but SPX is alone up there. The NASDAQ Composite is 1.8% below its 50 dma and the Russell 2000 index is 5.4% below its 50 dma! I normally don’t follow the Dow Jones Industrials index (too few stocks to analyze the total market), but I checked it out for this comparison – it stands 0.3% below its 50 dma. The bottom line isn’t attractive at all. I tend to be a reasonably positive person, but it is hard to be optimistic here.

I closed all of the positions in the Conservative Income trading service yesterday and closed the last newsletter trade on December 7th. I only have three trades open in my trading group; one is solidly profitable; one is borderline, and one is likely to be closed Monday unless the Santa Claus rally shows up. In spite of these last several weeks, all of my trading services are finishing the year in the profit column. I think I will relax for the last two weeks of 2021 and wait for calmer weather.

Merry Christmas and Happy New Year!