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The Standard and Poors 500 index (SPX) opened and ended this week on positive notes, but the price action in between was unimpressive. SPX closed today at 4432, up 105 points or 2.4%. SPX opened the week at 4356, posting a weak 1.7% weekly gain. Monday’s price action was very bullish with SPX trading as low as 4223 before strongly recovering to close at 4410. Normally I would have jumped on that bullish signal, but I wasn’t tempted for two reasons: 1) it just looked too good to be true, and 2) the FOMC meeting was looming. Who trades ahead of that event? The next three days slowly trended lower. But SPX tried to put a good face on it and traded strongly enough today to post a positive week. However, SPX remains under the 200 day-moving-average (200 dma).

Trading volume of the S&P 500 companies ran above the 50-day moving average (dma) all week, Trading volume spiked quite high on Monday’s turnaround trading session.

VIX, the volatility index for the S&P 500 options, closed at 27.7% today, down almost three points. VIX opened the week at 28.2%, so volatility spiked in the middle of the week but ended the week nearly unchanged. No one is taking off those put options just yet.

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 closed today at 195.25, up 3.73 points or +2%. The low point of IWM trading today was 188.09 which broke below the low for all of 2021. Note that IWM has yet to post a correction low – it broke Monday’s low today. If you are looking to the Russell 2000 for hope, you are looking in the wrong place.

The NASDAQ Composite index closed today at 13,771, up 418 points or 3.1%. NASDAQ opened this week at 13,482, completing a modest weekly gain of 2%. Trading volume spiked on Monday but remained flat the balance of the week, running along the 50 dma.

It has been excruciating to just sit on my hands for the past 2-3 weeks, but it beats losing money. All of my accounts are totally in cash. When you consider the summaries above of the S&P 500, IWM and NASDAQ, it doesn’t look like we are out of the woods. Only the perennial bulls could find confidence in this market.

When we add Fed actions to control inflation, the picture becomes even more bearish. The FOMC has previously discussed the discount rate cure for inflation as occurring sometime later this year or even in 2023. But we learned this week that the Fed plans to raise the discount rate at the March meeting and terminate all bond purchases at that time. Imagine what a series of two or three sequential discount rate increases will have on the markets. That means serious tightening on economic growth. Market prices are beginning to reflect that prospect.