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The Standard and Poors 500 index (SPX) certainly appeared to have found its footing this week, gaining just under 6% from last Friday through Wednesday of this week. But then it turned and bit us – ouch! SPX gapped open lower on Thursday and proceeded to lose over 2% in one day. SPX closed today at 4501, up 23 points or 0.5%. But Thursday’s loss took its toll on the week, resulting in a gain of 1.6% for the week. The only good thing I can say about today’s trading was that SPX appeared to find support at the 200 day moving average (dma).

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 198.38, up 0.85 points or +0.4%. IWM was up 3.5% for the week, but that is where the good news ends. IWM remains over 15 points, or nearly 8% below the 50 dma. The Russell 2000 is not giving us a strong bullish signal. It was looking rather weak even before Thursday’s loss.

The NASDAQ Composite index closed today at 14,098 , up 219 points or 1.6%. NASDAQ opened this week at 13,437, completing a strong weekly gain of 5%. But NASDAQ remains 637 points below its 200 dma. NASDAQ would have to tack on another 5% just to recover its 200 dma. Trading volume declined steadily all week.

Watching the S&P 500 index put on such a bullish performance from last Friday through Wednesday was mesmerizing and probably convinced many of us to jump back on the bullish train. I sold a SPY put on Wednesday, only to close it the next day. I told my clients I was sticking my toe in the water, but something bit it off!

Today’s price action was not very reassuring. Yes, it was generally positive and SPX appeared to find support at its 200 dma. But that is weak praise. Only the perennial bulls could find confidence in this market. I think the results of the last FOMC meeting are still scaring traders. The levels of inflation we are seeing are indeed scary. The Fed’s proposed actions to control inflation may be required, but bitter, medicine. It is hard to find a bull market in the midst of inflation, continued lockdowns, the end of the Fed’s bond purchases, and prospects of one or more discount rate hikes on the horizon.