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We were treated to a classic retest of the previous correction low this week, with the Standard and Poors 500 index (SPX) reaching a intraday low yesterday of 4115, for a correction of 14% since the open on January 4th. SPX came off that low yesterday very strongly and that performance was followed by a gap opening higher this morning and a gain of 96 points or +2.2% to close at 4385. Of course, that leaves us with the question of whether this is the last retest or, worse yet, will we break through at some point and try for 20% down? Trading volume of the S&P 500 companies was above average most of the week with a spike yesterday.

VIX, the volatility index for the S&P 500 options, spiked up to an intraday high of 38% on Thursday, but ended the day just above 30%. VIX opened this morning at 32% and closed down at 27.6%.

I track the Russell 2000 index with the IWM ETF. IWM closed today at 202.50, up 4.46 points, up 2.3% on the day. The gains of the past two days were sufficient to leave IWM in the black by +0.7% for the week.

The NASDAQ Composite index closed today at 13,695, up 201 points or 0.7%. NASDAQ opened the week at 13,735, so even the strong gains over the past two days could not quite make up for the losses earlier in the week.

Trading in the last week of January seemed to be concluding that a correction of 11% was about right. This week’s trading seems to suggest 14% is a better estimate. Traders have many worries on their minds: the Ukraine crisis, the economic effects of relaxing Covid restrictions, very high inflation rates and higher interest rates resulting from the FOMC meeting in March.

All in all, remaining largely in cash and being very conservative with your investments remain sound advice.