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The most recent plunge for the Standard and Poors 500 index (SPX) began on June 9th and hit an intraday low Thursday at 3640, down 24% for the year. Friday’s trading was somewhat more positive with a modest gain of eight points or 0.2%. The S&P 500 stocks ended the week with a 4.2% loss. Trading volume spiked Friday on quadruple witching.

VIX, the volatility index for the S&P 500 options, began a spike higher on June 9th at 24%, peaking on June 13th at 35%. VIX closed Friday at 31%, with volatile readings this week, but ending unchanged from Monday’s open.

I track the Russell 2000 index with the IWM ETF. IWM was modestly higher on Friday at 165.18, gaining 1.3 points or +0.8%. IWM opened the week at 173.63 for a decline of 4.9%.

The NASDAQ Composite index recovered slightly on Friday, closing at 10,798, up 152 points or 1.4% but down 1.7% for the week. Trading volume spiked Friday on quadruple witching.

Summarizing the 2022 market to date:
·      The S&P 500 index: -24%
·      The NASDAQ Composite: -32%
·      The Russell 2000 index: -28%

It goes without saying that the major driving forces for this correction are:
·      Record levels of inflation
·      Record oil prices
·      Rising interest rates
·      Fear of a recession

The Federal Open Markets Committee (FOMC, or the Fed) continued their raising of the discount rate for Federal funds, increasing it by 75 basis points on Wednesday. The size of that increase surprised the market and resulted in Thursday’s sell-off. Raising interest rates is designed to slow the economy and thus slow wage and price increases. The Fed is also selling treasury bonds and other securities in their portfolio to decrease the money supply, an additional upward pressure on interest rates.
Technical analysts watch for a trading volume spike at a market low that may be interpreted as “capitulation”, the last surge of selling that represents a large number of stockholders throwing in the towel. Thursday’s low on above average trading volume may have represented that capitulation low, but that certainly wasn’t confirmed by the modest rise in the markets Friday.

I am almost entirely in cash at this point, and I am not anxious to enter any new trades. I have too many scars this year from trying to jump back into the market.