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Category: Dr. Duke's Blog
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The Standard and Poors 500 index (SPX) began to show signs of life on June 17th and continued that recovery through today with a increase of 116 points to close at 3912, up 3.1% for the day and 5.3% for the week. Trading volume remained close to or below the 50 day moving average (dma) until spiking much higher today, reaffirming today’s strong gap opening and large recovery push.

VIX, the volatility index for the S&P 500 options, opened this week at 31% and steadily declined to close today at 27%. However, this level of volatility is far from benign. VIX opened 2022 just under 18% and even that level was somewhat elevated compared to the VIX prior to the 35% crash in March 2020.

The NASDAQ Composite index followed the lead of the other broad market indices today, gapping open higher and continuing the bullish run, closing up 3.3% at 11,608 and up 8.5% for the week. This might have qualified for a “follow through day" to confirm the resumption of an uptrend in the IBD methodology, but the trading volume was disappointing at 4.4 billion shares, well short of the 50 dma at 5.1 billion.

The 2022 market correction now stands at significant levels:
 
·      The S&P 500 index: -24%


·      The NASDAQ Composite: -32%


·      The Russell 2000 index: -28%



The question on everyone’s mind is whether this week’s trading marks the bottom of this correction. That assumes we remain in a bullish market. Unfortunately, there is a less pleasant answer. We could be transitioning to a recession with the accompanying bear market and we are simply observing the classic lower highs and lower lows of the bearish trend.

 I was certainly of the bullish persuasion in late March as the market appeared to be recovering to return to the highs earlier in the year. Instead, the S&P 500 collapsed to new lows in early May, and then lower again in late May, and then took another step lower in mid-June.
 
I am currently almost entirely in cash; my only active trades are the SPX condors of the Flying With The Condor™ service, up 26% this year. I opened two earnings trades on FDX for the trading group subscribers yesterday and closed them for modest gains today. I remain unconvinced that the bull market has resumed. It is safer on the sidelines.