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Category: Dr. Duke's Blog
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The Standard and Poors 500 index (SPX) came to life in today’s shortened trading session, closing up 40 points, or +1.1%, at 3825. But that wasn’t enough to save the week from a 1.2% loss. Trading volume remained below the 50 day moving average (dma) all week.

VIX, the volatility index for the S&P 500 options, was choppy but largely unchanged this week. VIX opened today at 29.5% and closed at 26.7%. It seems like we have been trapped in this “no man’s land” around 25% most of this year. Traders are nervous but not panicked.

I track the Russell 2000 index with the IWM ETF. IWM traded lower all week but recovered somewhat today, putting on over two points or +1.2%. But that could not save the week from a 2.4% loss.

The NASDAQ Composite index attempted a recovery today, just as we observed for the other broad market indices, but the gains were disappointing. NASDAQ closed today at 11,128, up 99 points or 0.9%. However, NASDAQ closed the week at a loss of 4.6%. Trading volume ran slightly above the 50 dma at 5.3 billion this week but dropped off today to close at 4.8 billion shares.

I have been observing the market weakness this year as a classic correction in an ongoing bullish market. Even after today’s attempted recovery, the 2022 market has incurred significant damage:
 
·      The S&P 500 index: -20%


·      The NASDAQ Composite: -29%


·      The Russell 2000 index: -23%



I am shifting my opinion of this market to a bearish downtrend. Instead of looking for the bullish recovery, I am on defense and will be actively looking for bearish trades to profit from the downward trend.



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 believe that style of trading will continue to do well in this environment so I am shifting investment cash to those trades. The upcoming earnings season will offer trading opportunities both before and after the announcements. I will be looking for more conservative income trades, e.g., deep ITM long term covered calls. This may be a good time for a vacation, or at least a pause in trading.

Enjoy this holiday weekend. Reflect on the exceptional freedom we enjoy in this country. Surrendering our freedom so the government can take care of us and tell us how to live is a poor bargain and will not lead to happiness.