Category: Dr. Duke's Blog
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The Standard and Poors 500 index (SPX) gapped open and traded higher today, closing up 73 points at 3863 for an increase of 1.9%. That almost made up for the losses from earlier in the week, resulting in a weekly decline of 0.5%. Trading volume increased this week but remained below the 50-day moving average (dma). Below average trading volume remains a negative factor for this market.

VIX, the volatility index for the S&P 500 options, closed down over two points today at 24.2%, down over 8% for the week. Volatility seems to be on a see saw, remaining around 25% at best week after week. To my mind, that connotes nervous institutions.

I track the Russell 2000 index with the IWM ETF. IWM gapped open and rose today, closing up at 173.09, a 2.1% increase. But IWM remained down over 0.7% for the week. IWM remains well below its 50 dma.

The NASDAQ Composite index followed the lead of the other broad market indices today, closing up 201 points or nearly two percent higher, but is down almost one percent for the week. NASDAQ, like all of the broad market indices, remains well below its 50 dma. NASDAQ’s trading volume was flat this week and well below its well 50 dma.

We seem to be just chopping sideways at this point. The bulls and bears are relatively well balanced. Inflation remains a central concern but the Fed’s moves to raise interest rates as the cure for inflation is another major worry for traders. This week’s CPI and PPI numbers continue higher and the FOMC’s July meeting will almost certainly raise the discount rate; it is only a matter of how much. Will the Fed cure inflation by causing a recession?

I remain largely in cash; my only active trades are the SPX condors of the Flying With The Condor™ service, up 26% this year. I opened a calendar spread on AAPL to play the implied volatility rise in advance of its earning announcement on 7/28. That is working out very well for us.

I remain cautious. It is safer on the sidelines.