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This month’s CPI and PPI reports encouraged traders and the Standard and Poors 500 index (SPX) gapped open on Wednesday and traded higher to close Friday at 4280, up 3% for the week. However, the S&P 500’s trading volume declined steadily all week, remaining below the 50-day moving average (dma).

VIX, the volatility index for the S&P 500 options, opened the week at 21.7% and closed Friday at 19.5%. VIX has been steadily trending lower since its recent peak in June. Friday’s close is the lowest level of volatility since April.

I track the Russell 2000 index with the IWM ETF. IWM closed at 200.36 Friday, up 4.01 points or 2.0% on the day and up 4.3% for the week. Friday’s gain broke through the 200 dma. Historically, the small to mid-cap stocks lead market rallies and that certainly played out this week with a strong run for IWM.

The NASDAQ Composite index closed Friday at 13,047 , up 267 points or 2.1% for the day and up 2.7% for the week. NASDAQ broke another resistance level on Friday that was established back in late April and early May. NASDAQ’s trading volume ran at or above the 50 dma all week but fell below average on Friday.

The current bullish trend began after the FOMC announcement two weeks ago and was fueled by a strong jobs report for July. The market paused for the CPI and PPI reports this week and traded strongly higher based on signs of a slowing rate of inflation. All of the broad market indices have now broken through the highs of the failed June recovery.

I will be actively looking for bullish trade candidates this week.