The Standard and Poors 500 index (SPX) put in a tough week, declining 2.8% with a close today at 3924, down 42 points on the day or almost three percent. Trading volume spiked up above the 50 day moving average (dma) midweek but declined back below average today. This bearish pullback for August was almost entirely carried at below average trading volume. This suggests that the large institutional players are not convinced that it is time for wholesale closing of large portions of their holdings.

VIX, the volatility index for the S&P 500 options, moved over a wide range today, opening this morning at 25.6%, declining to 23.2% as the market traded higher this morning, and then closing at 25.5% after this afternoon’s selloff.

I track the Russell 2000 index with the IWM ETF. This was a rough week for IWM dropping nearly four percent on the week. IWM closed today at 180.09, down 0.8%. IWM found support yesterday and again today at 178.50, the lows of 
mid-July.

The NASDAQ Composite index was no exception to the selling pressure this week, closing 154 points to 11,631. Today’s close ended the week down 3.2%. NASDAQ’s trading volume remained below the 50 dma all week and declined even a bit further during today’s sell off.

The markets ended their recovery on August 17th and tried to recover a few days later, but Powell’s comments at Jackson Hole last Friday started a new downward trend, down over 8% through today’s close. The S&P 500, NASDAQ and the Russell 2000 all posted very similar chart patterns this week, with their intraday lows on Thursday and Friday finding support at nearly the same prices. That observation, together with lower trading volume may signal a slowing of this recent trend lower. Perhaps we will trade roughly sideways until the Fed meeting.
 
Consensus on the street was looking for the Fed to slow or even end its rate hikes for 2022, but Powell’s comments have shifted that consensus to an expectation of another 75 basis point move at their next meeting on September 20-21. Market participants are worrying about a “hard landing” for the economy, and by extension, much lower stock prices.
 
I think it wise to limit your exposure to this market until at least after the September FOMC meeting. A few exceptions may be found in the oil and gas sector, e.g., CVX and LNG. Watch your trades closely, if you trade at all.