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The Standard and Poors 500 index (SPX) closed Friday at 4079, down 11 points on the day or -0.3%. SPX opened the week at 4097 for a weekly loss of 0.4%. Resistance at 4100 was set by the failed rallies in December and that level was solidly broken with a high at 4195 on February 2nd. This week witnessed a rally attempt that made it to 4150 before faltering and closing well below support at 4100. Trading volume ran below the 50-day moving average (dma) all week.

VIX, the volatility index for the S&P 500 options, opened the week at 21.7% and declined to 18.1% on Wednesday. Comments from a couple of the FOMC members on Thursday spiked volatility to 20.3%. VIX declined on Friday to close down slightly lower at 20.0%.

I track the Russell 2000 index with the IWM ETF, which closed Friday at 193.13, up 0.3% on the day, but up 1.4% for the week. IWM had a remarkable week, posting positive trading gains every day this week. In contrast to the S&P 500 index, IWM found support at the failed rally highs of November and December and steadily climbed higher this week.

The NASDAQ Composite index closed at 11,787 yesterday with a loss of 69 points or -0.6%. NASDAQ trended higher the first three days of this week but declined with the S&P 500 index on Thursday and Friday. NASDAQ’s trading volume ran below the 50 dma all week. Unlike SPX, NASDAQ remains well above the support levels of the failed rally attempts in November and December.

Comments from two FOMC committee members threw cold water on the market on Thursday, renewing fears that additional rate hikes are in store. Of course, the strong numbers from the CPI and PPI reports didn’t help. Those reports support the Fed’s case that more rate hikes may be required to get inflation to subside. The next Fed discount rate announcement is scheduled for March 22nd.
The most encouraging sign in the markets this week is the strength shown in the Russell 2000 this week. Those small to midcap stocks are the classic high beta stocks that the large funds tend to move into when they foresee a bullish market.
Trading volume has again fallen below the 50 dma. Note the spiking trading volume around February 2nd when the market broke through resistance to the upside. That money has returned to safety.
I will be watching the markets carefully on Tuesday for signs of strength. I noted the long lower shadows on the SPX and NASDAQ candlesticks for Friday. That often shows that traders sold off and drove prices lower but then met a group of buyers who found those prices attractive. We will see if that action follows through on Tuesday.
This market looks somewhat better than last week, but it is entirely too early to say the bear market is over. Stay vigilant.