The Standard and Poors 500 index (SPX) closed Friday at 4046, up 64 points on the day or +1.6%. SPX opened the week at 3992 for a weekly gain of 1.4%. With the exception of Tuesday, trading volume ran below the 50-day moving average (dma) all week.

VIX, the volatility index for the S&P 500 options, closed Friday at 18.5%. VIX opened the week at 22% and declined steadily. Before I run off on a bullish charge, I have reminded myself that we have seen VIX at these levels several times this year. This market remains volatile and dangerous.

I track the Russell 2000 index with the IWM ETF, which closed Friday at 191.50, up 2.6 points or 1.4% on the day and up 1.3% for the week. Friday’s trading decisively broke out above the failed rally highs of November and December.

The NASDAQ Composite index closed at 11,689 yesterday with a gain of 226 points or +2%. NASDAQ found support at 11,500 on Tuesday but solidly broke through that level on Friday. NASDAQ’s trading volume ran along the 50 dma all week.

The market decline that began in the first week of February may have found support this week and led to large gains on Thursday and Friday. However, Jerome Powell will be speaking to Congress on Monday, and his comments could change everything.
 
The S&P 500 index, the NASDAQ Composite, and the Russell 2000 all gained about one and a half percent this week. Traders were closely watching the resistance levels established in November and December by the failed recovery highs. NASDAQ and Russell broke those levels last week, but the S&P 500 index lags behind.
 
The consensus of economists is for a 50 basis point increase in the federal discount rate at the FOMC meeting later this month. The announcement is scheduled for 3/22. The market is focused on two issues:



·      The need to get inflation under control.



·      The concern that the Fed may raise rates too aggressively and drive the economy into recession.



Powell’s comments before Congress on Monday will be watched very closely and will likely result in market volatility. Don’t go too far out on the thin ice. Stay cautious.