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The Standard and Poors 500 index (SPX) closed today at 4299, up 5 points on the day or +0.1%. SPX closed the week at a gain of 0.4%. Trading volume has returned to its track under the 50-day moving average (dma).

VIX, the volatility index for the S&P 500 options, closed today at 13.8%, down 10% for the week. We haven’t seen volatility this low since January of 2020, just before the Covid lockdown correction. Should we be concerned?

I track the Russell 2000 index with the IWM ETF, which closed today at 185, up 1.5 points or +0.8% on the day. IWM closed the week with a gain of 2.3%. The small cap stocks of the Russell 2000 are now moving more in line with the S&P 500. It has traded strongly higher over the past two weeks, including two gap openings higher, but it remains well below the highs of February.

The NASDAQ Composite index closed at 13,259 today, barely up on the day but up almost two percent for the week. SPX and NASDAQ have now broken their February highs, but NASDAQ solidly broke out above its August 2022 highs this week. NASDAQ is leading this latest market rally. However, NASDAQ’s trading volume fell off significantly this week, closing the week with 3.5 billion shares traded versus the 50 dma at 4.6 billion.

NASDAQ’s price action has been much stronger and steadier since early May, having now broken the August highs from last year. The S&P 500 is threatening those highs but has not managed to break through as yet. Trading volume on both indices is weak. This bullish trend is a welcome relief but a lot of money is waiting patiently on the sidelines.

Market volatility, as measured by the VIX on the S&P 500, is now at lows unmatched since January of 2020, just before we slid off the Covid shutdown cliff in March. Low levels for VIX certainly show large institutional investors complacency, but we don’t have any clear signals of a strong, “risk on” posture either. It would take very little to crush this rally, e.g., another bank failure?

My trades are doing well; the Flying With The Condor™ service is up 26% on the year, and the trading group meeting last evening reviewed 12 positions we had opened since the previous meeting in May. One contract entered in each position would be up $1,114 over the past month.

However, I will continue to watch this market very carefully. The party could end quickly.