The Standard and Poors 500 index (SPX) impressed us last Friday and that run continued this week, faltered yesterday and collapsed today with SPX losing 22 points or 0.5% to close at 4328. We opened the week at 4289 for a weekly gain of 0.9%. However, at Thursday’s open the S&P 500 was up 2.1%. Trading volume came in above the 50 day moving average (dma) yesterday 
and today.

VIX, the volatility index for the S&P 500 options, closed today at 19.3%, after spiking to 21% earlier in the day. This intraday spike matched last Wednesday’s VIX spike and makes me wonder if we are headed lower.

I track the Russell 2000 index with the IWM ETF, which closed today at 170.3, down 1.4 points or 0.8%. IWM’s low today was 169.7, essentially matching last Friday’s low of 169.5. IWM has lost everything it gained in this recent rally. Another day of losses may signal the beginning of another downturn.

The NASDAQ Composite index closed today at 13,407, down 167 points or 
1.2%. NASDAQ opened the week at 13,326 for a weekly gain of 0.6%. NASDAQ broke above the 50 dma on Wednesday, fell back below the 50 dma yesterday and extended that loss today. Trading volume on NASDAQ fell well below average today.

The S&P 500 roared higher last Friday and that large move convinced IBD to declare the correction to be over and moved to a market assessment of Confirmed Uptrend. Friday’s rally continued into this week, took a breather yesterday, and may have fallen out of bed today. IBD reassessed the market after the close today and moved to Uptrend Under Pressure. Indeed.

The turn lower on SPX and NASDAQ today wasn’t severe, but the Russell 2000 really took it on the chin, effectively surrendering all of the gains since last Friday.

The talking heads attributed the weakness to CPI coming in at +0.4%, down from 0.6%. You would think that was a positive sign of inflation declining. But apparently some economists had expected CPI to decline to an increase of 0.3%. As is often the case, the talking heads don’t have a clue.

The optimists would point out that the correction low is often retested and sometimes more than once before the new upward trend begins. 

I entered several new trades this week and that may have been premature. I aggressively rolled out several positions today to reduce the capital at risk. We’ll see what happens on Monday.