The Standard and Poors 500 index (SPX) closed today at 5234, down 7 points or -0.1%. SPX opened the week at 5155, gaining 1.5% this week. Today’s weakness may have resulted from the FOMC chairman’s speech today. Many traders naively expect Powell to give them a schedule for rate cuts. Trading volume ran well below the 50-day moving average (dma) for the entire week.

VIX, the volatility index for the S&P 500 options, closed today at 13.1% after opening the week at 14.8%.

I track the Russell 2000 index with the IWM ETF, which closed today at 205.1, down almost three points on the day but ended the week with a 1.3% gain. IWM remains near its recent highs set this week around 208 to 209, but remains below its all-time high of 237 from 2021.

The NASDAQ Composite index closed today at 16,429, up 27 points or +0.2%. NASDAQ opened the week at 16,155 for a weekly gain of 1.7%. NASDAQ’s trading volume followed the same pattern as SPX, running well below the 50 dma all week.

The S&P 500 stocks rallied strongly on Wednesday after the FOMC failed to lower the discount rate. That may seem surprising, but the Fed’s reluctance to raise rates higher was a relief for traders. Ever since the December meeting of the FOMC, the institutional traders have been convinced that rates would be declining as early as the first quarter of this year. The FOMC has published the predictions from the committee members of many economic data points with the report issued after every meeting. Traders did not pay much attention to the so-called “dot plot” in the past. After all, what confidence do we have that anyone knows the rate of inflation, interest rates, unemployment and other data for the next four quarters? However, I have noted several authors referring to that dot plot as the Fed’s projection of future interest rates.



The implied volatility of the S&P index, as measured by VIX, declined this week, closing at 13.1%. In the current era of high inflation and extreme U.S. debt levels, the lowest VIX levels seem to be in the range of 12-13%.
The bull run we have witnessed since last November has been strong, but volatility remains relatively high. The other unusual characteristic of this market is the extremely low trading volume. The S&P 500 index and NASDAQ Composite have been trading with volume generally below the 50 dma this year with only a few exceptions. Trading volume ran below average this week on both broad market indices.

I keep a close eye on the Russell 2000 index, as measured by IWM, because the small and mid-cap stocks normally lead bull markets. IWM has been pretty weak for the past 2-3 weeks, even while the broad market indices have continued to advance. A weak Russell 2000 together with below average trading volume are a warning us to not get too far out on our skis in this market.