The Standard and Poors 500 index (SPX) closed today at 5204, up 57 points or 1.1%. SPX opened the week at 5258, losing one percent for the week. Yesterday’s tumble was severe and may have been triggered by the interviews of two FOMC members who doubted that rate cuts were coming soon, if at all, this year. That spooked the market, although SPX did recover about half of the losses today. Trading volume just did reach the 50-day moving average (dma) yesterday but ran well below average for the rest of the week.
VIX, the volatility index for the S&P 500 options, closed today at 16.0%, down 0.3 points or 2%. VIX hit highs of 16.9% yesterday and 16.8% today, after opening the week at 13.6%.
I track the Russell 2000 index with the IWM ETF, which closed today at 204.5, down less than one point on the day, but IWM ended the week with a 3% loss. IWM remains well below last week’s highs and below its all-time high of 237 from 2021.
The NASDAQ Composite index closed today at 16,249, up 199 points or +1.2%. NASDAQ opened the week at 16,397 for a weekly loss of one percent. Trading volume followed the same pattern as SPX, running well below average all week with the exception of yesterday when it barely exceeded the 50 dma. Today’s trading volume on NASDAQ was very low. I am unsure why.
The broad market indices have been trending sideways in a tight channel for the last several trading sessions. But this market is apparently very nervous, judging from yesterday’s severe decline. The relatively high levels of VIX suggested as much recently, failing to decline very far in spite of a pretty strong run since November. The large institutional traders appear to be sitting on the sidelines, judging from the trading volume. Even in yesterday’s debacle, volume was running at or below the 50 dma.
I noted the relative weakness of the Russell 2000 index about two weeks ago. “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 warning us not to get too far out on our skis in this market.”
Yesterday’s midday collapse is ample evidence of this nervous market. SPX managed to recover about half of yesterday’s losses in trading this morning. However, even those advances were timid.
The tentative nature of this market results in higher option premiums, so those of you that like to sell options for income are probably profiting, but many stocks are somewhat schizophrenic: up today and down tomorrow. It makes for a nervous ride.