The Standard and Poors 500 index (SPX) closed today at 5347, down 6 points or +0.1%. However, SPX was up nearly one percent for the week. SPX set a new all-time high on Wednesday, and the index chopped sideways the balance of the week. Trading volume declined steadily all week, remaining below the 50-day moving average (dma).

VIX, the volatility index for the S&P 500 options, opened the week at 13.1% and spiked up to 14.3% on Monday, but declined the rest of the week to close today at 12.2%. This level of volatility is moderately high for a bullish market; this market is nervous and ready to sell to preserve gains on any pretext.

I track the Russell 2000 index with the IWM ETF, which closed today at 201.2, down 2.3 points or -1.1%. IWM opened the week at 207.5 for a weekly loss of 3.0%. IWM broke down through its 50 dma today. SPX and NASDAQ are setting new market highs, but the Russell 2000 index is declining.

The NASDAQ Composite index closed today at 17,133, down 40 points or -0.2%. NASDAQ opened the week at 16,866 for a weekly gain of 1.6 percent. Trading volume ran below the 50 dma all week, similar to the S&P 500 index.

The market continues to be obsessed with real or imagined signals from Powell and the other members of the FOMC. Nearly all of the large moves in the market this year, higher or lower, have been triggered by perceptions of the Fed’s plans for interest rates. The street sees rate reductions as a return to easy money, economic expansion and a strong stock market. That promise is always appealing. The CME FedWatch now rates the probability of a rate reduction in the FOMC meeting in September at 71%. That estimate is up from 47% the previous week. That appeared to trigger Wednesday’s strong move higher. This bullish move is being led by a small number of high-tech stocks. While the S&P 500 and the NASDAQ were setting new all-time highs, the small cap stocks of the Russell 2000 index broke down through the 50 dma.

This bull market is fragile. If the large players were really confident, we would see strong buying of the high beta stocks of the Russell 2000. This market is riding on the backs of the so-called Magnificent Seven. That is probably the explanation of the below average and declining trading volume on SPX and NASDAQ.

It doesn’t make sense to sit on the sidelines but keep the fragility of this market in mind. Keep a close watch on your positions.