The Standard and Poors 500 index (SPX) closed today at 5639, up 117 points or 2.1%. SPX opened the week at 5705, down 1.2% for the week. SPX finally bounced higher today, but trading volume was below the 50 dma.

VIX, the volatility index for the S&P 500 options, opened the week at 24.7%, spiked up to 29.6%, but declined the rest of the week, closing at 21.8%, down 2.8 points on Friday.

I track the Russell 2000 index with the IWM ETF, which closed today at 203, up 4.8 points or 2.4%. IWM opened the week at 203, unchanged for the week. IWM’s trading volume was above average all week.

The NASDAQ Composite index closed today at 17,754, up 451 points or 
2.6%. NASDAQ opened the week at 17,840, setting up a weekly loss of 0.5%. NASDAQ’s trading volume was running below the 50 dma this week.
 
The conventional wisdom of the technical analysts has traditionally viewed corrections as declines equal to or greater than 10%. The NASDAQ and the Russell 2000 hit correction territory last week, and the S&P 500 joined them this week, although it did recover somewhat on Friday.

Trading volume is another parameter to watch as we assess the markets. SPX’s volume ran above its 50 dma most of the week but dropped below the 50 dma on Friday. The trading volume of the Russell 2000 continues to exceed its 50 dma. The trading volume of the NASDAQ Composite dropped below its 50 dma on Friday.

I use the Follow Through Day methodology developed by Investors Business Daily as an indicator of when it is time to begin to re-enter the market after a correction. The first thing we are watching for is a strong bullish day on above average trading volume on a broad market index like SPX or NASDAQ. Today’s bullish day on SPX and NASDAQ was on weak volume – so keep your powder dry.
 Jumping back in the market early can be dangerous.