The Standard and Poors 500 index (SPX) plunged today, closing at 6553, down 183 points or 2.7%. SPX opened the week at 6734 for a loss of 2.7% for the week. Trading volume ran along the 50 dma all week but spiked higher today as the market sold off. The S&P 500 index has not traded off this badly since the correction in early April.
VIX, the volatility index for the S&P 500 options, opened the week at 16.7% and traded sideways most of the week, closing Thursday at 16.4%. However, today’s sell-off spiked volatility to a close of 21.7%.
I track the movement of the ETF containing the top 100 S&P 500 stocks ranked by beta, SPHB, to monitor the movement of high beta stocks. SPHB closed at 107.5 today, down 5.4 points or 4.8%. SPHB opened the week at 113.7 for a weekly decline of 5.5%. SPHB trading volume spiked up 274% today.
The NASDAQ Composite index collapsed today, closing at 22,204, down 820 points or 3.6%. NASDAQ opened the week at 22,894, losing 3.0% for the week. Trading volume ran steadily above the 50 dma all week and didn’t even spike higher with the market sell-off today.
Since the market correction hit its low in early April, the market has steadily trended higher, in spite of multiple uncertainties: tariffs, political tension, deportation of illegal immigrants, etc. After the cease fire announcement in the middle east yesterday, I assumed a strong market would make its showing today. That prediction lasted until just before 11 am ET, when news of increased tariff tensions with China hit the markets. From that moment until the close of trading the S&P 500 lost over 2.7%. Ugly!
The federal government remains closed, eliminating significant economic and unemployment data. Shortly before the shutdown, the third and final estimate of second quarter GDP growth came in at +3.8%. That was impressive, but now it seems we are trading largely in the dark in terms of economic and unemployment data.
I have often cautioned my clients about event risk. It is always a surprise and it can really hurt, just as it did today. When these market sell-offs occur on Fridays, analysts always speculate:
• Will calmer minds dominate trading on Monday morning?
• Will the lower prices be seen as buying opportunities?
• Could the market slide continue lower?
Stay calm and look for opportunities, but don’t force the trade. It doesn’t hurt to take a pause.