The Standard and Poors 500 index (SPX) closed today at 6932, up 134 points for a gain of 2%. SPX opened the week at 6917, setting up a weekly gain of 0.2%. SPX broke down through the 50 dma yesterday but recovered that line very strongly today. Trading volume ran above average for the week.

VIX, the volatility index for the S&P 500 options, spiked up over 23% yesterday, opened this morning at 21.2%, and declined all day to close at 17.8%. Today’s close remains relatively high but the move lower was dramatic.

I monitor the movement of high beta stocks by tracking the ETF containing the top 100 S&P 500 stocks ranked by beta, SPHB. SPHB gapped open this morning and closed at 123.0, up over five points or +4.4%. SPHB opened the week at 123.5, setting up a weekly gain of 0.4%. Trading volume was above average from Wednesday on. SPHB broke its 50 dma yesterday but nearly reached its recent high today. 

The NASDAQ Composite index closed today at 23,515, down 15 points or 
-0.06%. NASDAQ opened the week at 23,517, setting up a weekly loss of 0.3%. NASDAQ’s trading volume has been quite low since mid-December but finally ran above the 50 dma all week. 

The Stock Trader’s Almanac calls the three January indicators for the year the January Trifecta. The Santa Claus rally (the last five trading days in December plus the first two trading days in January), failed this year with a decline of 0.03% on the S&P 500. The first five days of trading in January was positive at +0.6%. A positive first five days of January has an 83% correlation over the past 48 years with a positive market for the year. The January barometer, the entire month's trading results, was saved by today’s huge move (up 0.8% for the month). This leaves us with two of the key technical indicators pointing to a positive year in this year’s market. When all three indicators are positive, the S&P 500 has been for the year up 91% of the time; when only two indicators are positive the success rate of this prediction drops to 61%.

The economic data have been generally solid and growing. But the market has been very volatile. In my opinion, this is principally due to the extreme political uncertainties we face today. The large institutions and hedge funds are easily spooked, as they were this week. But they quickly recover and trade higher. I count 6 cycles on the S&P 500 chart since early October. This market reminds me of my favorite metaphor for the market:  We small retail traders are like mice running through a stampede of elephants. Don’t be spooked. Follow your rules. Discipline is crucial.