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The Standard and Poors 500 index (SPX) initially traded higher yesterday, but then retreated, closing down 37 points at 3962 for an decline of nearly one percent. But the week remained positive, trading up 2% from the week’s open at 3884. The S&P 500’s trading volume remained below the 50-day moving average (dma) all week. Lower than average trading volume remains a negative factor for this market.
VIX, the volatility index for the S&P 500 options, closed down yesterday at 23%, down over 7% for the week. Volatility seems to be on a see saw, remaining in the mid-twenties plus or minus a couple of points week after week. To my mind, that connotes nervous institutions.
I track the Russell 2000 index with the IWM ETF. IWM declined yesterday, closing at 179.51, a decrease of nearly two percent. But IWM remained up by 2.5% for the week. IWM finally recovered its 50 dma this week.
The NASDAQ Composite index followed the lead of the other broad market indices yesterday, closing down 226 points at 11,835, nearly two percent lower. NASDAQ finally recovered its 50 dma this week. NASDAQ’s trading volume remains below its 50 dma.
The markets have recovered much of the previous losses and have finally recovered the 50 day moving averages, but we are far from where we started the year. Traders are worried about the effects of increasing inflation on the economy on the one hand and equally worried about the Fed raising interest too far and too fast and possibly pushing the economy into recession.
I remain largely in cash; my only longer term trades are the SPX condors of the Flying With The Condor™ service, up 25% this year. The calendar spread we opened on AAPL to play the implied volatility rise in advance of its earning announcement worked out very nicely.
I remain cautious. Don’t expose too much capital to this market.
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The Standard and Poors 500 index (SPX) gapped open and traded higher today, closing up 73 points at 3863 for an increase of 1.9%. That almost made up for the losses from earlier in the week, resulting in a weekly decline of 0.5%. Trading volume increased this week but remained below the 50-day moving average (dma). Below average trading volume remains a negative factor for this market.
VIX, the volatility index for the S&P 500 options, closed down over two points today at 24.2%, down over 8% for the week. Volatility seems to be on a see saw, remaining around 25% at best week after week. To my mind, that connotes nervous institutions.
I track the Russell 2000 index with the IWM ETF. IWM gapped open and rose today, closing up at 173.09, a 2.1% increase. But IWM remained down over 0.7% for the week. IWM remains well below its 50 dma.
The NASDAQ Composite index followed the lead of the other broad market indices today, closing up 201 points or nearly two percent higher, but is down almost one percent for the week. NASDAQ, like all of the broad market indices, remains well below its 50 dma. NASDAQ’s trading volume was flat this week and well below its well 50 dma.
We seem to be just chopping sideways at this point. The bulls and bears are relatively well balanced. Inflation remains a central concern but the Fed’s moves to raise interest rates as the cure for inflation is another major worry for traders. This week’s CPI and PPI numbers continue higher and the FOMC’s July meeting will almost certainly raise the discount rate; it is only a matter of how much. Will the Fed cure inflation by causing a recession?
I remain largely in cash; my only active trades are the SPX condors of the Flying With The Condor™ service, up 26% this year. I opened a calendar spread on AAPL to play the implied volatility rise in advance of its earning announcement on 7/28. That is working out very well for us.
I remain cautious. It is safer on the sidelines.
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The Standard and Poors 500 index (SPX) came to life in today’s shortened trading session, closing up 40 points, or +1.1%, at 3825. But that wasn’t enough to save the week from a 1.2% loss. Trading volume remained below the 50 day moving average (dma) all week.
VIX, the volatility index for the S&P 500 options, was choppy but largely unchanged this week. VIX opened today at 29.5% and closed at 26.7%. It seems like we have been trapped in this “no man’s land” around 25% most of this year. Traders are nervous but not panicked.
I track the Russell 2000 index with the IWM ETF. IWM traded lower all week but recovered somewhat today, putting on over two points or +1.2%. But that could not save the week from a 2.4% loss.
The NASDAQ Composite index attempted a recovery today, just as we observed for the other broad market indices, but the gains were disappointing. NASDAQ closed today at 11,128, up 99 points or 0.9%. However, NASDAQ closed the week at a loss of 4.6%. Trading volume ran slightly above the 50 dma at 5.3 billion this week but dropped off today to close at 4.8 billion shares.
I have been observing the market weakness this year as a classic correction in an ongoing bullish market. Even after today’s attempted recovery, the 2022 market has incurred significant damage:
· The S&P 500 index: -20%
· The NASDAQ Composite: -29%
· The Russell 2000 index: -23%
I am shifting my opinion of this market to a bearish downtrend. Instead of looking for the bullish recovery, I am on defense and will be actively looking for bearish trades to profit from the downward trend.
I am currently almost entirely in cash; my only active trades are the SPX condors of the Flying With The Condor™ service, up 26% this year. I believe that style of trading will continue to do well in this environment so I am shifting investment cash to those trades. The upcoming earnings season will offer trading opportunities both before and after the announcements. I will be looking for more conservative income trades, e.g., deep ITM long term covered calls. This may be a good time for a vacation, or at least a pause in trading.
Enjoy this holiday weekend. Reflect on the exceptional freedom we enjoy in this country. Surrendering our freedom so the government can take care of us and tell us how to live is a poor bargain and will not lead to happiness.
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The Standard and Poors 500 index (SPX) took a breather today from the recovery that began on July 1st, closing at 3899 with a slight decline of three points for a decrease of -0.08% for the day. SPX opened the shortened holiday week at 3793, resulting in a gain of 2.8% for the week. The index may be running into resistance at the high of the last attempted recovery in late June around 3921. Trading volume was anemic all week, running well below the 50-day moving average (dma). Declining volume during a recovery from the low for the year doesn’t show much conviction.
VIX, the volatility index for the S&P 500 options, opened this week at 27% and closed today one point lower at 26%. The market may be showing signs of life, but traders remain unconvinced.
I track the Russell 2000 index with the IWM ETF. IWM closed today essentially unchanged at 175.59, down 0.01% from yesterday’s close, but IWM managed a 4.1% gain for this four-day trading week. Seeing a strong rise out of the Russell 2000 index is encouraging but Russell is running into resistance from the highs set by the last recovery attempt, just as we see in the other broad market indices.
The NASDAQ Composite index followed the lead of the other broad market indices today, closing at 11,635, essentially unchanged from yesterday but up 6.1% for the week. However, before we get too excited, note the trading volume decline for the week. Today’s volume was a disappointing 3.6 billion shares, well below the 50 dma at 5.3 billion.
This reminds me of the film, Groundhog Day, where the day kept repeating itself. Several times this year I have thought the correction was over and the market was returning to at least a slightly bullish track. But each mini recovery has been followed by a lower low. So here we are again. The market has been trading steadily higher since the first of July but we have seen this movie before. Every one of the broad market indices are closing in on the last attempted recovery high. Will this time be different?
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The Standard and Poors 500 index (SPX) began to show signs of life on June 17th and continued that recovery through today with a increase of 116 points to close at 3912, up 3.1% for the day and 5.3% for the week. Trading volume remained close to or below the 50 day moving average (dma) until spiking much higher today, reaffirming today’s strong gap opening and large recovery push.
VIX, the volatility index for the S&P 500 options, opened this week at 31% and steadily declined to close today at 27%. However, this level of volatility is far from benign. VIX opened 2022 just under 18% and even that level was somewhat elevated compared to the VIX prior to the 35% crash in March 2020.
The NASDAQ Composite index followed the lead of the other broad market indices today, gapping open higher and continuing the bullish run, closing up 3.3% at 11,608 and up 8.5% for the week. This might have qualified for a “follow through day" to confirm the resumption of an uptrend in the IBD methodology, but the trading volume was disappointing at 4.4 billion shares, well short of the 50 dma at 5.1 billion.
The 2022 market correction now stands at significant levels:
· The S&P 500 index: -24%
· The NASDAQ Composite: -32%
· The Russell 2000 index: -28%
The question on everyone’s mind is whether this week’s trading marks the bottom of this correction. That assumes we remain in a bullish market. Unfortunately, there is a less pleasant answer. We could be transitioning to a recession with the accompanying bear market and we are simply observing the classic lower highs and lower lows of the bearish trend.
I was certainly of the bullish persuasion in late March as the market appeared to be recovering to return to the highs earlier in the year. Instead, the S&P 500 collapsed to new lows in early May, and then lower again in late May, and then took another step lower in mid-June.
I am currently almost entirely in cash; my only active trades are the SPX condors of the Flying With The Condor™ service, up 26% this year. I opened two earnings trades on FDX for the trading group subscribers yesterday and closed them for modest gains today. I remain unconvinced that the bull market has resumed. It is safer on the sidelines.
