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The Standard and Poors 500 index (SPX) continued its bullish trend this week with a gain of 3.4% for the week after gap openings the past two mornings. SPX closed today at 5687, up 83 points or 1.5% on the day. SPX opened the week at 5233 and closed today at 5525 for a weekly gain of 5.6%. However, trading volume remains below the 50 day moving average (dma). That suggests that the large players remain on the sidelines.
VIX, the volatility index for the S&P 500 options, steadily declined this week, opening at 25.8% and closing today at 22.7%. That level of volatility suggests that many market participants remain moderately concerned.
I track the Russell 2000 index with the IWM ETF, which gapped open this morning and closed at 200.4, up 2.3% for the day and up 3.1% for the week. IWM’s trading volume is running well below average, as it is for the S&P 500 and NASDAQ indices.
The NASDAQ Composite index closed today at 17,978, up 267 points or
+1.5%. NASDAQ opened the week at 17,391, setting a weekly gain of 3.4%. NASDAQ’s trading volume has run well below average for the past three days.
This week gave us the first signs of a possible recovery as SPX gapped open Thursday morning and traded higher on above average volume. The S&P stocks continued higher on Friday. IBD had declared 4/22 as the Follow Through Day (FTD) but that bullish day occurred with below average trading volume. Thursday’s gap opening and continued move higher with increased volume fit the criteria better. I now feel more confident about beginning the process of slowly re-entering the market.
I have begun to place a few small trades, but I remain cautious. Weak trading volume is my primary concern and the VIX remains high at 23%. Be patient. Remain largely in cash. Keep your stops tight.
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The Standard and Poors 500 index (SPX) put on a strong bullish trend this week. Opening the week at 5233 and closing today at 5525 for a weekly gain of 5.6%. But the trend in trading volume constitutes the fly in the ointment. Trading volume on the S&P 500 index has been running under the
50 day moving average (dma) for the past two weeks. That suggests that the large institutional players have not yet been convinced to start a buying spree.
VIX, the volatility index for the S&P 500 options, opened the week at 32.8% and declined steadily to close today at 24.8%.
I track the Russell 2000 index with the IWM ETF, which closed today at 194, nearly unchanged from yesterday’s trading. IWM opened the week at 185, for a gain of nearly five percent for the week. IWM’s trading volume is running well below average trends, as we have also seen in the S&P 500 and NASDAQ indices.
The NASDAQ Composite index closed today at 17,383, up 217 points or
+1.3%. NASDAQ opened the week at 16,053, setting a weekly gain of 8.3%. NASDAQ’s trading volume has run well below average this week, with the single exception of Wednesday, the only down day this week.
This week gave us the first signs of a possible recovery, but the key indicator of higher trading volume as the large players move into the market is missing.
The large spike in trading volume on April 7th as the market hit its low of this correction, down 21%, may have been the sign of capitulation. Then trading volume spiked on the large bullish spike on April 9th, hinting that a recovery might be underway. But trading volume has consistently trended below averages since then.
I use the Follow Through Day methodology developed by Investors Business Daily to determine when it is safe to begin to re-enter the market after a correction. The first thing we are watching for is a strong bullish day on a broad market index like SPX or NASDAQ. That day would be the Day One of the Follow Through Day methodology. The bullish day of April 9th fits the criteria of Day One. The day count has continued but we have failed to find a Follow Through Day (FTD), a strong bullish trading session on above average trading volume. The purpose of the FTD methodology is to prevent our jumping back into the market just in time for the next leg of the downtrend.
Being largely in cash and waiting to reenter the market can be difficult. Be patient. Perhaps we will see confirmation of the recovery next week.
I am pleased to announce that my blog has been selected for the top 40 options trading blogs by Feed Spot. 
I am number 14 of the 40.
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The Standard and Poors 500 index (SPX) closed today at 5668, nearly unchanged, up five points or 0.08%. SPX opened the week at 5636, up 0.6% for the week. Trading volume spiked to 6.9 billion shares on quadruple witching today, over twice the 50 day moving average (dma) at 3.2 billion shares.
VIX, the volatility index for the S&P 500 options, opened the week at 22.9% and declined steadily this week, closing at 20.5% today.
I track the Russell 2000 index with the IWM ETF, which closed today at 203.8, up 1.3 points or 0.6%. IWM opened the week at 202.3, up 0.7% for the week. IWM’s trading volume ran at or below average most of the week, but with a spike higher today due to quadruple witching.
The NASDAQ Composite index closed today at 17,784, up 92 points or
0.5%. NASDAQ opened the week at 17,723, for a weekly gain of 0.3%. NASDAQ’s trading volume ran below the 50 dma most of this week and spiked higher today on quadruple witching.
The market checked all the boxes for a correction last week. Now the concern is whether the market may be pausing for another leg lower.
Trading volume has not given us a clue thus far. Traditionally, we look for what is known as capitulation, a bounce higher on strong trading volume. Today's volume was due to quadruple witching with the expiration of stock options, index futures, and index futures options contracts. That isn’t the volume spike we are watching for.
Trading in the broad market indices appears to have been establishing support over the past two weeks. However, that support could just be a short pause before the next leg lower in this correction. Trying to call the low is a dangerous game.
I use the Follow Through Day methodology developed by Investors Business Daily to determine when it is safe 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 wasn’t much stronger than other bullish days for the past several trading sessions. We can safely ignore today’s quadruple witching volume spike for the purposes of determining Day One in the Follow Through Day methodology.
It can be tempting to jump back into the market. Be patient.
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That sounds like a limbo contest but I’m serious. The Standard and Poors 500 index (SPX) gapped open even further than yesterday’s huge gap opening to drop another 322 points, closing at 5,074, down six percent. That puts the correction at -17.5% since the high on 2/19. SPX opened the week at 5528, resulting a loss of 8.2% for the week. Trading volume spiked up over six billion shares today, almost twice the 50-day moving average (dma) at 3.4 billion shares. To put that volume in perspective, today’s trading volume almost reached the level set two weeks ago for quadruple witching.
VIX, the volatility index for the S&P 500 options, spiked even higher today, closing at 45.3%, up 15 points or 51%. VIX opened the week at 24% but spiked higher yesterday and spiked even further today.
I track the Russell 2000 index with the IWM ETF, which closed today at 181, down 8.5 points or -4.5%. IWM opened the week at 197, chalking up a loss of 8.1% for the week. IWM’s trading volume spiked up to 93 million shares, dwarfing both the 50 dma at 30 million shares and quadruple witching on 3/21 at 39 million shares.
The NASDAQ Composite index closed today at 15,588, down 963 points or
-5.8%. NASDAQ opened the week at 17,045, setting a weekly loss of 8.5%. NASDAQ’s trading volume spiked to eleven billion shares today, well in excess of the 50 dma at 7.8 billion shares. Today’s trading volume even beat the record 8.8 billion shares set on quadruple witching Friday, March 21.
Two weeks ago, we were talking about the ten percent correction in the market, but we didn’t have a clue of how bad it could become. At this point, I am not only shocked at the magnitude of this market sell off, but worse, I don’t have a clue where this decline will finally end.
Traditionally, technical analysts look for a spike in trading volume as the market nears its ultimate low. This known as capitulation and tends to take place near the end of a market cycle when investors effectively throw in the towel and exit the market at a loss. The large declines yesterday and today on consecutively larger trading volume may be the signs of capitulation. The hope is that this signals that the bottom is near.
I use the Follow Through Day methodology developed by Investors Business Daily to determine when it is safe to begin to re-enter the market after a correction. The first thing we are watching for is a strong bullish day on a broad market index like SPX or NASDAQ. That day would be the Day One of the Follow Through Day methodology. The bullish day of 3/31 appeared to fit the criteria of Day One. The day count then continues as long as the intraday low of day one isn’t broken. That low of 3/31 at 5489 was broken yesterday, so the search for Day One continues. The purpose of this follow through day methodology is to prevent our jumping back into the market just in time for the next leg of the downtrend.
Being largely in cash and waiting to reenter the market can be difficult. Be patient.
It isn’t for everyone, but I have found that trading the zero dte options of the S&P 500 index works quite well on these otherwise dismal market days. It requires quick entry and exit, taking your profits and then being stress-free with 100% cash overnight.
I booked a 33% gain today. If you are interested in following my zero dte trading, take a look.
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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.
