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The Standard and Poors 500 Index (SPX) opened the week by setting a new 
all-time high at $3032 and then added 1.2% this week to close Friday at 3067, another all-time high. The choppy trading resulting from the China trade negotiations that has characterized recent weeks was generally absent this week. The bulls are in charge. Unlike recent weeks, trading volume for the S&P 500 companies broke out above the 50-day moving average (dma) four days this week. That has not happened in a long time. Perhaps the bulls have opened up their wallets a bit.

VIX, the volatility index for the S&P 500 options, opened the week slightly above 13% and steadily declined to close the week at 12.3%. Volatility hasn’t been this low since July. The market apparently isn’t too concerned about the China trade negotiations and all of the breathless impeachment talk.

I have always used the Russell 2000 Index (RUT) to track small capitalization stocks and compare those performances to the large blue-chip stocks of the S&P 500. Unfortunately, the Russell company has raised their prices so much that my charting service, StockCharts.com, has given up carrying the Russell 2000 index. A few months ago, the software that I use to analyze and back test option trades quit offering intraday pricing for RUT options due to the rising prices for the data. I am changing over to tracking the price chart of the ETF, IWM, which is based on the Russell 2000 group of companies. IWM is roughly one tenth the price of the Russell index (similar to the relationship of SPX and SPY). IWM closed at 158.10 on Friday, and RUT closed at 1589.33. The minor differences in price are due to the stocks in the Russell 2000 index being weighted by shares outstanding whereas IWM contains shares of the Russell 2000 companies weighted by market capitalization.

IWM broke through the previous highs from September and July, and closed Friday at 158, up 3 points. IWM remains well below its all-time high of 171 in August 2018.

The NASDAQ Composite index gapped open Monday morning at 8286, and proceeded to add another 1.2% to close at 8386, up 94 points on Friday. This represents another all-time high for NASDAQ. NASDAQ trading volume hit the 50 dma on Monday and traded above the average Thursday and Friday.

This week brought us several bullish signals. First of all, we finally are beginning to see some increased trading volume. Money is coming in off the sidelines. An even more bullish signal came from IWM. The Russell 2000 companies, all domestic small cap stocks, outperformed both the S&P 500 and NASDAQ this week, up 1.3%, as compared to 1.2% for SPX and NASDAQ. SPX and NASDAQ set new all-time highs this week and the Dow is one point away from setting a new all-time high. Several of these broad market indices displayed multiple gap openings higher this week – all in all, a very bullish week.

My caution is beginning to diminish a bit and I am putting more of my cash to work. However, I won’t be strongly bullish until we settle the trade dispute with China. Some negative news on that front could hit the market at any time. On the other hand, a signed deal would spike this market higher. Stay alert. Whenever possible, use trailing stops to protect your gains.

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The Standard and Poors 500 Index (SPX) closed Friday at 3023, up 12 points. Friday’s close represented a gain for the week of 0.9%. Although it was a bullish trend for the week, it was a choppy path higher as each day brought a new report or rumor about the trade negotiations with China.

Trading volume for the S&P 500 companies only broke above the 50-day moving average (dma) on one day this week, and Friday’s trading came in significantly below average. The lower volume continues to stand as a caution flag for this market. The bulls are buying, but they are also nervous and taking profits when they are available.

VIX, the volatility index for the S&P 500 options, declined significantly Wednesday through Friday, closing the week at 12.7%. Volatility hasn’t been this low since July. The market is calming in spite of all of the China trade and impeachment talk.

The Russell 2000 Index (RUT) continued to track higher this week, closing Friday at 1559, up 1.1% on the week.

The NASDAQ Composite index broke through resistance this week and closed Friday at 8243, up 57 points, capping off a strong week’s performance of 1.3%. Watch for the next resistance level at July’s high of 8330. NASDAQ trading volume was below average all week, but managed to touch the 50 dma on Friday.

It is worth noting that both the Russell 2000 and the NASDAQ Composite outperformed the S&P 500 index this week. That is a strong bullish signal.

This week’s trading was generally bullish, but each day brought a new twist, sometimes higher and sometimes lower. The trade negotiations with China continue to hang over the market. We are fortunate the U.S. economy is strong enough to persevere through these tariffs.

I am continuing to be somewhat cautious in this market. It is certainly a bullish market, but the bulls are nervous and it doesn’t take much to cause them to hit the sell button. I am picking my stocks carefully and favoring the solid blue chips like AAPL, COST and JPM. My iron condor trades on SPX are doing very well, gaining 27% in October and 16% for the November position. Stay alert. Whenever possible, use trailing stops to protect your gains.

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Encouraging news from the China trade negotiations buoyed the market this week. The Standard and Poors 500 Index (SPX) opened Monday at 2944, but declined on Monday and Tuesday to a closing low on Tuesday of 2893. Then the bulls started hearing positive rumors from the China trade negotiations and the market rallied the balance of the week, with SPX closing Friday at 2970, up 2.7% from Tuesday’s close. Don’t get too excited yet. SPX gapped open Friday morning and traded as high as 2993, before fading into the close at 2970. This resulted in the classic “evening star” candlestick on Friday. This was matched in the Nasdaq 100 and the Nasdaq Composite, but less so for the Dow or the Russell 2000 indices. The evening star often signals the top of a bullish trend, predicting a possible bearish reversal. Watch the trading closely next week to confirm this signal. Trading volume in the S&P 500 companies ran below average all week and barely made it up to the 50-day moving average (dma) on Friday. The lower volume continues to stand as a caution flag for this market. The bulls are buying, but they are also taking profits.

VIX, the volatility index for the S&P 500 options, spiked back up to 20.3% on Tuesday’s bearish price action, but traded lower the balance of the week, closing at 15.6% on Friday. This is a borderline level of volatility. Remain circumspect.

The Russell 2000 Index (RUT) tried to match recent lows on Tuesday’s market weakness, but bounced back the rest of the week, closing at 1512 on Friday. Friday’s price action broke out above the 50 dma at 1512 and then touched the 200 dma at 1527 before pulling back to close at the 50 dma. Russell’s bearish trend for the past several months remains a significant cautionary sign for the overall market.

The NASDAQ Composite index mimicked the S&P 500 price action this week, trading much higher after Tuesday’s down day, gapping open Friday morning, trading through the 50 dma, and closing up 106 points at 8057. The cautionary news is that the intraday high was one hundred points higher at 8116. NASDAQ trading volume was below average all week, but managed to break the 50 dma on Friday.

This week was typical of recent market activity with wide swings almost daily, based on the latest rumors and/or news (although it is often difficult to distinguish the two). Tuesday’s trading looked ugly, but then the market stabilized, traded higher Wednesday and Thursday, and then turned in a large gap opening higher Friday morning. All the financial news anchors were euphoric. Recall that they were all repeating “manufacturing recession” ad nauseum last week.

Encouraging reports from the trade negotiations with China helped turn the tide in the market this week, but Friday’s fade late in the day underscores traders’ nervousness. They took profits when given the chance. Don’t let Friday’s price action get you too excited. We may not have seen the worst of this market and I expect the volatility will continue. This week’s optimism was based on reports of positive progress in negotiations with China, but that could easily be overturned by next week’s news.

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News and rumors continue to jerk this market around on a daily basis. The Standard and Poors 500 Index (SPX) closed Friday at 2986, down 12 points. SPX remained modestly positive for the week, up 0.7%. It was a choppy week for the markets with a new report or rumor about the trade negotiations with China driving the market almost on a daily basis. Last Friday’s evening star candlestick was not confirmed by trading this week. The bullish underlying trend remains, but each day brings a new dose of either confidence or pessimism. It is a difficult market to trade. When it moves higher, traders take profits, and then the next rumor drives it lower, and the bulls buy the lows.

Trading volume for the S&P 500 companies broke above the 50-day moving average (dma) on Friday but the first four days of the week traded at volumes well below average. The lower volume continues to stand as a caution flag for this market. The bulls are buying, but they are also taking profits.

VIX, the volatility index for the S&P 500 options, reflected the choppy market action this week, opening the week at 15.7% and then moving to a low on Thursday of 13.8%. But Friday’s market weakness took its toll, increasing volatility to 14.6%. This is a moderate level of volatility, not exactly calm, but not scary either.

The Russell 2000 Index (RUT) appears to be attempting a rebound over the past couple of weeks after a very weak September. Russell closed Friday at 1525, down five points on the day, but up 1.2% for the week.

The NASDAQ Composite index appeared to hit resistance this week at the highs set in May and September. NASDAQ closed Friday at 8090, down 67 points, but up 0.6% for the week. NASDAQ trading volume was below average all week, but managed to touch the 50 dma on Friday.

This week was a repeat of last week’s trading with wide swings one day and then a doji candlestick the next day, driven by the latest rumors and/or news on the trade negotiations with China. This remains a dangerous market. I expect the volatility will continue and I remain less than fully invested. Pick your trades carefully and stop out positions aggressively.

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The trade war with China continues to haunt this market. The result is a sideways market with sudden and unpredictable twitches on the latest trade negotiation news. The Standard and Poors 500 Index (SPX) attempted to match the July highs in mid-September, but turned lower and declined modestly for about ten days before plunging on October 1st and 2nd. SPX declined to 2856 on Thursday before bouncing and recovering over half of the previous day’s losses. SPX gapped open Friday morning, broke through the 50-day moving average (dma) at 2942, and closed up 41 points at 2952. This particular market tantrum appears to have ended, but the storm will continue until we get confirmation of a China trade deal. Trading volume has generally remained below average for the past couple of weeks with a notable exception on Wednesday as we hit the lows for the week. Volume declined Thursday and Friday as the market recovered. The bulls have not given up on this market, but they are clearly nervous, and definitely not “all in”.

VIX, the volatility index for the S&P 500 options, opened the week at 17.2%, spiked to an intraday high of 21.5% on Wednesday, and then declined to close Friday at 17.0%. This remains a moderately high level of volatility that is worthy of caution.

The Russell 2000 Index (RUT) steadily trended lower from its high of 1585 on September 16th to a close of 1480 on Wednesday for a decline of nearly 7%. Russell is by far the most bearish of all of the broad market indices. Thursday’s intraday low at 1462 was close to the lows in August around 1456. RUT closed higher at 1500 on Friday, but remains about 1% below its 50 dma at 1521 and its 200 dma at 1523.

The NASDAQ Composite index lost about 5% in this pullback. NASDAQ bounced on Thursday, finding support at the lows from August and its 200 dma at 7720. NASDAQ closed Friday at 7982, up 110 points, or 1.4%. NASDAQ’s trading volume spiked on Wednesday’s gap opening lower, but ran at or below average the rest of the week.

This was a scary week for the markets. That gap opening lower on Wednesday spooked me, but when the broad indices recovered somewhat near the end of trading on Wednesday, I saw a glimmer of hope. That was confirmed on Thursday with the long lower candlestick shadows on all of the broad market indices. Traders saw those lows as a buying opportunity and that continued into Friday.

The bottom line for this market has not changed. The trade war with China and political squabbling are making traders nervous. The entertainment and scare mongering that masquerade as financial news was revved up on Wednesday as talking heads on the financial networks breathlessly repeated “manufacturing recession” all day. I long for the old days of neutral, but boring, financial anchors.

Nervous institutional traders hit the sell button on the basis of the lamest of rumors and investigate later. But then they quickly jump back on board lest they miss out on the gains.

It pays to be cautious and focus on solid blue-chip stocks. The following stocks remain above their 50 day moving averages and have made solid gains in this week’s otherwise scary market: NEE, EQIX, INVH and TGT.