Dr. Duke's Blog

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Written by Dr. Duke

Created: 13 September 2024

The Standard and Poors 500 index (SPX) closed today at 5,626, up 30 points or +0.5%. SPX opened the week at 5,442, gaining 3.4% for the week, about the same magnitude as its loss last week. Trading volume declined over the last three trading sessions this week.

VIX, the volatility index for the S&P 500 options, steadily declined this week, opening the week at 21.3% and closing today at 16.6%. I would normally consider this to be moderately high volatility but after the August correction, this feels low.

I track the Russell 2000 index with the IWM ETF, which closed today at 217, up five points or +2.5%. IWM gapped open higher twice this week, posting a gain of 4.3%.

The NASDAQ Composite index closed today at 17,684, up 114 points or 
+0.7%. NASDAQ opened the week at 16,836, setting up a strong weekly gain of 5%. NASDAQ’s trading volume remained at or below the 50 dma all week.

This week’s trading was almost the exact opposite of last week. The S&P 500 gained 3.4%, but NASDAQ and the Russell 2000 were hot at +5.0% and +4.3%, respectively.

 I believe the market has presumed a rate reduction from the Fed next week. As I see interviews and reports on the financial networks, the argument I hear is not whether they will announce a rate reduction, but whether it will be a reduction of 25 or 50 basis points. The year over year CPI numbers now stand at +2.5%. While that is moving in the right direction, Jerome Powell has been very firm about a target of 2%. If the Fed holds pat next week, it could be ugly.

I closed my September SPY condors for +12.2% and the September SPX iron condors for +16.7% today, but I will wait until after the Fed announcement to open the November positions for those services. On the other hand, if the FOMC reduces rates by 50 basis points next Wednesday, we may see new market highs.

I will close our QQQ iron condor before the announcement next week. Be cautious; take risk off the table where you can. We could have some rough seas.

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Written by Dr. Duke

Created: 06 September 2024

The Standard and Poors 500 index (SPX) closed today at 5,408, down 95 points or -1.7%. SPX opened the week at 5,624, closing down 3.8% for the week. Trading volume was above the 50-day moving average (dma) Tuesday and Friday but below average on Wednesday and Thursday.

VIX, the volatility index for the S&P 500 options, closed today at 22.4%, up 2.5 points. VIX opened Tuesday at 15.8% and spiked up over 20% and stayed in that neighborhood the balance of the week.

I track the Russell 2000 index with the IWM ETF, which closed today at 208, down four points or -1.9%. IWM was down almost five percent this week.

The NASDAQ Composite index closed today at 16,691, down 437 points or 
-2.6%. NASDAQ opened the week at 17,585, setting up a weekly loss of 5%. NASDAQ’s trading volume remained at or below the 50 dma all week.

I often make the mistake of looking for rational explanations for the market moves. When SPX dropped significantly earlier this week, the explanation by the talking heads was that the ADP private payrolls number at 99k was “below expectations”. Today’s explanation was that the jobs report at 142k jobs, up from last month’s 89k was “weak”. Last month was weak; this month was up.

Last week, I relayed the Stock Trader’s Almanac citation to you that September is historically the weakest month of the year for the stock market. Maybe I should have paid attention.

Today’s market decline seemed extreme to me. In particular, if one watched the SPX one minute chart today, it was uniformly down all day. That is unusual; normally, there is an ongoing tug of war with several ups and downs.

Based on my assumption of an extreme in trading today, I held several positions. We’ll see if that was a mistake.

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Written by Dr. Duke

Created: 30 August 2024

The Standard and Poors 500 index (SPX) closed today at 5,648, up 56 points or 1%. SPX opened the week at 5,640, closing almost flat for the week at +0.1%. Trading volume remained below the 50-day moving average (dma) all week, but spiked up above the average today.

VIX, the volatility index for the S&P 500 options, opened on Monday at 16.3%, and steadily declined to today’s close at 15.0%. That level for VIX remains a couple of points higher than before the correction.

I track the Russell 2000 index with the IWM ETF, which closed today at 220, up 1.3 points or +0.6%. IWM was down almost one percent this week.

The NASDAQ Composite index closed today at 17,714, up 197 points or 1.1%. NASDAQ opened the week at 17,868, setting up a weekly loss of 0.9%. NASDAQ’s trading volume remained at or below the 50 dma most of the week and fell even further today, probably a pre-holiday decline.

It seemed like the general expectation for the FOMC last week was for a rate cut at the September meeting. However, that consensus shifted a bit this week and that cooled the attitude of the bulls, holding increases to a minimum.

The Stock Trader’s Almanac cites September as historically the weakest month of the year for the stock market. Maybe this flat week is just the beginning. The FOMC meeting will probably set the pace for September.



Our QQQ iron condor is doing well, as one might expect for a sideways market. I gave it plenty of room so we can tolerate moderate moves in either direction. So far, that position is up 18%.

It pays to be selective and cautious in this market.

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Written by Dr. Duke

Created: 16 August 2024

The Standard and Poors 500 index (SPX) closed today at 5,554, up 11 points or 0.2%. SPX opened the week at 5,352, setting up a weekly gain of 3.8%. Trading volume remained below the 50-day moving average (dma) all week.

VIX, the volatility index for the S&P 500 options, opened on Monday at 20.8%, and steadily declined to today’s close at 14.8%. That level for VIX remains a couple of points higher than before the correction.

I track the Russell 2000 index with the IWM ETF, which closed today at 213, up 0.6 points or +0.3%. IWM gained 2.9% this week.

The NASDAQ Composite index closed today at 17,632, up 37 points or 0.2%. NASDAQ opened the week at 16,794, setting up a strong weekly gain of 5.0%. In spite of a strong week, NASDAQ’s trading volume remained below the 50 dma all week.

The Tale of Two Cities starts out with the famous line, “It was the best of times, it was the worst of times”. In the markets, last week was the worst of times and this week has been the best of times. What a contrast.

One could suggest the market had a temper tantrum over its disappointment with the FOMC not lowering the discount rate at the last meeting and got over it this week. It makes me wonder what will happen on September 18 if the FOMC decides to wait to lower rates. At least one of the committee’s members has already voiced his opinion that it would be prudent to wait for more data to confirm a decline in the rate of inflation before lowering rates. It is interesting that the Stock Trader’s Almanac cites September as historically the weakest month of the year for the stock market. That could make for an ugly coincidence of two trends.

Investors Business Daily’s Follow Through Day methodology has been very helpful for determining when it is safe to begin reinvesting in the market after a correction. But IBD appears to be breaking their own rules for this correction. IBD declared 8/15 as the Follow Through Day, even though the trading volumes on both SPX and NASDAQ were below average. Corrections often retest the initial lows. I wonder if IBD has jumped too soon. 



Our GS vertical spread was typical of my attitude in this market. I was only in the spread for two days. When it gave me a 21% gain, I took my profits and ran for cover.

I remain very cautious.

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Written by Dr. Duke

Created: 09 August 2024

The Standard and Poors 500 index (SPX) closed today at 5,344, up 25 points or 0.5%. SPX opened the week at 5,151, setting up a weekly gain of 3.7%. Trading volume spiked on Monday but then declined all week, ending the week at 2.1 billion shares, well below the 50-day moving average (dma) at 2.7 billion shares.

VIX, the volatility index for the S&P 500 options, gave us a wild ride this week, opening Monday at 23.4%, spiking to 66% and then steadily declining to today’s close at 20.4%. It certainly appears as though the market panicked on Monday and then steadily realized that nothing much had changed.

I track the Russell 2000 index with the IWM ETF, which closed today at 206, almost unchanged, down 0.4 points or -0.2%. IWM remains below its 50 dma.

The NASDAQ Composite index closed today at 16,745, up 85 points or 0.5%. NASDAQ opened the week at 15,713, setting up a strong weekly gain of 6.6%. After spiking higher on Monday, NASDAQ’s trading volume declined to the 50 dma for the rest of the week.

Many of us, including me, had not heard of the Sahm Rule before last Friday. Claudia Sahm is currently the chief economist with New Century Advisors and once held a senior position with the Federal Reserve Board. The rule attributed to her states that a recession is underway when the three-month average of the unemployment rate increases more than 0.50% in one year. On Monday, the signal triggered at 0.53% and the market panicked. The S&P 500 dropped 228 points or 4.3%.

In many ways, the market was set up for this dark prediction because most analysts were disappointed the FOMC did not reduce rates on July 31 and feared the Fed was leading us to a classic “hard landing”. The S&P 500 stocks, the NASDAQ Composite stocks and the Russell 2000 small caps all gapped open lower last Friday and then repeated that performance again on Monday. The lows on Monday had the S&P 500 at -10%, NASDAQ at -16% and the Russell 2000 at -12%.

It would be premature to declare the market correction is over, but the recovery this week has been significant with the S&P 500 at +3.0%, NASDAQ at +3.4% and the Russell 2000 at +2.0%. The decline in trading volume is another positive sign.

I have found Investors Business Daily’s Follow Through Day methodology very helpful for determining when it is safe to begin reinvesting in the market after a correction. For the time being, we remain largely in cash. Corrections often retest the initial lows. It is prudent to not jump back in too quickly.



For now, I am watching for the Follow Through Day signal. Be patient.

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Written by Dr. Duke

Created: 02 August 2024

The Standard and Poors 500 index (SPX) closed today at 5,347, down 100 points or -1.8%. SPX opened the week at 5477, setting up a weekly loss of 2.4%. Trading volume ran above the 50-day moving average (dma) for the last four days of this week. SPX set its recent high at 5670 on 7/16 and today’s close results in a pullback of 5.7%.

VIX, the volatility index for the S&P 500 options, closed today at 23.4% with an intraday high of 29.7%. VIX opened the week at 16.6% and rose as high as 18.5% during the week but spiked up significantly today.

I track the Russell 2000 index with the IWM ETF, which closed today at 209, down 8 points or -3.5%. IWM set its most recent high at 225 on 7/16, leading to a pullback of 7.1% to date.

The NASDAQ Composite index closed today at 16,776, down 418 points or 
-2.4%. NASDAQ opened the week at 17,332, setting up a weekly loss of 3.2%. From NASDAQ’s opening high on 7/11, this index has now corrected by 10%. NASDAQ’s trading volume rose above the 50 dma for the last three days of this week.

Traders were hoping for a reduction of the federal discount rate at the FOMC meeting on July 30-31. Markets traded higher after the FOMC announcement on 1/31, but the mood changed after further reflection and the markets traded off significantly over the past two days. The S&P 500 stocks, the NASDAQ Composite stocks and the Russell 2000 small caps all gapped open lower today for large losses.

Trading analysts have traditionally referred to market declines as pullbacks until they reach ten percent, where the term, correction, is employed. 

The S&P 500 index broke down through its 50 dma today; the NASDAQ Composite broke through its 50 dma on Wednesday of last week, and the Russell 2000 index found support at its 50 dma today.

Corrections come in different sizes. The correction of February of 2018 was 12%; December 2018 was 20% and the correction in March 2020 was 35% (all measured with the S&P 500 index). It is impossible to predict the severity of this pullback.

The only trades that remain open in my accounts are in the Conservative Income service and my long-term portfolio. Outside of those accounts, it is interesting that my only gains this week were for three earnings announcement trades in the trading group and two trades in the Zero DTE trading service. The irony is that those trades represent the riskier trades of my repertoire. What they have in common is a very short duration. 



I think this is a good time to be largely in cash.

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Written by Dr. Duke

Created: 19 July 2024

The Standard and Poors 500 index (SPX) closed today at 5505, down 40 points or 0.7%. Today’s performance capped off a weekly decline of 2.4%. Trading volume jumped above the 50-day moving average (dma) on Wednesday but then declined the rest of the week.

VIX, the volatility index for the S&P 500 options, opened today at 16.4%, spiked up to 17.2% and moved as low as 10.6% before closing at 16.5%, up almost four percent for the day. VIX opened the week at 12.8% and increased 29% this week. Traders are spooked.

I track the Russell 2000 index with the IWM ETF, which closed today at 216.8, down 1.1 points or 0.5%. IWM opened the week at 214.8 for a weekly loss of 0.9%. IWM started a very strong recovery last week that continued through Tuesday this week before succumbing to the pull back of the blue chips.

The NASDAQ Composite index closed today at 17,727, down 144 points 
or 0.8%. NASDAQ opened the week at 18,486 for a weekly loss of 4.1%. NASDAQ set new all-time highs last week and touched that level on Monday but declined the rest of the week. Trading volume ran below the 50 dma all week with the exception of Monday’s spike and declined significantly today. That may be the result of the global IT outage; many brokers were out of business much of the day.

The broad market indices have traded in a largely bullish trend since early May, but this week brought a decisive change of direction, although I am unsure what triggered the shift. The Russell 2000 was the oddity over much of this period since it was clearly not participating in the rally. However, that all changed on July 11th when IWM gapped open over two percent. IWM gapped open higher over the next four trading sessions. After trying to set a new all-time high on Tuesday, it declined into the close and traded lower the rest of the week.

Russell stood out this week with a gain of 0.9%. The S&P 500 lost 2.4% while NASDAQ brought up the rear with a loss of 4.1%.

The commonly accepted standard for calling a correction is a decline greater than ten percent. Lesser declines are called pull backs. NASDAQ is the winner in the downward race with a decline of 5.1% from its most recent high. SPX has declined 2.9% and the Russell 2000 has lost 3.5%. A relatively small group of high-tech stocks has dominated the bullish run this year, and the small caps were late to the game. Perhaps it isn’t too surprising that the NASDAQ with its high-tech dominance is leading the pull back, just as it led the rise.

I think it is premature to be thinking about corrections, but this week, at a minimum, is worthy of our paying closer attention.

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Written by Dr. Duke

Created: 05 July 2024

The Standard and Poors 500 index (SPX) closed today at 5567, up 30 points or +0.5%. Today’s performance capped off a strong week at +1.8%. Trading volume ran below the 50-day moving average (dma) all week, with the exception of Monday.

VIX, the volatility index for the S&P 500 options, opened the week at 13.0% and declined the rest of the week to close today at 12.5%.

I track the Russell 2000 index with the IWM ETF, which closed today at 201, down one point or -1.5%. IWM opened the week at 204 for a weekly loss of 1.5%. IWM continues to trade a very choppy and non-directional pattern.

The NASDAQ Composite index closed today at 18,353, up 164 points 
or 0.9%. NASDAQ opened the week at 17,774 for a weekly gain of 3.3%. NASDAQ set new all-time highs for each of the past three days. Trading volume ran below the 50 dma all week with the exception of Monday’s spike.

The broad market indices have traded in a sideways channel since June 12th, but that changed markedly this week with nearly a 2% gain for the S&P 500 and the NASDAQ Composite was up over 3%. But the IWM chart, representing the small cap stocks of the Russell 2000, is downright ugly, trading without any direction.

This underscores the below average trading volume of the large blue-chip stocks. To have the strong gains we saw this week post with weak trading volume suggests that the large institutional players are largely on the sidelines.

When I read the articles from the market analysts, they all seem to be waiting for signals from the FOMC about coming interest rate reductions. Weak trading volume suggests the large institutions are far from being “all in”. When we see the Russell 2000 come to life, that will be the signal that the institutional traders are beginning to load up on some risk. Until then, we will continue to see the strong price volatility we have seen in June. No one wants to lose the gains of the past few months and they are nervous that the end is coming.

Be careful out there.

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Written by Dr. Duke

Created: 08 June 2024

The Standard and Poors 500 index (SPX) closed today at 5347, down 6 points or +0.1%. However, SPX was up nearly one percent for the week. SPX set a new all-time high on Wednesday, and the index chopped sideways the balance of the week. Trading volume declined steadily all week, remaining below the 50-day moving average (dma).

VIX, the volatility index for the S&P 500 options, opened the week at 13.1% and spiked up to 14.3% on Monday, but declined the rest of the week to close today at 12.2%. This level of volatility is moderately high for a bullish market; this market is nervous and ready to sell to preserve gains on any pretext.

I track the Russell 2000 index with the IWM ETF, which closed today at 201.2, down 2.3 points or -1.1%. IWM opened the week at 207.5 for a weekly loss of 3.0%. IWM broke down through its 50 dma today. SPX and NASDAQ are setting new market highs, but the Russell 2000 index is declining.

The NASDAQ Composite index closed today at 17,133, down 40 points or -0.2%. NASDAQ opened the week at 16,866 for a weekly gain of 1.6 percent. Trading volume ran below the 50 dma all week, similar to the S&P 500 index.

The market continues to be obsessed with real or imagined signals from Powell and the other members of the FOMC. Nearly all of the large moves in the market this year, higher or lower, have been triggered by perceptions of the Fed’s plans for interest rates. The street sees rate reductions as a return to easy money, economic expansion and a strong stock market. That promise is always appealing. The CME FedWatch now rates the probability of a rate reduction in the FOMC meeting in September at 71%. That estimate is up from 47% the previous week. That appeared to trigger Wednesday’s strong move higher. This bullish move is being led by a small number of high-tech stocks. While the S&P 500 and the NASDAQ were setting new all-time highs, the small cap stocks of the Russell 2000 index broke down through the 50 dma.

This bull market is fragile. If the large players were really confident, we would see strong buying of the high beta stocks of the Russell 2000. This market is riding on the backs of the so-called Magnificent Seven. That is probably the explanation of the below average and declining trading volume on SPX and NASDAQ.

It doesn’t make sense to sit on the sidelines but keep the fragility of this market in mind. Keep a close watch on your positions.

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Written by Dr. Duke

Created: 24 May 2024

The Standard and Poors 500 index (SPX) closed today at 5305, up 37 points or +0.7%. SPX was unchanged for the week. SPX set a new all-time high on Tuesday, but the index lost all of that and more on Thursday. Trading volume continues to run well below the 50 day moving average (dma).

VIX, the volatility index for the S&P 500 options, opened the week at 12.3%, spiked as high as 13.4 on Thursday, but closed today at 11.9%. Even Thursday’s spike on the VIX was less than I would have expected for that sudden sell-off.

I track the Russell 2000 index with the IWM ETF, which closed today at 205, up 2.2 points or 1.1%. IWM opened the week at 208 for a weekly loss of 1.4%. IWM really took it on the chin on Thursday, almost reaching its 50 dma. Even today’s bullish move higher barely recovered half of yesterday’s loss. The Russell 2000 isn’t leading the bulls.

The NASDAQ Composite index closed today at 16,921, up 185 points or +1.1%. NASDAQ opened the week at 16,702 for a weekly gain of 1.3 percent. Trading volume ran above the 50 dma all week, in contrast to the S&P 500 index.

The current market appears to be largely driven by comments from Powell or one of the other members of the FOMC. Toward the end of 2023, many Wall Street analysts convinced themselves that the Fed would be reducing interest rates this year, starting in the first quarter. All of the large and sudden moves in the broad market indices this year have been driven by comments or rumors that rate reductions were not imminent. The scare this week came from comments of one of the FOMC members that a rate increase might be in order if inflation isn’t curtailed soon. The street sees rate reductions as a return to easy money, economic expansion and a strong stock market. That promise is always appealing.

May has been a strong month in spite of Thursday’s temper tantrum. But this market remains very volatile and twitchy. It doesn’t take much to tip it one way or the other. Neutral to bullish trades are still working but keep the stops close.