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Do you know any trading coaches who discuss the market candidly without any marketing hype? Dr. Duke publishes a weekly newsletter and shares the track records of his trading services. If you have questions about any of his services, Ask Dr. Duke.

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The Standard and Poors 500 index (SPX) spiked higher today and closed up 87 points at 3753, up 2.4% on the day and up 3.1% for the week. Trading volume spiked to three billion shares today, well above the 50-day moving average (dma) at 2.4 billion shares.

VIX, the volatility index for the S&P 500 options, closed down today at 29.7% after opening the week at 32.3%. Even though the market was up dramatically today, volatility did not decline as much as I would have expected. Obviously, traders remain a bit on edge.

I track the Russell 2000 index with the IWM ETF. IWM followed the lead of the large blue chips today and rallied up almost four points to close at 172.70, up 2.2% today and up 1.5% for the week. Watching the small cap stocks lead the market higher is encouraging. The question is whether it will hold next week.

The NASDAQ Composite index set a new low for the year last week, down 36%. But today’s strong reversal changed that tune, closing up 2.3% at 10,860, and up 2.7% for the week. However, NASDAQ’s trading volume barely reached the 50 dma today, so I have to wonder if this really is the beginning of a new trend higher.

The market set its new low for the year last Thursday and tried to recover through this past Tuesday, but then gave back much of those interim gains. Today’s market spike returned us to the highs set on Tuesday. The gain on the S&P 500 was accomplished with a strong spike in volume and that convinced the analysts at IBD to move their market assessment from Market In Correction to Confirmed Uptrend.
 
This year’s trading in the markets may have jaded me, but I am sure I have seen this show before. I jumped in with both feet a couple of times earlier this year and then had my head handed to me. The fact that VIX remains essentially at 30% today, even in the face of a strong day of trading, is a warning sign.
 
Today’s market surge in the S&P 500 was joined by NASDAQ and the Russell 2000 and that is certainly a good sign. But I remain cautious. My scars are fresh.
 
My recommendation from last week was to stay on the sidelines until we witness a clear bounce from the June lows. This week’s trading action wasn’t convincing. I respectfully disagree with IBD. Record rates of inflation and a Fed determined to continue raising the discount rate have not disappeared. Last week’s recommendation to stay on the sidelines remains good advice.

The Standard and Poors 500 index (SPX) set a new low for 2022 yesterday at 3492, down 27% on the year. SPX opened higher this morning at 3690, but could not hold the gains, closing down 87 points at 3583, down 2.4% on the day and down 1.8% for the week. Trading volume spiked to 3.2 billion shares yesterday and remained above the 50-day moving average (dma) today with 2.6 billion shares.

VIX, the volatility index for the S&P 500 options, closed down today at 32% after spiking as high as 35% earlier this week. This level of volatility remains a concern. It seems like we have been saying this all year, but this is a nervous market.

I track the Russell 2000 index with the IWM ETF. IWM did not set a new low for the year on Thursday, which I regard as bullish since the small cap stocks usually lead markets lower in bear markets. IWM closed today at 166.81, down 4.6 points or -2.7% on the day and down 1.5% for the week.

The NASDAQ Composite index set a new low for the year on Thursday at 10,089, down 36%. NASDAQ closed today at 10,321, down 328 points or 3.1% on the day and down 3.2% for the week. NASDAQ’s trading volume spiked above the 50 dma on Thursday but remained below average the rest of the week.

On Monday, October 3rd, it appeared that the market had found support at the June lows. SPX gapped open the next day and set up a series of sideways trading days. Then SPX gapped downward last Friday and proceeded to break the June lows. The market opened much lower this past Thursday but immediately started a strong run higher, led by the financial stocks.
 
Thursday was a strong day for the markets, but Thursday’s opening set a new market low for 2022. The S&P 500 index touched down at -27%, and NASDAQ recorded a low of -36%. The Russell 2000 index, measured via IWM, did not quite reach its June low at -28%. Normally, the high beta stocks of the Russell 2000 would be leading the race to the bottom, but not this time. That is the only positive sign I can find in this market.
 
The only new trades I entered this week for the trading group were earnings plays on WBA (+16%), JPM (+17%), and UNH (+28%). Overnight earnings trades incur more risk, but they don’t require the trader to have a conviction for overall market direction. That market assessment has proven difficult to impossible this year.
 
I closed the October SPX iron condor for the Flying With The Condor™ subscribers for a gain of 23%. That service is up 27% for 2022, compared to the S&P 500 at -23%. This has been an excellent year for non-directional trading. These positions are far enough out of the money to withstand the price volatility typical of this year’s market.

My recommendation is to stay in cash until we witness a clear bounce from the June lows with follow through.

 

One of the first principles taught to beginning stock traders for reading charts is “Higher highs and higher lows form an uptrend and lower highs and lower lows form a down trend”. Ever since the fed announcement last week, traders watched the chart to see if the June lows would be broken. Until about 1:30 pm ET today, it appeared that the Standard and Poors 500 index (SPX) was finding support at the June lows around 3640, but then it broke down and steadily declined into the close. SPX closed at 3586, down 55 points or -1.5% on the day and down 2.6% this week. SPX declined 8.9% in September. As one might expect on a dramatic break lower, trading volume spiked to 3.5 billion shares, well above the 50-day moving average (dma) at 2.3 billion shares.

VIX, the volatility index for the S&P 500 options, opened and closed today at 31.6%. The range was unusually large with a low at 29.4% and a high at 33.3%. This suggests that the decline late this afternoon didn’t panic the traders. Perhaps the large institutional traders were already adequately hedged.

I track the Russell 2000 index with the IWM ETF. IWM’s trading pattern differed from the S&P 500 in that it essentially traded sideways all week (down 0.3%) and never reached its June low. IWM closed today at 164.92, down 1.21 or -0.7%. The Russell 2000 normally leads the market lower in a correction, so today’s trading was a bit of a surprise.

The NASDAQ Composite index followed the S&P 500’s decline this afternoon but NASDAQ didn’t break its June low and didn’t spike its trading volume. NASDAQ closed at 10,576, down 162 points or 1.5% on the day and down 2.4% for the week. NASDAQ’s trading volume was at or below the 50 dma all week. The selling pressure in the NASDAQ stocks was much stronger earlier this year but it appears the sentiment has shifted.

The market gave every indication this week that it was finding support at the June lows. At first blush, this afternoon’s late decline appeared to break that support level, at least on the S&P 500 stocks. But SPX’s implied volatility was unchanged on the day – interesting. I would have expected it to spike higher with the selling pressure this afternoon. Both NASDAQ and the Russell 2000 have not yet broken their June lows.
 
I am more inclined to believe today’s trading was a test of the previous lows rather than a break that will lead the market significantly lower. But I am not going to test that hypothesis with my money or my clients’ money.
 
My recommendation remains the same. Stay on the sidelines until we witness a clear bounce from the June lows. Be patient. It is better to miss a bit of the turn higher rather than find that you jumped back in too soon.

 

The FOMC announcement this week overwhelmed all other news for traders. And the market did not like the message they inferred from the rate hike. The Standard and Poors 500 index (SPX) closed today at 3693, down 65 points or -1.7%. SPX opened the week at 3850, so today’s close represented a decline of 4.1% for the week. This month is setting up to be one of the weaker Septembers in market history. Trading volume was modestly higher than the 50-day moving average (dma) all week, but we did not witness a significant spike in volume as we did last Friday.

VIX, the volatility index for the S&P 500 options, opened the week at 27.7% and spiked to 32.3% today before settling into the close at 29.9%. VIX has been steadily rising since early September, probably in anticipation of the FOMC announcement.

I track the Russell 2000 index with the IWM ETF. IWM traded lower over the last three days, closing today at 167.31, down 4.08 or -2.4%. IWM opened the week at 177.01 for a weekly decline of 5.5%. IWM’s June low was 163 and today’s low was 165 before it recovered into the close.

The NASDAQ Composite index matched the S&P 500’s decline today, closing at 10,868 , down 199 points or 1.8% on the day and down 4.2% for the week. NASDAQ’s trading volume was below the 50 dma all week. NASDAQ took the largest declines into the June low but did not stand out this week. Perhaps the selling pressure for the formerly hot NASDAQ stocks has slowed.

The market moving event this week was the FOMC meeting with the discount rate increasing 75 basis points to result in a range of 3.00% to 3.25%. The consensus expectation of market analysts was for a 75 basis point rate hike. That appeared to be priced into the market’s prices and the market actually rose for a few minutes after the announcment. Then it settled modestly lower into the close Wednesday as Powell’s remarks at the press conference appeared rather hawkish.
 
As market analysts reviewed the members’ dot map of rate predictions, the overnight mood shifted significantly with gap openings lower yesterday and again today. FOMC members are projecting a discount rate of 4.4% by year end, peaking at 4.6% in 2023 and declining somewhat in 2024. The market interpreted this as the beginning of the “hard landing” scenario where higher interest rates push the economy into a serious recession.
 
I was considering taking this opportunity to sell far OTM SPX put spreads for my Flying With The Condor™ trading service. But the market continued to sink until a slight recovery about an hour before the close. Today’s market did appear to bounce off the June lows, and that was  very positive. I decided that staying in cash and watching the market open on Monday would be much more prudent.
 
My advice is to stay on the sidelines until we witness a clear bounce from the June lows. Don’t jump too soon; markets often test previous lows at least once before beginning a recovery.

 

This was a seriously negative week for the markets. The Standard and Poors 500 index (SPX) closed at 3873, down 28 points or -0.7%. SPX opened the week at 4084, so this close represented a decline of 5.2% for the week. Trading volume spiked higher Friday to 4.4 billion shares, double the 50-day moving average (dma) at 2.2 billion shares. The last time trading volume spiked this high was during the lows in mid-June. Is that level around 3640 the next stop?

VIX, the volatility index for the S&P 500 options, opened the week at 23.6% and closed yesterday at 26.3%. Given Friday’s market decline, I am a bit surprised VIX has not moved higher. Perhaps the large institutional players are already hedged.

The NASDAQ Composite index posted the largest decline of all of the major stock market indices this week, closing Friday at 11,448 , down 104 points or 0.9% on the day and down 6.0% for the week. NASDAQ’s trading volume also spiked Friday, hitting 7.5 billion shares as compared to the 50 dma at 4.7 billion shares.

The decline started by Powell’s Jackson Hole speech on 8/26 continued this week. The S&P 500 broke support at 3925; the next weak support level is at the May low of 3812. Then we are looking at another weak support level at 3727 before we test the June lows around 3640.
 
The next FOMC meeting is scheduled for next week with the rate announcement on 9/21. The consensus expectation of market analysts is for a third 75 basis point rate hike. How will the market respond? Is the expected rate hike priced into the current market prices or will the market continue to track downward toward the June lows?
 
Friday’s market decline of the order of five to six percent was accompanied by a trading volume spike. All of the price volatility up and down over the past couple of months occurred at average or below average trading volume. I doubt that Friday was the classic capitulation volume surge marking a market low, simply because the major market event everyone is talking about remains three days in the future.
 
My counsel is unchanged from last week. Stay on the sidelines until after the September FOMC announcement. Even then, don’t jump too soon; allow the market to digest the news. We could break that June low…

 

The Standard and Poors 500 index (SPX) finally found support and began to trade higher this week, closing Friday at 4,067, up 61 points or 1.5% on the day, and up 3.5% for the shortened holiday week. Trading volume continues to run along the 50-day moving average (dma) and closed below average on Friday.
 
VIX, the volatility index for the S&P 500 options, declined 11% this week, opening the week at 25.5% and closing Friday at 22.8%. In spite of this week’s decline in volatility based on three positive trading sessions, we will have to continue this bullish run much farther before returning to the 19% volatility levels of mid-August before this latest decline began.

I track the Russell 2000 index with the IWM ETF. As one might expect, IWM outpaced the blue chips this week. IWM closed Friday at 187.40, up 2% on the day and up 3.7% for the week.

The NASDAQ Composite index fell between the S&P 500 stocks and the Russell 2000 stocks this week, closing Friday at 12,112, up 250 points or 2.1% on the day and also up 4.0% for the week. However, NASDAQ’s trading volume remained below the 50 dma all week.

Powell’s comments at Jackson Hole on 8/26 started the decline that finally found support this week. However, three data points do not make a trend. Remain cautious.
 
The S&P 500, NASDAQ, and the Russell 2000 all posted very similar chart patterns this week, trading down after the holiday weekend, but then consistently higher each of the remaining three days of the week. Now the market waits for the next FOMC meeting on September 20-21. The consensus appears to be settling at a third 75 basis point rate hike and the market appears comfortable with that prospect. Personally, I don’t understand the apparent change in perception for a lower probability of a “hard landing” for the economy. The seemingly unending debt spiral of our government will have unpleasant consequences and both political parties are on board this train. Remember Greece? We are currently at those levels of debt to GDP.
 
I continue to think it wise to limit your exposure to this market until after the September FOMC meeting. I have had success with short term earnings trades on GME and DOCU and opened the AAPL iron condor for newsletter subscribers. I also opened an OTM Jan 2023 call butterfly on LNG to play the increasing price of natural gas. However, I remain largely in cash.

The Standard and Poors 500 index (SPX) put in a tough week, declining 2.8% with a close today at 3924, down 42 points on the day or almost three percent. Trading volume spiked up above the 50 day moving average (dma) midweek but declined back below average today. This bearish pullback for August was almost entirely carried at below average trading volume. This suggests that the large institutional players are not convinced that it is time for wholesale closing of large portions of their holdings.

VIX, the volatility index for the S&P 500 options, moved over a wide range today, opening this morning at 25.6%, declining to 23.2% as the market traded higher this morning, and then closing at 25.5% after this afternoon’s selloff.

I track the Russell 2000 index with the IWM ETF. This was a rough week for IWM dropping nearly four percent on the week. IWM closed today at 180.09, down 0.8%. IWM found support yesterday and again today at 178.50, the lows of 
mid-July.

The NASDAQ Composite index was no exception to the selling pressure this week, closing 154 points to 11,631. Today’s close ended the week down 3.2%. NASDAQ’s trading volume remained below the 50 dma all week and declined even a bit further during today’s sell off.

The markets ended their recovery on August 17th and tried to recover a few days later, but Powell’s comments at Jackson Hole last Friday started a new downward trend, down over 8% through today’s close. The S&P 500, NASDAQ and the Russell 2000 all posted very similar chart patterns this week, with their intraday lows on Thursday and Friday finding support at nearly the same prices. That observation, together with lower trading volume may signal a slowing of this recent trend lower. Perhaps we will trade roughly sideways until the Fed meeting.
 
Consensus on the street was looking for the Fed to slow or even end its rate hikes for 2022, but Powell’s comments have shifted that consensus to an expectation of another 75 basis point move at their next meeting on September 20-21. Market participants are worrying about a “hard landing” for the economy, and by extension, much lower stock prices.
 
I think it wise to limit your exposure to this market until at least after the September FOMC meeting. A few exceptions may be found in the oil and gas sector, e.g., CVX and LNG. Watch your trades closely, if you trade at all.


The Standard and Poors 500 index (SPX) fell out of bed after Powell’s remarks Friday at Jackson Hole. SPX closed down 141 points at 4,058, down 3.4% for the day and down 3.2% for the week. However, the S&P 500’s trading volume remained below the 50 day moving average (dma) all week. Even Friday’s decline didn’t spike a significant increase in trading volume.

VIX, the volatility index for the S&P 500 options, opened the week at 22.4%, declined to 21.8% on Thursday, but then spiked up to 25.6% on Friday.

I track the Russell 2000 index with the IWM ETF. IWM closed at 188.98 on Friday, down 3.2% on the day but down much less on the week at -1.6%. Earlier in the week, IWM appeared to find support at the 2021 lows, but Friday broke that support level.

Similar to the other broad market indices, the NASDAQ Composite index closed at 12,142, down 498 points or four percent for the day and down three percent for the week. NASDAQ’s trading volume remained below average all week and didn’t even reach the 50 dma on Friday after Powell’s speech rattled the market.

The markets essentially traded sideways this past week until Friday when traders hit the sell button after Powell’s remarks appeared to suggest plans to continue rate hikes that could cause consumers and businesses significant pain.
 
Friday’s market decline was significant, but trading volume remained weak and generally below the 50 dma. Monday’s follow through will be instructive. Unless we see a bounce or at least a sideways move Monday, I will be moving further into cash.

The Standard and Poors 500 index (SPX) hit resistance at the 200-day moving average (dma) on Tuesday and steadily declined to close today at 4228, down one percent for the week. However, the S&P 500’s trading volume remained below the 50 dma all week. Today’s decline triggered a small increase in trading volume.

VIX, the volatility index for the S&P 500 options, opened the week at 20.7%, declined a bit but then rose today to close the week at 20.6%. It may be a minor observation, but VIX peaked at 21.3% today and pulled back a bit to close the week. Closing at the low of the day for a stock or index is often worrisome while pulling back from an intraday low is encouraging. In the same way, VIX is most concerning when it spikes and closes at its high for the day.

I track the Russell 2000 index with the IWM ETF. IWM gapped open lower this morning and closed down 2.2% at 194.65. Historically, the small to mid-cap stocks lead both market rallies and bearish pull backs and that certainly played out this week with a strong decline for IWM.

The NASDAQ Composite index gapped open lower this morning and closed at 12,705, down 260 points or two percent for the day and down 2.2% for the week. NASDAQ broke another resistance level on Friday around 12,985 that was established back in early May. NASDAQ’s trading volume declined all week.

The bullish trend triggered by the FOMC announcement two weeks ago hit resistance this week and began a modest decline. The Russell 2000 broke out above its 200 dma and then pulled back. The S&P 500 index bounced off its 200 dma, but NASDAQ did not even approach its 200 dma before pulling back.
 
Trading volume remained weak and generally below the 50 dma during this entire bullish streak. Above average trading volume accompanying a bullish or bearish trend is always a strong endorsement of the trend.

I will be maintaining a cautious stance this week, but I guess that is nothing new for me.

 

This month’s CPI and PPI reports encouraged traders and the Standard and Poors 500 index (SPX) gapped open on Wednesday and traded higher to close Friday at 4280, up 3% for the week. However, the S&P 500’s 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 21.7% and closed Friday at 19.5%. VIX has been steadily trending lower since its recent peak in June. Friday’s close is the lowest level of volatility since April.

I track the Russell 2000 index with the IWM ETF. IWM closed at 200.36 Friday, up 4.01 points or 2.0% on the day and up 4.3% for the week. Friday’s gain broke through the 200 dma. Historically, the small to mid-cap stocks lead market rallies and that certainly played out this week with a strong run for IWM.

The NASDAQ Composite index closed Friday at 13,047 , up 267 points or 2.1% for the day and up 2.7% for the week. NASDAQ broke another resistance level on Friday that was established back in late April and early May. NASDAQ’s trading volume ran at or above the 50 dma all week but fell below average on Friday.

The current bullish trend began after the FOMC announcement two weeks ago and was fueled by a strong jobs report for July. The market paused for the CPI and PPI reports this week and traded strongly higher based on signs of a slowing rate of inflation. All of the broad market indices have now broken through the highs of the failed June recovery.

I will be actively looking for bullish trade candidates this week.