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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.

Dr. Duke practices what he preaches! You are entering the "No Hype Zone"!

 

The Standard and Poors 500 index (SPX) closed today at 4959, up 52 points or 1.1%. SPX opened the week at 4893, setting up a weekly gain of 1.3%. Trading volume ran above the 50-day moving average (dma) most of the week. After a disappointment on Wednesday that rates were not likely to be raised by the FOMC at the next meeting, the bulls got over it and opened today's trading with a gap opening and a very strong showing.

VIX, the volatility index for the S&P 500 options, closed today at 13.9%. Even with the market’s large pullback on Wednesday, VIX didn’t exceed 14.5%. The bulls didn’t even blink.

I track the Russell 2000 index with the IWM ETF, which closed today at 194, down a full point on the day (-0.5%) and down one percent for the week. IWM remains 5.4 percent below its December high at 205. These are the high beta stocks that should be leading a true “risk on” bullish run.

The NASDAQ Composite index closed today at 15,629, up 267 points or +1.7%. NASDAQ opened the week at 15,455, setting up a weekly gain of 1.1%. NASDAQ really tanked on Wednesday, making it difficult to fully overcome that loss this week. NASDAQ’s trading volume ran below the 50 dma all week with the exception of Wednesday. NASDAQ remains well below its all-time high of 16,121.

The odds on the street were for no change in the discount rate by the Fed on Wednesday, so the market was essentially wandering sideways until Powell was asked if the rates would be lowered at the next meeting in March. That led to a seventy nine point decline on Wednesday. But something changed the next day as traders made up most of that loss. Then SPX gapped open this morning and just ran strongly into the close.

The lack of a strong increase in VIX on Wednesday’s loss was the clue. The institutions and large funds were not concerned about Powell’s comment and the bulls drove the market higher. 

I continue to worry about the relative weakness of the Russell 2000 index. These are the high beta stocks that tend to lead strong bull markets. The weak trading volume on the NASDAQ Composite is another cautionary signal. Trading in the S&P 500 stocks rose this week, but not as much as one would expect in a strong bull market.

I am booking gains in this bull market but I am cautiously watching for signs of a correction. This just seems too good to be true.

The Standard and Poors 500 index (SPX) closed today at 4891, almost unchanged with a decrease of three points or -0.07%. SPX opened the week at 4853, setting up a weekly gain of 0.8%. Trading volume ran at or slightly above the 50-day moving average (dma) this week. Today’s trading volume came in below the 50 day moving average (dma). The S&P 500 index appears to be slowing a bit after strong gains over the past two weeks.

VIX, the volatility index for the S&P 500 options, closed today at 13.3%. VIX opened the week at 13.8%, declined to a low on Wednesday of 12.4% and rose over the last three trading sessions. The slight rise over the last few days probably reflects some concern that this bullish run is slowing.
 
I track the Russell 2000 index with the IWM ETF, which closed today at 196, unchanged for the day and up less than one percent for the week. This is a much weaker chart than SPX or NASDAQ. IWM remains four percent below its December high at 205. These are the high beta stocks that should be leading a true “risk on” bullish run.

The NASDAQ Composite index closed today at 15,455, down 55 points or -0.4%. NASDAQ opened the week at 15,393, setting up a slight weekly gain of 0.4%. NASDAQ’s trading volume was slightly above the 50 dma on Monday and ran below that average the rest of the week. NASDAQ remains well below its all-time high of 16,121.

Traders appear to have finally accepted that the Fed will not be reducing interest rates at this coming meeting January 30-31. The trading action after the FOMC announcement on 1/31 may be volatile.

The S&P 500 continues to set new all-time highs, but NASDAQ remains about four percent below its all-time high. And the Russell 2000, as measured by IWM, remains over four percent below its high from December. 

The relative weakness of the Russell 2000 index is a significant cautionary signal; these are the high beta stocks that tend to lead strong bull markets.

The weak trading volume on both the S&P 500 and the NASDAQ Composite is another cautionary signal.

A less quantitative concern is the frequency of significant market corrections in the markets after an extremely strong run higher. In fact, that is why we use the term, correction. The idea is that the market went too high, too quickly. It is helpful to remind ourselves that the S&P 500 has not only set a new all-time high; this index has also risen 19% in only three months.

Don’t misunderstand. I am not sitting on the sidelines touting the coming crash. I am playing this market, but I am cautious and very particular in evaluating the opportunities.

 

The Standard and Poors 500 index (SPX) closed today at 4840, up 59 points or 1.2%. SPX opened this holiday shortened week at 4772, setting up a weekly gain of 1.4%, with most of that gain coming today. Trading volume ran at or slightly above the 50-day moving average (dma) this week. Today’s trading volume seems somewhat weak for a gap opening higher this morning and such a strong gain.

VIX, the volatility index for the S&P 500 options, opened the week at 14.1%, 
rose on Wednesday’s decline, but then dropped yesterday and today to close 
at 13.3%.

I track the Russell 2000 index with the IWM ETF, which closed today at 192, unchanged for the week. This is a much weaker chart than SPX or NASDAQ. IWM hit its December high at 205 on 12/27 but remains over six percent below that high. These are the high beta stocks that should be leading a true “risk on” bullish run.

The NASDAQ Composite index closed today at 15,311, up 255 points or 1.7%. Surprisingly, this remains well below NASDAQ’s all-time high at 16,212, set on 11/22/2021. NASDAQ opened the week at 14,564, setting up a strong weekly gain of 2.7%. Nasdaq gapped open higher the last two mornings, but the trading volume remained rather low, similar to the S&P 500.

The market continues to view any and all positive economic data as supporting the Fed decreasing the discount rate. That makes me very wary of the trading action after the FOMC announcement on 1/31 because I don't see that happening. The Fed has been very clear about reaching two percent inflation rates before lowering the discount rate.

The S&P 500 set a new all-time high today, but NASDAQ remains about six percent below its all-time high. And the Russell 2000, as measured by IWM, remains over six percent below its high from December. 

The Russell 2000 normally leads strong bull markets; these are the high beta, “risk on” stocks the large funds play when they see the opportunity to “pile on”. The relatively weak trading volume on both the S&P 500 and the NASDAQ Composite should caution us to not get too carried away with bullish euphoria. Given the extreme debt levels and current political dysfunction in our country, there is a non-zero probability of a significant market correction in our future.

Pick your winners carefully. Remain cautious.

The Standard and Poors 500 index (SPX) closed today at 4784, essentially flat, up less than four points or 0.08%. SPX opened the week at 4704, setting up a weekly gain of 1.7%, recovering last week’s losses. Trading volume ran just below the 50-day moving average (dma) all week. This level of trading volume seems lackluster for a bullish week of recovery.

VIX, the volatility index for the S&P 500 options, opened the week at 14.0% and steadily declined all week to close at 12.7%.
 
I track the Russell 2000 index with the IWM ETF, which closed today at 193. This is a much weaker chart than SPX or NASDAQ. IWM opened the week at 193, so while SPX and NASDAQ were recovering last week’s losses, IWM was unchanged. IWM hit its December high at 205 on 12/27 but remains 5.9% below that high. That is not a bullish sign.

The NASDAQ Composite index closed Friday at 14,973, up three points or 0.02%. NASDAQ opened the week at 14,564, setting up a strong weekly gain of 2.8%. With the exception of Monday, trading volume ran below the 50 dma all week.

Traders concluded after the December FOMC meeting that the Fed was planning to begin reducing interest rates during the first quarter. Then the CPI came out this week with an increase of the annual rate of +3.2% up to +3.4%. The initial response was a large decline on Thursday, but the market recovered intraday.

The Santa Claus rally, developed by Yale Hirsch of the The Stock Trader’s Almanac, follows the trading of the last five days in December together with the first two trading days in January. Santa Claus didn't visit Wall Street this year, declining 1.1%. The Stock Trader’s Almanac also follows the First Five Days of January and the January Barometer for the full month of January. The First Five Days indicator also failed this year with a decline of 0.4%. Now we wait on the January Barometer to give us a clue for the nature of this year's market. The strongest bullish signal occurs when all three January indicators are positive. When we see a positive gain for the entire month of January, we have an 84% track record of this preceding a bullish year.

Another Stock Trader’s Almanac measure to watch is whether the December lows are broken during the first quarter; when that happens, the probability of a bearish year increases.

The S&P 500 has now recovered all of last week’s losses and set a new high. NASDAQ has recovered much of its losses but remains below the previous highs. The Russell 2000 isn’t even close to recovering its recent losses. I am not feeling very confident that the bulls can carry this market. Be cautious.

 

The Standard and Poors 500 index (SPX) closed Friday at 4697, up nine points or 0.2%, but down one percent for the first week of the new year. Trading volume ran at or just below the 50-day moving average (dma) all week. The bullish run from early November hit its high on 12/28 at 4793 and has now declined two percent from that high.

VIX, the volatility index for the S&P 500 options, opened the new year at 13.2% and closed at 13.4% Friday after spiking as high as 14.6% earlier on Friday.
 
I track the Russell 2000 index with the IWM ETF, which closed yesterday at 193, down less than one point on Friday, but down 3.1% for the first week of the new year. IWM hit its high in the most recent bullish move at 205 on 12/27 and is now down nearly six percent from that high. IWM broke support at 196 and closed just above the next support level around 192.

The NASDAQ Composite index closed Friday at 14,524, up 14 points or 0.09%. NASDAQ opened the week at 14,874, setting up a weekly loss of 2.4%. Trading volume ran slightly above the 50 dma all week. NASDAQ closed near support on Friday and the next support level is near the 50 dma at 14,162.

The strong bull market since early November was primarily based on traders’ expectations for the FOMC to lower interest rates in 2024. The so-called dot plots of the committee members that accompanied the Fed announcement in December were forecasting two to three rate cuts in 2024. Since then, the enthusiasm has faded steadily. The release of the minutes from the last FOMC meeting this week threw cold water on any rate cuts early in 2024. Committee discussion was hopeful that further hikes would not be necessary, but several committee members were concerned that the inflation rate may not be fully constrained. That took the steam out of the bulls’ sails and contributed to the bearish trading to start the new year.

The Santa Claus rally, coined by Yale Hirsch in 1972 (founder of the Stock Trader’s Almanac), describes a common bullish trend for the last five trading days in December and the first two trading days in January. The Santa Claus rally took a pass this year, declining 1.1%.

The Stock Trader’s Almanac also follows the First Five Days of January and the January Barometer for the full month of January. All three measures comprise the January Trifecta; when all three are positive, the S&P 500 has been positive for the year over 90% of the time. The Santa Claus rally failed, and the First Five Days is looking like a second failure, with four days done and the market down one percent. The track record of the January Barometer by itself boasts an accuracy of 84%.

Friday’s intraday trading was generally more bearish with highs set early and most of the subsequent trading trending lower. But the market managed a positive finish for the day. I am left with a mixed review for the 2024 market.

 

 

The Standard and Poors 500 index (SPX) posted a record-breaking day on Wednesday after the FOMC announcement, but settled a bit on Thursday and Friday, closing yesterday at 4719, essentially unchanged. SPX opened the week at 4593, setting up a 2.7% gain for the week. Trading volume spiked up to 5.6 billion shares yesterday, partly due to quadruple witching, but trading volume was up to 3.8 billon shares on Thursday, with the 50-day moving average (dma) at 2.5 billion shares. Many large traders were taking profits.

VIX, the volatility index for the S&P 500 options, opened the week at 13.1% and declined to close at 12.3% yesterday, although VIX did move as high as 12.7% on Thursday. VIX has not been this low since the beginning of 2020.

I track the Russell 2000 index with the IWM ETF, which closed yesterday at 197, down almost two points, just under one percent. IWM opened the week at 187, setting up a strong weekly gain of 5.3%. IWM gapped open over three percent on Thursday morning.

The NASDAQ Composite index was slightly more bullish than the S&P 500 this week, closing up Friday at 14,814, up 52 points or 0.4%. NASDAQ opened the week at 14,340, setting up a weekly gain of 3.3%. Trading volume ran above the 50 dma all week and was pushed higher today by quadruple witching, but trading volume on NASDAQ was over eight billion shares both Thursday and Friday.

The market has been on a strong run since October 30th, nearly straight up with several gap openings. Traders were apprehensive as the FOMC announcement neared but traded strongly higher on the announcement. The pause in rate hikes was widely anticipated, but the key data were the so-called dot plots of the committee members, which were forecasting two to three rate cuts in 2024. The end result was a huge day in the markets on Wednesday, but that was followed by profit taking on Thursday and Friday as the excitement faded.

It is helpful to step back and study the big picture for a moment. I may be alone, but I have been beaten up by this market over the past two years. It wears on you and can lead to a pessimistic outlook.

The S&P 500 and the NASDAQ Composite both hit their all-time highs in late 2021 and remain about 2% and 9%, respectively, below those highs. The Russell 2000 is about 20% below its high in November 2021. It may have been choppy, but a large amount of market repair has occurred this year. The slowdown for the bulls over the last two trading sessions may reflect a sobering effect after the Fed excitement upon reflection on some of the strong headwinds facing the market. We have now had two warnings of possible downgrades to our treasury bond debt. We are in a very similar situation to what Greece faced about eight years ago with our debt levels being much higher than our GDP. Congress appears to be completely unaware of this situation. In view of the upcoming election, I don’t expect anyone to touch this third rail and we may reasonably expect a continuation of the bull market into 2024. But I am watching my financial assets carefully.

The Standard and Poors 500 index (SPX) took a breather for most of the week, showed some life on Thursday and then powered upward today, closing at 4555, up 27 points or +0.6%. Trading volume spiked up to 3.5 billion shares yesterday but settled down to just above the 50-day moving average (dma) at 2.4 billion shares today.

VIX, the volatility index for the S&P 500 options, opened the week at 13.1% and traded mostly sideways and slightly lower to close at 12.6% today. It appears that the traders are becoming more comfortable in treating this as bull market.

I track the Russell 2000 index with the IWM ETF, which closed today at 184.9, up over five points, just under 3%. IWM opened the week at 178.5, setting up a very strong weekly gain of 3.6%. IWM has been very weak during this bullish surge since the first of November, but it came to life today, finally breaking above its 200 dma today. The 50 dma is at 173, over 6% below the 200 dma.

The NASDAQ Composite index was much more tentative than the S&P 500, closing at 14,305, up 79 points or 0.6%. NASDAQ opened the week at 14,239 and closed today at 14,125 , setting up a weekly gain of only a half percent. Trading volume ran above the 50 dma for the last three days and peaked at about 5.5 billion shares for the past two days; the 50 dma is 4.5 billion shares.

The market has been on a strong run since October 30th, nearly straight up with several gap openings. Everything slowed this week and culminated in a very strong bullish day for the markets. The most bullish signal today was the recovery of the Russell 2000. Russell has been trading very weakly all through this bullish run – until today, when it ran up three percent and tallied a four percent gain for the week.

Bond yields and comments from any member of the FOMC have contributed to recent price volatility. The slowing of the PCE price index probably contributed to the bullish run today. Traders are looking for signs that might cause the Feds to at least not raise rates further, but hopefully signal a rate decrease early next year. That may be wishful thinking.

The Standard and Poors 500 index (SPX) wandered sideways to a large degree today, closing at 4514, up 6 points or 0.1%. SPX opened the week at 4407, setting up a strong weekly gain of 2.4%. Trading volume peaked above the 
50-day moving average (dma) on Tuesday and then declined all week.

VIX, the volatility index for the S&P 500 options, closed today at 13.8%, down about 9% from the open at 15.2% on Monday.

I track the Russell 2000 index with the IWM ETF, which closed today at 178.3, up over two points or 1.4%. IWM opened the week at 168.2, setting up a very strong weekly gain of 6%. IWM broke out above its 50 dma on Monday but remains about one percent below its 200 dma.

The NASDAQ Composite index closed today at 14,125 , up 12 points or 0.08%. NASDAQ opened the week at 13,746 for a weekly gain of 2.8%. Trading volume peaked above the 50 dma on Tuesday but declined the rest of the week. Friday’s trading volume was over 25% below the 50 dma.

This recent bull market has been quite strong, rising over nine percent since October 30th. The market has opened and gapped higher seven times and we have only experienced one bearish trading session over this period of time. Pullbacks in this market have occurred with higher bond yields or remarks from Powell or any member of the FOMC that suggested more discount rate hikes are coming. Market analysts interpret each economic news or data in light of whether it might lead to the end of rate hikes, and thus a stronger market, or additional rate hikes that may lead to a hard landing. This makes it difficult to predict market trends. On one day positive economic news may lead to a market increase, but at another time, it may lead to a pullback.

It seems we are all whistling in the dark, hoping that huge government debt doesn’t eventually crush us. Paying the interest on the debt continues to take a larger share of the government’s budget.

The Standard and Poors 500 index (SPX) put on a show today, closing at 4415, up 68 points or 1.6%. SPX opened the week at 4364, setting up a weekly gain of 1.2% (yesterday’s large decline resulted in the inconsistency). Yesterday’s loss found support at the 50-day moving average (dma). Trading volume ran below the 50 dma all week.

VIX, the volatility index for the S&P 500 options, closed today at 14.2%, down over one point today and down nearly 8% for the week.
 
I track the Russell 2000 index with the IWM ETF, which closed today at 169.1, up almost two points or 1.1%. IWM opened the week at 174.5, setting up a gain of over three percent for the week. IWM remains far below both its 50 dma and 200 dma.

The NASDAQ Composite index closed today at 13,798, up 277 points or 
2.1%. NASDAQ opened the week at 13514 for a weekly gain of 2.1%. The weekly gain was affected by Thursday’s large pullback. Trading volume ran near average all week, with the exception of yesterday. Curiously, trading volume was significantly lower on today’s strong run higher.

This strong bullish run higher began in late October and was characterized by several gap openings higher. But trading volume has not been particularly high as the market ran upward. The one exception was a volume spike on yesterday’s strong decline after Powell’s remarks.

The danger in recent markets is due to either bond auctions that result in higher yields or remarks from any member of the FOMC that may be interpreted as suggesting additional rate hikes. Case in point: consider yesterday’s severe market decline versus today’s strong bullish run higher. A weak bond auction started the decline yesterday and Powell's remarks accelerated the drop. Today, the market forgot all about it and roared higher. Note that the S&P 500 and NASDAQ closed at their highs today, characteristic of a strong bull market.

 

 

The Standard and Poors 500 index (SPX) closed today at 4224, down 54 points or 1.3%. SPX opened the week at 4342, setting up a weekly loss of 2.7%. Today’s loss solidly broke down through the 200-day moving average (dma). Trading volume increased steadily all week, peaking today at 2.7 billion shares, well above the 50 dma at 2.2 billion shares. That increase in trading volume was an endorsement of the downtrend.

VIX, the volatility index for the S&P 500 options, closed today at 21.7%. VIX opened at 19.1% on Monday and declined to 17.2% at the close on Monday, but steadily rose all week.

I track the Russell 2000 index with the IWM ETF, which closed today at 166.4, down 2.2 points or 1.3%. IWM opened the week at 171.7, setting up a 3.1% weekly loss. On Monday, IWM’s 50 dma crossed down through the 200 dma.

The NASDAQ Composite index closed today at 12,984, down 202 points or 
1.5%. NASDAQ opened the week at 13,454 for a weekly loss of 3.5%. NASDAQ broke its 50 dma last Friday and is now approaching its 200 dma at 12,730. Trading volume was below average all week, with the exception of yesterday.

The weak state of this market may be summarized by noting that the S&P 500 and the Russell 2000 have now broken both of their 50 and 200 day moving averages. NASDAQ has broken its 50 dma but remains above its 200 dma.

Last week, I was skeptical of IBD’s move to Uptrend Under Pressure, because the market looked weaker to me. Monday and Tuesday’s relative strength fooled me. I should have started moving to cash. The marked decline of the Russell 2000 last week was the warning shot.

 I entered several new trades cautiously last week and remained in them this week. That was a mistake. Many of those trades could have been closed for gains on Monday and Tuesday. Mea culpa.