Dr. Duke's Blog

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Written by Dr. Duke

Created: 31 May 2025

The Standard and Poors 500 index (SPX) essentially wandered sideways this week, but it held up for a positive gain for May with a close at 5912, essentially unchanged for the day, but up 1.0% for the holiday shortened week. Trading volume has tracked below the 50 dma all month, but it spiked much higher today.

VIX, the volatility index for the S&P 500 options, steadily declined this week, opening at 20.6% and closing today at 18.6%. This level of volatility isn’t too extreme, but it isn’t perfectly calm either.

I track the Russell 2000 index with the IWM ETF, which has basically traded sideways this week, closing today at 205.1, down 0.5% for the day and down 0.2% for the week. IWM’s trading volume remained below average this week and barely touched its 50 dma today. IWM is still trading well below its 200 dma.

The NASDAQ Composite index closed today at 19,114, down 62 points or 
-0.3%. NASDAQ opened the week at 19,014, setting a weekly gain of 0.5%. NASDAQ’s trading volume ran at or below the 50 dma this week, except for popping higher yesterday.

The S&P 500 stocks gave back their previous gains last week and essentially traded sideways this week. Today’s trading was significant in that SPX hit a low intraday but quickly recovered and closed very close to Thursday’s close. That was a bullish sign for the market. Trading volume in the S&P 500 stocks spiked strongly higher today, another bullish sign.

The prices of the S&P 500 index, the NASDAQ Composite and the Russell 2000 index are now all trading above the 50 dma. That is confirmation of a bullish trend following the recent correction. But none of these broad market indices have returned to a bullish configuration of the 50 dma running above the 200 dma. This reflects the serious losses taken during the correction.

IBD raised its recommended stock market exposure to 80-100% on 5/13 and remains there today.

The candlestick patterns of the broad market indices today are interesting. IWM displayed the classic doji which may suggest a trend change in either direction. The traditional hanging man, seen in SPX and NASDAQ, often suggests a bearish reversal of an uptrend. But today’s trading action was interesting, opening lower this morning, hitting a significant low midday and then trading higher to close almost exactly at Thursday’s close. I believe this pattern suggests that traders saw the intraday low as a bargain and strong buying resulted in a much higher close.

I have continued to enter new trades, but I am cautious. Our AAPL diagonal call spread ended badly but our TSLA iron condor is proceeding profitably. All of my trades in the Conservative Income trading service are profitable and our Flying With The Condor™ positions are positive. Our SPX Zero DTE Trading positions have been profitable this week and that service is up 59% for 2025. Volatility declined steadily this week but it remains high enough to command respect. Use a high hurdle rate and tight stops for prospective trades. Large institutional traders are quick to hit the sell button and we have tariff news daily.

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Written by Dr. Duke

Created: 16 May 2025

The Standard and Poors 500 index (SPX) continued its bullish trend this week with a gap opening on Monday morning to break the 200-day moving average (DMA). SPX closed today at 5958, up 42 points or 0.7% on the day. SPX opened the week at 5807 for a weekly gain of 2.6%. However, trading volume remains below the 50 dma and slowly declined all week.

VIX, the volatility index for the S&P 500 options, steadily declined this week, opening at 19.8% and closing today at 17.2%. Declining volatility is suggesting a calming of the market’s nerves.

I track the Russell 2000 index with the IWM ETF, which has basically traded sideways this week, closing today at 209.9, up 0.8% for the day and up 0.5% for the week. IWM’s trading volume declined modestly this week and is running below its 50 dma. IWM posted a large gap opening Monday morning but then cooled off and just traded sideways, remaining well below its 200 dma.

The NASDAQ Composite index closed today at 19,211, up 99 points or 
+0.5%. NASDAQ opened the week at 18,675, setting a weekly gain of 2.9%. NASDAQ’s trading volume is unique among the broad market indices; it ran above the 50 dma all week. The AI stocks continue their run.
 
The strong gap opening of the markets on Monday morning, followed by a consistent run higher this week certainly quieted the doomsday crowd. The missing element of a strong bull market is increased trading volume. That suggests that the large players remain largely on the sideline. However, NASDAQ has broken out above its 200 dma. Both SPX and the Russell 2000 remain below their 200 dma. NASDAQ’s leadership probably reflects the continued drive into AI stocks.

IBD raised its recommended stock market exposure from 40-60% to 80-100% 
on 5/13.

The S&P 500 and the Russell 2000 indices have not yet returned to a bullish configuration of the 50 dma running above the 200 dma. That reminds us of the serious losses taken during the correction.
I have begun to slowly enter new trades, but I remain cautious. Our AAPL diagonal call spread is proceeding well. Volatility declined steadily this week and that is a helpful sign. Weak trading volume is my primary concern. Be patient for the right trade setup. Keep your stops tight.

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Written by Dr. Duke

Created: 03 May 2025

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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Written by Dr. Duke

Created: 25 April 2025

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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Written by Dr. Duke

Created: 04 April 2025

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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Written by Dr. Duke

Created: 21 March 2025

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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Written by Dr. Duke

Created: 15 March 2025

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.

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Written by Dr. Duke

Created: 08 March 2025

The Standard and Poors 500 index (SPX) closed today at 5770, up 32 points or 0.6%. SPX opened the week at 5968, down 3.3% for the week. SPX appeared to find support at the 200-day moving average (dma) on Thursday and bounced higher on Friday. Trading volume ran above the 50 dma all week.

VIX, the volatility index for the S&P 500 options, opened the week at 19.8%, spiked up over 26% on Friday, but closed at 23.4%, down 1.5 points or -6.0%.

I track the Russell 2000 index with the IWM ETF, which closed today at 206, up 0.7 points or 0.3%. IWM opened the week at 215 for a weekly loss of 4.2%. IWM trading volume been running above the 50 dma for the last seven trading sessions. One has to go back to August and September of 2024 to find similar lows for IWM.

The NASDAQ Composite index closed today at 18,196, up 127 points or 
0.7%. NASDAQ opened the week at 18,923, setting up a weekly loss of 3.8%. NASDAQ’s trading volume ran at or below the 50 dma this week. NASDAQ broke its 200 dma on Monday and continued to decline until today.
 
The overall markets hit recent highs on 2/19 and continued to decline this week. The S&P 500 has now declined 6.1%; NASDAQ Composite is down 9.5% and the Russell 2000, as measured by IWM, is now down 9.3%. Although technical analysts have traditionally viewed corrections as declines equal to or greater than 10%, I think it is fair to say the overall market is in correction with both the NASDAQ and the Russell 2000 down approximately ten percent.

Trading volume is another parameter to watch as we assess the markets. SPX’s volume ran above the 50 dma all week. The trading volume of the Russell 2000 has exceeded its 50 dma for the last seven trading sessions. Only the trading volume of the NASDAQ Composite has tracked along or even slightly below the 50 dma.

Investors Business Daily downgraded their recommended stock market exposure from 20-40% to 0-20% on Monday, consistent with a correction assessment.

Be cautious. There is nothing wrong with holding cash.

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Written by Dr. Duke

Created: 01 March 2025

The Standard and Poors 500 index (SPX) closed today at 5955, down 93 points or 1.6%. SPX opened the week at 6027, down 1.2% for the week. The recovery on Friday helped that number. At Thursday’s close SPX was down 2.7% for the week. Trading volume ran along the 50-day moving average (dma) most of the week, but spiked higher on Friday’s recovery.

VIX, the volatility index for the S&P 500 options, opened the week at 18.1% and spiked up to 22% on Friday, but closed the day at 19.6%.

I track the Russell 2000 index with the IWM ETF, which closed today at 214.7, up 2.3 points or 1.1%. IWM opened the week at 218.8 for a weekly loss of 1.9%. IWM trading volume ran moderately above the 50 dma most of the week.

The NASDAQ Composite index closed today at 18,847, up 303 points or 
1.6%. NASDAQ opened the week at 19,590, setting up a weekly loss of 3.8%. NASDAQ’s trading volume ran at or below the 50 dma this week. Most traders have been complaining about the choppiness of the markets this year, but that tune changed this week. Now the central questions are 1) Is this the beginning of a correction?, and 2) How low can it go?


 
The overall markets hit recent highs on 2/19 and hit a low yesterday (2/27). The S&P 500 had declined 4.6% by Thursday but recovered to a loss of 3.1% on Friday. The NASDAQ Composite posted worse declines of 7.7% through Thursday and 6.2% through Friday. The Russell 2000, as measured by IWM, posted declines of 6.5% and 5.5%, respectively.

Technical analysts have traditionally viewed corrections as a decline equal to or greater than 10%. Lesser declines are usually referred to as either pullbacks or pauses. By those guidelines, we aren’t in a correction yet, but these declines aren’t minor either.

Trading volume is another parameter to watch as we assess the markets. SPX’s volume spiked higher on Friday as the market recovered. That was a good sign, but trading volume on both NASDAQ and IWM ran long the 50 dma. However, some volume gains could be the result of funds rebalancing at month end.

Investors Business Daily downgraded their recommended stock market exposure on Thursday from 40-60% to 20-40%. At these levels, IBD recommends moving largely to cash in preparation for a possible correction. Be cautious. There is nothing wrong with holding moderately large amounts of cash.

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Written by Dr. Duke

Created: 21 February 2025

The Standard and Poors 500 index (SPX) closed today at 6013, down 108 points or 1.7%. SPX opened the week at 6122, down 1.8% for the week. Trading volume ran along the 50-day moving average (dma) all week and was only up modestly on today’s sell-off. The only good news was SPX finding support at the 50 dma.

VIX, the volatility index for the S&P 500 options, opened the week at 15.6% and trended sideways until today when VIX spiked to 19% and closed the day at 18.2%.

I track the Russell 2000 index with the IWM ETF, which closed today at 217.8, down 6.5 points or -2.9%. IWM opened the week at 226.2 for a weekly loss of 3.7%. IWM trading volume ran well below the 50 dma all week but spiked to almost double the 50 dma today.

The NASDAQ Composite index closed today at 19,524, down 438 points or 
-2.2%. NASDAQ opened the week at 20,041, setting up a weekly loss of 2.5%. NASDAQ’s trading volume ran along the 50 dma this week.

As I discussed in the last newsletter, this year’s markets have been very choppy, making it challenging for traders. The new administration is moving at record speed, and I think that creates uncertainty about the future. The market effectively prices the future into today’s trading and institutional traders are uncertain what may be around the corner. These changes may be good for the economy and the markets, but that is difficult to ascertain with much confidence.

The FOMC is remaining calm and deliberate and clearly does not want to release the interest rate brakes too quickly.

The S&P 500 is an excellent measure for the overall market, and it has been extremely volatile this year. SPX lost nearly two percent today alone. On the other hand, look at the market’s trading volume. It was only up modestly today. Trading volume actually declined on the NASDAQ Composite. The signs of institutional traders “throwing in the towel” aren’t there - at least not yet.

Each day brings another explanation for the weakness. Yesterday it was blamed on the weak forward guidance Walmart delivered Wednesday evening. Today it was blamed on reports of United Health being the subject of a DOJ investigation into Medicare billing. The market is nervous and tips over easily. Investors Business Daily downgraded their recommended stock market exposure yesterday and then again today.

Be cautious.