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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 Poor’s 500 Index (SPX) gapped open Friday morning and closed trading at 3975, up 65 points on the day or 1.7%. SPX opened the week at 3916, so the net gain for the week was 1.5% - SPX recovered the entire week’s losses on Friday. 2021 has been rough year so far with three pull backs: one ended January 29th; one ended March 4th and this last one ended Thursday? In all three cases, it appears that the 50-day moving average (dma) was the level for the market to find support and recover. Throughout this series of pull backs, the S&P 500 index trading volume has remained generally below average with few exceptions. That suggests that traders have not yet thrown in the towel and began significant selling. Instead, it appears to represent a rotation out of high tech into more cyclical industrial and commodity stocks.

VIX, the volatility index for the S&P 500 options, closed Friday at 19% after hitting 21.5% intraday. Friday’s close matched Monday’s close and both are the lowest levels of implied volatility observed this year.

IWM, the ETF based on the Russell 2000 group of companies, closed Friday at 220.61, up 3.95 or 1.8%. But IWM remained down 2.9% from its open on Monday. On the positive side, IWM recovered the 50 dma that it broke on Wednesday.

The NASDAQ Composite index closed Friday at 13,139, up 161 points on the day but down 1.1% for the week. NASDAQ broke down through its 50 dma last week and remained well below it on Friday (13,426). NASDAQ’s trading volume remains well below average and has only broken the 50 dma once since March 5th (on quadruple witching last Friday).

This has been a rough ride for traders this year. The S&P 500 has pulled back three times now, but each time it has found support at the 50 dma and bounced back higher. However, the real damage has occurred in the NASDAQ Composite with the rotation out of high-tech stocks. Friday’s market action was very encouraging, and in normal times, I might have invested heavily, but I didn’t. The whipsawing back and forth over the past couple of months has me a little gun shy (a term from hunting with bird dogs). I am now 88% in cash. On the positive side, the 50 dma on the SPX price chart has proven itself as the solid line in the sand, and the VIX is as low as it has been all year. But I am still worn out.

I will be watching the market carefully on Monday to see if it makes sense to begin to dip my toes in the water. I hope the crocodiles are gone.

The Standard and Poor’s 500 Index (SPX) closed today at 3913, down 2 points on the day. SPX opened the week at 3943, so the net loss for the week was 0.8%. From the intraday low on March 4th, the low of this pullback, SPX has increased 5.9%. Trading volume on the S&P 500 has continued to trend below the 50-day moving average (50 dma), but spiked higher today, as a result of quadruple witching, the simultaneous expiration of stock index futures, stock index options, stock options, and single stock futures that occurs once a quarter.

VIX, the volatility index for the S&P 500 options, closed today at 21% after hitting 23% this morning and then pulling back just under 20%. VIX has been running at a baseline in the low twenties since the March 2020 correction.

IWM, the ETF based on the Russell 2000 group of companies, closed today at 226.54, up 1.70. But IWM remained down 2.9% from its open on Monday. On the positive side, IWM remains well above its 50 dma.

The NASDAQ Composite index closed today at 13,215, up 99 points on the day but down 0.8% for the week. NASDAQ broke down through its 50 dma on Thursday and remains well below it today. NASDAQ’s trading volume continues its steady decline and remains well below average. The rotation out of high tech into industrials has hurt the NASDAQ Composite index.

We continue to see many mixed signals on the market. We have suffered through two quick dips since the end of January. The decline in early March tried to test the February low but didn’t quite make it. This week’s pullback has traders spooked again.

On the positive side of the ledger, we have the passage of the stimulus bill, progress with the distribution of the Covid vaccine, and several states beginning to reopen their economies. The FOMC this week upgraded their assessment of the economy, but it remains to be seen how quickly we can recover. Many small businesses won’t be reopening as the states reopen.

I continue to trade cautiously and stop out positions to lock in gains whenever possible. We may be in for a choppy ride.

The Standard and Poor’s 500 Index (SPX) closed yesterday at 3943, up 4 points, but up 2.6% for the week. From the intraday low on March 4th, the low of this pullback, SPX has increased 5.9%. Trading volume on the S&P 500 has been declining throughout this recovery, dipping below the 50 day moving average (50 dma) on Friday.

VIX, the volatility index for the S&P 500 options, closed Friday at 21%. The spike intraday to 32% on March 4th represented the high for this pullback. VIX has been running at a baseline in the low twenties since the March 2020 correction.

IWM, the ETF based on the Russell 2000 group of companies, closed at 233.59 Friday. IWM bounced back 12.7% from the intraday low of this pull back on March 5th.  IWM set new all-time highs on Thursday and Friday. The small to mid-cap companies of the Russell 2000 are high beta stocks that tend to lead markets higher in the “risk on” phase and lead markets lower in the “risk off” phase.

The NASDAQ Composite index closed Friday at 13,320, up 79 points on the day and up 3.2% for the week. NASDAQ is the weakest of the broad market indices and remains below its 50 dma. The previous all-time high for NASDAQ was set at 14,152 on 2/16 and the index remains nearly 6% below that high. NASDAQ led the previous bull markets but is lagging behind on this cycle. NASDAQ’s trading volume steadily declined all week and remains well below the 50 dma.

Technical analysts use a standard terminology of a market correction being called whenever the market drops by more than 10% and lesser declines are just termed pull backs. By that standard, the S&P 500 index pulled back by 4% before recovering, and the Russell 2000 index pulled back by 7%, but the NASDAQ Composite corrected by 11%. In similar fashion, SPX and IWM reclaimed their all-time highs set in February while NASDAQ remains 6% below its all-time high of 2/16.

Most market analysts are seeing the stimulus bill as the key to this latest recovery. Other analysts are encouraged by progress with the vaccine and several states beginning to reopen. The market appears to be pricing in a strong economic recovery. That analysis may be too optimistic. A large number of small businesses won’t be reopening as the states reopen.

I am not fully invested at this point. However, I am trading cautiously. Keep your stops close.

The Standard and Poor’s 500 Index (SPX) closed today at 3847, up 73 points. It is surprising to note that today’s close was within one point of the opening Monday morning. This week has been chocked full of large moves both up and down, throwing fear into many traders, but we ended the week where we started. Trading volume spiked up above the 50-day moving average (dma) yesterday and remained above average today as well. The lows both yesterday and today were very close to the lows set in the pullback toward the end of January. In spite of all of the doom and gloom, this market seems to be finding support.

VIX, the volatility index for the S&P 500 options, closed today at 25%. After spiking as high as 32% yesterday, this was a dramatic reversal.

IWM, the ETF based on the Russell 2000 group of companies, closed at 217.71 today, down 2.6% for the week. The high this year for IWM was 215 in mid-January and that level has been tested several times over the past couple of weeks. The 50 dma was tested yesterday and IWM opened this morning and ran down through the 50 dma before turning and closing well above that level today. The Russell 2000 remains the only broad market index that has not broken its 50 dma this week.

The NASDAQ Composite index closed today’s trading at 12,920, up 197 points on the day but down 3.6% for the week. NASDAQ broke its 50 dma once last week and then recovered, only to break down through the 50 dma on Wednesday this week. Even after a dramatic reversal this afternoon, NASDAQ remains well below the 50 dma at 13,341. NASDAQ’s trading volume remained below average all week, except for a spurt higher on Thursday.

This was an interesting week in the markets with three very bearish trading days and two gap openings lower Wednesday and Thursday. With the exception of the Russell 2000, the other broad market indices all broke their 50 day moving averages this week. Yesterday’s performance caught my attention and caused me to start playing defense and being reticent to add new positions.

But what a difference a day makes. SPX opened roughly at the intraday high from yesterday, tested yesterday’s lows and then proceeded to trade higher and soundly recover the 50 dma. The S&P 500, NASDAQ and the Russell 2000 all staged strong intraday recoveries today, but NASDAQ’s was the most dramatic. It closed a few points higher than this morning’s open after falling almost 500 points from the open, even setting a lower low than yesterday’s intraday low. You don’t see that very often.

Well, that is all very interesting, but where does it leave us? After the dust settled today, we have two indicators that appear surprisingly positive. One is the strong intraday recoveries staged by the S&P 500, NASDAQ and the Russell 2000. A stronger bullish signal came from the Russell 2000 index. This index is comprised of small to mid-capitalization stocks. These are the classic high beta stocks that tend to outperform the S&P 500 whether it is moving higher or lower. They are the stocks sold first in a panic. But that didn’t happen this week.

Since the first of this year, the S&P 500 is up 2%, the NASDAQ Composite is down 0.3%, and the Russell 2000 is up 10%. Yes, I checked my numbers. The Russell 2000 has gained a little over 10% for 2021 year to date.

By contrast, what we saw in the March correction last year was more typical: the S&P 500 lost 35%, the NASDAQ Composite lost 27%, and the Russell 2000 was the winner of the race downward at 43%. These are the classic stocks bought when traders yell “risk on” and sold when the tide turns. Why are they holding up so well this year?

I will remain cautious as trading opens Monday, but I don’t feel nearly as anxious as I did at yesterday’s close.

The Standard and Poor’s 500 Index (SPX) bounced off of its 50-day moving average (dma) on Tuesday, recovered and then tested that support level again today, closing at 3811, right at the 50 dma at 3808. Trading volume in the S&P 500 companies increased steadily all week. I believe this shows some selective selling in anticipation of additional pullbacks next week.

VIX, the volatility index for the S&P 500 options, closed today at 28%. Both yesterday and today, VIX spiked as high as 31%. Volatility ranged quite a bit today, from as low as 25% to a high of 31%. Traders are nervous.

IWM, the ETF based on the Russell 2000 group of companies, closed at 218.31 today, down 2.3% for the week. IWM continues to show support at 215, bouncing from that level Tuesday and again today. That makes 215 a good “line in the sand” to watch.

The NASDAQ Composite index closed today at 13,192, down 72 points on the day but down 3.8% for the week, exceeding the losses of both the Russell 2000 index (-2.3%) and the S&P 500 index (-1.9%). NASDAQ’s trading volume declined steadily this week, remaining below the 50 dma.

We close another bearish week for the markets with all of the broad market indices losing 2% or more of their value. The markets are holding at key levels of support this week, but a pullback or correction appears more and more likely. Perhaps we will retest those early February lows.

I am continuing to sell these elevated levels of volatility, but I am also closing positions aggressively when they move against me. Several stocks continue to post strong gains. Deere (DE) is a good example, posting gains this week after its earnings announcement on Monday. I sold the Feb(2/26) 345 put on Wednesday for a 1.2% yield in two days. It will expire worthless tomorrow. But I chose not to roll it out to next week. A weekend can be a long time in this market.

Watch your positions very closely. It is a nervous market.

The Standard and Poor’s 500 Index (SPX) closed Friday at 3907, down 7 points on the day, but down 0.8% for the week. I am watching the support level formed this week and last week around 3875. If SPX breaks support, it could be headed lower. SPX’s trading volume ran below the 50-day moving average (dma) all week.

VIX, the volatility index for the S&P 500 options, closed Friday at 22%. As one might expect for a flat market week, VIX was in a narrow range this week of 21% to 24%.

IWM, the ETF based on the Russell 2000 group of companies, closed at 225.19 Friday, down 1.9% for the week. IWM has shown weak support at 219 and stronger support at 215. A break below 215 would be a warning signal.

The NASDAQ Composite index closed Friday at 13,874, up 9 points on the day but down 2% for the week, close to the losses of the Russell 2000 index. NASDAQ’s trading volume ran slightly above and below average all week, and closed Friday almost precisely at the 50 dma.

This was a bearish week for the markets with the Russell 2000 index (the basis of IWM) and the NASDAQ both losing about two percent and the S&P 500 index losing almost one percent. The only positive signs were some weak signs of recovery on Friday.

Market analysts are in two camps. One remains bullish and the other is nervous, expecting a pullback or possibly a correction soon. Of course, the usual doomsday gurus are being interviewed on the financial networks. I find it hard to take them too seriously. It’s the “boy cried wolf” problem. I doubt the end of the world scenario, but a pullback or correction would not be surprising at all.

I am continuing to sell these elevated levels of volatility, but I am also closing positions aggressively when they move against me the least bit. Several stocks continue to post strong gains. Watch your positions very closely. It is a nervous market.

The Standard and Poor’s 500 Index (SPX) continued its steady climb higher this week, closing today at 3935, up 18 points and up 1.1% for the week. It seems too good to be true, especially when one looks at the weak economic data. However, SPX is continuing this march higher with steadily declining trading volume. One should not bank too heavily on higher prices being achieved on lower volume.

VIX, the volatility index for the S&P 500 options, closed today at 19.97%. I was surprised when I expanded the chart and found that today is the first day VIX has closed below 20% since its close at 17.1% on 2/21/20, just before the market went off the cliff.

The NASDAQ Composite index closed today at 14,095, up 70 points today and up 1.1% for the week, identical to the gains of the S&P 500 index. NASDAQ’s trading volume advanced all week but suddenly retreated to close at the 50 dma today. Did everyone leave early for the long weekend?

This market is whipping traders back and forth. Consider the S&P 500 index price chart over the past three weeks. SPX lost 4% during the week ending 1/29, but then gained it all back with a 4% gain last week. SPX continued its run higher this week, although at a somewhat slower pace of 1%. It isn’t surprising that traders are nervous and the “sky is falling” crowd are all carrying their “end of the world” posters.

The S&P 500 volatility index, VIX, closed below 20% today for the first time since February 21st of last year, just before the March correction. An old adage about VIX goes, “When the VIX is low, it’s time to go”. This is based on the observation that volatility cycles between the lows and highs as the market cycles. However, the same disclaimers apply here as predicting market highs and lows. The VIX may be lower than it has been in nearly a year, but it could go lower. At a minimum, it is wise to be cautious and watch the market very carefully.

I am carefully positioning my stops tighter, closing trades when they trip the stop, and closing early when I can lock in gains and take some risk off the table.

Enjoy the long weekend.

Alfred E. Neuman’s infamous quote seemed appropriate as we set new all-time record market highs with the economy in tatters. The Standard and Poor’s 500 Index (SPX) closed trading today at 3714, up 15 points. Incredible as it may seem, the S&P 500 marched 4.2% higher this week. The only sobering sign was watching trading volume steadily decline all week.

VIX, the volatility index for the S&P 500 options, reached 37.2% last week and closed today at 20.9% in about ten days. If one ignores VIX and just watches the market indices, you would think a return to 20% volatility was the all-clear signal. When you can sell puts of solid blue chips stocks for close to one percent yield per week, these are dangerous levels of volatility. Don’t be deceived.

IWM, the ETF based on the Russell 2000 group of companies, closed at 221.65 today, down 3.03. But the incredible news is that today’s close culminated a growth rate of 6.5% for this week. This is the classic ultra-strong bull market where the high beta stocks outperform the blue chips as investors scramble for higher gains. It sounds a little frothy, doesn’t it?

The NASDAQ Composite index closed today at 13,856, up 79 and setting another all-time high. NASDAQ outperformed the S&P 500 with a weekly growth rate of 4.8%. NASDAQ’s trading volume has declined since last week and dipped below the 50 dma today.

What a difference a week can make! Last week’s market had all of the signs of tipping over the edge into a downtrend or at least a pullback. This week saw every index gaining 4% or more. The Russell 2000 gained 6.5%. These aren’t strong gains; they are extraordinary gains.

This underscores the need for caution. I am not suggesting burying all of your cash in the backyard. But I am very carefully positioning my stops and closing trades when they trip the stop – no exceptions and no dreams of recovery. In my opinion, this is an excellent time for selling options. But be conservative. Trade only solid blue chip stock options. Don’t use any margin and close at the first sign of trouble.

The Standard and Poor’s 500 Index (SPX) closed trading Friday at 3714, down 73 points on Friday and down 3.6% for the week. The close occurred at the fifty-day moving average (dma), often a key inflection point for the market. Trading volume spiked up above the 50 dma for the last three days of the week, underscoring the losses.

VIX, the volatility index for the S&P 500 options, closed Friday at 33.1% after spiking as high as 37.5% on Wednesday and earlier Friday morning. These are dangerous levels of volatility.

IWM, the ETF based on the Russell 2000 group of companies, closed down 3.16 points to 205.56 on Friday, down 4.4% for the week. As expected, IWM’s high beta stocks are outperforming the S&P 500 stocks to the downside as the market declined this week. However, IWM remains well above its 50 dma at 196.36.

The NASDAQ Composite index closed Friday at 13,071, down 266 for the day, and down 4.5% for the week. The recent market leaders are leading the market lower this week. NASDAQ’s trading volume remained well above the 50 dma all week but declined in the latter part of the week.

The concerns I have written about in the last several newsletters continue and the “sky is falling” cries are becoming more shrill. So far, I have simply been closing positions that hit their stops, so the majority of my trades remain open. I have not panicked as yet. One positive sign was the slight recovery of the S&P 500 on Friday. Go back and look at the S&P price chart in late February and early March last year and you will see several closes at the lows of the day. Those are serious bearish signals.

Be cautious about entering new trades until we see some evidence of the markets finding support.

It is difficult to discern a direction for the markets today. The Standard and Poor’s 500 Index (SPX) has steadily tracked higher since early November, but the daily price changes have become more volatile, gaining one day and then giving it back the next day. Many market observers are becoming more concerned about whether the market prices accurately reflect the current economic situation of this country. SPX closed the week at 3841, down 12 points. However, this close represented an increase of 1.3% over this shortened week, but it doesn’t “feel” like the market traded higher. Trading volume on the S&P 500 has remained at or below the 50-day moving average (dma) all week.

VIX, the volatility index for the S&P 500 options, closed Friday at 21.9%. VIX opened Tuesday morning at 23.0% and declined slightly through the week. Historically, these twenty-plus levels of implied volatility are rather high. Often this level of volatility was typical of minor pullbacks and was temporary. It is sobering to realize that it has been nearly a year since VIX was below 20%. VIX spiked up several times in 2018 and 2019 and settled down to levels around 12%. And if we go back to 2017-2018, VIX ran at foundational levels of approximately 10-11%. My point is to caution us not to become accustomed to these high levels of volatility. VIX is flashing caution. Stay alert.

IWM, the ETF based on the Russell 2000 group of companies, hit all-time highs last week and closed Friday near those highs at 215.00. IWM seems to be more solid than the broad market. The stocks that make up the Russell 2000 are the high beta stocks that are sold first when institutions get nervous. Thus far, IWM is holding up well and serves as a bullish signal.

The NASDAQ Composite index closed Friday at 13,543 , up 12 for the day, and up 3.1% for the week. The traditional high-tech stocks continue to lead this market. NASDAQ’s trading volume stands out, having remained well above average for the first four weeks of this new year.

The commentary from the “sky is falling” crowd is increasing in volume, and I certainly understand the underlying concerns. However, we have a clear choice: hide under the bed or remain invested. Solid risk management is especially important in this market.

As I mentioned above, VIX has been running above 20% since early last year. Be sure you have clear stops in place for all of your positions and monitor those positions every day. Stay alert.