Despite Weakness Among Small-caps, Stocks Showed Resilience

INDEXCBOE:VIX weakness among small-caps Form CRS late trading late trading

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Guest posted by Gorilla Trades

Even considering Friday’s broad pullback and the weakness among small-caps, U.S. stocks continued to show resilience this week, and volatility remained fairly low on the last session of the week. The Russell 2000 was very weak for the second straight day and the downtick in Treasury yields also pointed to a pre-weekend risk-off shift, but the market-leading Nasdaq remained stable on Friday so the underlying bullish trend still looks safe. The entire week was full of gyrations in the VIX (INDEXCBOE:VIX) and other volatility measures.

The major indices closed lower fort he first time in five days on Friday, as, despite the better-than-expected non-farm payrolls number, bulls took some chips off the table ahead of the weekend break in response to the resurfacing coronavirus fears and the weak European economic releases. The Dow was down 277, or 0.9%, to 29,103, the Nasdaq lost 52, or 0.5%, to 9,521 while the S&P 500 fell by 18, or 0.5%, to 3,328. Decliners outnumbered advancing issues by an almost 3-to-1 ratio on the NYSE, where volume was slightly above average.

INDEXCBOE:VIX roller-coaster week

Even though the coronavirus outbreak continues in China and more and more countries are reporting confirmed cases, global risk assets had a very strong week. The mostly positive earnings surprises, the improving economic indicators, and China's trade-related flexibility boosted investor confidence, and the rumors regarding an effective treatment of the virus also helped the quick recovery. The U.S. tech sector clearly led the bull run, but the S&P 500 and the Dow Jones also caught up in the second half of the week, both hitting new all-time highs on Thursday. The long-term technical breakout that started in October seems to be well and alive. This is also the case with the longest bull market in history. This is further confirmed by the decrease in INDEXCBOE:VIX towards the end of the week.

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