With the exception of last Thursday, the S&P 500 Index made lower highs and lower lows every day culminating in a whopping 155.57 points or -3.63% decline on Friday. With the Federal Reserve's Open Market Committee (FOMC) meeting scheduled for Tuesday and Wednesday equity markets dutifully adjusted prices ahead of Wednesday's announcement and press conference. Most analysts echoed Jerome Powell's comments from the International Monetary Fund the week before when he said he saw merit in the argument for front-loading rate increases, with a half-point rate hike on the table for May.

As they say, a 50 basis point rate hike seems "discounted" or baked in the equity cake ahead of Wednesday's announcement. Should the Fed surprise the markets with a 75 basis point hike or announce a faster reduction plan in Treasuries or Mortgage Backed Security holdings (QT) than expected, equities will quickly adjust to a new reality by heading lower.

S&P 500 Index (SPX) 4131.98 declined for the fourth week with a stunning loss of 139.85 points or -3.27% ending well below the 50-day Moving Average at 4382.63. After dropping below the widely followed average the week before the odds of retesting the February 24 low at 4114.65 greatly increased and Friday's close came within 17.28 points of that low. While a potential Head & Shoulders Bottom pattern can't be ruled out, another new low as early as Monday seems more likely. If so, watch for another intraday reversal as it makes a wide range low and then closes on the high of the day, with increased volume, like the one that occurred on February 24.

IVolatility Implied Volatility Index, IVX using four at-the-money options for each expiration period along with our proprietary technique that includes the delta and vega of each option, increased 4.05 points ending at 28.01 with the 20-day historical volatility, also called realized volatility, at 24.67% up 6.28%. The week before the IVX increased 4.48 points as rising implied volatility reflects uncertainty due to multiple macroeconomic concerns and the upcoming rate hike announcement on Wednesday.

VIX-VXST Indicator

This coincident indicator measures the distance between the 30-day VIX and the 9-day VIX to produce an indicator. While the VIX Index is calculated using monthly options with 30-days to expiration, the VXST uses options with 9-days to expiration and include options that expire in one week making then more sensitive to changes in short-term implied volatility. Like the put/call ratio, it provides a way to measure the degree of hedging impulse.

Typically, the spread is positive with the VIX higher than VXST. Caution signals start flashing when it turns negative as short-term implied volatility increases faster than the standard 30-day measure. It might also be useful as to measure the degree of bullishness or hedging complacency when it's positive, however that's not now the case since it was negative all week ending at -2.71( 33.40 -36.11).

Market Breadth

Market Breadth as measured by our preferred gauge, the NYSE ratio adjusted Summation Index that considers the number of issues traded, and reported by McClellan Financial Publications turned lower after advancing up to -64.70 on April 5, just short of reaching the 200-day Moving Average after bouncing back from -752.24 on March 15. Since then it declined every day with one brief exception on April 19. For the week, it declined 233.19 points to end at -486.31 slightly under the 50-day Moving Average at -439.35. On the bright side, since bear markets affect most stocks, the current positive divergence (not as low as on March 15) with the equity indices offers some slight encouragement for the bulls.