Technical Levels and Market Dynamics

Right now, the 200-hour moving average is providing support, while the 100-hour moving average is acting as resistance. This places the index in a critical position between these two levels. Sellers are currently defending the 100-hour moving average by either reducing their investments or opening short positions. In the long run, stocks generally favor buyers, but reversals can happen at key technical points, especially near resistance levels. The 100-hour moving average is now an important test. If sellers keep control and push prices down, they may strengthen their position. However, if buyers manage to break above this level, it could create upward momentum, supported by the 200-hour moving average. We are seeing the Nasdaq test short-term resistance around the 100-hour moving average. After a sharp drop following last Friday’s jobs report, buyers came in to protect the 200-hour moving average. This has set up a tense situation as we start the week of August 4, 2025. The index is currently stuck between the 100-hour moving average resistance at 20,972 and the 200-hour moving average support. Today’s early gains are encouraging for buyers, but the inability to break above the 100-hour level shows that sellers are still present. This type of price compression often leads to sharp movement in the coming days.

Strategic Options for Traders

The jobs report from August 1st showed that 210,000 new jobs were created in July, slightly above expectations, raising concerns about Federal Reserve policy. Coupled with a core CPI reading of 3.1% for June 2025, the market is anxious about potential hawkishness at the upcoming Jackson Hole meeting. The VIX, which measures expected volatility, has increased to 15.8 from its summer lows. For those traders expecting a decline at this level, buying put options on the QQQ exchange-traded fund may be a smart strategy. This would provide downside protection or profit if sellers regain control and push the index back to its 200-hour moving average. If the price drops below this support, a larger correction could occur. On the other hand, if buyers push the Nasdaq decisively above 20,973, it would indicate a failed breakdown and could spark a rally. In this case, call options would allow traders to benefit from upward momentum. We saw a similar situation in early 2024, where strong defense of a key moving average led to a months-long rally. Given this tight range and mixed economic signals, some traders might consider strategies that profit from significant price movement in either direction. A strangle strategy, which involves buying both an out-of-the-money call and put option, could be effective. This approach would benefit from the increase in volatility expected once the index breaks out of its current range. Create your live VT Markets account and start trading now.

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