Markets reacted today to the end of the government shutdown, following the trend of “buy the rumor, sell the fact.” The tech sector remains weak, continuing a three-day slump. US small caps are also facing ongoing losses. Volatility has risen, showing ongoing concerns about high valuations. Michael Burry’s decision to close his fund has caught attention, with different interpretations based on market views. While he has been accurate in the past, it doesn’t guarantee future predictions. Gold prices went up due to economic worries and a declining US Dollar, but chances of the Fed not cutting rates may limit its growth.

Cryptocurrency Developments

Ethereum dropped by 7% due to continuous selling, with $500 million in profits and $100 million in losses since Sunday. Ripple’s value is nearing $2.50, boosted by positive sentiment in the cryptocurrency market. Speculation continues around the Bank of Japan possibly raising interest rates from 0.5%, considering political, economic, and market factors. Traders of GBP/USD are facing difficulties from weak UK data and uncertainties about tax plans, which are hurting market sentiment. The EUR/USD has risen for a third straight day as the US Dollar declined after the government shutdown ended. Markets are now waiting for euro area GDP figures. With the government shutdown finished, the market is selling off after rallying on the rumor. The S&P 500 has pulled back 1.5% since the reopening was confirmed yesterday. This indicates a shift back towards underlying economic uncertainties.

Market Volatility

Market volatility is the main point to note right now, as the VIX has risen above 22 this week for the first time in over a month. This increase in expected market fluctuations makes buying protective puts on major indices more appealing, even if they are more costly. It suggests we should prepare for wider price swings in both the S&P 500 and the tech-heavy Nasdaq 100. The weakness in tech stocks and US small caps hints at a move toward safer assets. We are seeing unusual options activity in puts on the Invesco QQQ Trust, which tracks the Nasdaq 100. This bearish outlook on growth sectors suggests we should consider more defensive investments in the coming weeks. The market buzz around Michael Burry’s fund closure adds to the nervous atmosphere. It recalls the sentiment from late 1999 when prominent bearish voices were often ignored before the market turned in 2000. While it isn’t a direct signal, it reinforces a cautious approach and highlights the need for hedging long positions. We are also keeping an eye on the ongoing sell-off in the US Dollar, which continues to support assets like gold. The U.S. Dollar Index recently fell below the 104 level, changing from a support level to resistance. This trend makes call options on gold-related investments like the GLD ETF a practical strategy to align with safe-haven flows. Create your live VT Markets account and start trading now.

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