**Nvidia’s Market Milestone** We are keeping an eye on geopolitical tensions as Russia’s stance may change due to ongoing events in Ukraine. The Dow Jones Industrial Average (DJIA) features 30 major US companies and is calculated based on the stock prices of these companies. Several factors affect the Dow, including company earnings, macroeconomic data, and interest rates from the Federal Reserve. Dow Theory helps identify main market trends by analyzing DJIA and DJ Transportation Average (DJTA) movements. It uses trading volume to confirm these trends and recognizes three phases of market movement. You can trade the DJIA through various means, such as ETFs, futures contracts, options, and mutual funds, offering different ways to invest in the index. **Market Volatility And Trading Strategies** US index futures are currently flat in thin holiday trading, as the market takes a pause after reaching record highs. The major indices saw impressive double-digit gains in 2025, prompting some profit-taking as the year ends. Caution is advised because low trading volumes can amplify market movements in the days ahead. The upcoming Federal Open Market Committee (FOMC) minutes are crucial for understanding the Federal Reserve’s outlook for 2026. After a year of steady benchmark rates around 5.4%, the market expects at least two rate cuts next year. Any hints in the minutes that challenge this expectation could lead to significant shifts in futures pricing. We are also looking at Wednesday’s Initial Jobless Claims data for insights on the labor market’s condition. A figure close to the recent average of 215,000 will be key; any major deviation could raise concerns about the economic outlook that has supported stock market performance this year. A much lower number could postpone anticipated rate cuts, while a sudden rise could suggest economic difficulties ahead. Volatility is currently low, with the VIX index at a yearly low of 13. This situation makes options fairly inexpensive, allowing us to buy protection against surprising market events. Given high market valuations and low trading volumes, purchasing put options on indices like the S&P 500 could be a wise approach to safeguard our investments as we enter the new year. We are cautious about the concentration of gains in large tech stocks, especially as Nvidia reached a $5 trillion valuation. Nvidia’s recent investment in Intel illustrates how interconnected this sector is. A significant decline in Nvidia could negatively affect the entire Nasdaq 100 and S&P 500. According to Dow Theory, although the Dow Jones Industrial Average has hit new highs, the Dow Jones Transportation Average has shown some weakness in the fourth quarter of 2025. This discrepancy is a classic warning that requires attention when full trading volume returns in January, suggesting that the broader economy may not be as strong as the headline index indicates. We should also pay attention to renewed geopolitical tensions between Russia and Ukraine. As we saw in early 2022, such events can quickly disrupt markets and increase energy prices. Any escalation could lead to a search for safe-haven assets, putting pressure on equities and making defensive investments more appealing. Create your live VT Markets account and start trading now.

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