The S&P 500 index increased slightly by 0.32% on Wednesday, even with some profit-taking, keeping its short-term stability. Retail sales rose by 0.6% for the month, surpassing expectations; however, overall sentiment saw a small drop from the previous day. The Nasdaq 100 pulled back from its Tuesday high of 23,051.87, closing just 0.1% higher. This might suggest a possible topping pattern. The VIX rose to 19.48 before settling around 17, indicating continued market stability. Generally, a lower VIX means less fear in the market, but it could also hint at a potential downturn.

Market Volatility and Geopolitical Influences

S&P 500 futures are around 6,300. The resistance is between 6,300-6,320, while support sits near 6,240-6,260. The market is quite volatile, reacting to geopolitical events. Crude oil prices fell by 0.21% but then bounced back due to unexpected drops in U.S. inventories, stabilizing around $65-66. Crude oil is back on the rise, hitting resistance at $67. The stock market is currently in a flat correction phase, waiting for corporate earnings to determine its direction. Netflix will report today, and major tech firms will follow next week. This period of consolidation shows no clear bullish or bearish trends. Traders may find the current market consolidation a chance to use range-bound strategies. Since the CBOE Volatility Index recently lingered near a multi-year low around 13, option premiums are relatively low, offering a good opportunity to define risk. Strategies like selling premiums through iron condors on the S&P 500 could work well while it moves sideways. The Nasdaq 100’s pullback from above 19,900 indicates that caution is wise. We recommend buying protective puts on tech-focused ETFs to safeguard long portfolios against possible declines. This is pertinent, as the rally has largely centered around a small group of significant tech stocks, which might be prone to profit-taking.

Strategies for Trading and Earnings Season

With the market looking for direction from upcoming earnings reports, traders might want to prepare for notable price movements. A long straddle or strangle on companies like Netflix, known for large market reactions to earnings, can allow profits from moves in either direction. This strategy effectively capitalizes on volatility during uncertain times. The recent stabilization of crude oil prices, now around $81 per barrel after U.S. inventory reports, eases immediate inflation worries. For traders in this sector, using calendar spreads on energy ETFs can be advantageous, taking advantage of short-term time decay while keeping exposure to potential breakout opportunities as the summer driving season approaches. With clear technical levels established, this market is well-suited for defined-risk vertical spreads. Selling bull put spreads below the current support of around 5,440 or bear call spreads above the 5,500 resistance can provide high-probability trades that benefit from the ongoing consolidation and time decay. Create your live VT Markets account and start trading now.

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