European stock indices had mixed results today. The French CAC and Italian FTSE MIB fell, while the Spanish Ibex and the UK’s FTSE 100 rose. Here are the details: – **German DAX:** +0.23% – **France’s CAC:** -0.41% – **UK’s FTSE 100:** +0.5% – **Spain’s Ibex:** +1.34% – **Italy’s FTSE MIB:** -0.24% As European markets closed, US indices showed mixed results as well. The Dow industrial average neared its record high from December 2024, but ended slightly down. The S&P and NASDAQ posted small gains. Here’s how they finished: – **Dow:** -207 points to 44804.60 – **S&P:** +10.9 points to 6369.50 – **NASDAQ:** +32.3 points to 21052.25 – **Russell 2000:** -22.78 points to 2260.35

Notable Stock Performances

Alphabet shares rose 1.36% to $192.79, and Nvidia shares went up 1.22% to $172.86. Both companies are investing in AI. Broadcom reached a new high, increasing 1.75% to $288.70. Additionally, OpenAI has plans to release GPT-5 by August. Given the mixed signals from European markets, we suggest that traders refrain from broad bets in the region. The strong performance in Spain and the UK contrasts with the declines in France and Italy, indicating that specific country factors are at play. Therefore, trading options on individual country ETFs could provide a more targeted approach. In the US, the difference between tech-heavy indices and the overall market signals important trends for the upcoming weeks. The 1% drop in the Russell 2000 suggests underlying weakness, supported by recent data showing the top 10 S&P 500 stocks now account for over 34% of its value. We recommend a pairs trade: going long on NASDAQ 100 futures while shorting Russell 2000 futures to take advantage of this trend.

Market Cautions and Recommendations

The momentum in artificial intelligence continues, with leading companies reaching new highs. With events like OpenAI’s August launch on the horizon, we encourage traders to consider bullish options strategies for these tech leaders. Buying call spreads can help you capture potential gains while managing risk. However, the Dow’s struggle to maintain a new record and general market weakness suggests a cautious approach. The latest Consumer Price Index (CPI) reading of 3.3% indicates that the Federal Reserve is unlikely to lower interest rates soon, posing challenges for the broader economy. We recommend buying protective puts on broad market ETFs to guard against a possible downturn. This narrow market leadership often results in increased volatility. We witnessed a similar situation in the late 1990s, before the dot-com bubble burst, where a few major companies dominated the market. So, we advise adding positions in VIX futures or call options to prepare for potential spikes in market turbulence. Create your live VT Markets account and start trading now.

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