European stocks are declining today. S&P 500 futures are down by 0.4%, with technology stocks driving the drop, as Nasdaq futures fall by 0.6%. In Europe, the DAX and CAC 40 indices have also decreased by 0.6%. **Market Adjustments** There isn’t a specific reason for this decline, but it may be related to month-end rebalancing flows. Despite this dip, the S&P 500 recently hit record highs and is up 2.6% this month. The Nasdaq has also gained 2.8% this month. Although the DAX and CAC 40 are down this week, indices in Spain and Italy have performed well. Today’s slight pullback seems more like a routine adjustment rather than a major change in market sentiment. Since the S&P 500 closed at a record high just yesterday and has increased by 2.6% in August, some profit-taking at the end of the month is normal. This isn’t a reason to panic; instead, it’s a chance to review investments as we enter a new month. This minor decline has caught attention in the options market, with the VIX volatility index rising over 8% to 14.5 this morning. While this is still historically low, it indicates that traders are starting to seek protection for the upcoming weeks. It might be wise to consider buying protective puts on major indices to shield long portfolios against a potential rise in volatility. **Seasonal Patterns** We should also acknowledge the well-known seasonal trends, as we are entering the historically challenging period for the market. Data since 1950 shows that September has consistently been the worst month of the year for the S&P 500. This historical trend suggests it’s a good time to establish some defensive strategies. In addition to seasonal factors, key economic reports could add uncertainty. All eyes are on next Friday’s Non-Farm Payrolls report, where experts expect a modest increase of 175,000 jobs. A significant surprise in this number, especially after last month’s core PCE inflation held at 2.7%, could easily change market sentiment. For those holding tech shares that have done well, now might be a good time to sell some out-of-the-money call options against those positions. This strategy can generate income that cushions against sideways movement or declines into September. It also allows for continued gains if there is a strong resurgence in the upward trend. Create your live VT Markets account and start trading now.

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