The SPX closed at 6,502.09 on September 4, showing a slight bearish trend despite an overall upwards movement. A price above 6,510.8–6511.0 indicates a bullish stance, while a dip below 6,507.5 signals weakness. The option delta was negative at –2,133, suggesting a mild bearish edge, but the averages were nearly balanced. In the options market, the delta imbalance hints at bearish sentiment. Traders are advised to wait for price confirmation at critical levels of 6511 and 6507.5. With the non-farm payrolls report coming out, the SPX is staying within a range, presenting a chance for short-range trading and better risk management.

Critical Levels And Trade Scenarios

S&P 500 E-mini futures reached a pre-market high but then plateaued. The fair value stands at about 6,521.95, aligning with important levels like VWAP and POC. Bearish scenarios appear below 6,527, while bullish scenarios unfold above 6,535, offering multiple targets. VWAP, Value Area, and POC guide trading decisions by marking fair value zones and activity points. Effective trade management includes taking partial profits and adjusting stop-loss orders after hitting targets. Price confirmation beyond critical thresholds is essential for validating trades. A negative NFP report could significantly change market bias and target levels. This analysis stresses the importance of risk awareness and the need for flexibility in changing market conditions. The market is paused at a crucial pivot, anticipating movement as today’s non-farm payrolls report was released. The report showed a significant miss, with only 110,000 jobs added in August, well below the expected 180,000. This confirms the slight bearish sentiment noted in the options flow. Weak labor data implies the uptrend is losing strength, prompting traders to brace for a potential shift in momentum. With the key bearish level of 6507.5 on the S&P 500 now breached, we can expect a retest of lower support levels in the coming weeks. Focus should shift to downside targets around 6485 and the significant liquidity pool at 6450. For derivative traders, adjusting or hedging strategies that were neutral or bullish may be necessary to account for further weakness.

Market Volatility And Economic Conditions

Volatility is critical to monitor, as the low implied volatility of 11.8 is unlikely to last. The VIX, a measure of market fear, has already jumped from recent lows below 12 to over 15 after the jobs report. This rise makes buying protection with put options more costly, so considering bear put spreads could offer a more economical way to prepare for a move towards the 6450 level. The broader economic landscape supports this cautious view. Recent inflation data from August shows that Core CPI remains stubbornly above 3%. This creates a challenging scenario with slowing growth, highlighted by the weak jobs report, compounded by ongoing inflation. This environment, which mirrors trends seen in 2023, often results in volatile, downward-trending markets as investors adjust to increased economic uncertainty. Given this context, we should protect profits from the long-standing uptrend and consider taking bearish positions. Look for October expiration dates for put options with strike prices around 6450 and 6400 to allow enough time for this new trend to develop. Any rallies back towards the 6511 level should be seen as opportunities to increase short exposure rather than signs of strength. Create your live VT Markets account and start trading now.

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