The US job market is facing challenges, shown by a drop in JOLTS Job Openings from 6.9 million in November to 6.5 million in December. In January, US companies laid off 108,000 workers. The NASDAQ 100, which is primarily made up of tech stocks, reached its lowest point since November 24. Companies like Alphabet, Estée Lauder Companies, Super Micro Computer, and Eli Lilly saw their share prices decline for various reasons. Bitcoin has fallen below $67,000, leading to a loss of over $1 trillion in market value recently. Shares of MSTR have dropped 72% from their peak. Interestingly, gold prices have not increased despite a general risk aversion, falling 3% to around $4,800 per troy ounce. On the other hand, US Treasuries have done well, with a noticeable steepening in the yield curve.

NASDAQ 100 Weakness

The NASDAQ 100 is weakening, with almost one-third of its holdings now considered oversold. Companies like Advanced Micro Devices and Palantir Technologies have reported substantial losses in recent trading sessions. In the software sector, AI is threatening traditional software companies, adding to market declines, particularly with Microsoft experiencing falling shares. As of February 6, 2026, fear in the market suggests that volatility presents the best opportunity. The CBOE Volatility Index (VIX), often called the market’s “fear gauge,” is rising, and we expect it to continue climbing in the upcoming weeks. Historically, during periods of stress, such as the 2008 financial crisis, the VIX surged above 80, indicating significant potential for upward movement from current levels. Our main focus is on the ongoing weakness in the NASDAQ 100, which has fallen below the key support levels established in December 2025. We are actively buying put options on the QQQ ETF to capitalize on this downward trend. Technical analysis suggests the 23,854 level is the next major support area, where we plan to take initial profits. The belief that AI poses a near-term threat to high-margin software companies is clearly gaining traction and impacting once-popular stocks. We are employing put spreads on individual stocks like Microsoft (MSFT) and oversold names like PayPal (PYPL) to manage risk and position for further declines. Many of these companies, after trading at historically high price-to-sales ratios, are especially vulnerable to changes in market sentiment.

Defensive Strategies

We are also adopting a classic flight-to-safety strategy, reflecting the broader market’s shift from cyclical to defensive sectors. This includes purchasing call options on healthcare (XLV) and consumer staples (XLP) ETFs while also buying puts on consumer discretionary (XLY) and energy (XLE) ETFs. This relative value strategy should perform well as recession fears continue to lead the news. The bond market is signaling caution as money flows into US Treasuries. We are heeding this signal by buying calls on long-duration treasury ETFs like TLT. The widening gap between the 2-year and 10-year Treasury yields is a strong historical indicator that often precedes economic slowdowns, reinforcing our defensive approach. This pattern was clearly observed before the downturns in 2008 and 2020. Finally, Bitcoin’s drop below $67,000 confirms the strong risk-averse sentiment affecting all asset classes. Any short-term recoveries in BTC or related stocks like MSTR provide opportunities to start new short positions or buy puts. The recent loss of over a trillion dollars in the crypto market illustrates how quickly this market can deteriorate when fear takes hold. Create your live VT Markets account and start trading now.

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