Stocks hit new all-time highs, with mixed trading throughout the day. The NASDAQ, S&P, and Dow closed positively. The S&P index rose by 20.82 points, ending at 6466.58. The NASDAQ climbed 31.24 points to finish at 21713.14. The Dow increased by 463.66 points, closing at 44922.27.

The Russell 2000 Surge

The small-cap Russell 2000 saw a significant jump, gaining 45.27 points to reach 2328.05. This follows a 2.99% rise the day before. During the session, the NASDAQ hit a high of 121.84 points but later fell to -36.76 before closing with gains. The S&P had a session high of 34.52 points, dipped by -0.74, but also closed higher. New intraday records were set, with the S&P reaching 6480.28 and the NASDAQ hitting 21,801.75. Major indices like the S&P 500 and NASDAQ are moving into new territory. However, large intraday swings, where indices turned negative before bouncing back, suggest some underlying nervousness. This indicates that not everyone is fully convinced despite the record closings.

Market Strategies and Opportunities

With the CBOE Volatility Index (VIX) around a low of 14, options premiums are low. This presents a good chance to buy protection against potential downturns. Purchasing put options on indices like SPY or QQQ could be an effective hedge in the coming weeks. The market rally is supported by recent data, like a July jobs report showing steady growth and a Consumer Price Index (CPI) drop to 2.8%, which eases inflation concerns. All attention is now on the Federal Reserve’s statements, especially from the Jackson Hole symposium later this month. Any change in the Fed’s tone could significantly impact the market. A similar situation of constant new highs occurred during the 2021 rally, which also included brief sharp sell-offs. Thus, traders might consider using bull call spreads rather than outright calls to limit costs and manage risk, allowing participation in potential gains while capping losses if the market turns. The impressive performance of the small-cap Russell 2000, which has risen nearly 5% in just two sessions, suggests more widespread market enthusiasm. This shows that investors are expanding their interest beyond large-cap tech stocks. Derivatives traders may look to options on the IWM ETF for this catch-up trade, as small-caps usually outperform when economic optimism is high. Create your live VT Markets account and start trading now.

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