The S&P 500 index rose by 0.14% on Monday, getting closer to its record high of 6,290.22. Nvidia’s choice to restart chip sales to China boosted futures, pushing the index toward a new peak. The S&P 500 is expected to open 0.4% higher after the Consumer Price Index (CPI) showed a month-over-month increase of 0.3%, which was in line with estimates. This week, investors are looking ahead to bank earnings and reports from ASML, TSMC, and Netflix.

Investor Sentiment Analysis

Recent data indicates that 41.4% of individual investors feel optimistic, even with possible signs of a market peak. The NASDAQ 100 rose 0.33% and is projected to climb another 0.5%, largely due to Nvidia’s premarket gains. The Volatility Index (VIX) fell to 15.70 on Thursday but rose to 17.85 yesterday, indicating potential market uncertainty. A low VIX often signals risks of a market reversal. After the CPI data, S&P 500 futures reached close to a record of 6,350. The index is stabilizing, balancing around resistance near 6,350 and support near 6,300. Crude oil prices fell by 2.15% on Monday, landing near $67 as geopolitical developments unfolded. Prices adjusted as market concerns about supply disruptions eased. Despite these tensions, OPEC held its oil demand growth forecasts steady, expecting support for crude between $65 and $66.

Trading Strategies and Considerations

As the market pushes toward record highs, important actions are taking place below the surface. The rise in the Volatility Index is more than just a sign of uncertainty; it’s a key indicator. This situation is classic—while the index appears stable, options traders are feeling more anxious. The CBOE’s total put/call ratio has risen to 0.98, moving from a neutral position to one showing that traders are buying downside protection. Historically, a rising VIX while the market hits new highs is noteworthy. This suggests it’s time to secure protection. We are considering buying out-of-the-money puts on the SPY and QQQ ETFs—not as a bearish tactic, but as affordable insurance for our long positions amidst important earnings announcements. Reports from major semiconductor and streaming companies present a great chance to trade on volatility. We know that implied volatility often rises before these big events. Instead of predicting post-earnings movements, we plan to structure long strangles on specific companies likely to see significant action. This strategy benefits from sharp price changes in either direction. The current market feels like a coiled spring, caught between firm support and resistance. Last earnings season, stocks from the Magnificent Seven saw an average one-day price change of 4.7%, which is much higher than the market’s general volatility. We expect similar or even greater reactions this time, making these volatility-focused plays appealing. The drop in crude oil adds another dimension to our strategy. While some view this as a sign of slowing global demand, we see it as a disinflationary factor that might keep the Federal Reserve from acting. This complicates a straightforward bearish outlook. Analysts have recently raised their S&P 500 earnings forecasts for the fourth quarter, now expecting a 2.4% year-over-year growth rate, up from just 1.5% a month ago. This fundamental strength against technical nervousness suggests the market may remain range-bound. Therefore, we are also selling iron condors on the S&P 500, a method designed to profit if the index stays within clear support and resistance levels during this upcoming earnings season. Create your live VT Markets account and start trading now.

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