Stock markets have had a good week as US-China tensions ease. The S&P 500 hit a new high, rising by 33 points or 0.6%. As the week progressed, trading volumes decreased, but trading activity remained strong. This trend suggests there’s little stopping a return to February’s highs. The AI sector is also seeing a surge in trading activity. So far this week, investor confidence has grown due to decreasing political friction between the US and China. Equity indices have risen, particularly the S&P 500, which has steadily climbed. A 0.6% increase isn’t huge on its own, but in the context of the overall market, it shows a healthy risk appetite. Lower trading volumes later in the week are common for this season, especially ahead of earnings reports or major economic news. While low volumes can exaggerate price movements and make patterns less reliable, the market still showed an upward trend. It’s essential to note the difference between a market pullback caused by low participation and one driven by fading confidence. Meanwhile, artificial intelligence stocks are gaining fresh interest. After being overvalued earlier this year, this sector is seeing renewed activity. Corporate updates have hinted at stronger developments in machine learning products. Although traditional valuations may seem off, the demand for tech stocks remains strong. These trends aren’t isolated. Until now, we’ve seen mixed signals across various asset classes — defensive and cyclical sectors were moving together, creating conflicting macro data. However, this week shows clearer signals leaning toward cautious growth. We also noticed that implied volatility hasn’t increased despite these shifts, suggesting the market isn’t expecting sudden shocks soon. This creates opportunities for tactical trading. Options like straddles might be less appealing right now due to lower premiums, so strategies like calendar spreads could be more beneficial as they take advantage of differences between actual and expected market movements. Federal Reserve Chair Powell’s comments this week were cautious but reassuring, suggesting no further tightening of policies soon. This lifted some concerns for rate-sensitive assets. Interestingly, yields decreased even without an official policy change. Sometimes, simply holding rates steady can feel like easing. We’re also monitoring the relationship between equity indices and commodities. When they move together, it usually signals broader optimism. This alignment gives us better insights into institutional positioning. At present, it suggests a tentative risk-on attitude is being maintained. Short-term positioning may need some caution, especially with technical resistance levels nearing. We can’t ignore the possibility of intraday reversals around February’s highs. As these levels approach, sensitivity to external shocks could increase. Instead of taking full long positions, it may be wiser to balance exposure with clear stop-losses and remain aware of daily sentiment changes. A sudden move could erase gains if not managed well. As the week goes on, long gamma exposure is becoming more costly, which might limit significant price movements unless supported by trading volume. Option markets indicate that traders prefer structured plays to accumulate delta rather than outright volatility purchases. The momentum is strong, but it’s crucial to stay alert. Order books still show caution near past highs, with institutional trading not fully aligning with retail enthusiasm. This divergence is significant. Lastly, it’s important to consider the upcoming macro data, such as consumer spending and jobless claims, which could introduce fresh volatility. However, unless there’s a significant surprise, the groundwork laid in recent sessions seems to support further testing of upper resistance levels. Whether these levels can hold will be a different question. We’ll keep watching not just prices but also how participants adjust their sector exposures. Sector rotation can provide insights that basic charts may miss. This rotation could reveal early shifts that quantitative models overlook in the short term.

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