The S&P 500 and Nasdaq had a strong start before the market opened, reflecting overall trends. However, the Nasdaq’s hourly chart tells a different story, showing bond stability and promising signs. Today’s strategic outlook suggests possible shifts in both the Nasdaq and S&P 500. Gold prices climbed close to $4,500, fueled by geopolitical tensions and expectations for US interest rate cuts. Meanwhile, Australian CPI data for November will challenge the Reserve Bank of Australia’s approach, marking the second full month of switching from quarterly to monthly inflation figures.

Currency Movements and Market Behavior

In currency trading, the EUR/USD pair dipped near a weekly low of 1.1660, while the GBP/USD fell below 1.3500 but bounced back slightly as traders anticipated US employment data. The USD/JPY strengthened, supported by a positive sentiment in the market that negatively affected the yen. In the commodities sector, silver experienced a major increase, with XAG/USD rising above $80. Cardano held onto its gains as the cryptocurrency market showed optimism, with potential breakout signals indicated by MACD analysis. Events in Venezuela are capturing market interest, though no significant forecast changes are expected just yet. While the recent rise in the S&P 500 is noteworthy, it should be approached with caution, as it lacks support from the broader market. There’s a clear disconnect, with the Nasdaq not showing the same strength. This divergence suggests that the rally may be limited and possibly unstable. Looking back to the last quarter of 2025, a similar trend occurred, where over 60% of market gains came from a few large-cap stocks. Additionally, the NYSE Advance-Decline line did not reach new highs alongside the S&P 500, which has usually indicated bearish conditions. This gap indicates that the market’s overall health may not be as strong as the main index suggests.

Bond Market and Economic Expectations

In the bond market, investors seem to expect economic slowdown, with prices remaining stable. The CME FedWatch tool shows a nearly 70% chance of a Federal Reserve rate cut by June 2026. This creates a dilemma for traders, as the bonds are signaling caution while the S&P 500 index is not. In this climate, traders might want to consider buying protection. The VIX is around 18, making it relatively affordable to purchase put options on major market indices like the SPY. These options would provide some insurance against a potential market decline if the weakness in the market breadth affects leading stocks. Geopolitical tensions, particularly from the situation in Venezuela, are adding to the risks. This unrest has helped push gold toward $4,500 and kept crude oil prices above $110, raising inflation worries. Trading options on commodities, like calls on gold (GLD) or oil (USO) ETFs, could serve as a hedge against this uncertainty. The strong US dollar is also important, affecting multinational companies dependent on foreign sales and contributing to Nasdaq’s struggles. This is evident as the EUR/USD has dropped below 1.1700. Traders might consider using options on currency ETFs to bet on continued dollar strength. All attention should now turn to the upcoming US employment data due later this week. A weak report could support the bond market’s concerns and trigger a market drop. Conversely, a surprisingly strong report could temporarily resolve the current divergence, but the underlying breadth issue is expected to persist. Create your live VT Markets account and start trading now.

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