On Friday, the S&P 500 and Nasdaq couldn’t beat their highs from Thursday. The market started with selling, ending the day in a cautious state. The Russell 2000 also showed a decrease in risk. Despite the downturn, small-cap stocks have offered good profit chances. A slight drop on Wednesday provided a chance to enter the market as the S&P 500 struggled below support levels, bouncing back from 6,925. Meanwhile, small-caps have broadened market activity, even though the S&P 500 hasn’t progressed much, and Big Tech is facing challenges.

Professional Trader And Financial Analyst

Monica Kingsley is a professional trader and financial analyst with experience since February 2020. The main indices are weak, with the S&P 500 and Nasdaq unable to maintain their upward trend, ending defensively. Last week’s CPI report showed inflation at 3.4%, higher than the expected 3.2%, alarming the market and causing selling right from the start. This suggests that selling call spreads on the SPY and QQQ ETFs above recent highs could be a smart way to take advantage of the stalled momentum. There is a noticeable shift away from the Big Tech stocks that led the rally in 2025. This weakness occurs as market breadth starts to improve, presenting opportunities beyond the usual large-cap stocks. The Russell 2000, despite a recent decline, is still a focus for riskier investments.

Market Rotation And Opportunities

This trend is similar to what happened in the third quarter of 2025 when Big Tech consolidated for several weeks. During that time, small caps and industrial sectors outperformed the major indices. Now, net inflows into the IWM small-cap ETF have increased to over $2 billion in the first two weeks of January 2026, signaling a change in sentiment. For traders of derivatives, any dip in the Russell 2000 should be seen as a chance to take bullish positions. Purchasing out-of-the-money calls or selling put spreads on IWM allows for potential gains while controlling risk. The recent slight pullback was a great example of a buying opportunity for those who acted quickly. With the VIX rising above 17, volatility is making a comeback, which benefits premium sellers. This situation supports strategies like buying protective puts on overextended tech stocks while also selling puts on strong small-cap indices. This creates a balanced portfolio that can profit from the ongoing market shift. Create your live VT Markets account and start trading now.

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