The S&P 500 dropped by 0.37%, closing lower after hitting a record high of 6,427.02. The latest Nonfarm Payrolls report showed an increase of 73,000, but this was below the expected 106,000. As a result, a 0.9% decline is anticipated when the market opens. Currently, 40.3% of individual investors are feeling optimistic, while 33.0% have a negative outlook. S&P 500 futures are trading above 6,300, facing resistance around 6,350 and support between 6,250 and 6,300.

Volatility Breakout System

The Volatility Breakout System, which had a long position since June 3, switched to a short position with a gain of 363.94 points. This strategy aims to take advantage of significant market moves while avoiding daily fluctuations. Crude oil prices also fell, now below $69 after a 1.06% drop on Thursday. U.S. tariffs and possible sanctions on Russian crude are key factors affecting the oil market. Chevron reported a profit of $3.1 billion for Q2, surpassing expectations despite an 11% decline in crude prices. This success was driven by solid production numbers and reduced capital spending, showing the company’s strength amid market changes. The market’s inability to maintain its record high, coupled with the disappointing jobs report, signals potential challenges ahead. The S&P 500’s drop seems to reflect concerns about a slowing economy, a trend we previously noticed during payroll misses in late 2024. Traders should view this not just as a short-term issue, but potentially as a shift in market direction.

Market Technical Signals

The shift to a short position by the Volatility Breakout System, after a successful long stretch, serves as a significant warning. The VIX, a measure of market fear, has surged over 30% this week, now trading above 17, indicating rising uncertainty. This may be a good time to consider put options for protection against further declines or to speculate on a drop toward the 6,250 support level. While individual investor optimism remains above 40%, the market is not yet geared for a major downturn. However, if the S&P 500 futures break decisively below the 6,300 level, it could quickly change investor sentiment as bullish investors exit. We are closely monitoring order flows for signs of this potential downward acceleration. Crude oil dropping below $69 a barrel highlights the weakening demand in the economy. The latest EIA report, which revealed an unexpected inventory increase of 1.8 million barrels, supports this slowdown and reinforces our cautious perspective. Ongoing geopolitical tensions surrounding Russian crude add another layer of volatility that traders need to watch. Chevron’s strong profits, driven by effective operations, should not be confused with overall economic strength. The broader picture for derivative traders is shaped by macro data, which is currently trending downward. We believe that the weaknesses in job growth and energy demand will be critical indicators for market direction in the weeks ahead. Create your live VT Markets account and start trading now.

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