The S&P 500 showed some stability during the day but dropped after closing, falling below the crucial 6,850 point mark in futures. Although Palantir (PLTR) reported strong earnings, interest in the stock waned. Companies like Apple (AAPL) and Meta (META) are affecting stock momentum, especially due to weaker performance in the communications and financial sectors. Volatility measures indicate that systemic risk remains unchanged, with both the VIX and VVIX steady. Bond market volatility is also decreasing. In New Zealand, unemployment rose to 5.3% in Q3, matching forecasts. The Dow Jones is facing concerns related to AI trading, while forex markets are focusing on the ISM services PMI, especially with a possible U.S. government shutdown on the horizon. The EUR/USD pair is on a downward trend, with attention on the ADP report and Eurozone PMI. Meanwhile, the Yen is strengthening due to signals from the Bank of Japan (BOJ), impacting EUR/JPY and USD/JPY. Gold and Ethereum prices have slightly decreased as well, affected by ETF outflows and other market changes. DeFi platforms are under scrutiny following a $120 million hack of Balancer. The article advises caution in trading, highlighting the importance of thorough research before making investment decisions. FXStreet points out that the markets discussed are for informational purposes and are not buy or sell advice. They emphasize the risks and responsibilities tied to investing. The S&P 500 has just dropped below 6,850 in futures trading. Even though Palantir reported solid earnings, the stock is being sold off, and weakness is spreading beyond major tech companies. This indicates that the recent market rally was fragile and lacked widespread support. Surprisingly, the VIX, which measures market fear, is not spiking. The CBOE Volatility Index remains around 14, showing that options pricing doesn’t reflect major panic, creating a disconnect with the significant drop in stock prices. This situation makes options for protection relatively affordable. This could be a good time to buy protection against further declines. Consider purchasing put options on SPY or QQQ to safeguard against a deeper slide in the coming weeks. This is an easy way to hedge long portfolios against additional market turbulence. Since volatility is low, buying VIX calls could be a smart bet. If selling accelerates towards the end of the year, we can expect the VIX to rise significantly from its current calm levels. A similar scenario occurred in late 2021 before the sharp downturn in 2022, when a calm VIX preceded a major market correction. We also need to keep an eye on the upcoming ISM Services PMI data, especially with the threat of another U.S. government shutdown looming. The previous extended shutdown in 2018-2019 cost an estimated $11 billion to GDP, so this is a substantial risk to the economy. This uncertainty could trigger the next decline in the market. The Japanese Yen is gaining strength, signaling that traders are shifting to safe-haven assets. This risk-averse sentiment is likely why gold remains near $3,930 an ounce, indicating underlying fear. These external signals suggest that the recent dip in the stock market might have further to go. True weakness is outside the few mega-cap tech stocks that have supported the market this year. For example, the Russell 2000 index of smaller companies has lagged behind the S&P 500 by over 10% in 2025, showing a lack of overall market health. This could be a prime opportunity to use derivatives to bet against weaker sectors like financials or consumer cyclicals.

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