The major US stock indices are showing mixed results today. The NASDAQ is down, the S&P 500 is mostly flat, and the Dow Industrial Average is up. The Russell 2000 index is experiencing a slight increase. Currently, the Dow is up by 138 points, or 0.31%, sitting at 44,462.24. Meanwhile, the NASDAQ has fallen by 88 points, or 0.43%, bringing it to 20,885.

Recent Market Trends

Yesterday, both the NASDAQ and S&P 500 reached record highs. Alphabet is aiming for its 10th straight day of gains. Today, its stock price rose from a low of $172.81 to a high of $191.53, but it has now dropped to $188, down $1.70 or 0.94%. Alphabet will report its earnings after the market closes tomorrow. We’re seeing a typical market shift, with money moving away from successful tech stocks and into industrial and small-cap stocks. The CBOE Volatility Index (VIX) has risen over 5% from its recent lows, indicating that we should expect larger price swings soon. This might be a good time to consider protecting against potential losses.

Current Market Strategy

The weakness in the tech-heavy NASDAQ, following its record high, serves as a key warning. There’s a concentrated risk, as just five tech companies now account for over 27% of the S&P 500’s total value, a situation reminiscent of the dot-com bubble. We are responding by buying put options on tech-focused ETFs to guard against potential declines in this overvalued sector. On the other hand, the strength in industrial and small-cap stocks shows that investors are seeking better value. Recent data from the U.S. ISM Manufacturing PMI reflects unexpected strength in manufacturing. As a result, we plan to increase our exposure in these sectors. We are entering bullish positions, such as call spreads on industrial and small-cap funds, to take advantage of this anticipated trend. The movement in Alphabet’s stock, which has reversed after a strong run just before its earnings report, highlights the current market anxiety. The options market indicates an expected price movement of over 6% for the stock after its report, which is historically significant. We think that selling this heightened volatility through strategies like an iron condor could be a smart approach to trading the event, taking advantage of what might be an overreaction. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now