**US Stocks Decline at Open** Friday’s rally after Chair Powell’s speech at Jackson Hole helped the index move above key averages. Right now, staying above the 100-hour moving average at 21,390 keeps a positive short-term outlook. However, if the price falls below this level, sellers could take control, risking a drop to the 200-hour moving average at 21,187.33. **Testing Key Support Levels** As the week begins, the markets are slightly pulling back, especially the NASDAQ, which is testing an important short-term support level. The 100-hour moving average at 21,390 is crucial for derivative traders. A significant break below this could lead to a deeper correction and prompt more aggressive short positions. This cautious trading follows last week’s Consumer Price Index report for July, which came in slightly higher than expected at 3.4%, compared to the anticipated 3.3%. While this isn’t alarming, it has dampened enthusiasm from Chair Powell’s balanced tone at the Jackson Hole symposium. It places more pressure on the upcoming jobs report to indicate a cooling economy without raising recession fears. Implied volatility is on the rise, with the VIX increasing over 8% this morning, trading around 16.5. This suggests that buying options might be a smart choice in the coming weeks. Higher volatility boosts option premiums, benefiting long positions if a significant market move occurs. **Historical Precedent and Strategy** Remember when Chair Powell’s hawkish speech at Jackson Hole in August 2022 led to a sharp sell-off lasting weeks? Although his tone was more measured this time, that history reminds us to be ready for a possible delayed market reaction. Protecting long equity portfolios with index puts could be a wise strategy until the market’s direction is clearer. With the NASDAQ resting on this key level, a volatility strategy like a straddle on the QQQ ETF could be effective. This entails buying both a call and a put option at the same strike price, benefitting from a significant move in either direction. It’s a bet that current uncertainty will end with a clear breakout or breakdown from the 21,400 level. The Russell 2000’s underperformance today is also a red flag, as small-cap stocks tend to be more sensitive to economic changes. With the NFIB Small Business Optimism Index dropping for the third month in a row, traders might consider buying puts on the IWM ETF. This can serve as a hedge against a broader economic slowdown that could hit smaller companies harder. Create your live VT Markets account and start trading now.

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