US stock market futures opened flat and stayed that way throughout the day. The S&P 500 briefly hit an all-time high but ended up closing down by 3 points at 6584, breaking its four-day winning streak. The Nasdaq saw a small increase, thanks to a 7% jump in Tesla shares, which closed at a record high. Here’s how the major indices wrapped up for the day: – S&P 500: down 0.1% – Nasdaq Composite: up 0.5% – DJIA: down 0.6% – Russell 2000: down 0.8% – Toronto TSX Composite: down 0.4%

Weekly Performance Across Indices

For the week, the S&P 500 rose by 1.6%, the Nasdaq Composite went up by 2.0%, the Russell 2000 gained 0.5%, and the Toronto TSX Composite increased by 0.8%. Overall, most indices showed growth, even though the market finished flat on the last day. With the market showing signs of weariness at record highs, it’s time for caution. The CBOE Volatility Index (VIX) is hovering near a low of 13, making it cheaper to buy protection. It might be wise to purchase put options on broad market ETFs like SPY to protect our long positions against a possible drop in the weeks ahead. The divide between the strong Nasdaq and the weaker Dow and Russell 2000 indicates a narrowing in market leadership. Recent data reveals that even with the S&P 500 at a high, less than 45% of its stocks are trading above their 50-day moving average, creating a classic bearish divergence. This trend suggests that pairs trades—like going long on Nasdaq futures while shorting Russell 2000 futures—could perform well if this pattern continues.

Federal Reserve Meeting And Market Implications

Attention is now focused on the upcoming Federal Reserve meeting later this month. With last week’s jobs report showing a resilient labor market, there’s increasing uncertainty about what the Fed will say regarding future interest rates. Options traders might consider strategies like straddles, which benefit from significant price movements in either direction after the announcement. It’s also important to keep in mind the seasonal patterns of the market. September and October are typically volatile months, as seen with the sharp drop in fall 2023. Given this year’s strong market run-up, the current flat trading might be a sign of an approaching turbulent period. Holding some downside protection seems smarter than making speculative bets. Create your live VT Markets account and start trading now.

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