The S&P 500 had a steady rise throughout the week, thanks to lower US-China tariffs. The index climbed without any interruptions. On Friday, stock market data showed gains across multiple indices. The S&P 500 rose by 0.7%, the Nasdaq Composite by 0.45%, the Russell 2000 by 0.9%, the Dow Jones Industrial Average by 0.7%, and the S&P TSX Composite by 0.3%.

Weekly Trends

For the entire week, the S&P 500 increased by 5.1%. The Nasdaq Composite surged by 7.0%, and the Russell 2000 gained 4.5%. The Dow Jones Industrial Average had a small dip with a 0.2% decrease, while the S&P TSX Composite rose by 2.4%. These numbers indicate strong interest in stocks, especially those focused on growth. The overall upward trend reflected confidence in trade improvements, particularly the latest tariff changes between the US and China. This kind of information often triggers renewed buying interest, especially from those who see geopolitical progress as a sign of favorable conditions. It’s more than just sentiment—it’s a response to real change. Cyclical stocks performed well, especially those linked to consumer demand and small companies. The Russell 2000’s rise was stronger than its larger counterparts, suggesting an increased willingness to take risks. Larger multinational companies with significant overseas revenue benefited from favorable foreign exchange movements during the week. Right now, market momentum and sector shifts are more important than balance sheet strength. At the end of the week, the market breadth was supportive. More stocks advanced than declined, and there were no significant intraday pullbacks, indicating that investors were confident even heading into the weekend. This is unusual, given the mixed earnings outlook ahead. Options trading confirmed this trend, with many investors favoring call contracts in large-cap tech, leading to a slight rise in implied volatility. This detail indicates ongoing speculative interest beneath what appears to be steady accumulation. Powell’s earlier comments about interest rates still influence bond-equity correlations, though the impact seems less severe due to tariff optimism. His previous remarks were taken as slightly accommodative, creating lingering sentiment. Yields are being closely monitored. Prices of thirty-year government bonds reflect uncertainty about how long the Federal Reserve will keep its current position. Volatility in longer-dated futures hasn’t spiked significantly, but the curve remains tightly grouped around the near-term midpoint, suggesting potential for sudden changes if new data varies. We’ve previously used this as an indicator for shifts in option gamma trends.

Market Strategies

Traders focused on volatility would have seen a reduced skew on indexes, pointing to a lower perception of short-term downside risk. However, this doesn’t mean that selling protection is the best move. It’s a chance to reassess exposure to volatility, especially with key Fed comments expected soon. There’s little room for error if sentiment shifts due to bad jobless claims or unexpected inflation pressure. We don’t rely heavily on seasonal trends, but patterns suggest that this time of year often leads to tighter trading ranges until a catalyst breaks expectations. Macro hedge funds are currently staying light, avoiding firm directional exposure as much of the good news is already factored into prices. This could mean smaller volatility spikes have a larger impact on positioning. At the same time, low equity volatility across benchmarks offers opportunities for creating asymmetrical payouts using shorter duration spreads with controlled costs. Friday’s price action can also be seen as a test of market conviction. After a big week of gains, markets did not show immediate reversal in after-hours trading or international indices. This is significant. It provides a reference point for traders—indicating where buying interest may begin if a retracement occurs before the next CPI release. As a group, we are preparing for range-bound trading in the short term while staying responsive. Last week’s high correlations indicate that basket trades are still popular and could be sensitive to earnings from tech companies. Probability-weighted strategies involving paired long and short options could help manage potential abrupt shifts. Additionally, it could be wise to enlarge hedges as key economic data days approach. Currently, all attention will shift to incoming PCE data and whether the signs of disinflation continue. However, the earlier response to softer growth metrics shows that traders are willing to overlook short-term weaknesses if broader political and trade signals are positive. This creates a situation where short gamma exposure could be affected rapidly if complacency sets in. Keep your contract positioning flexible. The cost of misinterpreting the next set of data could outweigh the benefits of sticking to a static outlook. Create your live VT Markets account and start trading now.

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