The Nasdaq index has reached new record levels, experiencing a rise of 0.3%. This growth has been primarily driven by gains in major companies, with Apple increasing by 1.6% and Tesla by 1.5%. Intuit also saw a rise, with a 2.4% increase.
Conversely, chipmakers have seen a decline. Micron faced a drop of 3.5%, Broadcom by 1.9%, and Intel decreased by 1.4%. These shifts illustrate differing performances within the technology sector.
The Nasdaq Rally
We are seeing the Nasdaq push to record levels, but the rally is narrow. This strength is concentrated in mega-cap consumer tech like Apple and Tesla. The divergence with weakening semiconductor stocks is a key signal for the next few weeks.
This upward move in Apple seems directly tied to the positive reception of the new iPhone 17. Recent supply chain reports show pre-order numbers for the device are running about 12% ahead of initial forecasts. For derivative traders, this suggests continued strength, making bullish call spreads on Apple an attractive strategy to capture further upside.
Conversely, the drop in chipmakers like Micron and Broadcom reflects growing macroeconomic concerns. The latest purchasing managers’ index (PMI) data released for August showed a dip to 49.1, signaling a contraction in the manufacturing sector which is a major consumer of semiconductors. This follows a trend we saw developing in the second half of 2024 where industrial demand began to soften.
Trading Opportunities in the Current Market
This split performance presents a clear pairs trading opportunity for options traders. One could consider going long on the tech leaders through call options on the Nasdaq 100 ETF (QQQ) while simultaneously buying put options on a semiconductor ETF (SOXX). This strategy isolates the performance gap between the strong consumer-facing tech and the weakening industrial-focused chip sector.
With the market at all-time highs, we also have to consider risk. The Nasdaq’s volatility index, the VXN, has fallen to 19.5, a level not seen since the spring rally. This makes protective put options relatively inexpensive, offering a cost-effective way to hedge long portfolios against a potential market pullback.
