July has brought a sharp rotation in equity leadership into late Q2, with prior year-to-date winners sliding. South Korea\u2019s Kospi is down 23% this month, China\u2019s Shenzhen index has fallen 16%, and Japan\u2019s Nikkei is off 9%. Europe has fared better: the FTSE 100 is up 4% in July, while Germany\u2019s Dax and the Eurostoxx banking index have risen 5.71%. In the US, the Nasdaq Composite is down 2% and the Nasdaq 100 has fallen 5%, with heavier losses in the Nasdaq Telecommunications Index and the Philadelphia Semiconductor index, down 19% and 18% respectively.<\/p>\n
A late-week rally in US technology shares helped prevent deeper drawdowns and left the Nasdaq 100 away from its 200-day SMA support at 26,690, with resistance at the 50-day SMA of 29,590. European equities have held up despite a 20% monthly rise in Brent crude, with oil still below $100 per barrel, while the Eurostoxx 600 and FTSE 100 set record highs this week. On earnings, Eurostoxx 600 headline EPS growth is 17% versus 11% expected, or 7% excluding energy, with 70% yet to report; S&P 500 earnings are up 37% year on year, or 25% excluding Alphabet, the fastest pace since Q3 2021.<\/p>\n
We suggest derivative traders target bullish call spreads on US tech hyperscalers as we enter August, capitalizing on the sector’s recent late-July rebound. With the Nasdaq 100 stabilizing well above its 200-day simple moving average of 26,690, there is a clear technical runway toward the 50-day moving average at 29,590. Outstanding S&P 500 earnings growth of 37% year-over-year\u2014the fastest pace since Q3 2021\u2014provides strong fundamental backing for this upward momentum.<\/p>\n
While European indices like the FTSE 100 and Eurostoxx 600 hit record highs this week, we recommend buying protective put options on these indices to hedge against a potential pullback. Although headline European earnings growth looks strong at 17%, stripping out energy sector gains slashes this growth rate to a modest 7%. Since 70% of European companies are still left to report their earnings, any disappointing corporate guidance in the coming weeks could trigger a sharp market reversal.<\/p>\n
Traders should prepare for heightened market swings by using long straddle or strangle options strategies on mega-cap tech stocks ahead of next week’s flurry of earnings. Historical market data shows that August is traditionally one of the most volatile periods of the year, with the Cboe Volatility Index (VIX) rising by an average of over 10% during this month due to thinner summer liquidity. This seasonal volatility, combined with highly anticipated reports from companies like SpaceX, makes premium-buying strategies highly attractive right now.<\/p>\n
We also see opportunities in crude oil derivatives, as Brent crude’s recent 20% spike has yet to break past the psychological $100 per barrel mark. Traders can look at call options on energy exchange-traded funds to ride the momentum of the sector currently carrying European corporate earnings. This strategy allows us to hedge against broader inflationary pressures that central bankers are still actively monitoring.<\/p>\n\n\n\n