The E-Mini Nasdaq and S&P 500 indices approach the final stages of their five-year bullish cycles. Meanwhile, Gold and the VIX volatility index show early signs of shifting from complacency to caution in global markets.

While equities approach record highs, shifts emerge with Gold Futures showing reversal signs and the VIX building a base. This mirrors past transitions in 2018, 2020, and 2021 where market sentiment moved from confidence to caution.

Critical Resistance Zones

The E-Mini Nasdaq and S&P 500 enter critical resistance zones, with RSI near 70 and momentum flattening, indicating a potential shift. Historically stretched valuations and macro conditions suggest the rally might be in its terminal phase.

Gold Futures form a reversal structure amid divergence from equities, signalling investors may shift to hard assets against liquidity stress. A breakout above 4,000 could affirm the bullish trend, with Gold leading over equities often marking macro inflexion points.

The VIX holds above 15.66, suggesting volatility may expand, potentially reaching levels associated with market corrections. Despite retail optimism, institutional hedging rises, warning of possible volatility spikes as seen in previous years.

Macro signals align with technical exhaustion in equities, suggesting a late-cycle transition with a potential broad repricing of risk across assets. The divergence between Gold, VIX, and higher equity indices suggests a market rhythm change, indicating fading momentum and early capital rotation.

Potential Protective Strategies

Given the euphoria in equities is showing signs of exhaustion, we should consider protective strategies. With the E-Mini S&P 500 approaching the formidable 7,471 resistance level, buying put options offers a direct hedge against a potential 15–35% correction. Recent data shows the top 10 stocks in the S&P 500 now account for over 35% of the index’s weight, a level of concentration not seen since 2000, suggesting the rally is fragile and led by only a few names.

For those wanting to generate income while positioning for a sideways or downward move, selling out-of-the-money call credit spreads on the Nasdaq 100 is a viable approach. This strategy profits from time decay and a drop in volatility if the index fails to break through the 27,207 resistance zone. The flattening momentum seen in the RSI indicator supports the view that the powerful upward trend is losing steam.

We see a clear warning sign in the CBOE Volatility Index (VIX), which has quietly formed a base above 15.66 while equities push to new highs. Buying VIX call options with strike prices above 21 is an effective way to position for a sharp increase in market fear, a pattern we previously observed in early 2020. The VIX has averaged just 14.8 over the last quarter, which is historically very low and often precedes sharp spikes in volatility.

At the same time, Gold futures are signalling a potential turn higher, diverging from the risk-on sentiment in stocks. We should consider buying call options on gold, anticipating a breakout above the 4,000 level. The World Gold Council’s latest report for Q3 2025 confirmed that central banks continued their aggressive gold buying, adding another 250 tonnes to reserves, providing a strong fundamental floor for prices.

These technical signals are reinforced by a challenging macroeconomic environment. The October 2025 CPI report came in at 3.2%, remaining stubbornly above the Fed’s target and forcing the 10-year Treasury yield to hold near 4.5%. This high cost of capital makes it difficult to justify current equity valuations and strengthens the case for rotating into defensive assets and volatility hedges.

Create your live VT Markets account and start trading now.