The NASDAQ index closed at a new record high and achieved a new intraday high of 21464.53, surpassing the previous high of 21457.48 from 31st July. The S&P also performed well, closing slightly below its previous record at 6389.45.
Closing levels for major indices for the day included the Dow Industrial Average rising by 206.97 points or 0.47% to 44175.61. The S&P index rose by 49.45 points or 0.78% to reach 6389.45, while the NASDAQ index increased by 207.32 points or 0.98% to close at 21450.02. The Russell 2000 rose by 3.700 points or 0.17% to end at 2218.41.
Major Indices Weekly Performance
Throughout the trading week, the Dow Industrial Average climbed by 1.35%. The S&P index escalated by 2.43%, marking its largest gain since June 23. The NASDAQ index surged by 3.87%, also its largest gain since June 23.
Amongst individual stocks, Apple stood out with a weekly gain of 13.33%. Amazon, Meta, Nvidia, Alphabet, and Tesla also experienced increases, with Amazon rising by 3.7%, Meta by 2.57%, Nvidia by 5.17%, Alphabet by 6.50%, and Tesla by 8.93%. Conversely, Microsoft’s value decreased by 0.39%.
With the NASDAQ pushing past 21,450, we are seeing strong upward momentum driven by a handful of large tech stocks. We could ride this trend by considering call options on technology indices to capture further gains. This allows us to maintain exposure while defining our maximum risk.
However, we must note the caution signal from the broader market. The Russell 2000’s minimal gain this week shows that smaller companies are being left behind, a pattern of narrow leadership we also observed through much of 2024 when a few giants drove the S&P 500. This kind of divergence can make a rally fragile.
Volatility is likely low, with the VIX probably trading near the 12-14 levels we saw during similar record runs last year. This makes options relatively cheap, which is a double-edged sword. It means buying protective put options to guard against a sudden drop is more affordable now than it might be in a few weeks.
Strategic Market Positioning
Looking forward, all eyes will be on the next inflation reports and the Federal Reserve’s policy meeting in September. As we learned from the market jitters in late 2024, any unexpected inflation data could quickly put a stop to this rally. Positioning ahead of those key economic releases is crucial.
A prudent strategy in the coming weeks could involve using vertical credit spreads, such as a bear call spread on the NASDAQ 100. This approach allows us to collect premium, profiting if the index moves sideways, down, or even slightly up. It provides a buffer in case this strong momentum begins to fade.
We also have to consider the time of year, as late August and September have historically been weak or volatile months for equities. After the market’s largest weekly gain since June, a seasonal pullback would not be surprising. This historical tendency suggests that adding some downside protection is a sensible move.
