Major US stock indices ended higher, with the NASDAQ index showing the largest rise. The S&P and Dow also marked record closings. The NASDAQ index closed 8 points shy of its all-time high, finishing at 21705.16.
Dow and S and P Performance
The Dow industrial average climbed 71.67 points, or 0.16%, reaching 45636.90. The S&P index increased by 20.46 points, or 0.32%, closing at 6501.86. The NASDAQ index rose 115.02 points, or 0.53%, to 21705.16.
The current month has seen the key indices improving, spearheaded by the Dow with a 3.41% increase. The S&P index rose by 2.56%, while the NASDAQ gained 2.76% during the month.
Among the Magnificent 7 companies in August, three saw declines, though Tesla was not one of them. Tesla led with a 12.23% rise. Apple jumped 2.76%, and Nvidia edged up 1.26%. Amazon fell by 1.07%, while Meta and Microsoft dropped 2.89% and 4.47%, respectively. Google achieved a notable gain of 10.29%.
With the NASDAQ just points away from its all-time high, we are watching for a potential breakout or a rejection at this key resistance level. Traders might consider strategies that profit from a large move in either direction, as the market decides its next course. The upcoming long weekend also adds a layer of uncertainty, making short-term options plays on the QQQ ETF attractive.
Market Complacency and Volatility
Implied volatility is sitting near its lowest levels since late 2024, with the VIX hovering around 13. This suggests a high degree of complacency in the market and makes buying options relatively cheap. It could be a good time to purchase some downside protection, like put options on the S&P 500, as a hedge against a sudden reversal.
Historically, September has been the weakest month of the year for stocks, a pattern we have seen play out in over half the years since 1950. As we close out a strong August, we should be cautious of this seasonal headwind. This historical tendency suggests that trimming some call positions or setting up bearish put spreads could be a prudent move.
The rally is not lifting all boats, as seen by the mixed performance of the market’s biggest stocks this month. While Tesla and Google have soared, big names like Microsoft have lagged behind. This suggests focusing on single-stock derivatives rather than just broad index futures, perhaps by selling covered calls on underperformers.
All eyes will turn to next week’s August jobs report, which is the next major catalyst for the market. A strong report could provide the fuel needed for the NASDAQ to break through to new records. A weak number, however, could be the trigger for a sell-off that the seasonal trends suggest is possible.
