Insights 
VT 
In the cryptocurrency market, Bitcoin tested the $110,000 resistance, and Ethereum moved towards the 100-day EMA hurdle. The appointment of Sanae Takaichi as Japan’s new Prime Minister had a steadying effect on the Japanese Yen.
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The S&P 500 is showing real weakness below the 6,785 level, with every attempt to rally being sold into aggressively. We are seeing signs of forced selling, which suggests some large players may be in trouble. This kind of price action indicates that the path of least resistance could be lower in the coming weeks.
What’s unusual is the complacency in the options market, with the VIX failing to show any real fear. As of this week, the VIX is hovering near 16, a level not seen since before the market jitters in late 2024, making protective put options relatively cheap. This disconnect between the weak price action and low volatility presents a clear opportunity for us.
We are bracing for the upcoming US CPI data, which could be the catalyst that breaks this calm. Last month’s CPI on September 15th came in hotter than expected at 4.1%, briefly sending markets tumbling. Another high inflation print could force the Federal Reserve into a more hawkish stance and finally wake up the volatility buyers.
Credit Markets And Energy Prices
Given this setup, we should consider buying some downside protection while it remains inexpensive. Purchasing S&P 500 or SPY put options dated for late November or December offers a defined-risk way to position for a potential drop. This strategy is a hedge against the heavy selling pressure finally overwhelming the market’s current calm.
We’re also watching credit markets closely, as they often lead stocks. The spread on high-yield corporate debt has widened by about 15 basis points in the past two weeks, a subtle warning that risk appetite is fading. This is reminiscent of the early warning signs we saw just before the market correction in the first quarter of 2024.
Adding to the pressure are rising energy prices, with WTI crude pushing past $95 a barrel on the back of new US sanctions. This adds another layer of inflation concern for a market already on edge. Geopolitical headlines, including the continued uncertainty in US-Russia relations, are also contributing to a fragile backdrop.
The strength in gold, which is holding firm above $4,100, tells us that some investors are already moving toward safety. Meanwhile, the weakness in currencies like the British Pound suggests growing concerns about global economic divergence. These factors support a cautious approach and make holding some downside protection prudent.
