🕒 Market Overview: S&P 500 hits record 6,204.95 as Canada scraps digital services tax

🔄 Sector Insight: Technology leads rally with Meta and Nvidia posting fresh all-time highs

💰 Today's Trade Idea: Bear Put Spread on TSLA targets downside from Trump-Musk conflict

MARKET BREAKDOWN

Macro Lens – Big Picture Market Forces

Canada's complete reversal on its digital services tax sparked the most significant rally of 2025, pushing equity markets to record levels and marking a dramatic end to the trade-war volatility that plagued April. The swift diplomatic resolution demonstrates the leverage power of the world's largest consumer economy, with President Trump's Friday ultimatum forcing Canadian Prime Minister Mark Carney to abandon the 3% levy on US tech giants entirely.

Market sentiment shifted decisively as geopolitical risks evaporated. The VIX collapsed to 16.73, hitting four-month lows as implied volatilities compressed across asset classes. This volatility flush follows the pattern established by the Israel-Iran ceasefire agreement, reinforcing the theme that policy clarity drives market performance more than policy content in the current environment.

Federal Reserve policy expectations continue evolving, with markets now pricing two rate cuts for 2025, potentially beginning as early as July rather than September. The trade resolution removes a significant downside economic risk while supporting the Fed's dual mandate objectives.

Sector and Stock Watch – Identifying Key Movers

Technology stocks commanded today's advance, with the "Magnificent Seven" companies reaching new peaks as investors celebrated the removal of the Canadian digital tax threat. Meta Platforms and Nvidia closed at record highs, while Microsoft touched intraday peaks before settling slightly lower.

The options market reflected this optimism through unusual call buying activity in major semiconductor names and technology-focused ETFs. The put-call ratio in equity options fell to 0.63, indicating continued bullish sentiment among individual stock traders, while institutional positioning concentrated in large block trades across technology names.

However, beneath the surface celebration, a developing conflict between President Trump and former DOGE head Elon Musk threatens to create sector-specific volatility. The dispute over the administration's economic package has escalated to mutual threats, with potential implications for government contracts and EV tax incentives affecting Tesla directly.

Trading Strategy in Focus – How to Play the Market

While broad market momentum remains constructive, individual stock opportunities emerge from policy-specific conflicts. Tesla shares present a compelling bearish setup as the Trump-Musk feud intensifies, with both leaders wielding significant influence over the stock's fundamental drivers.

The technical picture supports this thesis, with TSLA declining over 17% from May highs to current levels around $302. Key support sits at the June 5 low of $273.21, presenting a defined risk-reward opportunity for traders expecting continued pressure from the ongoing political conflict.

Bear put spreads offer an efficient method to capitalize on this setup, providing defined risk exposure while maintaining reasonable capital efficiency. The August expiration provides sufficient time for the conflict to impact share price while avoiding excessive time decay risk.

SMART TRADE IDEA

Bear Put Spread on TSLA

Trade Setup: Buy 300 Put / Sell 270 Put, August 15, 2025 expiration

• Cost: Cost: $12 ($1,200 per spread)

• Max Profit: $18 ($1,800 per spread)

• Breakeven:  $288.00

Management Plan - Example:

•  Exit at 50 percent loss, roll down, or take profits if TSLA shares reach $275.

TSLA shares could experience significant pressure as the war of words between the administration and Elon Musk continues. The short-term chart suggests that a challenge of the June 5 $273.21 or lower could be on the horizon. 

NOTE: Remember, options trading involves substantial risk and is not suitable for all investors. Consider your investment objectives, financial resources, and experience level before implementing this or any options strategy.

DISCLOSURE: Trade recommendations may have changed since publication. Evaluate current market prices and risk/reward before acting. Trading involves significant risk and is not suitable for everyone. This is not personalized investment advice. Past performance doesn't guarantee future results. Publisher and contributors may hold positions in recommended securities. Readers assume full responsibility for their trading decisions. Consult a financial professional before investing.

The United States is the world's leading consumer nation, providing President Trump with a significant edge in trade negotiations. While China and India have significantly larger populations, U.S. consumer spending was over twice that of China's in 2023 and remains far higher in 2025. Canada's recent reversal regarding the digital services tax is an example of the realization that dealing with the current U.S. administration requires a level playing field.

As the markets have adapted to the trade negotiations and occasional bluster from 1600 Pennsylvania Avenue, the administration's Big Beautiful Bill faces roadblocks that could delay its passage past the current July 4 deadline before it reaches the President’s desk. The markets are depending on extending the current tax rates, which could be critical for the current bullish path of least resistance of the leading stock market indices. 

Meanwhile, the President is at odds with his former head of DOGE, who is 100% against the Big Beautiful Bill. Elon Musk is threatening to put his capital to work to unseat Senators and those in Congress who vote in favor of the economic package. In response, the President has stated that he will consider canceling the EV tax breaks and other government contracts that favor Musk's companies. The President told reporters, "DOGE is the monster that may have to go back and eat Elon."

While Elon Musk is the world's wealthiest person, Donald Trump is the most powerful.

After reaching a high of $367.71 on May 29, TSLA shares have declined by over 17.8% to around the $302 level as of July 1. Meanwhile, the shares fell to a low of $214.25 on April 7 as the administration's tariff announcement gripped the stock market. A continuing war of words and threats between the world's two leading egos could be bad news for TSLA shares over the coming days and weeks. The daily chart shows that technical support is at the June 5 low of $273.21 per share.

For those who believe the war of words will continue to weigh on TSLA shares, the August 15, 2025, $300-$270 vertical bear put spread could offer value at $12 per share as it provides a 1:1.5 risk-reward ratio.

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LATEST MARKET BREAKDOWN

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