The US stock market encountered a 'Black Monday' on the first trading day of September,$S&P 500 Index (.SPX.US)$falling over 2% to the lowest level since August 14th,$Dow Jones Industrial Average (.DJI.US)$dropping 1.5% and falling below 41,000 points,$Nasdaq Composite Index (.IXIC.US)$plummeting over 3%. $PHLX Semiconductor Index (.SOX.US)$A sharp drop of nearly 8%.

Analysts say that the continuous contraction of US manufacturing activities in August for the fifth consecutive month has deepened investors' concerns about a US economic recession.

The report released by the Institute for Supply Management (ISM) states that the US manufacturing index rose by 0.4 points to 47.2 in August, lower than the expected 47.5. This data has been below 50 for the fifth consecutive month, indicating a continuous contraction in manufacturing industry activity. In addition, the report also shows that the production index in the United States has declined for five consecutive months in August, reaching the lowest level since May 2020. The new order index has dropped to a 15-month low, and export orders have contracted at the fastest rate since the beginning of this year.

It is worth noting that during the decline of the large cap, the so-called 'fear index', $CBOE Volatility S&P 500 Index (.VIX.US)$surged more than 40% at one point and ultimately closed up over 30%; this is the first time since August 14 that the index has surpassed the 20-point mark.

The value of the VIX represents the annualized volatility. Taking the current situation as an example, when the VIX is 22.5, it indicates an expected annualized volatility of 22.5%, and the future 30-day volatility of the S&P 500 index is 6.4% (22.5% ÷ √12 = 6.4%).

In addition, the Bank of Japan has been hinting at interest rate hikes recently. If the economic and price data meet expectations, the central bank will continue to raise interest rates. After this unexpected 'hawkish' move, the market expects that the Bank of Japan will still have room to raise interest rates later this year, and the Damocles sword of carry trades in yen is hanging high once again.

Arif Husain, fixed income chief at T. Rowe Price, who successfully predicted the last yen crisis, warns that the August crisis was just a preview. He says, "Investors only saw the first change of this turmoil, and future market volatility will increase further." Husain believes that the expected rate cuts by the Federal Reserve and further tightening by the Bank of Japan could shock the market again soon.

Meanwhile, Bank of America released a report stating that the bank's "selloff sentiment index" (SSI) shows that Wall Street's optimism for stocks has risen to the highest level in nearly two and a half years, with the SSI rising to 56.2% in August. However, this high level also implies the possibility of the market heading towards an 'overheated' trend and poses a risk of decline. Although sell-side analysts are generally bullish on the US stocks, buy-side investors such as fund managers are more cautious in their positions.

Global markets are focused on Friday's non-farm payroll data, with concerns about increased volatility in the US stocks.

It is worth noting that this Friday, the US will also release a critical non-farm payroll employment report.

However, Tom Lee, co-founder and head of research at Fundstrat Global Advisors, an American investment institution, stated that as investors readjust their interest rate expectations, even if the non-farm payroll data exceeds expectations, there may be a pullback. He suggests that US stocks may fall by 7% to 10% within the next eight weeks and advises investors to prepare for significant volatility, as there will be a series of challenges to the US stock market during this time.

Lee also says, "If concerns about its (non-farm payroll data) strength lead to a Friday sell-off in US stocks, I would buy on the dip."

According to reports, among the strategists tracked by Bloomberg, Lee's predictions are the most accurate, and he is jokingly referred to as the 'Wall Street oracle.'

Interestingly, amidst the turmoil last night, there were large sell orders of over 33 million US dollars.$CBOE Volatility S&P 500 Index (.VIX.US)$If on the expiration date, the index does not rise above 22 and 30 points, the income from selling the call options will be realized, which means betting on the US stocks until September 18th, and there will be no greater volatility.

From the options chain, we can also see that the top two contracts by volume are call options with expiration date on September 18th, and exercise prices at 30 and 22 points respectively. The trading volumes are 0.438 million and nearly 0.4 million contracts.

In addition, there are major investors who have purchased combination orders totaling over 27 million US dollars. They are primarily buying put options with an exercise price of 18 points and expiration date on October 16th, totaling over 12 million US dollars; primarily selling call options with an exercise price of 19 points and expiration date on October 16th, totaling 6.3 million US dollars; and primarily selling put options with an exercise price of 19 points and expiration date on October 16th, totaling over 8 million US dollars.

Furthermore, due to the strong negative correlation between the VIX index and the stock market, many investors choose to diversify their investments, hedge their positions, or engage in short-term speculative trading through financial instruments related to the VIX index.

For ordinary investors, direct investment in the VIX index itself is not possible, but we can invest in the VIX index through tools such as ETFs, futures, and options. ETFs are the easiest investment method for stock investors to understand, and they can achieve related investment returns and protection.

As we can see,$2x Long VIX Futures ETF (UVIX.US)$Rose nearly 40% yesterday.$ProShares Ultra VIX Short-Term Futures ETF (UVXY.US)$,$iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX.US)$,$ProShares VIX Short-Term Futures ETF (VIXY.US)$Many rose more than 20%, even in a market where the overall market fell, they could still achieve contrarian gains.

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