| | | | 3-Wave Rally Warning: Why Smart Money Is Already Exiting Tech
Something's been nagging at me as I watched the market grind higher through the early part of the week...
Sure, we're sitting just below all-time highs. But when I dig into the actual price structure, I'm seeing warning signs that most traders are completely missing.
Here's what caught my attention…
The recent rallies are completing in three-wave moves instead of the healthy five-wave impulses we need to see for sustainable uptrends. This isn't some minor technical detail — it's a fundamental shift in how the market is behaving.
When you see three-wave advances repeatedly, you're looking at corrective patterns, not impulsive ones. This is the kind of price action that sets us up for another flush, possibly bigger than the last one.
And speaking of that last flush — Friday's selloff showed something I haven't seen in previous pullbacks: All of big tech got hit in a coordinated fashion. Usually during corrections, some names hold up better than others. Not this time. Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Nvidia (NVDA) — they all went down together.
That's institutional distribution, plain and simple.
The Warning Signs Are Flashing Red
The warning signs are there that smart money is getting out and taking the exits. I know that sounds dramatic when we're parked right under all-time highs, but that's exactly when these warnings matter most.
Look at the underlying instability: We've seen around 200 tickers moving in pre-market sessions versus the typical 60 to 80. Meanwhile, the market's been range-bound for four consecutive days. That combination — elevated volatility underneath a tight range — signals trouble brewing beneath the surface.
Friday's drop was approximately 3%, but this next one could be 5% to 10% over a day or three. The setup is there. The internal weakness is building. And we've got potential catalysts stacking up with government shutdown concerns and the upcoming FOMC meeting.
How I'm Positioning for What's Coming
I'm not waiting around to see if this plays out. I'm planning to buy protection early through UVXY or VIX options.
Here's what makes this particularly interesting: Market makers are pricing a $4 move in UVXY for November expiration, but the VIX is pricing a $5 move. Because of UVXY's 2x leverage structure, that $5 VIX move would translate to a $6 move in UVXY — creating a genuine mispricing opportunity.
When I look at individual names, the same corrective three-wave pattern shows up everywhere. These structures suggest potential downside moves of 20 to 50 points across major tech names. That's not minor profit-taking — that's a legitimate correction.
The market rarely rewards the crowd when positioning gets this one-sided and complacent. Right now, most traders are assuming we'll just drift higher into new records. The price structure is telling a different story, and I'm listening to what it's saying.
Stay sharp out there. | | | | |
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