Don here...
The AI trade is dead in the water.
Microsoft peaked in October. Nvidia hasn't moved since summer. Meta topped out in August.
Yet the S&P keeps flirting with all-time highs. The reason should concern you.
Capital is rotating into consumer staples at a pace that defies logic. Target rallied 35% in a couple weeks. The XLP moved $6 in five trading sessions.
Based on implied volatility, that move should take 100 days.
This is not healthy rotation. This is money running scared.
The VVIX confirms it. That's the volatility of the VIX itself. It cracked 110 this week. Professional traders only push the VVIX that high when they're buying call options to hedge against something ugly.
Meanwhile, the 10-year yield broke out today. The administration just bought $200 billion in mortgage-backed securities to force rates lower. It failed. Rates exploded higher anyway.
In tonight's video, I break down exactly what's at stake:
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The S&P futures are hovering just above 5950. A drop below that level opens the door to 5850 in a hurry.
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The VVIX is still above 100. That signals professional trade is actively hedging for a volatility spike.
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The 10-year yield cracked 4.62%. Higher rates will constrain the money supply and pressure equities.
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Next week's expected move is $81.56 on a four-day trading week. Slightly elevated, but the market isn't pricing in the risk I'm seeing.
The QQQ is flatlined. Tech can't carry us anymore. Consumer staples and industrials cannot hold up the entire market.
If the VVIX breaks above 110 early next week, expect sell-side activity to accelerate.
Click here to watch me break down the critical levels and what happens next
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
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