Don here...
The S&P finally broke out of its 100-point trading range today. We've been stuck between 6850 and 6950 for nearly seven weeks. That changed with violence this afternoon.
But I'm not celebrating yet.
The sector ETFs are flashing warning signs I cannot ignore. Every sector is posting moves two to three standard deviations beyond expectations. These are not normal rotations.
The XHB ripped 5% higher like a takeover just got announced. The XRT moved almost three standard deviations. The XLU collapsed and rebounded with moves you never see in utilities. Consumer staples broke lower, then closed substantially outside the expected move.
This is manic behavior.
The market keeps playing musical chairs. Money rotates from financials to tech to healthcare and back. The only thing that changed today was tech finally stepped up and carried us through 7000.
Here is what matters now. We closed outside the $83 expected move this week. We moved $44 in a single session. Yet the market expects only $83 of total movement over the next five trading days.
I am taking the over on that bet.
In tonight's video, I break down:
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Why Monday and Tuesday are critical. If we continue higher, every trading firm has to buy into buying. Short sellers could get squeezed to death.
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How seven weeks of range-bound trading created a massive ball of open interest that must be hedged when the range breaks.
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The binary outcome ahead. We either explode higher or collapse back into the range. There is no in-between.
The advanced decline line has not improved. Correlation remains low. Tech needs to take leadership for any sustained breakout.
We are at an inflection point. The next two days will define January.
Click here to watch me break down the exact levels and what happens next
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
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