Don here...
Gold just breached the lower edge of its expected move for the third straight week. That kind of liquidation in metals only happens when major banking institutions need to raise capital.
The S&P 500 sold off nearly 2% on triple witching Friday. Interest rates exploded. Bonds tanked alongside equities. And gold dropped over two and a half standard deviations below its expected move.
Every asset class sold off at the same time. That tells you something is broken in the financial plumbing.
Here is what really concerns me. The S&P 500 is only 7% off all time highs. A correction does not even begin until 10%.
Nvidia, the largest constituent in the S&P 500, has shown virtually no sell side activity. If mutual fund holders were liquidating, Nvidia would be getting crushed. The fact that it is holding up means the real selling has not even started yet.
The VIX is elevated but not making new highs. I call this the scary movie proposition. The first time you see it, you scream. The third time, you already know what is coming. The market has seen this film before, and that means true capitulation is still ahead of us.
Financials finished the day nearly flat while the S&P 500 dropped almost 2%. In a real capitulation event, everything sells. The lack of correlation across sectors tells you we are not there yet.
Meanwhile, the 10 year yield jumped a full tenth of a percent in a single session and is approaching 4.5%. Money is not flowing from equities into bonds. It is leaving both.
Here is what I walked through in tonight's video:
-
The S&P 500 has now stayed inside the expected move for 10 consecutive weeks, an anomaly that signals violent moves are directly ahead
-
Gold is in liquidation territory at 2.5 standard deviations below expected move, the kind of selling that only comes from banks raising capital
-
Tesla butterflies I bought for 50 cents closed at $1.18 and $1.50, returning over 140% in 24 hours
-
A Toll Brothers spread bought for $2.75 closed at $6.00, a 100% return in roughly a month
-
Volatility futures are in backwardation but only by a single point, meaning the fear premium has room to expand significantly
Click here to watch me break down the sell side activity, the metals liquidation, and exactly where the next violent move is coming from
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
P.S. Tuesday at 1PM, I'm doing a special encore of my latest 0DTE webinar. You may think you know how to trade 0DTE options. But I promise you, what I'll explain will blow your mind.
Click Here to add it to your calendar.
Post a Comment
Post a Comment