Don here...
The S&P 500 rallied 70 handles today. The expected move priced in exactly $69. The market called it to the penny.
That precision should comfort you. It doesn't comfort me.
Despite a 160 point bounce off Tuesday's lows, the volatility futures have not normalized. They are not even close. The term structure from April through June remains flat, signaling that institutional money still sees elevated risk ahead for months.
The S&P 500 is unchanged on the week. The entire year to date range fits inside 200 points. We tagged the lower edge of the $144 weekly expected move on Tuesday and snapped back, but there is still $82 of anticipated movement left for Thursday and Friday alone.
Here is what I walked through in tonight's video:
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The advance decline line is still broken. Even with a 70 point rally, breadth is not confirming the move.
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Volume behind today's bounce is anemic. The S&P futures are trading roughly 1,000 contracts per minute, well below what you would expect on a move this size.
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Consumer staples sold off on Monday when geopolitical risk spiked. That is the opposite of how a flight to safety trade should work.
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Meta and Nvidia led with 2% gains, but Google and Apple are struggling. The bifurcation inside tech is unnatural.
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Financials rallied just 0.7%, lagging the broader index on a day they should be participating fully.
Gold is getting no relief from the dollar pulling back after yesterday's selloff. Caterpillar has been decimated over the past few sessions. The risk on and risk off signals across asset classes are sending contradictory messages.
Broadcom reports earnings after the bell tonight. That could set the tone for the rest of the week.
The S&P 500 is back in the range. The range means nothing. The volatility structure is telling you the risk has not gone anywhere.
Click here to watch me break down the full volatility setup and what I'm watching into the end of the week
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
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