Don here...
The S&P 500 just dropped 1.6% on the session and is now approaching a 9% decline from the all-time highs. We are on the doorstep of a full correction.
But here is the problem. I don't feel the fear yet.
After 30 years of trading, I know what real capitulation looks like. Volume pumps 10,000 to 15,000 contracts per minute in the S&P futures. Every stock gets sold regardless of sector or fundamentals. The tape goes bidless.
None of that happened today. Volume was terrible. The advance/decline line never fully correlated to the downside. Oil stocks, retailers, even Netflix held firm while everything else sank.
The sell-off looks serious on the surface. Underneath, it is orderly. That is exactly what should concern you.
Meanwhile, the volatility futures are telling a completely different story. In tonight's video, I break down the exact signals I am watching and why the real move may still be ahead:
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Volatility futures have entered a two-point backwardation, the largest since the COVID crash. The only comparable reading in the last year was a brief spike during the 2025 tariff tantrum.
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The VVIX, the volatility of the VIX, surged to 133. The VIX itself pushed into the 31 handle. These are among the heaviest readings in recent history.
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The S&P 500 has now gone 11 consecutive weeks without closing outside the expected move. The options market has been pricing risk perfectly, even as headlines scream panic.
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Microsoft is down 25% year to date. Meta is off 19% on a fresh lawsuit. Google dropped 13% and just posted a two standard deviation weekly move.
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Apple is only down 8% and actually finished the week higher. If mutual fund redemptions accelerate, Apple becomes the next target because of its massive weight in the S&P 500.
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Oil cracked $100 per barrel with short duration implied volatility above 100%. That kind of pricing belongs in a crisis, not a garden variety pullback.
Next week is a four-day trading week with markets closed Friday for Good Friday. The expected move is roughly $188 on just four sessions. That means daily implied volatility is actually higher than this week.
The tape is telling me we are living inside the echoes of extreme volatility. The real capitulation has not arrived yet.
Click here to watch me break down the exact levels, the vol futures signal, and what I am positioning for next week
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
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