Don here...
The S&P 500 is down 5% from its highs. That sounds dramatic until you realize we haven't seen a single day of real panic selling.
Friday's advance decline line came in at fifty-fifty. You don't capitulate until you correlate, and we are nowhere close.
Oil just closed at its highs, reaching for $100 a barrel. The dollar is breaking out above 100 for the first time in three years. Bonds are getting clobbered, which means rates are climbing.
Rising oil, a surging dollar, and higher interest rates create a toxic combination for the economy. The 25% recession probability the street is pricing in looks way too low.
Meanwhile, the financials are absorbing real damage. The XLF is down 11%. Deutsche Bank has dropped 26% on private credit exposure.
Private credit is the piece most people are ignoring. Firms like Blackstone and Blue Owl are cutting off or limiting redemptions on funds holding illiquid debt instruments. Investors who need cash and can't get it from those funds will sell whatever they can, whether that's stocks or Bitcoin. The domino effect is already starting.
The mega caps have barely flinched. Nvidia is trading in the same range it held back in July. Broadcom and Google are essentially untouched.
That is exactly the problem. If this sell-off deepens, the big market caps are where the next wave of selling will come from.
Volatility futures are inverted by 70 cents between the front month and May. The market is pricing extreme near-term risk with an assumption that things calm down later.
In tonight's video, I break down the exact levels and setups heading into what could be a massive week:
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The SPX expected move this week was $224. Actual move was just $110. The market didn't even get close to either edge.
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Next week brings a Fed announcement and triple witching with a $210 expected move baked in.
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Oil is closing at its highs and threatening $100 a barrel heading into a weekend loaded with geopolitical risk.
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I detail the specific spread trades that produced winners this week, including a 100% gain on Toll Brothers and profitable positions in IBIT and Microsoft.
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I explain why names like Nvidia, Broadcom, and Google sitting at these levels represent the next leg of opportunity.
Nobody wanted to go home long on a Friday afternoon with this much risk on the table. Next week, with triple witching and the Fed converging, the real fireworks could finally arrive.
Click here to watch me break down next week's setup and the trades I'm positioning around
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
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