Don Kaufman here.
You're one little tweet away from a 200-point move in the S&P.
Think about that for a second.
While everyone's celebrating markets being up 31 handles today, I'm watching volatility futures climb WITH the market.
That doesn't happen unless something big is coming.
And here's what most traders don't get: There's no technicals when markets start to get wild.
The Volatility Warning Nobody Sees
I've been screaming about this since the weekend update, but apparently nobody's listening. We're minutes away from full volatility backwardation - and if you don't know what that means, you're about to find out the hard way.
Look at the November versus December volatility futures. Only 30 cents differential. For those not versed in volatility land, we're almost in backwardation - the throes of incredible volatility.
The VVIX - that's the volatility OF the VIX - is up almost 3% today while the S&P is up half a percent.
That only makes sense if we're basically proclaiming: get down, duck and cover.
What Friday's Selloff Really Opened
Friday opened Pandora's box. Every day since, we're seeing wild two-sided trades. Yesterday we ripped up, sold off hard. Today? We dipped to 6650, then 110-point reversal.
The volatility structure is preparing for imminent risk. And just in the last eight minutes while I'm recording this? Volatility futures jumped another 21 cents. We're getting closer by the minute to full-fledged backwardation.
The Rotation Nobody's Talking About
While the S&P looks decent on the surface, look under the hood. NVIDIA is down on the week. Amazon struggling. The only thing standing between us and the abyss is a handful of rotations - Broadcom coming on strong, Tesla holding up.
This is a very weak move to the upside. Particularly not being led by AI.
Then There's the Bitcoin Problem
Gold is exploding - doing a million option contracts in GLD alone. But Bitcoin? We're aligning to break through the 110 level. You break through 110, it's a clean shot to 100,000. And that's going to spill over into equity markets. High beta stuff is going to get smoked.
The same retail money trading crypto products is trading high beta stocks. This is even more concerning than the gold squeeze.
My Expected Move Reality Check
The S&P's expected move this week? $197. We came close to hitting the upper edge today before reversing - that's when I grabbed my XSP trade. Paid $1.07, out at $3.85.
But here's the kicker: we still have $85 of anticipated movement for just Thursday and Friday. That's not normal. That's not "buy the dip, sell the rip."
What Is Wrong With People?
You want to get bullish, you want to get bearish, you better use spreads. What is wrong with people? You wanna go out and buy some stock, you're gonna get absolutely annihilated.
Hell, I used a spread on an intraday trade today. Want to know why? Because volatility is expensive just to buy a single option.
There's no heroes made in volatility. There's only those that go out, grab a couple bucks, make 200-300% using proper risk management.
The Bottom Line
Spread your risk. Define it. Keep yourself intact. You don't have to make any shortsighted, ridiculous moves in here.
All your volatility indicators are pointing to the fact that nothing is abating. In fact, volatility with the market up isn't abating - it's going higher.
It's on, people. Things are gonna get hectic. There's no more easy free rides in this marketplace.
To your success,
Don Kaufman
P.S. - I've got a few more things I want to share with you in this video I just recorded. The volatility situation is developing fast, and there are some specific levels and setups I'm watching that could make or break the next few trading sessions.