Don Kaufman here.
And welcome to another episode of "The Media Gets Everything Wrong."
This morning everyone's talking about the big rally on government reopening news.
Futures were up 62 handles when I woke up.
Every major channel is running the same story - markets celebrate as Senate passes deal to end shutdown.
Here's the thing that's driving me absolutely nuts: this rally has nothing - and I mean NOTHING - to do with the government reopening.
You wanna know how I know?
Let me walk you through the tape.
If this was really about government operations resuming, you'd see money flowing into the obvious plays.
Airlines should be ripping because air traffic control is back. Government contractors should be celebrating. Retailers should be popping because people are getting their benefits restored.
Instead, look what's actually happening:
Walmart is DOWN today.
Think about that for a second. The government reopens, snap cards get reloaded with billions of dollars, and Walmart - the biggest beneficiary of government assistance spending - is selling off?
Energy stocks are FLAT.
Government reopens, people can pay their bills again, they'll be buying gas, and the entire energy sector is red? Come on.
Airlines are basically FLAT.
Air traffic control comes back online and nobody gives a damn about jets? Please.
Meanwhile, you know what IS ripping?
NVIDIA is up almost 4%. That's a $175 billion market cap move in one stock. Tesla, Broadcom, Google - all the AI darlings are running.
This isn't a government reopening rally, people.
This is AI back on the pony, period.
And here's what should scare the hell out of you: we're talking about the biggest company in the world moving 4% and carrying the entire marketplace higher while everything else either sucks or gets ignored.
Look at the advanced decline line - it actually went NEGATIVE while the S&P was up over 1%.
More stocks were declining than advancing during a supposed broad market rally.
That's not healthy market action. That's a handful of stocks propping up the entire show.
I keep hearing about this AI bubble, and people ask me if I'm worried. You know when I get worried?
When the marketplace can only move higher because of one sector, and that sector represents maybe 6-7 stocks doing all the heavy lifting.
The S&P is up 76 points this morning. You know how much of that is just NVIDIA? About 25-30 points. One stock carrying a quarter of the entire index move.
What happens when NVIDIA has an off day? What happens when the order flow in those AI names starts getting sketchy?
I was looking at NVIDIA's options flow this morning - yeah, there's call buying, but it's not the catastrophically large volume you'd expect for a move this size. The sizzle index (today's volume versus 5-day average) isn't even showing epic proportions.
That tells me this move, while real, isn't backed by the kind of conviction you want to see sustaining a rally of this magnitude.
Here's the reality: we've already moved halfway to the upper edge of the week's expected move, and it's only Monday. The weekly expected move was $123. We're up $76 already.
Statistically speaking, we're getting extended fast.
But the bigger issue isn't the math - it's the market structure. When you need NVIDIA to carry water for the entire marketplace, you don't have a robust rally. You have a dependence.
And dependencies break.
Look, I'm not saying sell everything and hide under your desk. The order flow in NVIDIA is still positive. Volatility is contracting, which is bullish. The technical move is real.
But don't fool yourself about what this is.
This isn't the market celebrating good government or economic optimism. This is algorithmic momentum chasing the same handful of names that have been carrying this market all year.
The government reopening story is just convenient narrative to hang the rally on. The real driver is simple: AI got oversold last week, so it's bouncing.
When the media tells you markets are rallying on government reopening while Walmart tanks and energy sells off, you know they're not paying attention to what's actually happening.
The tape doesn't lie. The headlines do.
To your success,
Don Kaufman
P.S. - I grabbed some put spreads in XSP this morning at excellent risk-reward. Not because I'm bearish, but because when you're already halfway to statistical extremes on Monday morning, the math favors some mean reversion. Risk one to make four - I'll take those odds all day.