Don here...
Five weeks. One hundred points. Dead center at 5900.
That's the entire story of the S&P 500 since late November. Bulls are claiming we ended the year strong. The chart says we've gone absolutely nowhere.
Let me say this…
The longer we stay compressed, the more open interest accumulates on the same option strikes. This creates massive dealer gamma exposure.
When we finally break, dealers will be forced to buy into buying or sell into selling. The move will be explosive in either direction.
In tonight's video, I break down the key signals:
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Volume hit 1.3 million contracts with 40 minutes left in today's session, confirming this wasn't holiday fluff.
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The advance/decline line showed persistent 50/50 rotation, with tech selling off while financials and energy caught bids.
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Interest rates are approaching the critical 4.2% threshold on the 10-year, a level that has historically triggered significant market moves.
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Next week's expected move is only $84 for a full trading week, yet today alone saw a 60+ point range.
Rather than buying VIX products (which track futures at 18.37, not spot VIX at 14), I bought a 49-day SPY put spread.
The 575/565 spread cost $1.98-$2.02 with nearly $8 of upside potential. Skew works in my favor, buying 13.47 vol and selling 14.66 vol.
Stay under-allocated until you see higher correlation across sectors. When 95% of stocks start moving together, that's your signal to press.
Click here to watch my full market breakdown and defensive positioning strategy
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
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