The Market Is Lying to You

Don Kaufman here.

Let's get one thing straight…

The market loves to lie.

It whispers sweet nothings of trends that don't exist, throws tantrums at the slightest headline, and convinces traders to jump into trades they'll regret 10 minutes later.

And today? Today's market is practically screaming lies.

The S&P 500 is down, but there's no volume to back it up.

Financials are dragging, volatility futures are sitting quietly, and everyone's still arguing about whether tariffs on foreign films will destroy Netflix.

But let me tell you something: none of this matters unless you know how to read between the lines.

So, buckle up, because I'm about to show you how to separate the market's noise from its signals.

Forget the headlines. Forget the emotions. Let's talk about what really matters.

Market Moves Without Volume? Don't Take the Bait

Here's a hard truth: low-volume moves tell you nothing. This morning, the S&P 500 was down about 0.8%, and traders everywhere started acting like their portfolios were on fire.

But here's the thing—there's no volume behind the move. And without volume, it's all smoke and mirrors.

Volume is the lifeblood of the market. It's what separates real conviction from random noise.

If you're trading based on low-volume moves, you're basically gambling. It's like trying to bet on a horse race where all the horses are cardboard cutouts.

And this isn't just today's problem. Low-volume volatility has been a recurring theme lately, turning the market into one big game of chicken.

Traders jump in, hoping to catch a wave that doesn't exist, and end up getting chopped to pieces.

So, what do you do?

Simple: wait for volume. If the market is moving without it, stay on the sidelines. Let the amateurs chase phantom trends while you keep your powder dry for when the real opportunities show up.

Volatility Futures: The Quiet Before the Storm

Let's talk about volatility, the market's favorite drama queen. Right now, the VIX is sitting quietly and volatility futures aren't flashing any red flags.

But that doesn't mean you should relax.

Here's the deal: volatility has been crushed lately, but I'm starting to see a little bid coming back under it. It's subtle, like a storm cloud forming on the horizon. You might be tempted to ignore it, but that's exactly when you need to pay attention.

Why?

Because volatility doesn't creep higher for no reason.

It's a sign that traders are starting to hedge their bets, preparing for something big. If you're not watching it, you're flying blind.

The play here is simple: keep an eye on volatility futures.

They're often the first to signal when the market is about to get interesting. And when they start moving, you'll want to be ahead of the curve—not scrambling to catch up.

Berkshire Hathaway: The Market's Crutch Is Breaking

If there's one stock that's dragging the market down today, it's Berkshire Hathaway.

The stock was down over 6%, and while that might not mean much for your average trader, it's a big deal for the market as a whole.

You see, Berkshire isn't just a stock—it's the market's psychological crutch.

When Berkshire is strong, traders feel like the market has a safety net. But when it crumbles, that safety net disappears, and everyone starts looking for the exits.

Financials are already under pressure, and Berkshire's decline is adding fuel to the fire. It's not just about the numbers—it's about the message it sends.

If the market's "rock of Gibraltar" is cracking, what does that say about the rest of the market?

Here's my take: watch Berkshire closely.

It's not just a bellwether for financials—it's a bellwether for market sentiment. If it stabilizes, the market might find its footing. If not, expect more downside pressure.

The Advanced-Decline Line: A Brutally Honest Market Diagnosis

Let's talk about one of the most overlooked tools in trading: the advanced-decline line.

It's not sexy, but it's brutally honest. And today? It's telling us the market is in rough shape.

This morning, the advanced-decline line was downright hideous. Stocks were down across the board, showing broad weakness in the market. That's not what you want to see if you're hoping for a rally.

But here's the thing: ugly breadth can create opportunities. When the market is broadly weak, you can sometimes find individual stocks that are swimming against the tide. Just don't expect those outliers to carry the market.

The lesson?

Don't fight the trend. If the market is broadly weak, even the strongest stocks will struggle. Use the advanced-decline line as your guide—it's a window into the market's health, and it rarely lies.

Risk-Reward: The Only Strategy That Matters

If there's one thing I want you to take away from this post, it's this: risk-reward is everything.

I don't care how good a trade looks on paper—if the risk isn't worth the reward, it's not worth taking. Period. The market doesn't care about your feelings or your opinions. It doesn't owe you anything. Your job is to protect your capital and only take trades where the odds are in your favor.

Right now, the market's downside potential outweighs its upside. That doesn't mean you should panic and sell everything—it just means you need to be smart.

Focus on trades with clear, favorable risk-reward ratios.

If you're not confident in the setup, don't take it.

Don't Let the Market Fool You

Today's market is full of traps.

Low-volume moves are tricking traders into chasing trends that don't exist. Volatility is quietly creeping higher, signaling trouble ahead. And sector-specific issues, like Berkshire's decline, are dragging the market lower.

The smart move?

Stay patient. Don't let the market's lies trick you into making rash decisions. Wait for volume, watch volatility futures, and always prioritize risk-reward.

Remember, traders: the market doesn't reward the reckless. It rewards the disciplined. So, stay sharp, stay nimble, and don't let the noise drown out the signals.

See you on the other side of the next move!

And if you're not already trading with me, click here to get started.

To your success,

Don Kaufman

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