This Isn’t a Rally—It’s a Reaction

Don Kaufman here.

Alright, sit down, tune in, and turn on, because while the market is busy celebrating, I'm here to tell you why today's move isn't what it seems.

The Dow's up 500 points, the S&P 500 is popping 1.4%, and the Nasdaq is screaming higher—and all it took was a press conference from Trump about a trade deal framework with the U.K.

But let me ask you this: is this a real rally, or is the market just reacting to not bad news?

Because from where I'm sitting, this isn't a breakout—it's a sugar high, and when the market's running on fumes like this, you'd better have an exit strategy.

What's Really Going On Here?

1. The Market Wanted a Reason to Move—It Got One

This morning, I said we were stuck in a tight volatility box—bouncing between 5,600 and 5,700 on the S&Ps. The market was begging for a reason to break out, and Trump handed it to them with his U.K. trade deal announcement. But let's be clear: this wasn't some groundbreaking agreement.

It's a framework—which is a fancy way of saying, "We're still figuring it out." No signatures, no finalized terms, and a 10% baseline tariff that's not all that different from where we were before. If you're thinking, "That's it?"—you're not wrong.

But when the market's starving for optimism, even a breadcrumb feels like a buffet. That's what we're seeing today: a market that's reacting, not rallying.

2. Volatility Isn't Calming Down

The VIX is still floating around at 22.

Why does that matter? Because it tells you the market isn't buying its own hype. Elevated volatility means traders are still hedging, still nervous, and still expecting something to go wrong.

And let's not forget: this move is happening on low volume. That's not conviction, that's opportunism. When the volume isn't there, it's like trying to build a skyscraper on a sand dune—the foundation is shaky, and one wrong move could bring it all crashing down.

3. Correlations Are Off the Charts

Let me remind you of something I said earlier today: when the S&Ps move, everything moves with it—whether it deserves to or not.

That's exactly what's happening right now. Financials, energy, tech—they're all along for the ride.

Even Nvidia, which was fading earlier, suddenly caught a bid after the chip restriction news. But here's the thing: correlation cuts both ways.

When this rally reverses—and it will—everything's going to go down together. That's what happens when the market trades on momentum instead of fundamentals.

Don't Confuse Noise with Progress

One of the biggest mistakes traders make is confusing noise for progress. And let's be honest: this rally is noise.

The U.K. trade deal announcement is a headline, not a game-changer. Nothing was signed, nothing was finalized, and the 10% tariff is sticking around.

If anything, this feels like a relief rally—the market's way of saying, "At least it wasn't bad news." But here's the problem: when you're trading on relief instead of substance, the gains don't stick.

What I'm Seeing That Others Are Missing

1. The Real Story is in Volatility

Everyone's focused on the Dow being up 500 points, but the real story is in the volatility. Elevated VIX levels, backwardation in volatility futures—these are red flags that the market isn't as confident as it looks. If you're not paying attention to volatility, you're missing the bigger picture.

2. Tech is a Canary in the Coal Mine

Let's talk about tech, because it's leading today's rally. But here's the thing: these aren't sustainable moves. Google is fighting off rumors of declining search traffic, Nvidia is bouncing on chip news, and Microsoft is just riding the wave. None of this is based on long-term fundamentals.

In fact, Google might be in serious trouble. As I pointed out earlier, 70% of their revenue comes from advertising, and if Apple decides to ditch Google as the default search engine, that's going to leave a mark. Today's 2% pop? That's just noise.

3. This Rally is All Correlation

Here's what most traders don't understand: in highly correlated markets like this, everything moves together. That's great on the way up, but when the market turns, it's a bloodbath. If you're not ready for that, you're going to get caught flat-footed.

What Am I Doing? Sitting Tight

Look, I'd love to tell you I'm diving into this rally headfirst, but I'm not. Why? Because this isn't a market you chase—it's a market you wait out. When everything is correlated and volatility is high, forcing trades is a losing game.

I said it this morning, and I'll say it again: "If the S&Ps move higher, everything moves higher. If the S&Ps move lower, everything moves lower." That's not a market I'm interested in trading until it shows me something real.

Don't Get Fooled

So, what's the takeaway here? The Dow's up 500 points, and everyone's acting like the bull market is back. But don't get fooled.

This isn't strength—it's noise.

The market broke out of its range, sure, but it's not because of progress.

It's because traders were looking for an excuse to move, and they found one.

Here's my advice: enjoy the rally, but don't trust it.

Keep an eye on volatility, watch the volume, and don't get sucked into the hype. This market isn't out of the woods yet, and when the sugar high wears off, it's going to get messy.

To your success,

Don Kaufman

P.S. What's the best way to play this market? Click here to learn my favorite strategy.