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Don Kaufman here. |
What's the most important thing moving markets today?
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Earnings? Inflation data? Federal Reserve policy? Nope. It's a phone call. |
This morning, the markets reacted – no, overreacted – to the news that Trump and Xi Jinping shared a phone call. |
No deal, no details, no promises... just a conversation. Yet copper surged 3.5%, Tesla got hammered, and the S&P futures were all over the place. |
Why? Because we're in a market driven less by fundamentals and more by hope, rumors, and emotional reactions. And that's dangerous. |
If you don't know how to navigate this speculative environment, you're in the wrong game. But don't worry – I'll show you exactly what's happening, what most people are missing, and how to position yourself smartly. |
Let's dive in. |
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The Problem: Speculation Is Driving the Market |
This morning's action underscores a critical issue in today's market: prices are moving on whispers, not substance. |
Take copper, for example. It's often called "Dr. Copper" because it's a leading indicator of global economic health. Today, it spiked 3.5% on speculation that a U.S.-China trade breakthrough could boost manufacturing demand. Sounds good, right? |
Wrong. Here's the reality: |
No deal was made. The phone call was just a gesture. Copper's move is reactionary. It's not based on real growth or orders, but on traders chasing a fleeting headline. A pullback is likely. If the trade talks falter (and they very well could), copper could retreat to $4.50 – a 10% drop from current levels.
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And it's not just copper. Tesla tanked this morning, dragging down the Nasdaq. |
Why? Heavy put option activity – traders are betting against it. Add in Elon Musk's shifting public persona, and Tesla's stock can't seem to catch a break. |
Meanwhile, the S&P 500 futures are wobbling, but volatility (the VIX) isn't moving. That's a red flag. Without a spike in volatility, any sell-off will likely fizzle out. |
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What Everyone's Missing |
Here's the part no one's talking about: This isn't about the phone call. |
It's about the market's fragility. We've had a 1,200-point rally in the S&P 500, driven by hopium and headlines. Traders are chasing upside potential in a market that's running on fumes. |
But what happens when the music stops? |
Volatility spikes. When the VX futures finally move, it'll be the market signaling, "Game over." Downside risks loom. The risk/reward here is skewed. The upside is limited, while the downside? It's an abyss.
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China knows this. Their recent actions – like stockpiling gold – suggest they're bracing for prolonged trade pain. Meanwhile, the U.S. market is clinging to a narrative that everything will work out. |
Spoiler alert: it might not. |
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The Opportunity: How to Navigate This Market |
So, how do we play this? Here's the deal: |
1. Watch Volatility Like a Hawk |
The S&P's next big move won't come from price action alone – it'll come when volatility punches through. If the VX futures spike, brace for sell-side activity. |
2. Position for Downside Risks |
If you're not skewing your trades to the downside, you're playing with fire. The risk/reward here favors smart, defensive positioning. |
3. Don't Chase Headlines |
Copper's rally? Tesla's drop? These are short-term reactions to noise. Don't get caught chasing rumors. Focus on real opportunities with solid fundamentals. |
4. Lock in Gains When You Can |
I exited my silver position this morning with a 50% gain in a day…(if you're not a 3TW subscriber, click here to get started). |
Why? Because in this environment, taking profits is smart. Don't overstay your welcome in trades. |
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The Payoff: Stay One Step Ahead |
This is a market running on speculation, not substance. The phone call between Trump and Xi is a perfect example of the emotional rollercoaster we're on. |
But here's the good news: If you understand the game, you can play it better than anyone else. |
Focus on volatility signals. Skew your trades toward high-reward, low-risk setups. Ignore the noise and stick to your strategy.
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The market's fragile. The next big move is coming. And if you're prepared, you won't just survive – you'll thrive. |
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Your Next Steps |
Here's what I want you to do: |
Pull up the S&P 500 futures chart. Look for resistance at 6,000 and watch the VX futures closely.
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Review your portfolio. Are you positioned for downside risks? If not, it's time to adjust. Stop chasing headlines. Focus on real opportunities – not the noise.
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The market's hanging on a thread. Don't let it catch you off guard. Stay sharp, stay skeptical, and most importantly, stay ahead. |
This market isn't for the faint of heart. But if you play it right, the rewards are massive. Let's get to work. |
To your success, |
Don Kaufman |
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