The $500B Illusion Everyone Fell For Today

Don Kaufman here.

Half a trillion dollars. That's how much market cap moved this morning between just three stocks while everyone thought the market was "ripping."

Here's the truth nobody wants to hear: we're actually flat for the week. And now?

We're fading fast.

Listen to Me - We're Massively Unchanged

I know, I know. You were looking at your screen this morning seeing META up 12%, Microsoft up $26, and thinking this was some kind of rally.

But listen to me - before you get all kinds of crazy, let me show you where we really are.

The SPX hasn't done anything this week despite all these earnings beating…

So it didn't matter that the NASDAQ looked like it was ripping this morning. Define ripping.

Did it hit the upper edge of the expected move?

No. And now it's proving why - because it wasn't ripping at all.

Here's What Most People Don't Know Jack About

But here's what was really happening under the hood this morning, and this is where most people don't know Jack.

You had META adding roughly $250 billion in market cap.

Microsoft? With 7.5 billion shares outstanding, up $26 - that was another $200 billion of market cap moving around.

Throw in NVIDIA which was up almost $3 on 25 billion shares, and you had another $75 billion.

You see where I'm going with this?

Literally half a trillion dollars of movement between three products. I'm not even including Amazon - that lightweight was only adding like $35 billion.

There's only a handful of companies in the entire world worth $500 billion, and that was the size movement you had this morning from three stocks.

You Don't Even Have All of Tech

Meanwhile, what was everyone else doing?

XLF was down 30 cents at the open. The energy sector is getting hammered. Home builders are getting absolutely walloped. Even semiconductors were down - and that's supposed to be tech!

You didn't even have all of tech participating.

You only had monsters of tech. And of course that's all that matters.

This is the rotation everybody's been talking about for three weeks. We've been looking at equal weight versus market weight divergences, and this crap is getting kind of crazy out there.

The advance decline line?

It was negative this morning. Ticks? Negative 400. Six of the 11 S&P sectors in the red. Dogs and cats living together, people.

Which is why I'm sticking to this strategy right now.

Come On, Show Me the Math

But here's the reality check: How can the S&P sustain when you only have META and Microsoft doing the heavy lifting?

They can hold for a while, but you cannot and will not have a sustained rally unless you get substantial participation from the rest of the market.

And guess what? That participation never came. That's why we're fading now.

This Crap Is Getting Kind of Crazy Out There

Without shadow of a doubt, there is change afoot in this marketplace. The fire hose opened up this morning - we were doing 5,000 contracts a minute, and that order flow was shifting all over the place.

But when only three stocks are providing all the lift while everything else gets sold, that's not sustainable.

And the afternoon fade is proving exactly that.

So what am I saying?

You had a pretty strong bid this morning from three giants, but everything else was getting walloped.

The market figured that out, and now we're paying the price.

That's an illusion.

Don't chase the headline rally next time.

When you get concentration like this - three stocks doing all the work while the rest struggle - trade the rotation, not the illusion.

Because the fade always comes.

To your success,

Don Kaufman

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