Don here...
Something's brewing in the market that has me on high alert—and it's not what most traders are watching.
While everyone's glued to Jackson Hole and Powell's next move, I'm staring at something far more dangerous: a 200-point volatility box that's been holding the S&P captive for seven weeks.
Here's what's got my attention:
We've been locked in a tight range from 6250 to 6450 since late June. That's it. Seven weeks of back-and-forth in just 200 points.
But here's the kicker—if we break above 6450, it's wildly bullish. I'm talking about a door swinging wide open to the upside. And if we crash below 6250? Well, that's when things get ugly fast.
The real danger? We're seeing something that makes my skin crawl as a trader.
Today the S&P was down over 50 points, but the advance-decline line was sitting at 50-50. You don't want to see that kind of setup. It's like having a false sense of security right before the floor gives way.
I call big tech the "Death Star" right now. It's so massive it has its own gravity. When tech starts selling off by 1.5% or 2%, it's going to snap that advance-decline line in two and drag everything down with it.
The scary part? Volatility isn't even moving yet. The VIX is acting like nothing's happening, which tells me the market thinks this is just rotation and profit-taking.
I don't buy it.
When this non-correlated state we're in right now flips to pure correlation—and it will—we could go from being down 20 handles to down 180 handles in the blink of an eye.
The SPX is sitting right at 6360—the lower edge of the expected move. We flirted with breaking below it today. If we punch through that level, the market could literally rip itself apart at the seams.
👉 Click here to watch me break down these critical levels and what to watch for
This isn't about interest rates or Jackson Hole. This is about tech rotation turning into something much bigger. And when it does, you'll want to be prepared.
To your success,
Don Kaufman
Chief Market Strategist, TheoTRADE
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