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Don Kaufman here. |
Fed week. Oh, I'm really not all that excited. |
I was in a meeting with Garrett and I was like, "It doesn't mean anything. It's a quarter point. And then I gotta listen to Jerome Powell." Oh man, that's gonna be the most exciting two hours of my life. |
But here's the thing - I'm gonna be on with him tomorrow during the Fed announcement anyway. |
Because even when you know it's theater, you still gotta watch the show. |
The Contradiction Every Trader Lives With |
Look, I'll be the first to tell you Fed meetings are nothing more than hoops you have to jump through. |
Jerome Powell's gonna get up there and "dance monkey dance" because that's what they do. |
But while everyone's hanging on every word from twelve people in a room, the real intelligence is hiding in plain sight. |
And I'm gonna spend two hours tomorrow pretending their words matter more than what I can already see happening. |
The Intelligence That Actually Matters |
This morning, we did 65 million option contracts. Sixty-five million. Predicated on what? Not a damn thing. But buried in that volume is intelligence that separates the smart money from the "bye bye bye" crowd. |
Here's how I can tell the difference: order flow patterns. |
Take NVIDIA. This morning, 100,000 calls traded. But only 22,000 - just 22% - traded between markets. The other 80%? Pure retail chaos. People just going "buy buy bye" at whatever price. |
Now compare that to the VIX. |
Over 60% of the order flow trades between markets. You know what that means? |
These aren't retail monkeys hitting market orders. These are proprietary trading firms, hedge funds, market makers. When I look at VIX order flow, I know unequivocally that smart people are trading in there. |
The VVIX hit 100 today. |
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That's institutional money managers finally stepping back up. Not BlackRock - they probably don't even have anybody who knows what a VIX hedge is. |
I'm talking about small hedge funds with a few billion dollars, most of it their own money, doing massive volatility calendar spreads to mitigate exposure coming into major announcements. |
The Fight Club Rules of Institutional Intelligence |
Speaking of things most traders never learn - rolling markets. We do not talk about Fight Club, and we do not talk about rolling markets. |
Most people rolling futures contracts give up $30 every time. |
But there's a rolling market where the spread is 5 cents instead of 50 cents. You're rolling for basically free instead of $30. |
If you've carried futures positions for years and nobody told you about this, you may have given up tens of thousands of dollars. |
Unless somebody takes your hand and shows you, you'll never know. Like, literally somebody doesn't tell you about this, and you can get just a lot of movement in overall markets while those rolls are underway. |
Why I'm Watching Theater I Don't Believe In |
So here's my contradiction: I think the Fed meeting tomorrow is mostly BS, but I'm gonna spend two hours breaking it down anyway. |
Why? |
Because you've got this wild conjunction - Fed meeting Wednesday, SPX expiration Friday. |
Everything's caught in crossfire. The problem isn't the meeting itself. The problem is all the risk you gotta roll. You have a few trillion dollars of risk to actually roll over, and the Fed meeting creates an environment that can make rolling that risk explosive. |
Look at this morning's action. We opened higher, finished about four points higher than the open. Nothing happened. |
But it was done on massive option volume - 65 million contracts. That's a complete and utter slop fest of a marketplace, but it tells me there's massive repositioning going on that should shake things loose. |
Reading the Intelligence While Everyone Watches the Show |
The real intelligence isn't in what Powell says tomorrow. |
It's in reading the positioning, the order flow patterns, the institutional footprints happening while everyone's watching the theater. |
Most traders treat Fed meetings like the main event. Smart money treats them like background noise while they execute the real positioning. |
The Honest Truth About Tomorrow |
So why am I hosting a Fed breakdown when I think it's meaningless? |
Because even theater creates volatility. And volatility creates opportunity. |
The quarter point cut is already priced in. Powell's gonna say exactly what you expect him to say. But the market's reaction to theater he's performed a dozen times before? That's where the intelligence gathering pays off. |
I'll be reading the order flow in real-time while Powell talks. |
Watching which way the smart money moves while retail hangs on his words. Looking for the positioning shifts that happen during the distraction. |
The contradiction is the point. You can think something is BS and still trade the hell out of it. |
That's the difference between being right and making money. Tomorrow, I'm choosing money. |
At least it's gonna move the markets. |
To your success, |
Don Kaufman |
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