| | | | Why This Selloff Isn't Following Normal Patterns
When you see the market drop and the VIX spike, your first instinct might be to think something is fundamentally broken. But here is what I have been watching — and what is actually driving this recent action.
The selling pressure we have been seeing is not coming from deteriorating fundamentals or technical breakdowns. We are dealing with a handful of specific catalysts that are creating abnormal market behavior. DHS funding has become a real issue, and there has been concern about going into the long weekend with a partial government shutdown. That kind of headline risk changes how traders position themselves.
On top of that, inflation data has added another layer of uncertainty. While inflation is not necessarily accelerating, it is also not cooling as quickly as traders would like, which complicates expectations heading into the holiday period. But the biggest factor remains the three-day holiday weekend approaching. Nobody wants to hold risk over an extended weekend when Washington might deliver unwelcome news.
Understanding the Abnormal Setup
When you see the market down over 1.5% with the VIX surging over 8%, approaching levels near eight-point-two-seven, that is not normal market action. The VIX climbing more than 8% and pushing past ten — that is government shutdown concerns showing up in volatility pricing.
The market is sending a clear message: political uncertainty is the driver here, not economic deterioration. Traders view the potential government shutdown as a significant negative, and that is where the pressure originated. If Washington produces a continued resolution or reaches a deal, we should expect the market to rally. The selloff is event driven, not structure driven.
Trading Around External Catalysts
When abnormal factors create abnormal price action, your strategy needs to adjust accordingly. This is not the time to treat the market like it is following typical technical patterns. The key is recognizing when the market is not behaving normally — and adjusting your expectations accordingly.
That shift in mindset also means taking practical steps to manage risk. If you have stock, you sell some covered calls. And if you already have option positions on, tightening your spreads or reducing exposure can help control risk when external catalysts are driving volatility.
I have been focused on understanding what is actually moving prices rather than just reacting to the red on the screen. When you recognize that specific, potentially resolvable external factors are driving the action, it changes your approach. This environment is about hedging, managing risk and staying flexible until political uncertainty clears.
If you’re unsure how to navigate headline volatility, this is exactly why we built Sunrise — it waits for confirmation before triggering trades. Click here to learn about Sunrise Signals
Trade to Win,
TBUZ
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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