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I just wrapped my segment on Schwab, and I had to get this out right as the Fed makes its announcement. |
Fed Day. Zero rate expectations. And the S&P is sitting on a gamma time bomb. |
Here's what nobody's talking about: dealers are sitting in negative gamma right now. That means if the market starts to sell off, they have to sell into it. If it rallies, they have to buy into it. |
Translation: any word out of Powell today could turn into an explosive move — in either direction. |
And heading into triple witching expiration? The positioning is phenomenally large. |
So I walked through three setups on Schwab that are setting up for violent moves — regardless of what the Fed says. |
Setup #1: The Retail Feeding Frenzy That's About to Reverse |
This one's off the beaten path for most people. But it's a textbook gamma squeeze running out of steam. |
Retail traders have been rushing in every single day to buy call options. That forces market makers to buy the stock. Which pushes it higher. Which brings in more call buyers. Rinse and repeat. |
But here's the thing: that squeeze is coming to an end. |
The technicals are rolling over. The momentum is stalling. And I'm not interested in the fundamentals here — this is purely quantitative, purely technical. |
I'm playing this one with a defined-risk bearish spread. Looking for a very quick, very violent pullback. |
This is the kind of setup where retail gets caught holding the bag. I'm betting on the fade. |
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Setup #2: The Oversold Bounce Nobody Wants to Touch |
This one's ugly. Absolutely crushed. Oversold on every indicator you want to look at. |
And it just tested a critical support level that's held multiple times in the past. |
Here's what caught my attention: the selling stopped dead at that level. Not a breakdown. A hold. |
Now, I'm not long-term bullish on this name. But short-term? This looks like a reflexive bounce setup. |
I'm giving myself duration on this trade because in the near term, it's wild out there. A little further out, maybe we stabilize. |
This is make-or-break right now. Either it holds this level and pops, or it breaks and it's over. |
Setup #3: The Rollover That's Going Right Back to Trend |
This one had a nice pop recently. News-driven. Short-covering. The usual. |
But it's rolling over again. Hard. |
Before that pop, this was all downtrend. And now it looks like it's heading right back into that trend. |
The move higher? It was short-lived. The fade? It's already starting. |
I'm playing another out-of-the-money setup here — minimal risk, big payout. That's where I like to be when I'm playing contrarian. |
This one doesn't need to collapse. It just needs to keep fading. And the technicals are lining up for exactly that. |
Look, I'm not trying to be a contrarian just to be different. |
I'm picking off setups where the structure is obvious once you strip away the noise. |
A gamma squeeze that's exhausted? That's not a long. That's a fade. |
Oversold conditions at a major support level? That's not capitulation. That's a reflexive bounce. |
A news-driven pop that's already rolling over? That's not a reversal. That's trend reassertion. |
The volatility is here. The setups are here. And Fed Day is going to be the catalyst. |
⇒ WATCH THE FULL SCHWAB BREAKDOWN HERE |
Don't blame the messenger. |
To your success,
Don Kaufman |
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