A lot of crap was going on this morning.
That is exactly why I started the room 10 minutes before the cash open. The ceasefire headlines hit around 1:00 in the morning my time, and by the open we were down 40 handles with heavy volume already sitting in the overnight tape.
But the S&P was flat on the week. Basically unchanged.
Sounds calm, right? It was the opposite of calm. And that flat number is the thing most people stared at and completely misread.
Unchanged is not the same as quiet. Unchanged with this much size underneath it is a market loaded and waiting to move.
So I did what I do before every bell. I stopped looking at the price and went and looked at the expected move.
The expected move is the number the options market prices in for how far an index is likely to travel over a set time. It is not my opinion. It is the market telling you, in dollars, how much movement it is bracing for.
Here is what it told me. The weekly expected move was set over the weekend, before the week even opened. The market had priced this week for a $105 move in the S&P.
That number was sitting on the board since Sunday. And the daily expected move, around $33, we had already ripped straight through before the cash open even started. Gone.
Now sit with what that combination means. Flat on the week, and already blowing past the daily number.
That is not a sleepy tape. That is a market with nowhere it has decided to go yet, and every reason to go there hard.
I told the room to strap in. I meant it.
And the day delivered. We opened down 40, the advance decline line came out worse than we would have expected, and the VIX took off. Then the rotations started throwing names around in both directions.
Financials got crushed. Tech caught a bid.
At one point I was watching Broadcom firm up and talking to my screen like it was a dog. “Stay. Sit. Good dog.” It did not listen.
Wild, hectic, two-way tape all session. None of it was a surprise, because the number told us it was coming.
The people who got hurt were the ones who saw unchanged and assumed boring.
This is the whole point I hammer on. Do not think. Go look at the expected move.
The price tells you where you are. The expected move tells you what the market is bracing for. When those two disagree, when the tape looks calm but the number is screaming, that gap is the trade, and it is the warning.
To your success,
Don Kaufman
P.S. — Number 20 is setting up right now. I’ve made this exact trade 19 times in the last 15 months, and all 19 have paid. On July 9th at 1 PM EST, I’m walking through the whole thing live — every entry, every exit, the full record. If it triggers while we’re together, you’ll watch me assess it in real time. Register here and I’ll send you my new report, The Market Makers’ Seat, the second you save your spot.
