The Fed cut rates today. Jerome Powell talked. Journalists asked questions.
The market moved 43 points on a 46-point expected move.
Translation: Today was nothing.
I know everyone wants to dissect Powell’s every word and find hidden meaning in the Fed statement. They can analyze away. I’m looking at something far more dangerous brewing beneath the surface.
The SPX just completed two consecutive weeks without hitting its expected move range. That means we haven’t touched the upper or lower boundaries for nine straight trading sessions.
This almost never happens. I pulled up the charts and had to go back to June to find the last time we saw this pattern. Even then it was rare.
The market is coiled. Volatility is pent up. We’re stuck in a box while everyone keeps allocating as if nothing will change.
Here’s the problem with that thinking. When the SPX finally breaks out of this range, correlation will spike hard. It won’t matter if you’re trading Broadcom, NVIDIA, or Boeing. If the SPX moves violently in either direction, every stock moves with it.
Today proved we’re not getting leadership from the AI trade:
- Microsoft dropped 3%
- NVIDIA finished slightly down
- Meta declined
- Financials rallied over 1%, but all the financials combined don’t equal NVIDIA’s market cap
Volatility crushed lower today, but it can’t go much further. The futures markets are already pricing higher volatility at 19 in 42 days and 20 in 70 days. The Trump administration guarantees volatility stays elevated.
We have $60 of implied movement still left this week. Last week we didn’t move. This week we haven’t moved.
Something has to give.
If we’re going to explode higher, it has to come from big tech. There’s nothing else that can move this market meaningfully. But right now big tech is leaning lower. That’s the order flow I’m reading.
The Fed lit the fuse today. Now we wait to see if volatility makes its raging comeback.
