This morning the advanced decline line ran 90 products up, 10 down. The S&Ps rallied right alongside it.
I watched it happen live and said out loud, “This is not good.”
Strong breadth reads as healthy. Lately it has signaled the opposite.
Every time breadth spikes like this, capital rips violently out of tech. That rotation is hitting a crescendo right now.
The S&P sits locked in place. NASDAQ volatility is sky high.
We have one of the largest divergences on record between NASDAQ volatility and S&P volatility.
VXN is elevated. The VIX is completely dead.
That gap explains this entire tape. Correlations are broken, so the rotation game runs the whole show.
The option market prices a weekly range it expects to hold 68% of the time. Apple shattered it.
This week Apple posted a two and a half standard deviation move. That is earnings announcement magnitude on a quiet holiday week.
Tesla told the same story. Deliveries came in spectacular, then the stock got sold anyway.
Individual names are going manic. The S&P refuses to budge.
The index has traded the same 7,350 to 7,700 range since early May. We sit at 7,500 today, exactly where we sat 30 days ago.
Today proved it. The S&Ps ran up 50, then reversed down 50.
That is a swing of more than 100 points. We closed right back near where we started.
Here is what I broke down in today’s video:
- The advanced decline line hit 90 up and 10 down this morning, the first strong positive correlation in weeks, and my clearest warning that another violent tech rotation is loading.
- The S&P is up 8% this year against the NASDAQ’s 15%, while most sectors lag badly and financials sit dead unchanged.
- SMH, the semiconductor engine behind this whole rally, ran up near 80% and has already bled back to 57% as money rotates out.
- NVIDIA is massively unchanged for the year, with Broadcom right beside it, so the biggest names are no longer carrying the tape.
- Next week’s SPX expected move contracted to $112 after a $128 move over four days, leaving volatility unusually coiled.
The S&Ps will not break down until S&P volatility moves. Right now it will not budge.
I am positioning for the shock before it lands. I want to be short NASDAQ volatility and long S&P volatility.
I took the trade off today. I am putting it back on early next week.
This situation is coming to a head. I can smell it.
