$60 expected move on the S&P today

My power went out at 5 am this morning. Construction crew cut a cable and the whole area was down.

When you lose power in Phoenix, you have until about 9 am before things get ugly. After that the temperature climbs and the house turns into an oven.

Two of my three kids are in finals week and they were freaking out. "Can I even get out of the garage?"

You would think they had lived on an island. They forget the routine that fast.

My wife asked about a generator. We have 600 amps in this house, three car chargers, seven air conditioning systems, and a partridge in a pear tree. The generator is not happening.

I watched the market from my phone until the power came back. The tape was already two-sided, same energy as my house.

This was going to be Mr. Toad's wild ride for the rest of the day.

Here is what the math is telling you.

The SPX expected move for today is $60. That is the range the options market is pricing in for the session. The expected move for the week is $133.

That is sizable. Pull this number up before the bell and let it tell you what kind of day the market is pricing in.

A $60 daily expected move means the market is pricing two-sided trade. No clean rip, no bottom in, just up-down-up-down all session.

If you sat down today thinking you were going to buy the open looking for a one-way rally, the expected move was telling you to stop before you started.

And the tape is confirming it. The S&P was doing 6,000 contracts a minute this morning.

At 5,000 contracts a minute, you are pumping. At 6,000, people are standing up behind trading desks. By the time you hit 10,000, the fire hose is full open.

This is heavy hedging activity, which confirms what the expected move is already saying. Volatility is in the price.

So what do you do?

You do not fight a two-sided tape. You trade what is in front of you. Scalp, take profits, get out, look for the next setup.

Today is a sit-on-your-hands-until-the-setup-is-clean kind of day.

Tomorrow morning before the bell, I'll pull up the SPX expected move and walk through what it's pricing for the session. If it's a $40 move, we're looking for direction. If it's a $70 move, we're scalping and staying nimble.

You'll know the game plan before the first tick.

If you're showing up without the expected move, you're guessing. The algos already did the math. 

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To your success,

Don Kaufman TheoTrade