Why I’m Worried About The Market Right Now

To the naked eye, today's market opening didn’t feel unusual…

Both the S&P 500 and Nasdaq futures were relatively unchanged. 

However, there is potential danger lurking. 

And it all has to do with what’s happening in the bond market. 

Not only did bond futures outpace ES futures in volume this morning…

They’ve also been dropping sharply over the past few trading sessions. 

My early take is that after the Presidential debate, the market is beginning to price in a Trump win…which appears to be INFLATIONARY. 

With interest rates rocking to the upside…I expect to see tech stocks come under heavy pressure. 

That said…I wouldn’t go into full bear mode yet.

Nvidia has led tech all year…and while it has pulled back from its highs a few weeks ago…it’s still trading within its expected range. 

There are two things I’m watching with Nvidia. 

First, it’s the options flow:

What am I looking at?

Are traders selling calls (hitting the bid) and buying puts (hitting the ask)?

Early this morning that’s what we were seeing…but as the session progressed the options flow started to balance out. 

Nvidia right now is consolidating until we start to change the options flow. 

Second, take a look at the expected move in Nvidia. 

It has more or less traded within its expected range. For a breakdown to occur it needs to close below the lower edge of the expected move for a few sessions. 

Something we haven’t seen yet. 

Onward and upwards…

We only have 3.5 trading days this week. 

However, the expected move for the SPX is approximately 59 points. Now, you might be thinking, but isn’t it less than last week’s 65. 

It is…but last week we had five trading days. So we’re actually expected to have more volatility this week on a daily average…kind of strange for a holiday week.

I wouldn’t be surprised if he hit both sides of the expected range (upper and lower edges) this week. 

What can I say…the action lately has been slop-tastic. 

Sure…the advanced decline is rising…but to me that just indicates a rotation out of tech. And while that’s healthy…the issue is that the largest components of the indices are tech…which could push the market lower. 

Financials are trading beautifully at the moment…but it’s hard to put a trade in the sector with earnings around the corner. 

Elon got his pay package and now Tesla shareholders are getting paid. 

Shares of Tesla are trading comfortably above $200 for the first time since early March. 

The company is set to issue delivery numbers tomorrow…but today’s action implies they’ll be good and are being front run. 

I was able to get a piece of the move in my Catapult Alerts Portfolio.

I’ll be going live tomorrow to talk about what’s next in the portfolio…

If you have any questions about how it works give my team a call at 623-244-5567.

In my opinion, utilizing this strategy is the most cost effective way to trade high-dollar stocks.

Not only that, but it can dramatically shift the risk-to-reward in your favor. 

Onward and upwards…

While Tesla is raging…Chewy Inc. is getting smoked. 

The man they call Roaring Kitty announced he was taking a 9 million share stake in the company. 

And while he made a fortune trading Gamestop…I don’t think this will end well for him. 

The market mechanism is just too efficient to let it happen. And as you can see from today’s price action…Chewy is getting chewed up and spit out. 

I’m also watching for further weakness in the housing market. Which could spell out bad news for companies like Home Depot, Lowes, and Pulte Group. 

There’s lots of stuff to watch this week and I’ll be sharing more of my insights with you tomorrow. 

If you haven’t signed up for my next Catapult Alert you can do so here.

You can also sign up and get any questions answered by calling 623-244-5567.

Subscribers will get to see me live tomorrow. 

To your success,

Don Kaufman