New Weekend Update Video
| | | | Don Kaufman here. | While everyone's focused on summer doldrums and range-bound trading, I found something that has me on high alert. | I spent this week digging into a correlation breakdown between equal-weight S&P and market-cap weighted S&P that can only be described as critical. | And here's what's got my attention - this type of divergence has only happened 4 other times in the last three years. | Every single time, it preceded significant volatility. | Now, let me be clear about something. This isn't a timing mechanism. I'm not saying volatility hits tomorrow. | But what I am saying is we're officially on the clock. | The math here is pretty straightforward. | When you see this kind of correlation breakdown - and I mean the really clean, substantial divergences - there's only two ways it resolves. Either the lower product rips higher, or the upper product comes down hard. | Given how substantial the market cap weighting has become with your Microsofts, your Nvidia's, your Apples, I'm betting on the second scenario. | Here's the really crazy thing though. Nobody's positioning for this. I would have expected people to start hedging, maybe picking up some VIX protection. But nothing. | The crowd is completely asleep at the wheel. | And that brings me to the most important point of this entire analysis... | Watch the full breakdown here - including the exact correlation charts and why this setup reminds me of every major volatility spike we've seen | The technical details matter here, and frankly, they're too important to summarize in a quick note. | You need to see the actual correlation study and understand exactly what we're looking at. | Because if I'm right about this convergence pattern, the next few weeks are going to get very interesting. | To your success, | Don Kaufman | P.S. Yeah…I might be ranting a little but don't think I'm not taking shots in the market. In fact, my earnings strategy delivered three overnight triple-digit returns this week including AXP and TSM. If you haven't seen this, check it out now. | | |
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