Senin, 19 Mei 2025

"NVIDIA's "powder keg" warning sign"

Don Kaufman here.

You ever see a building that looks solid from the outside, but you know the foundation is cracked?

The paint's fresh, the windows are clean, and the scaffolding makes it look like progress is happening. But deep down, you know it's just a matter of time before the whole thing starts to shift.

That's where the market is right now.

The S&P 500 is clawing back losses, and the Nasdaq is flirting with the green.

But if you're paying attention, you can feel the tension building underneath. The kind of tension they don't talk about in the headlines until it's too late.

Everyone's Watching Stocks—But the Bonds Are Whispering

Here's the thing: If you want to know what's really happening in this market, don't waste your time marveling at Microsoft's bounce or Nvidia's endless rally.

The real story? It's in the bond market, where the 10-year yield is sitting north of 4.5%

And the 30-year earlier this morning crossed 5%.

These aren't just numbers you skim past on CNBC. They're gravity. And when gravity intensifies, it pulls everything else down with it—borrowers, companies, and yes, the cozy portfolios of retail traders who think this rally has legs.

Here's the kicker: While everyone is focused on Nvidia's 0.5% gain, I'm watching the bonds and wondering how long the market can pretend it doesn't notice the cracks forming at the foundation.

Rallies Without Breadth: A Warning Sign

Let's look at what's actually driving this bounce.

Microsoft? Up. Nvidia? Still riding the AI hype. But outside of those? Apple and Tesla are limping. Financials are flat. And small caps? Flattened.

This isn't a healthy rally. It's a few overworked soldiers carrying the weight of an entire army. And when one of them stumbles—and they will—it won't just be a stumble. It'll be a domino effect.

Here's why that matters: When a rally lacks breadth, it's not a sign of strength. It's a red flag. And the more dependent the market becomes on a handful of names, the more fragile the entire structure gets.

Moody's Downgrade: The Match in the Gasoline

Now, let's talk about the thing everyone's making too much noise about: Moody's downgrade of U.S. debt.

Here's the truth: the downgrade itself doesn't matter. It's not like traders woke up today shocked that the U.S. has a debt problem. We've known this. But what Moody's did is remind the market of something it doesn't like to think about: rising yields and a mountain of debt don't play nicely together.

And that's the real issue. The Treasury's going to have to roll over a ton of debt at rates we haven't seen in decades.

That's not a headline—it's a structural problem. And structural problems? They don't go away when the Nasdaq has a green day.

The Hidden Weakness in Microsoft's Strength

Microsoft is having a moment, trading up while the rest of the market limps along. But let's not confuse strength with sustainability. You know what I see when I look at Microsoft's chart?

A linchpin. And linchpins don't just hold things together—they're also the first to snap when the pressure's too high.

The same goes for Nvidia. This stock isn't trading on fundamentals anymore; it's trading on momentum, feedback loops, and an unsustainable appetite for call options. That's not strength. That's a powder keg.

What I'm Watching (And Why You Should Be, Too)

This isn't a market where you chase the rallies or panic over the dips. It's a market where you focus on what isn't being said. Here's what I'm paying attention to:

The Bond Market's Next Move
Bonds are the heartbeat of this market. If yields keep rising, expect equities to struggle. But if we see a bid under the bonds? That could be the relief valve the market desperately needs.
Volatility's Quiet Comeback
The VIX is calm, but don't let that lull you into complacency. This kind of market tension doesn't resolve itself quietly.
Tech as a Crutch
Watch Microsoft and Nvidia like a hawk. They're propping up this rally, but they're also the market's Achilles' heel.

How I'm Positioning

This isn't a market for heroes—it's a market for opportunists. Here's how I'm playing it:

Short-term trades only: I'm not falling in love with anything right now. If I'm in a trade, it's with a tight leash and a quick exit plan.
Selling bond puts: The bond market looks like it's setting up for some juicy opportunities. Selling puts on bonds has been a bread-and-butter trade for me, and I'm not stopping now.
Watching for rotation: If we see money rotate out of tech and into beaten-down sectors, that could be the signal for a broader market shift.

Don't Get Distracted

This market is full of distractions—headlines about Moody's, morning rallies in tech, and endless noise about "resilience." But the real story is beneath the surface.

It's in the bond market, in the lack of breadth, and in the cracks forming under the weight of rising yields.

So, while everyone else is chasing Microsoft's green candle, I'm staying focused on the cracks.

Because when this market finally decides to stop pretending, those cracks will be impossible to ignore.

Stay sharp. Stay small. And don't forget to keep your helmet on.

To your success,

Don Kaufman