The market got a stick save today from a Trump administration tweet about Iran. Brandon Chapman thinks it only delayed the inevitable.
The VIX three index ratio crossed above 1.2 last week with skew over 130. That combination has historically signaled a 5% to 10% correction in the S&P 500.
Brandon walked through the setup that has him pulling risk off the table heading into NVIDIA (NVDA)’s Wednesday earnings.
Semiconductors got roiled today before the Iran announcement reversed the slide. NVIDIA alone added over $200 billion in market cap last Thursday.
Brandon believes the dispersion trade is starting to unwind. Money rotated into staples as NVIDIA weakened, with XLP closing up 1.49% on the session.
Here’s what Brandon flagged in tonight’s video:
The VIX three index ratio crossed above 1.2 last week, with skew above 130, signaling a 5% to 10% correction setup.
Treasury yields broke through 4.5% today and the chart is pointing toward 5%.
USD/JPY is grinding back toward 160, raising the risk of Japanese government treasury selling to defend the yen.
Last October’s NVIDIA gap up faded fast and produced a 20% decline in NVIDIA along with a 10% drop in MAG Seven names.
SPY downside risk sits at 620 to 640 while the best-case upside only stretches to 760 or 780.
We just cleared monthly options expiration. Put hedge unwinds had been creating artificial lift in the S&P 500 throughout this rally.
Memorial Day shortens this week. NVIDIA earnings hit Wednesday after the close.
The setup mirrors last October right before the MAG Seven unwind. Brandon’s message is direct.
If you wait for the 8% correction to act, the typical retail portfolio is already down 30% to 50%.
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