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The S&P 500 dropped two percent today. 

Energy stayed flat. 

Staples barely budged. 

The selling hit hard across most sectors.

The dip looks tempting. Your gut says buy. 

Every CNBC guest will tell you this is the opportunity.

They're wrong.

Let me show you how to be patient, and earn your next great set of trades.

What the Volatility Markets Actually Say
 

The market fell over one ATR (59 points) today. The VIX spiked above its two ATR Keltner Channel. Those are two textbook signals that suggest capitulation might be near.

But they're not enough. Not even close.

I track four core signals that identify true market bottoms. Today we checked two boxes. The other two remain stubbornly absent. And without all four, you're catching a falling knife.

The Four Signs of Capitulation

Sign #1: 90-Day Rubber Band Below 1.0
 

Status: NOT MET (Currently at 1.08)

The rubber band measures the ratio of the three-month VIX to the spot VIX. When it drops below 1.0, the market expects volatility to fall over the next 30 days. That's the signal smart money sees a bottom.

Right now we're at 1.08. The VIX hit 19 today. The three-month VIX sits at 20.6. Forward volatility expectations remain elevated. The market still prices in more pain ahead.

Intraday we touched 1.06. We're getting closer. But close doesn't count when real money is on the line.
 

Sign #2: VIX in Backwardation
 

Status: NOT MET

VIX backwardation happens when near-term VIX futures trade higher than longer-dated contracts. It signals the market expects volatility to decline going forward.

We don't have it. February and March VIX futures remain in contango. The curve still slopes upward. The volatility complex is telling you more selling lies ahead.

Sign #3: SPX Down One ATR
 

Status: MET ✓

The S&P 500 dropped 78 points today against an average true range of 59 points. That's a significant down move. This box gets checked.

But one signal out of four doesn't make a bottom. It makes the beginning of potential capitulation. Nothing more.
 

Sign #4: VIX Above Two ATR Keltner Channel
 

Status: MET ✓

The VIX closed above its 20-day, two ATR Keltner Channel. This confirms elevated fear relative to recent levels. Yesterday we popped above it. Today we're still there.

This matters. But it's not sufficient on its own. The VIX can walk along the upper channel for weeks. We saw it happen last April. The VIX stayed elevated for over a week before reaching its apex.
 

The Correction Isn't Finished
 

From the January 13th high, we're down about 2.25%. Historical patterns suggest a 5-10% correction when volatility expectations peak at levels we saw in December.

A 5% correction would take the S&P to 6,650. We're nowhere near that level yet.

The volatility markets peaked at multi-year highs in December. The 90-day rubber band hit 1.3—the highest since 2021. That degree of elevated forward volatility expectations has historically preceded corrections in the 5-10% range.

We've barely scratched the surface of that move.

Why Patient Capital Wins
 

I have learned it is best not to predict bottoms. Better to let them signal for themselves. I look for institutional money shifts positioning. Right now that positioning remains defensive.

The 90-day rubber band needs to break below 1.0. VIX futures need to invert. Those two signals work together. They represent real economic theory about how volatility markets price future expectations.

When both flip, smart money is signaling the worst is priced in. Until then, you're fighting against probability.

What Happens Next
 

More selling creates the conditions for capitulation. The VIX needs to spike harder. The 90-day rubber band needs to compress. VIX futures need to flip into backwardation.

Those signals might come tomorrow. They might take weeks. The market doesn't operate on your timeline.

Patience is the trade right now. Cash is a position. Waiting for all four signals to align beats catching a falling knife.

The market will bottom when the volatility complex says it's bottoming. Not before. Not because it "feels" like the right time. Not because some talking head says so.

When the 90-day rubber band drops below 1.0 and VIX futures invert, that's when smart money re-enters. 

We're not there yet.

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