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Markets hit all-time highs today. The S&P surged 42 handles. Everyone's celebrating.

But I just spotted something that has me on high alert.

The volatility futures structure is screaming that October is about to get violent.

Here's what I found. The VX contract with 14 days left is trading at 17.55. Meanwhile, the VIX closed at 16.30. That's a massive gap of over a full point.

Normally at this point, they're only 50 to 60 cents apart.

This is monumental. One of two things has to happen. Either the VIX explodes higher, or the volatility futures collapse. But here's the problem. The VX contract 42 days out is trading all the way at 19. The structure keeps climbing higher and higher into October and November.

The entire volatility term structure is proclaiming that seasonality matters. October should see higher volatility. And it's screaming that message right now through this wicked contango.

Meanwhile, today's rally came on absolutely anemic volume:

• Tesla TSLA traded only 75% of normal options volume
• Nvidia NVDA at 95% despite a big bid
• META at 76% on a decent sized move
• Futures volume incredibly light across the board

This is now multiple days of weak volume on up moves.

The bifurcation is also getting extreme. AI stocks like Broadcom AVGO and Nvidia are flying. But financials have been boxed out since mid-August. Energy is down on the day. Consumer staples and home builders just broke to new lows. The S&P 100 shows 57 decliners today despite the index surge.

We're barely 30 points higher on the week despite a $94 expected move. That means volatility is about to pick up into Friday's close. The market will push toward either the upper or lower edge.

I've got a 20-point wide butterfly sitting on the lower edge of that expected move. Paid 35 cents for something that could be worth 20 bucks. Any sell-side activity into the end of the week would be lovely.

Video Length: 00:10:11

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