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The market closed the week exactly where it started. Yet volatility futures are screaming that the real chaos is still ahead.

This is not what happens when the danger passes.

The VIX sits at 20. Fine. Everyone has seen that before. But dig one layer deeper and you find something disturbing. Back month volatility futures are trading at 22 for contracts 96 days out. The market is pricing substantially more risk in January and February than it is right now.

That almost never happens after a week like this one.

We just witnessed wild sector rotation with no clear pattern. 

Healthcare ripped to the upper edge of its expected move while financials tested critical support at 52…

Energy got crushed. Utilities sold off hard... 

The market moved over 100 points higher on Monday and Tuesday with virtually no options volume, then collapsed on Thursday with 80 million contracts traded.

The VVIX hit 116 this week. Even as it cooled off slightly into Friday, it remains at levels that tell professional traders to stay hedged and stay cautious.

Here is what concerns me most. We caught a brief glimpse of real correlation this morning when 90 stocks in the S&P 100 were declining simultaneously. Then mega cap tech rallied and pulled everything back. 

But you need correlation for capitulation. You need everyone selling together for the pressure to actually release. We are nowhere close to that yet.

Some sectors finished completely unscathed this week.

That does not happen during genuine sell side activity. 

When real volatility hits, there is nowhere to rotate and nowhere to hide. 

Right now portfolio managers are still shoving capital into healthcare and consumer staples like they have options.

They do not.

Crypto dropped 25% from its recent high. Metals got bid aggressively early in the week then sold off hard into Friday. 

The correlation is starting to bleed across asset classes. When Bitcoin breaks 90,000, companies like MicroStrategy will be forced to exit positions. That forced liquidation will reverberate directly back into high beta stocks and the broader market.

Next week brings a $150 expected move. After we closed this week basically unchanged despite touching both edges of a $123 range, the market is pricing even bigger swings ahead.

The players have narrowed. Google GOOGL is up 46% year to date. Broadcom AVGO is up 47%. But META is unchanged. Amazon AMZN is up just 6%. Tesla TSLA is up 7%. When you strip out two or three names, this market has already been bleeding for months.

Volatility is breaking. Trust nothing. The sectors are rotating wildly. Correlation is building. The bid backs keep bringing us right back to unchanged.

This is not over. This has not even started yet.

Video Length: 00:22:01

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