الثلاثاء، 11 مارس 2025

The Markets Are Sketchy, and That’s Putting It Lightly

March 11, 2025 | Read Online

Don Kaufman here.

If you thought today's market would bring clarity, think again. It's been one wild ride as we navigate through a powder keg of risk, volatility, and breaking news that has traders scrambling for cover. Whether you're in it for the long haul or just trying to survive the day, buckle up—this market is not for the faint of heart.

Let's dive into what's happening and, more importantly, how to stay sane when the markets are moving faster than a caffeinated squirrel on a trading floor.

The Market Is a Powder Keg of Risk

If you've been watching the S&Ps this morning, you've probably already thrown up your Cheerios. The futures were jumping around like a kid on a trampoline, and we're staring down an $80 expected move for the day. That's not just wild—that's "holy crap, what's next?" kind of wild.

We're in the middle of massive volatility, and, honestly, it's been a while since we've seen anything quite like this.

The S&Ps are flirting with some dangerous levels, and the Dow is tumbling on the back of new tariffs from Trump on Canadian steel and aluminum. You'd think at some point the market would find its footing, but nope—this thing is sketchy, and there's no telling where we're headed next.

Volatility: The Real MVP

Right now, volatility is the name of the game. The VIX is climbing, and we're deep into backwardation territory. For those of you new to the term, backwardation means the near-term volatility futures are priced higher than the longer-term ones. Translation? The market expects things to get worse before they get better.

Now, here's the kicker: markets don't stay in deep backwardation for long. Either we're going to see a massive sell-off or a rip-your-face-off rally. My money? I'm betting on both—just not at the same time.

Correlation Is King in a Sell-Off

One of the hallmarks of a major sell-off is when everything moves in the same direction. And I mean everything. No women and children first here—it's every stock, sector, and ETF for itself.

But here's the thing: we're not quite there yet. What we're seeing right now is a broken and disconnected sell-off. You've got some sectors holding up, like energy, and others getting absolutely hammered, like tech.

Until we see full-blown correlation—when everyone rushes for the same exit at the same time—we're not at the bottom.

The Christmas Tree Spread: Playing Chicken with the Market

Let's talk strategy for a second.

You know I love me a good Christmas tree spread. If you're not familiar, it's a multi-leg options trade designed to take advantage of volatility skew. In plain English, it's a way to profit from the market's tendency to overprice fear.

Here's why I love it: no matter where the market goes, I'm making money as long as we stay within a reasonable range.

If we break lower, I've got hedges in place to protect me. If we rally, I pocket a tidy profit. It's like playing chicken with the market—except I'm driving a tank.

Tesla: The Bounce Trade You Love to Hate

Yes, I went bullish on Tesla. Yes, I know it's been beaten down like a piñata at a six-year-old's birthday party. But you know what? That's exactly why I like it.

The stock is down 40% year-to-date, and yesterday's volume was off the charts. Combine that with an IV rank of 100%, and you've got the perfect setup for a short-term bounce.

I'm not looking for Tesla to reclaim its trillion-dollar market cap overnight, but a rally to $235 or higher? That's fully within reason, and I'll be there to collect.

The "Sketch Factor" in Full Effect

Let's not pretend this market is anything close to normal. Futures are swinging wildly, and the JOLTS report earlier lit the fuse on an already explosive situation. The market is like an ocean trying to fit through a window—there's too much liquidity and not enough room for it to go anywhere cleanly.

We've got energy stocks rallying like there's no recession in sight, while the rest of the market is pricing in doom and gloom. It's schizophrenic, and that's putting it mildly.

Zooming Out: The Bigger Picture

If you're trying to make sense of all this, do yourself a favor: step back and look at a three-to-five-year chart. Markets don't move in straight lines, and what we're seeing now is the unwinding of an epic rally that started in 2022.

From a macro perspective, we're still dealing with the fallout of rising rates, trade tensions, and slowing growth. But here's the thing: markets are resilient. They puke, they panic, and then they find a way to climb out of the hole. The key is to stay focused on the long-term and avoid getting whipsawed by the day-to-day noise.

Survive the Day, Win the War

Today's market is not for the faint of heart. If you're trading, keep your positions tight, your stops tighter, and your emotions in check. This isn't the time to go all-in on a single trade.

Remember: volatility is opportunity. It's scary, yes, but it's also where the biggest profits are made. Stay disciplined, stay engaged, and most importantly, stay in the game.

As always, put on your big boy (or girl) pants, and let's get to work.

To your success,

Don Kaufman

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