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Look, I'm gonna tell you something that might save you a fortune in the coming weeks. All this hand-wringing about Friday's selloff, all the panic about AI rotating into financials - you haven't seen real selling yet. |
You know how I know? |
Because I lived through this exact playbook 25 years ago, and what's happening right now is just the opening act. |
The Difference Between Rotation and Liquidation |
Picture two scenarios: In the first, it's like a crowded nightclub where people keep moving from the bar to the dance floor to the patio. Same people, just shifting around. That's rotation. |
In the second scenario, someone yells "FIRE!" and everyone stampedes for the exits at once. That's liquidation. |
Right now, we're still in the nightclub phase. Money is desperately moving from AI stocks into financials, from growth into value. Oracle gets decimated, JP Morgan hits all-time highs. Broadcom drops, financials pump. |
But here's what most people miss: this shifting around only works as long as there are enough "rooms" for everyone to crowd into. When those rooms fill up and correlations break down, everyone heads for the exits together. |
I Was There When the Music Actually Stopped |
March 2000. I was managing institutional risk when the NASDAQ peaked. We were trading something called the one-five arbitrage - basically a strategy that only worked when the S&P 100 and S&P 500 moved together like two dancers in perfect rhythm. |
In April 2000, those dancers started stepping on each other's feet. |
One of my colleagues said this could be the greatest opportunity of all time and started massively shorting tech stocks. Not because he hated technology, but because the correlations were breaking down - our early warning system was flashing red. |
Every day back then looked exactly like today: Dow up 200 points, NASDAQ down 200 points. "Healthy rotation," everyone said. "Money's just finding a new home." |
Until it wasn't rotation anymore. |
What the Warning Signals Actually Look Like |
Here's how you know rotation is about to become liquidation: watch what I call the advanced decline line. |
Think of it like a tug-of-war. Normally, about half the stocks go up while half go down - the rope stays pretty much in the middle. That's a healthy market. |
But when correlations start snapping, that rope gets yanked hard to one side. Instead of 50% up and 50% down, suddenly you see 80% of everything turning red at the same time. The tug-of-war becomes a stampede. |
We're sitting right at 50-50 right now. Still balanced. Still "healthy rotation." But I'm watching for that moment when the rope gets yanked. |
The Catalyst That Changes Everything |
Here's the specific trigger I'm watching for: if tech continues selling off this week - not next week, this freaking week - while financials stay pumped up, something's gotta give. |
Think about it logically: where did all the money buying JP Morgan to all-time highs come from? It came from selling Oracle and Broadcom. It's not new money - it's the same money playing musical chairs. |
But what happens when someone wants to buy that Meta dip? Where's that money gonna come from? It's gotta come from somewhere, and the most logical place is those overbought financials. |
So if tech rallies, financials get smashed. If tech keeps falling, eventually everything gets smashed. There's no scenario where both stay elevated when the underlying driver is fear, not growth. |
When Real Selling Feels Different |
I keep saying you haven't seen real selling yet, and here's what I mean by that: |
Real selling doesn't give you time to think. You don't get these nice orderly rotations where you can say "oh, I'll just buy financials instead of tech today." |
Real selling is when you wake up and everything - and I mean everything - is down 3%. Growth, value, defensive, cyclical. It's when the Magnificent Seven stocks are falling and the "safe haven" financials are falling just as hard. |
It's when correlations don't just weaken - they flip. When diversification stops working because everything becomes the same trade: SELL. |
That hasn't happened yet. We're still in the musical chairs phase. |
The Bottom Line for Your Portfolio |
Most traders today weren't around for 2000. They think last Friday was scary. They think Oracle dropping 12% in a week is real selling. |
It's not. It's just money trying to find a safe room in a house that's starting to shake. |
The real test comes when money stops rotating and starts evacuating. When those financial "safe havens" start falling with everything else. When the advanced decline line snaps and stays snapped. |
I'm not saying it's happening tomorrow. I'm saying the setup looks identical to what I lived through 25 years ago, and back then, the rotation phase was just the warm-up act. |
When the real show starts, you'll know it. Because there won't be anywhere to hide, and the musical chairs game will be over. |
Until then, trade the rotation. Just don't mistake it for anything other than what it is - the market desperately trying to find its footing before the ground starts shaking for real. |
To your success, |
Don Kaufman |
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| When Everyone Else Is Guessing, He's Following The Money | Powell's hawkish cut just shattered market expectations. Now institutions are quietly repositioning for selloffs across gold, commodities, small caps, and tech. | Brandon's Ghost Prints Surveillance Console is tracking exactly where they're moving. XLB and IWM are flashing bearish signals. The weakness in TSM and ORCL? Just the opening act. | Today at 2pm ET, he's revealing what the console shows—potential pullbacks that could deliver quick profit opportunities before year-end. | His recent Ghost Prints trades delivered 62%... 67%... 62%... 42%... and 46%. Past wins include 375% on KSS in 13 days and 150% on RKT in 25 hours. | You'll see the bearish prints, the institutional positioning, and his exact framework for executing profitable put trades when markets turn. | Register for the Silent Surge webinar—2pm ET today | When correlations snap and selloffs begin, there's nowhere to hide. Unless you know where to look. |
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