Everybody Panic!

Volatility is BACK

Narratives are cosy, familiar and something that human beings typically cling to as a means to justify every event that’s transpired since the dawn of time.

Ze Germans lost the war because Hitler invaded Russia.

The Titanic sank because the Captain fell asleep.

Stocks are falling because…

Granted, those are deliberately simplistic examples, but you get the point.

Humans are wired to search for cause and effect. We crave neat explanations, clean conclusions and villains we can point to when things go wrong. Narratives serve a purpose, but only up to a point.

Beyond that, they often become a lazy shortcut - a convenient substitute for the uncomfortable reality that most outcomes are driven by a messy combination of factors, probabilities and unintended consequences.

Markets are perhaps the best example of this.

At one extreme, every down day is framed as the beginning of some mythical bubble bursting. At the other, we’re handed a more respectable-sounding explanation - the Strait of Hormuz, bond yields, tariffs, inflation, take your pick.

And yet stocks spent the best part of two months grinding higher while many of these same narratives were being peddled as reasons to stay bearish.

Then, the moment price moves in the opposite direction, they’re dusted off and repackaged as the obvious explanation.

Which is precisely why it's dangerous to anchor your investment process to headlines. More often than not, they're explaining what already happened, not what's about to happen.

Because what’s about to happen, might actually be something much less dramatic.

Here’s a chart I shared on X yesterday. On it, you’ll see I’ve annotated some key levels on interest - most importantly, in my view at the least, the turquoise line which represents the AVWAP from the ‘Megagap™️’ move of Wednesday April 8.

Here’s how the same chart looks today…

The gap has been filled and the AVWAP and 50dema are being tested.

And yet despite this irrefutable fact, provided by nothing other than price action on a chart, we’re already seeing the usual narratives being peddled to explain what may well turn out to be healthy retest of support after a monster rally.

The Strait of Hormuz.

Trump has lost control of the war.

The bubble is bursting.

We’re all going to die.

Bears, naturally, are among those shouting the loudest. And who could blame them? After spending nine straight weeks on the sidelines, shaking their fists at the sky while the S&P 500 marched higher, it’s easy to understand why they’re so angry.

But price doesn’t care. Not what the bears think, nor what I think. And it certainly doesn’t care about the latest narrative du' jour.

So what am I doing?

Pretty much the same thing I’ve been doing since the rally began: respecting price.

That doesn’t mean blindly buying every dip or pretending risk doesn’t exist. Quite the opposite. If this pullback develops into something more meaningful, I want to be ready for it.

For me, that means tightening things up beneath the 20-day EMA, respecting key anchored VWAPs and generally trading a little lighter than I was a few weeks ago when breadth, momentum and trend were all firing on all cylinders.

The gap has now been filled. The AVWAP from the April lows is being tested. The 50-day EMA is right there too. These are exactly the types of levels you’d expect price to interact with after a near-vertical move higher.

If support fails, I’ll adjust accordingly. If it holds, then this may simply prove to be another pause within a broader uptrend.

The important point is that the chart will tell us. Not X. Not CNBC. Not the guy who’s spent the last two months predicting a crash that never arrived.

Until then, I see little value in forcing a narrative onto what currently looks like a fairly ordinary test of support.

In the meantime, maybe go touch some grass.

Best,

Alex