Join Brandon LIVE Tomorrow at 8:45 AM ET

Dear TheoTrader, Brandon Chapman here.

I’ve got a lot to unpack before tomorrow's live session.

Let me tell you, the market's been on a wild ride this past week. Everything's changed, and I mean everything!

First off, let's talk junk bonds.

We're seeing spreads widening over Treasuries, and historically, this has led to bigger declines than what we're seeing now.

It's like the canary in the coal mine, folks.

Now, onto the Fed.

The market's pricing in some aggressive rate cuts - we're talking 1% by year-end and another 2% next year.

That's not typically what you see in a growing economy, is it?

It's got me raising an eyebrow, that's for sure.

Speaking of Treasuries, they've had a strong bid lately, anticipating these cuts.

But here’s the things…if the Fed does cut over 1% by year-end, we'll likely see the yield curve uninvert.

Sounds good, right?

Wrong.

It's actually a classic recession indicator.

Yeah, I said it - the R-word.

Let's not forget about jobs. Last week's unemployment numbers hit a level that typically signals the start of a recession. It's all adding up, and not in a good way.

Now, about that VIX. It actually shot above 65 this week, which is huge. Normally, that level would scream panic. Instead, we saw orderly selling in the market, and since then, it has come off substantially.

Looking at the NYSE advance-decline line, this week's rallies have shown better breadth than today, but they've faded.

To me, it looks like we're forming a bear flag with the consolidation and the previous downtrend in the S&P 500.

Here's something crucial for you traders out there.

I showed the VIX today along with the ATR for SPY in the TheoTrade Members Chat, and let me tell you, you need to take about twice as much risk for a trade now compared to early July.

So if you're eyeing any buying opportunities, you've got to view them in that context.

Risk-reward, people. It's all about risk-reward.

Bottom line?

The market's giving us a lot of signals, and they're not pointing to sunny skies ahead.

We're in for some choppy waters, so make sure you're prepared.

I’ll be live with Blake tomorrow morning at 8:45 AM ET to make sure you’re ready.

Click here to reserve your spot to tomorrow’s pre-market live session.