This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop an explanation of what is driving the price action. Then we derive market lessons to help us become better traders.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Federal Chairman Warsh indicated a hawkish tone during Jackson Hole which rippled through markets as expectations of higher interest rates

• Individual catalysts like NVDA earnings and META’s legal reprieve created highlights in various industries

• The next best step is to go deeper into Treasuries to begin a multi-part series

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Indexes

Russell 2000 performed the worst this past week, notably it has performed the best YTD. The other indexes were fairly flat across with equal weight in the negatives and market-cap weighted with positive returns. The big event that led to this dispersion was Friday’s Jackson Hole meeting where Warsh indicated hawkish tones.

1. He continued to avoid committing to forward guidance or a reaction function

2. He stated that inflation readings had come better than expected but underlying trends had not meaningfully improved

3. He described the economy as strengthening with business capex rising and labor markets stable

All of these comments led the room to tighten which caused concerns of higher interest rates. Higher interest rates means growth stocks will be impacted the most since their future earnings and cash flow will be discounted more

The Friday Jackson Hole announcement came on the back of NVDA’s strong quarterly report as well as Wednesday’s hot PCE held at 3.7% y/y vs 3.6% consensus and Core PCE printing 3.3% above 3.2% expected. When we look at Core PCE from April through July (3.3%, 3.4%, 3.3%, 3.3%) we find 4 months with no progress which is what Warsh was alluding to.

Industries

The biggest winners this week are Communication, Technology, and Financials. with the other industries facing losses for the week. What’s interesting is each of the winners had a specific catalyst that had nothing to do with the others. The losses in the other industries for the week was collateral damage from Friday’s Jackson Hole announcement by Warsh.

For Communications, META settled its child safety litigation with the US on Wednesday for $18 Billion payable over 10 years. The multiyear legal overhang was finally cleared. Notably Communications is still -4.02% YTD which is the worst group in the bunch due to lofty valuations and concerns over heavy AI spending.

Technology gained from NVDA’s Wednesday earnings with revenue $96.22B, EPS $2.22 and 70% revenue growth guided for 2028 which drove an 8.7% gain on Thursday. Friday reversed with a drop of -4.6%.

Financials rose due to an environment with higher policy rates, higher 2 year (which climbed 12bp to 4.36%), with a resilient economy. This supports net interest margins for financial institutions broadly speaking and if this trend continues, could see further gains.

Bonds

The Fed turned hawkish on Friday. Short term bonds sold off but long term bonds rallied which is counterintuitive. We would have expected the threat of higher interest rates to decrease bond prices. 20 year treasuries gained 1.01% this past week while 1-3 year treasuries lost -0.13%. The hawkish repricing lists September rate hike odds from 35% to 57% should hurt everything, but instead, created a textbook bear flattener. The front end sold off and the long end rallied. Everything in the middle barely moved.

The short end declining is intuitive but the long end rallying is counter intuitive. There were two forces that caused this.

First, on August 19, the Treasury announced it would at least double liquidity-support buybacks in the 10-20 and 20-30 year sectors from $2 billion to at least $4 billion effective at least from 9/9/26 to 11/4/26. This announcement led to long term bonds rallying but this quickly fizzled within 48 hours. However, Bessent hinted on Monday that the amount could be more. The bottom line is the government may be intervening very aggressively so it is best not bet against it.

Second, hawkishness at the front end is disinflationary at the back end. Warsh reaffirmed that the 2% PCE target is fixed and while the 12 month PCE is at 3.7%, the 6 month is running at a 4.1% annualized pace. This signals that inflation has been re-accelerating, not converging. The benefit of stable prices in the future affects long-term bonds more. The market is potentially supporting the policy of hiking into low GDP growth for stability by buying long-term bonds.

Keep in mind that the YTD dispersion of Short Term to Long Term treasuries is still in line with a backdrop of a Hawkish fed. The weekly returns indicate some other driver may begin, but the trend will need to be demonstrated in future weeks.

Notably, credit didn’t blink. This means the price action for bonds for the week had to do with rates not the creditworthiness of companies. Although I say this every week, it is important to identify. When equities decline based on rates, it’s not the “end of the world”. When equities decline due to concerns of credit, it needs further investigation. Today, we appear to just be negotiating value, not fundamentals of core business functions.

Commodities

Precious metals is the biggest story for commodities with Gold and silver declining -3.42% and -4.30% for the week with the bulk of that decline happening on Friday. Gold entered the week with a strong uptrend with 5 consecutive weekly gains hitting a 3 month high of $4,696 on Tuesday. The rally was built on the Treasury’s expanded long-duration buyback program which has been seen as a dollar debasement policy along with fiscal-credibility concerns.

However two things landed at once. Warsh reinforced the inflation fight and the labor department showed March 2026 payrolls overstated by 79,000, far smaller than the large downward adjustment some traders feared. Gold bulls needed a weak labor market to offset the hawkish tone and didn’t get one. Therefore, with the threat of higher rates, precious metals like Gold declined. Silver did worst due to its higher volatility.

Oil declined this week with Brent falling -4.31% and WTI falling -3.67%. The US announced what it called the toughest-ever sanctions on Iran but Tehran called them ineffective. Traders increasingly read the situation as an economic and sanctions confrontation, not a physical supply threat. Goldman estimated that Persian Gulf Exports have recovered 15-16 mb/d against 22-24 mb/d pre-conflict.

Natural Gas was the only commodity that went up. This was purely a fundamentals story with no Fed input. EIA reported a 15 Bcf injection for the week below the 20 Bcf forecast. Weather supported it with record forecasts in the Southwest with Commodity weather group calling for above average temperatures. Higher demand for electricity through air conditioning combined with lower supply means higher prices.

Bitcoin was flat for the week but lost -3.07% for the day. This was after the big 21% upward move for the month starting last week after the announcement that Bessent would double its buyback program. What initially happened was a short squeeze with more than $4.3 Billion in short positions liquidated. Afterward, flows took over with Bitcoin ETFs pulling in $2.72 billion in August. The big question I discussed in last week’s report is whether the initial short covering can be continued with a resumption of the carry trade that drove Bitcoin’s bull market. It heavily relied on cheap interest rates to fuel the carry trade and with threats of higher interest rates, the next leg up will have to come from somewhere else.

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Market Lesson for Today

Prior to starting Brain Meets Wealth, I traded equities with a long-short portfolio consisting of options. I used a fundamental framework on the economy to drill down which equities to buy and sell. It was a system I’ve grown accustomed to and I wanted to share the process through substack.

AI began to take up a bulk of the growth potential and I began having trouble with correlations. A diversified portfolio shouldn’t have all of their long positions tied to a single growth story. It made the process challenging to demonstrate since nearly every weekly move was driven by developments in AI. However, it was still in the realm of equities.

However, the Iran war began and Oil took over as the most volatile asset. The market began moving based on developments of the war and how it affects Oil Prices. I was essentially forced to transition from equities analysis to Energy analysis. I then developed the Drivers of Oil prices Series and I’m a stronger trader because of it. I’ve been able to use the lessons learned to better assess the fundamentals of Oil prices.

Currently, we’re in a situation where there was a massive change in the Federal Reserve. We have a new Fed Chairman who states he will not give forward guidance. Markets hate uncertainty. People can make money if we can plan for the future. But when we don’t know what the future holds, we have to move forward by pricing in uncertainty in the form of a risk premium. The current market volatility is just that risk premium. On top of that, we have a Treasury who is making moves to save the long end of the yield curve. The extent of what they are willing to do and the consequences of such are still unknown.

I started Brain Meets Wealth as a Long-Short Equities Trader with options exposure. However, the market forced me to do a deep dive into Oil Prices. I did so and was rewarded. It is now forcing me to do a deep dive into Treasuries.

Thus, the market lesson for today is to be adaptable. And I’m taking you along for the journey.

The Complex World of US Treasury Bonds

When I hear Equity traders talk about bonds, I find that they often latch onto some news and then make a determination about where bonds will go further from there. This past week was rife with news that will greatly impact treasuries. However, it’s not as simple as “rates go up for X reasons so bonds go down”. Rather, there is a large backdrop of integrated parts and financial plumbing that adds to the story.

Most of the time, the system works and no one notices. We only notice the leaks, the kinks, the breaks and we think that those leaks, kinks, and breaks drive the system. That’s not the case. Rather, those leaks, kinks, and breaks drive the system temporarily until something else comes to repair it or restructure the system itself.

It is the backdrop that most people miss that I plan to describe in a new series. Why? Because it’s going to shape markets in the next 4 weeks. However, for this article, I want to outline the component parts.

Rates and Inflation

• R1 - Term Premium

• R2 - Real Yields

• R3 - Expected Policy path

• I1 - Market Implied Inflation Expectations

• I2 - Realized Inflation Trend

• I3 - Persistence & Composition

• I4 - Pipeline & Wages

Growth

• G1 - Labor Market

• G2 - Business Activity

• G3 - Consumer & Credit

• G4 - Nowcast & Leading

• G5 - Market-implied Growth

Supply and Fiscal Policy

• S1 - Auction Results

• S2 - Issuance & Duration supply

• S3 - Fiscal Trajectory

• S4 - Structural Demand

Positioning & Flows

• P1 - Futures Positioning

• P2 - Volatility & Risk Appetite

• P3 - Fund Flows

• P4 - Dealer & Repo Positioning

• P5 - Sentiment & Consensus

Technicals

• T1 - Trend

• T2 - Yield Curve Shape & Leadership

• T3 - Stretch & Mean Reversion

• T4 - Range Position & Levels

These are the factors that affect Long Term Treasuries with a specific focus on TLT. I plan to go through each of these in a series similar to that of my Drivers of Oil Prices Series. If you enjoyed that series, you’ll love this one coming up.

I believe this is the next best step for my training journey. Thanks for joining me on the ride!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop an explanation of what is driving the price action. Then we derive market lessons to help us become better traders.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• AI Rotation into Healthcare and Energy led by volatility in the bond market

• Long yields hit multidecade highs to reverse after Treasury announces double its support

• Bitcoin pops >22% for the week and the most interesting asset class for short-term trading

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Indexes

Nasdaq 100 performed the worst this past week. We can see that equal weight indexes of the S&P, Dow, and Russell 1000 were generally flat, suggesting much of the drawdown was in megacap stocks. This was an issue of megacap draw downs due to concerns of higher oil prices and growing uncertainty about what the Federal Reserve will do next with interest rates. This will be discussed in greater detail below.

Industries

In light of the S&P’s modest decline of -1.37% above, this was not a broad selloff, but rather, it was a violent single-week rotation out of the entire AI infrastructure chain into Healthcare and Energy. The Technology complex of Technology, Telecom, and Utilities did poorly this week, along with Industrials. Healthcare and Energy did well comparatively.

AI chain cracked as one trade. Compute is seen in Technology, the network is seen in Telecom, and the Power is seen in the Utilities. The proximate cause was the bond market which will be discussed below. Treasury yields rising due to concerns of rising inflation and rate hikes led to the longer end of the bond curve getting hit harder. This led to projects where cashflows are largely in the future being hit the hardest such as AI.

Industrials also declined but was not necessarily due to the rotation out of AI. Rather, it was due to two specific things. The first is BA down 7.5% for the week after engineers covering 17,000 workers rejected the latest contract and authorized a strike. Machinery names fell after a July industrial report showed slower than expected growth.

Healthcare performed well after MRK and MRNA announced positive topline phase 3 results for a treatment for melanoma. MRNA jumped over 100% on the news on Wednesday and MRK over 12%. It appeared to be a stock specific catalysts rather than a signal for the industry overall.

Energy performed well due to rising oil prices and rising geopolitical tensions between the US and Iran. More will be discussed in the commodities section.

Bonds

On Monday, the 30 year Treasury rose to 5.31%, after the NY Fed’s Empire State Index jumped to +20.6 in August against expectations of +11.0 and prices jumped to +58.6 from +52.3. The strong activity plus hotter input prices led to angst over surging government spending, heavy long-dated issuances, and inflation running above the Fed’s target for five years. In the meantime, real Sales fell a surprising 0.6% and July Producer Prices came in flat, leading to concerns about growth.

On Wednesday, the Treasury announced it would at least double the size of liquidity support buyback operations in the 10-20 year and 20-30 year sectors from $2 Billion per operation to at least $4 Billion effective Sept 9 through Nov 4. The news came out the same day outstanding public debt hit $40 Trillion for the first time. This caused Treasuries to plunge from 5.26% to as low as 5.18%. Also, FOMC minutes showed several officials favoring a hike in July and indicating that tightening would be necessary if inflation did not decline.

The net effect is a seemingly uneventful week as Monday and Wednesday canceled each other out. When we look at the YTD column, we find that the biggest negative impacts remain in long duration due to the concerns listed above. Note that we’re not as concerned about credit as the 20 year treasury is doing the worst among shorter dated Treasures and Corporate and High yield bonds. However, Corporate bonds still lose -3.88% YTD and that is due to the AI trade bleeding into the bond market. As there are larger concerns of the viability of AI, we may find that the rate-only issue becomes a credit issue very quickly. Therefore, it is worth keeping an eye of this part of the price action.

Commodities

On Thursday, Trump said Washington would launch a major economic campaign against Iran and Bessent flagged tougher sanctions. Oil rose more than 5% higher after Bessent told CNBC that the US would impose the “toughest sanctions in history” on Iran. Brent rose to $94 after the 60-day US-Iran memorandum on Hormuz expired with no plan to renew.

Gold and Silver are up 5.45% and 7.25% respectively along with bitcoin up 22.59% respectively. This potentially signals the debasement trade coming back to life. They all ripped upward Wednesday afternoon after the Treasury’s announcement of doubling the size of liquidity support. Bessent attempted to tame borrowing costs by knocking down long-term yields for a day but the lasting signal was a weaker dollar leading to higher gold and bitcoin.

Bitcoin is worth a closer look as it is an extreme outlier for this week with > 4 STD move. Yes, bitcoin is part of the debasement trade, but it was previously part of a broader unwinding of a carry-trade when rates were low. Institutions were short bitcoin as rates rose and after the announcement of the Treasury keeping rates low, there was aggressive short-covering leading to the big move. The rally began on Wednesday when Treasury yield pulled back after Bessent’s announcement and was then amplified by a short-squeeze that liquidated $2.7 Billion crypto shorts per CoinGlass. Bitcoin is still down -12.02% for the year and it remains questionable whether this bounce will be sustained by further buyers or will taper off once short-sellers have all covered to return once again.

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Market Lesson

I want to take a moment to talk about Bitcoin because it is a trade that will either launch back into a new fever of cryptomania or sharply reverse to continue its downward trend. It is worth discussing the moving parts of what is currently driving bitcoin prices.

Bitcoin in the Recent Past

I spoke about the rationale behind Bitcoin’s decline in a previous article. It’s worth a read as it outlines and details the exact mechanisms of why Bitcoin has been trending down. Understanding that will help you understand why Bitcoin is going up and whether it will go exponential. I can explain what went on in the past very quickly here:

1. When rates were lower, Institutions were able to sell Bitcoin Futures that had a built in return while also buying Bitcoin through ETFs. They would profit on the built in interest from selling the futures and negate any potential losses with Bitcoin ETFs.

2. If the trade above gave 8% and they could borrow at 4%, they made a practically risk free 4% profit

3. Futures are settled in cash while ETFs actively purchase the underlying asset

4. Therefore, when interest rates were below the Futures rate, institutions would put on the carry trade. The net effect is more bitcoin being purchased by ETFs and bitcoin prices going higher

5. All of this reverses if interest rates go up because if the trade gives 8% and the cost of borrowing was 9%, it would not make sense to do this trade as you would lose 1% a year

The carry trade went well until we started talking about higher interest rates back in late 2025. That’s when bitcoin began declining as institutions unwound the carry trade, selling their ETFs (forcing the ETFs to then sell Bitcoin in the open market). Speculators then continued to short bitcoin since there was no major catalyst to cause it to go up.

Bitcoin Right Now

Long-Term Treasuries have been falling, raising interest rates, due to concerns of inflation and interest rate hikes. This has made the carry trade unfavorable. However, things fundamentally changed after Besset signaled that they would double the backing of long term Treasuries.

Although the rates were volatile during the week and essentially returned to previous levels by the end of the week, Besset’s announcement signaled a policy change. Those shorting Bitcoin realized “okay, the trade is over, let’s get out and figure out what’s going on”. Hence, the major jump in Bitcoin for the week. It was fundamentally short-sellers assessing what will happen next.

Will the Treasury be more aggressive with their purchasing? How much are they willing to do to save the 20 or 30 year bonds? How far will they go and is there a way to make money off this?

No one really knows the answer to this question but many will speculate.

Let’s talk about scenarios we’re trying to speculate

Bitcoin in the next month

Bull Scenario: The rapid jump in Bitcoin catches the attention of a lot of pro-crypto traders waiting for their moment to make insane gains! Momentum traders come in as well and bitcoin starts going exponential. Talk about interest rate cuts begin to happen which fuels the fundamental story behind long bitcoin. It breaks new highs and articles talk about the resurgence of cryptocurrency as the future of the world. Some even make some vague claim of how bitcoin will fuel AI or AI funding or something like that.

Bear Scenario: The rapid jump begins to stall and short-term momentum traders sell as they don’t believe the pro-crypto traders are coming in mass. The short-sellers know that the fundamentals of the carry-trade haven’t changed much and there needs to be actual real rates going down in order for that engine to start again. They’re watching the tape and once the pro-crypto crowd has exhausted themselves, they’ll short again as there are no major catalyst or fundamentals justifying bitcoin price appreciation.

Volatile Scenario: I’m of the mind that the bull and bear scenario wrestle with each other in the price action. We won’t know the story until after the move has been made. By that time, it is too late to profit. I believe elements of both exist but I, as a retail trader, don’t have access to the magnitude of the short-seller party versus the pro-crypto party. I do know that the only way to drive bitcoin higher is for rates to go down. However, you don’t need rates to go down per-se, just an expectation for rates to go down. Therefore, the major driver (and volatility) of price will be related to rates.

How to Trade This

For me, it’s worth going long and a bull trend should see higher highs and higher lows. I was short bitcoin until I started seeing the short momentum stall around June and July so I created a neutral option position to collect credits. When Bessent made his statement, I knew that the previous driver of the crypto-carry trade unwinding was under threat so I reversed my position. Now, I’m going to see how far the crypto hype goes in the next step. I express my trade idea through IBIT.

Therefore, keep track of interest rate expectations through CME Watchtool

Keep track of fund flows through: ETF fund flow Tool

If you’d like to learn more, shoot me a comment and I’d be happy to go into further detail. But for now, I believe this should be enough to guide you on how to trade Bitcoin in this next leg.

I hope you enjoyed today’s article. If you liked it, consider subscribing if you want more of my content. Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop an explanation of what is driving the price action. Then we derive market lessons to help us become better traders.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Oil prices spiked with energy leading. Consumer Discretionary suffered

• Bonds are whispering stagflation, not recession

• Capital is rotating within AI, not out of it. Best to investigate further

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Indexes

Nasdaq Equal weight outperformed the other indexes, suggesting Megacap tech companies did poorly in the past week. This appears to also be true for quarterly and monthly returns as well. Megacaps like AVGO and AMAT hurt the market cap weighted Nasdaq Index. AVGO fell 6% after Bank of America questioned a potential $370 Billion debt financing vehicle tied to its AI buildout. Goldman Sachs published a note flagging that hyperscalers are increasingly relying on lease commitments and debt structures rather than cash spending.

Note that money is rotating within AI, not out of it (More in this under the Market Lessons Section). As Broadcom sank 6%, AMD climbed on Baird doubling its price to a high of $1,250. Storage names like SNDK was found up 5.7% after a bullish long-term outlook on investor day.

Industries

Energy posted the biggest gains this week after crude oil jumped above $81-$82 a barrel as Treasury Secretary Bessent said Washington would impose unprecedented economic measures on Iran while maintaining its naval blockade of Iranian ports. Also, the IEA forecasted the widest global supply deficit in five years.

Consumer Discretionary performed the worst among the sectors this past week. July retail sales fell 0.6% to $763.6 Billion, the sharpest drop in over a year. The preliminary August University of Michigan Consumer Sentiment report came in 51.0 against a 55.0 forecast. The belief was that a rotation into Consumer Discretionary would be possible if oil and interest rates remained stable or improved. However, expectations of oil and rates have shifted in recent events, leading to Consumer discretionary performing poorly this past week.

Bonds

Treasury bonds were mixed with the short end gaining and the long ends worsening. This signals that the move is a credit event rather than a liquidity event with high yield bonds flat for the week. July CPI came in as expected at 3.4% with 2.5% Core. PPI was lower than expected at 4.7% when the market was expecting 5.0% and Core at 4.2% when the market was expecting 4.3%. This lowered expectations of a rate hike in September down to 42%. Short-term bonds reacted positively while longer-term bonds did not.

What’s odd is with the soft Retail Sales and lower than expected Michigan Consumer sentiment, longer term bonds sold off anyway. This reaction signals a concern about growth but for now signals stagflation more so than a recession.

Commodities

Commodities remain the most volatile asset class for 2026. Oil gained > 7% for the week after Treasury Secretary Bessent said Washington would impose unprecedented economic measures on Iran while maintaining the naval blockade. As a result, the IEA forecasted the widest global supply deficit in five years. During this time, talks on reopening the Strait of Hormuz remains deadlocked.

Precious metals were up due to rates more so than fears. But the STD move comparatively remains muted.

Bitcoin performs the worst among the commodities and poorly among the other asset classes. The ETF continues to experience outflows with four days of consecutive drawdowns erasing 38% of the prior week’s inflow. I discussed the fundamentals behind Bitcoin’s downturn here. It was part of a carry trade unwind. Presumably, lower interest rates may reverse the flow of money in ETFs, however, it has not happened yet.

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Market Lesson for the Week

For the past couple of weeks, we’ve seen capital leaving popular AI names in favor of other companies. There have been articles about the concerns of leverage within the AI industry. Although some are calling for a bubble burst, we’re not seeing a big liquidity event. Rather, we’re seeing capital re-organize itself, leaving high PE names priced for perfection for something else. The big question is “what is the something else?”

Big Picture AI Review

The trades that have made the most money within the AI industry have been identifying the bottlenecks of the AI supply chain and watching prices go exponential. Previously it was Silver when the supply of silver was caught off guard by the insatiable demand for AI chips. Next it was memory as there were significant constraints with production.

All of this makes AI more expensive and raises questions of whether the industry can pay off its debt. While some may call for a bubble burst, I simply see capital repositioning itself for further AI development. I don’t see a capitulation of the basic thesis that further AI development will change the way we do basic functions in society.

Therefore AI is here to stay and the question shifts from “Will AI succeed” to “At what cost?”

Let’s review the supply chain:

Materials > Components > Hyperscalers > AI Models > AI Services > Society

Materials are used to build components. Components are compiled to build Hyperscalers. Hyperescalers rent out compute power to AI Models (Anthropic, Open AI). AI Models then sell their models to various services. These services are then provided to Society who ultimately gains value from using these services.

The following statement was made above: “Note that money is rotating within AI, not out of it”

It is important to first identify that AI isn’t going anywhere. It is here to stay. Therefore, the question is “at what price”. If capital is leaving some parts of AI for other parts of AI, it will be a game of value rather than a game of growth.

The growth game is stalled by concerns of debt, threats of high interest rates, and the rising costs of materials. AI will be developed but it will not be a question of who can navigate the complex capital, supply/demand, economic and political landscape to success.

Price as a Guide

I do a weekly Price Action Week-in-Review because it is the cleanest way for me, a retail trader, to get a pulse on the market with a very quick glance. Price tells me a lot about what is happening with the world and it cannot be denied. People can argue about employment numbers, or whether inflation is sticky, or whether GDP was actually growing at X% or if there is some esoteric part of the data that should be revisited.

No one can argue about price. Priced happened and it’s our job to identify why. It is the strongest starting point for someone who has a data disadvantage compared to major institutions.

That being said, it would make sense to then create a Price Action review of every part of the AI Supply Chain.

Here it is:

Yeah, it’s a lot. But I believe it needs to be done. I’m going to briefly review the Price Action of each part of the Supply Chain but I likely won’t be able to go too in-depth without another article. If you’d like me to go deeper in another article, let me know in a comment below.

My hope with this analysis isn’t to inundate you with data. Rather, it is to demonstrate the power of Price Action and to help you identify areas to investigate further. We’ll be focusing on time frames longer than week to potentially capture longer-term trends.

Materials

The Materials sector includes SLV and CPER as raw materials for data centers. I also included some major mining operations to get a sense of whether they’re profiting from AI growth. Energy is also included here as AI has a major energy bottleneck problem. However, I did not include Oil prices here because it would skew the entire data sheet towards Oil volatility and make it harder to identify outliers.

SLV and CPR have lost YTD but have gained substantially for the month, but not so for the 3 months. The big question is whether or not a second rally can happen with continued supply constraints. Regardless of your opinion about that, it is interesting to find that MP has outperformed the metals for YTD and the 1 month time frames. It would be worth investigating whether MP has been able to structure a business model to benefit from higher production of precious metals, allowing them to profit whether or not the price of silver and copper rise.

As for the Energy component, the biggest winner YTD is BE and the biggest loser is OKLO. For the past month, energy companies have done poorly. The AI Energy trade was based on Data centers tight supply for energy with plans to provide energy from the scarcity. However, there have been major political roadblocks along the way. Potentially worth investigating if those roadblocks clear up. There are reasons why CEG, BE and OKLO are outliers. That’s where I would investigate further.

Components

The AI Component lists is large. So there are 2 component lists. Here, we have

• Fabrication Equipment - ASML, AMAT, LRCX and KLAC.

• AI Accelerators and Chips - NVDA, AMD, AVGO, MRVL, ARM, INTC

• Foundry and Packaging - TSM, GFS, ASX, AMKR

• Memory - MU, RMBS

For this section, we should first acknowledge that the YTD gains for the AI Accelerators and Chips has been in the triple digits. MU also has a whopping 240% YTD. Any short term volatility should be viewed in light of these numbers. This is fundamentally THE AI trade.

Given this fact, it makes sense for profit taking to happen in the shorter-term and for capital to re-rate their expectations towards a more reasonable outlook. It is not to say that prices will go down more. Rather, it is to say that the majority of the gains occurred in this part of the supply chain for 2026. Expecting more will require even greater promises and expectations.

But can such promises and expectations be made during a time of uncertainty with supply constraints, US-Iran War, inflation concerns, and potentially rising interest rates? It is likely in the industry’s best interest to solve major problems with bottle necks and supply constraints than promising higher guidance without those solutions in place.

Components 2

The second part of the Components is listed here as follows:

• Networking and Optics - ANET, ALAB, COHR, LITE, FN

• Systems and Assembly - SMCI, DELL, CLS

• Power and cooling - VRT, ETN, NVT, MOD

• Construction - CAT

I lumped these in Component 2 because they are not the direct AI chips powering the processing for AI. Rather, they are the support components. Although necessary, they tend to be more commodities rather than the actual technology that advances the AI to the next level.

Notably, these companies have not had as much of a YTD gain, although it is impressive with LITE and DELL posting triple digit gains YTD. SMCI appears to be resurging aggressively for the month, most of it being in the past week and is worth looking into. However, we also see some weaker players in MOD, VRT, and CLS along with COHR. Since these components are functionally a commodity and can be replaced by someone who can build them cheaper or more effectively, there is likely more dispersion with returns as it success heavily depends on execution.

Hyperscalers

This part of the supply chain should come at no surprise. And I’ve spoke about them at length in previous articles. The hyperscalers are in hot water due to their AI Capex Spending plans. They are fundamentally fueling the entire boom of the AI Components part of the Supply chain with debt, equity, and Cash flow. They will need to find a return son or else continue to face pressure from capital markets.

This is not to say they will go bankrupt. Rather, the market is re-rating them for the risk they are taking. Although the high flying numbers of the previous parts of the supply chain may pique your interest, the next leg up may be a re-rating of all the hyperscalers should they actually succeed in building out the datacenters with the promised Revenue and profit to match.

Although there is a lot of criticism about whether or not these data centers can be built as promised, we should note that MSFT and ORCL are winners for the month. MSFT likely due to more efficient use of their capital for AI buildout as well as growth in Azure. ORCL likely due to a rebound from previous concerns that their debt load was much too high. This is notably the softest part of the supply chain and it shows with losses YTD and over the past 1-3 months. However, it is worth continuing to watch for the time being as they need to succeed wildly for AI to flourish as originally planned.

AI Models

The largest AI models are ChatGPT by OpenAI and Claude by Anthropic. They are currently private so I do not have public price action data on them. When they go public, we can evaluate what the market is telling us about these companies.

Finally, we have AI services, an area that is in a major state of flux. The services are organized in the following way:

• Application - PLTR, CRM, NOW, ADBE, SAP, INTU, FIG, APP

• Data plumbing - SNOW, DDOG, MDB, NET, ESTC

• Integrators - ACN, IBM, INFY

It should be noted that the AI Services are companies that were nearly decimated by the SaaSpocalyse where capital was expecting the death of all SaaS services from the development of AI. We see that in the YTD column. Many of these companies have pivoted to incorporate AI into their business mode. Some with more success than others. What we’ve found in the past month is a resurgence of these companies now that the AI boom has slowed and investors are potentially seeing value among overly beaten down SaaS names.

A lot of the success of various AI services companies will be related to execution, much like that Components 2 portion of the AI chain. The fundamental questions to answer are

• How is the company integrating AI?

• Is it creating Revenue Growth?

• At what Cost?

If these three fundamental questions can be answered with a clear vision of AI of the future, we can expect the past downward volatility to be reversed for major gains in the future. If they cannot answer these questions, they may be left in the dust and have their entire lunch eaten.

Wrapping Things Up

This article was a bit longer due to the double Price Action Analysis of the Economy and then the AI industry. I’ve been told that specific actionable ideas would be helpful. I plan to start ramping up my discussion of individual companies and ideas.

For now, I hope you can appreciate how the AI narrative has been transitioning. It went from grow grow grow! To Doom doom doom! To now “everything is negotiable”. We’re in the “negotiation” stage and it is helpful to use price action to identify how those negotiations are playing out. There’s so much more I want to share. If you’d like to see more, let me know in the comments below. Until then, thanks for the support. Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop an explanation of what is driving the price action. Then we derive market lessons to help us become better traders.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Stocks recovered on rate-cut hopes, led by tech

• Dispersion beneath the index was the rates story

• Read price first, news second

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Indexes

It was a choppy week but ended up a rally for most indexes. However, the gains are more of a recovery as the 1 month return still shows a decline for Nasdaq 100 and Russell 2000. On Monday Trump called off a planned strike on Iran. S&P was up 1.48%, Nasdaq up 2.1% and Dow was up 1.32%. This single session was 40% of S&P’s weekly return. On Tuesday, semiconductors surged with the Semiconductor Complex up over 6%. MRVL was up 14%, INTC up 10%, AMD up 7%, MU up 8% sending S&P to new highs.

Wednesday and Thursday took back the gains after an inflation scale from the ISM Services Index. ISM Services for price paid jumped to 70.3 in July from 67.7 in June whereas headline index rose to 54.1 and new orders jumped to 57.2 from 55.1. If Monday and Tuesday rallied due to anticipated decline in oil prices and lower inflation leading to lower interest rates, ISM Service pricing partially negated those fears as prices for services tends to have less influence from oil prices.

Friday closed off the week with a weak Jobs Report. Payrolls fell 23,000 vs expectations of an 83,000 addition driven by a 53,000 drop in government jobs while private payrolls rose 30,000. Unemployment ticked down to 4.1% mostly because people left the labor force. Average hourly earnings slipped to 3.2% the lowest since May 2021. As a result, indexes rose due to anticipation that weakening employment would make the Fed more comfortable with lowering interest rates.

Industries

The events discussed in the Indexes section can be seen in the dispersion within the sectors as well. The Winners are Technology, Consumer Discretionary, Telecom, Communication Services and Industrials with the losers being Utilities, Energy, Real Estate, Staples and Healthcare.

Tech, Telecom and Communication Services did well as part of the technology recovery discussed in the Indexes section. SOXX surged 16.8% over four sessions after falling 21% in July overall. Telecom’s gains were driven by LITE up 13%, COHR up 12%, CIEN up 9% after Reuters reported that the Trump Administration was preparing restrictions on Chinese-made optical transceivers used in Data centers. Consumer Discretionary was mostly driven by TSLA which is down 30.8% YTD and 26.8% this past month. The snapback was likely shorts covering their positions and taking profits.

Utilities underperformed due to rising interest rates since Utilities behave very closely to bonds. But there is also a concern about heavy capital spending requirements to supply energy to AI projects. With the 30 year at 5.2%, a utility’s AI growth story needing more capital has become a liability more than an asset. Every gigawatt of promised data-center capacity has to be financed and when the cost of capital rises faster than the return, it raises dilution risk.

Energy was down due to declining oil prices from de-escalation of the US-Iran Conflict. I’ll discuss this further in the commodities section.

Bonds

Longer term bonds fared worse than shorter term bonds with Corporate and High Yield bonds in the middle. The price action tells us this is a rate story, not a credit story. The decline is concentrated in the long end for all time scales. The macroeconomic and Fed policy framework underpins the tension within bonds. Federal Chairman Warsh has decreased the visibility of the Fed’s future policy. His fed statement shrank, he withheld his own dot from the projections, he ended forward guidance, telling inventors to watch the economy rather than anticipate the Fed. He’s had repeated assertions of taming inflation, with no actions to move towards 2% and hinted that the goal post themselves might change. This contributed to increasing rates and declining bond prices.

Commodities

Oil declined this past week and has been the main story for the year. On Monday Trump called off a planned strike on Iran and Oil dropped around 5% that day. Tensions still loom and Oil remains volatile. Looking forward, EIA raised its expectations for global oil production following the Memorandum of Understanding (MOU) and increased transit from the strait and now expects most of crude output to return to pre-conflict averages by year end. That’s the market’s overarching expectations. But what happens between now and the forecast timeline remains uncertain.

Precious metals did well. In particular, Gold and Silver did very well on the day with Copper doing poorly. Much of Gold and Silver’s YTD price action came after a 30% rise with a sharp drop after Fed Chairman Warsh brought a hawkish outlook on monetary policy. As Gold and Silver declined on concerns of rising rates, the week’s drop in oil prices and employment weakness led the market to believe that rate hikes may not happen. As a result, the negative sentiment on precious metals abated to a weekly gain, even though the YTD number shows a slight decline.

It should be noted that Copper’s positive performance on most time frames (except the 1 day time frame) is due to a supply tightness story. The DR Congo banned copper concentrate exports effectively immediately and could stay suspended for as long as two years. Aggressive tariff-driven stockpiling in the United States also drove prices higher. However, the one day decline of 2.11% is very telling. Although the market believes rates may decline with worsening employment, such a situation affects economic growth and demand, causing copper to decline when the other precious metals gained on the Jobs Print

Natural Gas declined due to record output led by the Permian as inventories stay high enough to cap prices.

Finally Bitcoin is flat but continues to have negative flows with their ETFs. Citi estimates $3.3 Billion of outflows from US Spot Bitcoin ETFs in 2026 by early July and that ETF flows accounts for 45% of the weekly price movement. The ETFs continue to decline as rising interest rates threaten the pairs trade discussed in a previous article. But gained on Friday due to renewed hopes that interest rates would decline on the weak Jobs Print.

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Market Lesson

There’s a lot of uncertainty in markets based on the news. We have continued concerns of the US-Iran conflict which can both escalate and de-escalate on a single news print. We have hints of inflation going beyond just higher oil prices. And we have an AI buildout narrative that is becoming increasingly more expensive and the market is not willing to pay for it.

However, with all the concerns aside, we need to take a step back. Look at the S&P 500 from a 3 year view:

Let’s zoom in closer for the year:

Then the Month:

And now the week:

It’s plain as day. The market is up. Specifically for the week, we have a great surge on Monday (8/3) and Tuesday (8/4) and then more or less flat from 8/5 to 8/7.

But what about the US-Iran Conflict? What about Inflation? What about the lack of guidance from the Fed? What about the cost of building out AI?

I’ve seen an uptick of news flow talking about concerns on all of these issues. But do you know what I haven’t seen? I haven’t seen someone say, “Hey, look at the S&P 500 on multiple time scales. What’s the problem?”

How I used to Trade when Starting Out

This is an important lesson but it’s a personal one as well. It has to do with why I trade and how trading helped me as a person, beyond the profit, beyond the numbers.

When I first started trading I thought it was a great way for me to translate my intelligence into dollars. I did fairly well with school and could understand complex ideas and concepts. I had an ever expanding knowledge base of financial markets, industries, and other facts about the world that I wanted to use to create an edge.

I spent a lot of time consuming financial content. I learned about Gold from Peter Schiff. I was an early adopter of Real Vision TV. I read countless articles and books on the history of the Federal Reserve. I took a bunch of classes on how professional traders viewed the market. In my view, the smarter I got, the better I would trade.

I believed that the best trader knew what was going on with the world and, with superior analysis, they would be able to make better bets than the other person. Therefore, understand what’s going on with the world, make your bet, and if you’re good, you’ll have unlimited money raining from the sky!!

But how do I know what’s going on with the world? Well, that’s easy. With the Internet, Social Media, and how we are connected together through Technology, understanding what is going on in the world is as easy as turning on your smartphone. Nothing happens without someone hearing about it and writing about it.

I believe this is the general belief most people have. And, admittedly, I’ve learned that this is the wrong way to go about trading. Why?

I’ve written about this before: The News Cycle is not here to help you.

How I Trade Now - Price Action First

I’ve noticed something interesting about News Cycles and Trading.

The News Cycle will talk about all the threats in the world, yet the S&P 500 will cream to all time highs and there will not be a single peep about why this is happening. Just that “the market is climbing a wall of worry”.

By the time I saw the all time highs, it’s too late. I was out because I was “reducing risk” and I missed the resurgence back to previous levels. I could get in now, but at the cost of alpha since I’m getting back in at higher prices.

That’s when I flipped the process. Instead of looking at the news and then looking at the price, I look at the price and then I look at the news. I derive my worldview from the price action of assets, not from the news.

What I learned is that the news follows the price action. The narratives were always there, but they were only showcased at specific times. [Case in Point - everyone knew how much debt companies were taking out for AI, but only now there are a million articles highlighting it? Something else is going on]

So here we are. US-Iran Conflict, Inflation fears, AI narrative instability. ALl great things I could talk about as a “news” commentator talking about markets. But in reality, with a price-action first approach…There’s no story.

Stocks are up. The market is back to their previous levels and more. Whatever concerns there were about the war, inflation, or AI, it’s not showing in the larger picture.

What’s there to write? What could I guide you to get you to read my article? What do I need to spin for you to pay me for a subscription? What do I do as a financial commentary to turn this into a living? What can I do when the truth is actually counter to the narrative the news cycle is trying to feed you?

If I want to maintain my integrity, the answer is: Nothing

But if I want to sell you the idea that I know something more, that I have some secret knowledge of analysis that can help you make money, I’m sorry. I don’t.

But no one else does.

You make money from your own analysis, your own work. You don’t become successful copying other people.

What to do now?

Markets are up and the narrative has not caught up. This doesn’t mean markets won’t go down. It just means that it will take more than just the current narrative for markets to suddenly reverse from the current all time highs.

If you want to trade successfully moving forward, you need to think deeply about these three major themes:

• US-Iran Conflict

• Inflation concerns outside high Oil prices leading to higher interest rates

• AI Growth Narrative

For each of these themes, you need to answer the following questions:

• What is the outcome you believe will happen?

• Why do you believe this?

• Is this belief consistent with your other beliefs on other topics? (e.g. how will higher interest rates help or hurt the AI Growth narrative)

• What evidence do you need to see to re-consider your current beliefs?

Once you have a clear view, you’ll be able to put on trades based on those views. Once you’ve identified a theory of why price action is behaving a certain way, you need to put that theory to the test.

• If the theory is right, you’ll make money.

• If your theory is wrong, you’ll need to re-adjust your theory and become better from that market lesson.

• If you repeat this over and over again, you’ll eventually understand what is going on.

About that Personal Note…

That is why I trade. To me, it’s not just about the profit. It’s about becoming a better person. It’s about facing my assumptions and illusions about the world with real dollars on the line. I used to see trading as a means to convert my intelligence into dollars. However, I’ve come to learn that the world is too complex for intelligence to be rewarded so easily. My illusions about that have been shattered due to many of my past theories being flat out wrong. However, I’ve gained a better, more nuanced understanding of how markets work and it has nothing to do with intelligence. I’ve shared my views in previous articles. I encourage you to check them out if you haven’t yet.

If you enjoy trading, I encourage you to work on yourself this way. You’ll become free from the news cycle, from the pump and dump schemes. More importantly, you’ll get the best mirror to yourself and the assumptions and illusions holding you back will be shattered (if you let it). When that happens, the world will make more sense and market movements will have a different meaning. If you enjoy trading and decide to journey this way, I guarantee you won’t regret it.

I hope you enjoyed today’s article. If you haven’t yet, consider subscribing for more content. Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop an explanation of what is driving the price action. Then we derive market lessons to help us become better traders.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Indexes were flat but the AI complex was not

• Hawkish Hold by the Fed repriced the long yield and everything correlated to it

• The AI narrative transitions from a race to AGI into a Review of Sustainability

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Indexes

The indexes were relatively flat for the week with the Dow making a 1 STD move at 2% return. Index level moves were unremarkable but single stock dispersion was violent. The AI Capex verdict finally arrived. Earnings landed for MSFT, META, and AMZN. MSFT rose 8% after hours on Wednesday on Azure strength but META fell 8% after raising the floor of its 2026 capex range to $130 Billion. Q2 capex of $31.1 Billion crushed FCF to $784 billion and EPS missed 14% on legal and severance charges. AMZN surged 15% on cloud and AI monetization.

The big takeaway is that the first largest cloud providers now expect combined 2026 Capex of $720-$745 billion but investors decided that spending is okay as long as you can show the revenue.

Industries

The biggest winner this week was Consumer Discretionary with the biggest loser in Utilities.

AMZN is roughly 1/5th of XLY and surged 15% on Friday after earnings, the biggest single-day gain in more than a decade, after eating on cloud growth and AI monetization. This single earnings print erased more than two months of sector losses. We should read this as concentration, not a consumer signal.

Utilities fell without a sector or earnings catalyst. However, returns for utilities function much like a bond and can move with bonds when interest rates are affected. The FOMC kept interest rates at 3.5%-3.75% but with no forward guidance, causing bonds to fall and Utilities to drop as well. More will be discussed about this in the bond section.

Bonds

For bonds, the FOMC voted 9-3 to hold the funds rate at 3.5%-3.75% with the three dissents wanting a 25bp hike. Fed Chairman Warsh emphasized there is “no soft inflation target” and refused forward guidance. As a result, there was a spike in yields sending the 30 years treasury to its highest levels since 2007. By Friday, the 30 year sat near 5.25% and the year year topped 4.7%. The end result is that shorter duration rallied while longer duration declined.

Corporate and high yield bonds remain relatively flat.

Commodities

Oil fell this week by roughly 5% but spiked > 1% on Friday. Oil initially fell on hopes that the Middle East conflict would de-escalate but it reversed in the end on Friday as Iran said it attacked two tankers transiting the Strait of Hormuz under US military escort with more turning back.

Natural declined due to oversupply. Gas futures fell to their lowest in three months due to strong production, comfortable inventories and weak demand.

Copper stood out as the biggest winner due to the resurgence of the AI Datacenter build narrative combined with the Fed’s decision to keep rates unchanged. LME three month copper rose 1.4% to $13767 per ton as concerns over tight inventories outside the US resurfaced, supported by a weaker dollar after the Fed’s decision to hold interest rates with the dollar index hitting a one-week low. Gold and Silver, by comparison, were flat.

Bitcoin is down for the week and on Friday as investors cut risks ahead of the Fed meeting. The Bitcoin ETF flows had 4 sessions of outflows totaling $526 million. This is likely a continuation of the carry trade reversal as markets are concerned of longer-term interest rate increases.

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Market Lesson for the Week

This week ends the most recent updates of the Hyperscalers AMZN, GOOG, META, MSFT and ORCL. AI is the major theme of our time so it will be important to round up and recap where we are right now. If you want a primer on the situation last quarter, check out my article titled “Concerns of Concentration into Oil and AI Data Center Spend” dated 5/3/26.

This is the re-cap so far:

The Winners:

MSFT was the cleanest print with Azure crossing $100B in annual revenue up 43% for the full year with FY 2026 Revenue of $331B and Microsoft cloud at $214 Billion. Management guided for continued acceleration into Q1 FY 2027, 45% for September quarter. MSFT jumped during earnings due to 2026 Capex Guidance coming down from $190B to $175B, reflecting the lengthening of the assumed useful life of data center and office properties

AMZN also delivered on the reacceleration narrative with AWS growing 37% to $42.2B, fastest in 18 quarter and backlog of $496B up $132B in a single quarter. Capex grew from $200B to $220B due to higher memory costs and even at this level of spending, AWS won’t have enough capacity to meet demand in 2026 or 2027. Note, the $62.6B net income includes a $53.4B investment revaluation gain (largely in Anthropic). Also, their $18.2B inflow last quarter swung to a $7.6B outflow this quarter.

The Losers

GOOG had the strongest quarter but the worst reception. Cloud grew 82% to $24.8B with segment operating income more than tripling to $8.8B. Backlog rose to $514B but Capex doubled to $44.9B y/y for the quarter and FCF went negative $5.9B. GAAP EPS of $9.11 looks enormous but was driven by $98 in unrealized equity gains. Core operating income rose 30% to $40.8B with margin expanding to 34%.

META has the most criticism with their ROI for AI investment. Ad revenue continued to accelerate to $59.4B up 27% with impressions up 14% and pricing up 12% but EPS of $6.18 missed by 14% dragged by 2.4B legal charge and $1.18B in severance and FCF fell 91% to 784M as capex hit $31.1B. The press release language for META’s legal charges related to youth related litigation was vague.

ORCL is the most leveraged of the group and their earnings is off cycle with the other 4 Hyperscalers. Their OCI grew 93% to $5.8B and RPO reached $638, up 363% Y/Y and $85B sequentially, mostly from large AI contracts where customers prepaid for GPU or supplied the hardware themselves. ORCL signed $67B in AI infrastructure contracts in the quarter and plans to raise $40B in debt and equity during FY 27. FY26 FCF was negative $23.7B. Concentration is the biggest risk, as Bank of America estimates that over 50% of the RPO comes from Open AI

The Takeaway

The AI narrative is shifting from “Who will accomplish AGI first” to “Who can reach AGI sustainably”. The reason is because we’re transitioning into a tighter monetary environment with the Fed not giving any indications of a rate cut anytime soon.

An AGI first narrative is focused on getting to the technological milestone first. In a winner-takes-all tech environment, tech companies will spend any amount of money to reach that accomplishment first or else find themselves becoming quickly obsolete.

The cost of money has become more expensive through higher interest rates. The cost of building data centers has become more expensive through higher cost of components from the memory chip shortage. The cost of running the data center has become more expensive through higher oil prices. Building these data centers will not be cheap. The game is no longer speed with a moat built through high capital expenditures.

It is now a game of business models with MSFT and AMZN potentially demonstrating both revenue growth and cost containment. GOOG has revenue growth but an issue with maintaining costs with negative FCF. META has issues with demonstrating a product or service that would benefit from developing AI datacenters. ORCL has funded its investments through a lot of debt.

What to do Next?

It is important that narratives are developed after the price action is made. The goal is to identify the narratives of the future if you want to be successful in trading.

If you are bullish on AI, then this is a great opportunity to buy depressed AI Hyperscalers when the narrative is overly negative. Whatever capital expenditure fears happen in the short term will not matter over the longer term.

If you are bearish on AI, the bearish narrative has already hit the price. Going further down is going to require a surprise that the market has not taken into consideration. Since the game is has transitioned from “AGI first wins” to “Business Model Wins”, a further downward move will need to be demonstrated in either slowed Revenue growth or a faster rising Capex Spend.

I personally believe that AI is here to stay, but the question is “at what price”. The volatility is where we trade and both narratives will be able to express themselves over time. Therefore, staying mentally nimble will be important if you want to avoid large drawdowns and maximize major trends.

I hope you enjoyed this article. Consider supporting my work with a like and a subscribe. Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop an explanation of what is driving the price action. Then we derive market lessons to help us become better traders.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Nasdaq Underperformed the other indexes after negative reaction from GOOG and TSLA Earnings

• Oil rose to $100 a barrel due to further escalation of the US-Iran War

• It is important to Zoom out before coming to any conclusions about the next leg of the market

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Indexes

Nasdaq 100 performed the worst among the indexes along with the Nasdaq Equal weight. This was due to the poor performance of GOOG and TSLA during earnings, megacap companies that are disproportionally represented in the Nasdaq 100.

GOOG beat revenue, margin and income expectations. However, Capex expectations were increased from $180-$190 B to $195-$205B and FCF was negative $5.9 Billion which was the first negative quarter as a public company. The market is punishing AI capital spending.

TSLA, on the other hand, sold off for the opposite reason. Capex guidance was in line at $25 Billion for 2026 against analyst expectations of $25.16 billion. The reason why TSLA did poorly was because they sold a record number of cars and made practically no money doing so. Revenue was $28.24B up 26% y/y vs expectations of $26.32B with deliveries at 480,126 up 25% vs expected 406,600. However, Gross margins were 16.9% (16.3% ex-credits) and operating margins were 1.4% vs 4.1% a year ago. FCF was negative $1.09 Billion which is better than the negative 3.64 Billion feared by wall street.

These two earnings reports set the tone for the week.

Industries

Energy performed the best and Consumer discretionary performed the worst. Energy did well after Brent crossed $100 on Thursday for the first time since 5/26 after Houthi strikes on two Saudi tankers opened a Red sea front alongside escalating Hormuz attacks. 61 commercial ships have been hit since March 1.

Consumer Discretionary performed the worst for the week, with communications to follow. AMZN and TSLA account for roughly 42% of the Consumer Discretionary data. TSLA fell due to earnings discussed above. Amazon fell about 4.6% without reporting a thing. As a result, most of the selling was due to other companies’ reports and fears that AMZN’s AI Capex spending will also increase following the trend of GOOG and TSLA..

Communications did poorly, largely led by GOOG as it makes up 18.85% of the Communications sector with the top 3 holdings being GOOG, META, and TMUS. TMUS reported $22.79 Billion in Revenue against expected $22.94-$22.95 Billion and weak Q3 subscriber guidance. META didn’t report anything but their cap-ex issues are more strained than GOOG which led to sympathetic selling on GOOG’s earnings news.

Bonds

Bonds did poorly this week with longer duration performing worse than shorter duration, signaling that the decline had more to do with rates rather than a credit or liquidity issue. Three themes contributed to the decline: (1) Fed expectations were repriced from Hold to HIke as the markets ended the week piercing a 35% odds of a rate hike in July 28-29 and 80% for September. A week earlier, the September odds were 50/50. (2) Oil crossed $100 on Thursday due to worsening US-Iran Tensions. (3) New 10%-12.5% tariffs took effect on Friday on 60 trading partners covering 99.4% of US trade.

Notably, the decline in Corporate bonds was worse than High Yield bonds, suggesting that the concerns about AI are now hitting the bond market.

The biggest mover here is Oil after Brent cross $100 on Thursday due to escalating US-Iran Conflict. Notably, Oil has been up aggressively for the year but is flat for 3 months and back up again, indicating that this is not a trend but the second leg of the war premium that was previously priced in. Friday’s reversal is important to note due to reports that Pakistan, with Chinese support, was seeking to revive US-Iran negotiations due to Chinese officials increasingly concerned that the Gulf attacks and Hormuz disruption were damaging their economic interests.

Silver is up due to increased demand for AI components as Megacap companies continue their upward revisions of Cap-Ex spending. Copper and Gold were relatively flat. Natural Gas and Bitcoin were also flat for the week.

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Market Lesson for the Week

The market narrative is quite negative. There are concerns about AI being too expensive, rising oil prices, risk of inflation, higher interest rates. However, I’d like to help put things in perspective:

This is the S&P 500

This is the Nasdaq

I see higher highs and higher lows with current consolidation during the summer.

Is AI cap-ex spending concerning? Yes.

Is the rising conflict between the US and Iran concerning? Yes.

Is the rising price of oil concerning? Yes.

Is inflation leading to higher interest rates concerning? Yes.

Is it possible for there to be a correction and still be in a bull market? Yes.

The VIX remains below 20 and the bond market is not signaling a credit crisis.

So although the negative narratives are true and driving the markets, taking a larger picture, we find that the sky is not falling (not yet at least).

What to Track

The major stories continue to be about the AI, Oil prices and the Federal Reserve.

For Oil Prices, check out my 5 part series I’ve developed:

1. How to Get Exposure to Oil

2. How to Track Fundamentals of Oil Supply and Demand

3. The Macro Regime that Underpins Oil prices

4. Momentum and Technical Indicators

5. Geopolitical Concerns

For the Fed, check out my discussion about the Federal Reserve through the lens of a trader

And finally, for AI, I’ve been discussing this topic for quite some time:

• AI Infrastructure Spending

• AI Supply Chain

• Supply Chain Funding Problems

• META’s AI Pivot

• Memory Chip Shortage

• AI Transition to Robotics

Of the three major news stories, AI is the least understood. There is nothing new with GOOG’s earnings that we did not know already. Hyperscalers need to spend money and the market is concerned the money won’t come back. However, any extensive commentary is premature until we hear from AMZN, META, MSFT, and ORCL.

MSFT and META post earnings after hours on 7/29/26 with AMZN on 7/30/26. ORCL is due in September. Furthermore, the Fed will be gathering on 7/28/25-7/29/26.

It will be a busy week next week. So for now, I would recommend brushing up on the topics at hand so you can be prepared when the news comes out.

I hope you found today’s article helpful. Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop an explanation of what is driving the price action. Then we derive market lessons to help us become better traders.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Nasdaq 100 led losses while S&P 500 Equal Weight led gains, led by concerns of a threat to the AI narrative.

• This looks more like a rotation, not a risk-off sentiment

• Oil rises due to escalating US-Iran conflict

• The AI Narrative will likely transition into one focused on Robotics

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Indexes

Nasdaq 100 was the worst performer for the week with its equal weight counterpart faring a little better. The best performer among the indexes for the week was the S&P Equal weight, suggesting that capital left the megacap tech names in favor of a more diversified spread of other industries.

Industries

In the industries subsection, we find that Technology and Telecom are the biggest losers with Energy, consumer staples and real estate as the biggest winners.

For Technology and Telecom, the Semiconductor industry shed 10% for the week, the largest weekly fall in over a year. Two triggers threatened the AI/semiconductor complex. (1) Chinese Startup Moonshot AI unveiled Kimi K3, a model that narrows the gap with top US offerings reviving DeepSeek type fears about the economics of AI models. Also GOOG was found to be months behind its Gemini 3.5 Pro, its most powerful flagship AI model. The market is derating AI due to concerns of AI frontier model economics where valuations of many semiconductor stocks have been priced for perfection. As a result, Technology semiconductors and Telecom equipment sustained heavy losses.

Energy rose on geopolitical risk premium related to oil prices which will be discussed in the commodities section. Consumer staples are up as part of the capital’s flight to safety.

Real estate did well comparatively for the week. However, when you look at the monthly gain of 0.80%, we find that Real Estate was essentially recovering from previous losses. This suggests that when capital left AI, it came back to Real Estate likely due to finding assets at good valuations.

Bonds

Bonds were flat for the week overall which indicates that the equities downturn is more of a sector rotation rather than a risk event. This is interesting given that CPI and PPI were lower than expected. However, this was likely offset by renewed concerns of rising oil prices which will be discussed below.

Commodities

Oil prices were the biggest movers for the week with a 3 STD move compared to the other asset classes. The rationale is clear as the US-Iran conflict escalated with renewed strikes. Brent rose more than 4% on Friday with an 11% gain for the week. Notice the 3 month indicating a 4-5% decline with the 1 month indicating a 3-6% gain. This is the ceasefire round-trip in price action.

Gold and Silver fell for the week which is counterintuitive. But the logic has more to do with the Fed than geopolitical risk premium. Higher oil prices means higher inflation which leads to higher interest rates. Higher interest rates are bad for precious metals like Gold. Silver is also a precious metal but declines further due to the threats to the AI narrative. If semiconductors are not needed, silver (a major component of semiconductors) demand falls.

Copper was unchanged for the week which is interesting given the rise in oil prices, a major input in copper production costs. This further supports that the price action for the week is not an issue of risk of slowed growth or recession, but rather, this is an isolated issue with the supply/chokepoint for the Strait of Hormuz, not an issue with demand for the economy as a whole.

Natural gas fell while Oil spiked as the US gas is a domestic pipeline constrained market, not connected to Hormuz exposure. EIA’s July Short-Term energy Outlook as US production putting downward pressure on prices.

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Market Lesson for the Week

Themes for the week once again fall on Oil prices as it relates to the Iran Conflict as well as the shifting AI narrative. I spent a bit of time outlining drivers of oil prices a few months ago when the US-Iran conflict was at it’s peak. If you haven’t already, I encourage you to check it out:

1. How to Get Exposure to Oil

2. How to Track Fundamentals of Oil Supply and Demand

3. The Macro Regime that Underpins Oil prices

4. Momentum and Technical Indicators

5. Geopolitical Concerns

Although there remains uncertainty with the future of Oil prices, I do believe that there will be a resolution in the near future. Either the war is resolved and things go back to normal or it persists and the economy figures out ways around the Strait of Hormuz. It won’t be pretty, but as the cost of continued closing of the strait rises, the high costs to develop alternatives become worth the investment to ensure this doesn’t happen again.

Therefore, I’d like to focus today’s Market Lesson/Commentary on the shifting AI Narrative. I’ve been talking about the AI story for a while, but for good reason: It’s really important!

We’re not in Panic Mode

I’d like to note that this week’s price action indicates that the market is not in panic mode. Why do I say that?

• VIX hasn’t spiked

• Bond Prices are relatively flat

• Gold is down instead of Up

• The downturn is focused on Technology stocks, namely AI Semiconductor and equipment names.

This isn’t a liquidity crisis, this is a re-rating. I’ve talked about AI before and people who have been reading my content know that I have my reservations. The losses on a lot of tech names is well deserved given the amount of risk they are taking. How can they be priced to perfection when the AI Supply Chain hasn’t been fully funded yet?

It’s not to say that funding will never come from customers in Society begging for AI services. It’s to say that there is still risk and that risk needs to be reflected in the price.

I am not convinced that a delay in Gemini Pro and a cheaper Chinese AI Model threatens the entire AI industry. If anything, it advances it by creating more competition, leading to future breakthroughs.

Recognizing the News Cycle

I believe that the negative sentiment is part of the cycle of Human Psychology. When markets go up, stories of the future with flying cars, individualized medicine that cures all things, and clean energy completely replacing fossil fuels rain down on your social media.

When markets go down, you get pieces like this from the Atlantic titled “Generative AI is an Engineering Disaster.”

I’m not saying the Atlantic is wrong. I’m saying that Ed Zitron has been talking about the problems with the AI narrative for several years so far. And NOW suddenly markets want to re-rate them? What changed? China’s new AI model? A delay of GOOG’s Gemini Pro 3.5?

For the past year, the market has identified AI as the only growth story worth paying a premium for. Whether you liked it or not, if you wanted to grow, you need to put money into AI. The funding issues, engineering challenges, AI failures were all well known prior to this past week’s downturn. Yet NOW it’s reflected in market prices?

Something else is going on.

What Happens Next?

I’d like to refresh your memory about a previous concept I talked about and expand on it. Here are some articles that introduces those ideas in detail:

• First, Second, Third Order Effects

• Understanding the different players of a complex system

AI Bears will be inclined to say, “This is it! This is the big one! The market is finally realizing that AI is total bunk and these stocks are going to crash down, losing 50%!”

The AI Bulls will retort and say, “Diamond hands! Diamond hands!!! This is just a small bump in the grand road to AI heaven. Artificial General Intelligence is going to be made and no discount chinese model or minor GOOG delay is going to change that. WHen it happens, we’ll have AI everywhere in a multi Trillion dollar industry! Just watch! Diamond hands!!!”

I hope by now, you’ve come to appreciate my measured stance. I’m not looking for a binary bull or bear case to win or lose. I’m trying to see the relevant players and understand how they will interact with each other. That’s how I plot the next course.

The Relevant Players

• AI Industry (AI Models, Hyperscalers, Datacenter Component Manufacturers)

• Private Equity

• China AI

• Market Participants

The AI industry made a big bet with a lot of loans from Private Equity. AI Models borrowed hundreds of billions of dollars to purchase compute from Hyperscalers. Hyperscalers then took that money to build out more data centers, requiring more components from manufacturers. This big bet needs to pay off or else Private Equity will be left holding the bag.

The reality is that there is insufficient revenue to continue funding the AI industry’s plans for building out $1 Trillion worth of data centers. A lot of the money comes from operating cash flows, equity raises, and loans. Why is there insufficient revenue? The AI services haven’t produced enough value to warrant every company in America to use those services. Proponents of AI say, “we need more time for AGI to develop.” This stuff is expensive!!!

Along comes AI China to say “We can build things cheaper. We can have all the benefits of an LLM, do everything that your expensive AI can do, and we can do it at a cheaper cost, and start bringing cash flow in right now this very second.”

Is the western AI industrial complex going to take that sitting down? Is Private Equity going to now say “whelp, we made the wrong bet. Now we need to build cheaper data centers to try and recoup and average out the costs of the expensive data centers we previously built”. NO! Of course not!!! Private Equity can’t afford to do that.

So what are they going to do? With an understanding of the market participants, what will be the first, second, third, and fourth order effects of China AI threatening the AI business model of Spend Spend Spend, figure out the profitability later?

This is what I would do if I were heavily invested in the expensive western AI industry:

1. Begin promoting that China’s AI model is great, but it can never reach AGI. It can always be cheaper and do things a little less than the best, but we’re not trying to just create large language models to chat with you. We’re trying to reach Artificial General Intelligence where AI is completely indistinguishable from a human’s way of interacting. We’re so close! Look at how far AI has already come! And it’s exponential! But we still have more to go. Once there, the real fun begins. That’s the narrative I’d focus on very heavily. Compute needs are only going to rise from here, not decrease.

2. What’s the real fun? Putting it into robots. That’s where AI has limitations. AI is stuck inside of a computer with no sense of touch, sight, smell, sound. It doesn’t actually interact with the world so it is unable to derive context with things in the world. We need to start incorporating robots into the AI future because this is the necessary next step for AGI.

3. Fear Monger an arm’s race. If you do not keep up with the advancement of AI robots, your world will be taken away from you. If you are a government, you will not have an army. If you are a company, your workers will be obsolete competing against AI machines. If you are an individual person, you better brace yourself and develop skills for an AI future.

Therefore, the only way for the Expensive Western AI Industry to recover from China’s AI Model’s challenge to the AI Narrative is to begin pressing heavily into AI robotics. (Check out BB and ROK).

Will things actually play out this way? I don’t see how the players can do anything else. The game of Tech is to grab money and develop something. If the thing you develop is amazing, great! If not, grab more money to develop more things. Keep grabbing money until something is developed that changes the world.

This is a haphazard path towards growth. It’s why Market Participants from long-term investors to short-term traders disagree so much. It’s what creates market volatility.

Market Position, not Future Prediction

The market was pricing the AI industry to perfection. When it stopped wanting to price it that way, the news media blamed whatever they could find. Since the market is not flashing Danger! Danger! With respect to market liquidity, this seems like a natural correction to allow capital to flow to other areas of the economy.

The market will begin to position itself to a doom narrative with regards to AI. When that happens, it will be a good time to buy up the right sort of AI stocks because the AI Industry will begin to hype up the next cycle. That’s how they get you to click. But it’s not how you make money unless you understand the relationships I discussed above.

I hope you enjoyed today’s article. Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop an explanation of what is driving the price action. Then we derive market lessons to help us become better traders.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Megacap AI led, small caps lagged driven by renewed bullishness on Data Center narrative on SK Hynix’s IPO

• Oil Shock without the usual safe-haven reaction

• Market Lesson - Deep Dive into Memory Chip Industry

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Indexes

S&P 500 and Nasdaq 100 outperformed Dow and Russell 2000 suggesting large megacap names outperformed the rest of the market. This is corroborated by the observation that the Equal Weight counterparts were largely flat for the week.

What drove the Megacap winners?

SK Hynix (SKHYV) IPO’d on 7/10 with a CEO comment that he expects the memory supply shortage to extend beyond 2030. This provided further support for the AI infrastructure trade is still strong and that high margins would continue for memory components.

META also had a standout week, jumping 15% for the week. Bank of America Maintained its buy rating and said an internal memo reviewed by Reuters suggested that META was potentially improving its Artificial Intelligence cost structure. This is a continuation of last week’s announcement of META selling excess compute, allowing the market to re-rate them as they shift their AI strategy.

IWM was comparatively weak due to continued concerns of rising oil prices and inflation leading to Fed hikes. Thus, capital fled back to the Megacap AI Infrastructure narrative.

Industries

Energy and Technology Performed well this week. The drivers for technology were discussed above so it will be best to review Energy.

Oil rose this past week due to renewed US-Iran hostilities threatening flows through the Strait of Hormuz. Brent was up over 6% with WTI around 5% this week. Traffic slowed from attacks on Qatar-owned LNG Tankers with retaliatory Iran strikes on Bahrain and Kuwait. Trump subsequently declared the peace agreement “over” at NATO which led to a rise in Crude Oil Prices.

Note, this war premium is overwhelmed by the bearish news supply with announcement of OPEC august production increase and an unexpected build in US crude inventories. To learn more about Drivers of Crude Oil, check out my 5 part series starting here.

Materials did poorly in the past week which is the flip side of the tech/energy leadership. Rising Oil prices lead to higher production costs directly affecting the bottom line, But they also cause concerns of inflation and Fed Rate Hikes. Smaller cap growth names tend to be more sensitive to these interest rate concerns since most of their earnings are expected in the future which are discounted more heavily. This double impact has caused the Materials sector to underperform for this week.

Bonds

Bonds were down for a week with longer-dated bonds selling off. This was driven by the higher oil prices leading to concerns of inflation and a hawkish Fed discussed above. Note that High Yield corporate bonds were flat, suggesting that this downturn was not a credit event.

Commodities

Oil was the biggest mover for this week for the Geopolitical issues discussed above. Further uncertainty with the US-Iran conflict was superimposed on top of rising oil inventories suggesting that demand is softening underneath the supply chain chaos.

Bitcoin rose 4% for the week during a time with an oil shock and bond selloff. Analysts attribute the gains to leverage-driven short-covering, a weaker dollar, and the powerful AI stock rally rather than anything specific about bitcoin. Whether this is a bottom remains to be seen.

Natural Gas declined more than 8% this week with a > 3 STD move versus the other assets. The driver is that EIA storage report showed a 61 Bcf injection for the week which was well above the 49-51 Bcf analysts were expecting. This is a supply-gut story with no geopolitical component. Furthermore, Freeport LNG announced maintenance at its Texas facility starting 7/10, threatening a temporary drop in export demand.

It was notable how Gold was flat even with the geopolitical news and oil shock. What should have resulted in a safe haven flight to safety move ended up being not too concerning. Therefore, it would suggest that the overall price action has more to do with concerns of yields (oil prices, inflation, higher interest rates) rather than geopolitical fear.

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Market Lesson for the Week

The biggest movers this week has been about the AI Infrastructure Narrative with SK Hinix (SKHYV) Memory Chip Manufacturer IPO and Geopolitical news on US-Iran tensions.

I’ve talked about Understanding the relationship between Geopolitical concerns and Oil Prices in a 5 part series. Check it out:

1. How to Get Exposure to Oil

2. How to Track Fundamentals of Oil Supply and Demand

3. The Macro Regime that Underpins Oil prices

4. Momentum and Technical Indicators

5. Geopolitical Concerns

For today’s market lesson, I wanted to go deeper into the Memory Chip Shortage that is driving the current AI Trade.

To start, we should review the overall AI Supply Chain:

Materials > Components > Hyperscalers > AI Models > AI Services > Society

I go into more detail here about the nature of the supply chain and how bottlenecks work.

The bottleneck we will be talking about today is the Memory Chip Shortage which will be in the components part of the supply chain.

The Role of Memory in AI and LLMs

Modern AI accelerators (like NVDA’s GPUs) depend on High-Bandwidth Memory (HBM). This is a 3D-stacked form of DRAM that delivers multiples the bandwidth of standard memory. This matters because AI training and inference are bottlenecked by Memory Bandwidth. Why?

The processor’s speed on any given task is limited by one of two things (1) How fast it can do the arithmetic, and (2) How fast it can move the data in and out of memory.

For any computation you do, you have to ask “how many arithmetic operations do I perform per byte of data I have to pull from memory”? This is considered arithmetic intensity and can be measured with a ratio called Floating Point Operations per second (FLOPS). When the ratio is high, you can do a lot of math on each byte of memory. Therefore, if you want to do more processing, just improve the power of the processor doing the arithmetic. If it is low, it means the processor is constantly waiting for the memory to deliver the data so the memory becomes the bandwidth.

AI Inference models, more specifically LLMs have low FLOPS (arithmetic intensity). When an LLM generates text, it produces one token at a time. Each token depends on the one before it. To produce the next token, it feeds a representation of the most recent token, and then the next token, and then the next token. Waiting for the LLM to process the next token is essentially the same as waiting for the memory to deliver the data to the LLM. Since the LLM processing is done for every token, the bottleneck has become the memory.

Challenges with Production

The above demonstrates the importance of memory chip technology but it does not outline the true problem. There is a clear need for the technology to advance but the High Bandwidth Memory (HBM) manufacturing process is significantly more complex and resource-intensive than the standard DRAM with lower yields per wafer. Vertically stacking memory dies consumes three times the wafer capacity compared to standard DRAM. This is the “3-to-1 rule” where every HBM ramp cuts the supply of general purpose DRAM.

Samsung, SK Hynix, and Micron control over 95% of the global DRAM production so their decisions dictate the whole market. One could ask, “Can’t they just build more factories?” But it’s not so easy. Modern Memory Fabs cost tens of billions of dollars and roughly 3-5 years to build and bring to volume. Also note that only 3 years ago, the industry had the opposite problem. As the Pandemic PC and PHone boom faded, ordered dried up and DRAM prices collapsed. The manufacturers responded by cutting wafer production. Postponing capital expenditures and shelving expansion plans to contain mountain losses.

Memory has always been brutally cyclical and overbuilding into a boom is exactly how these companies destroyed their own margins. Therefore, the companies have learned their lesson and have been taking a more disciplined approach.

The Game Being Played

Let’s look at the AI Supply Chain again

Materials > Components > Hyperscalers > AI Models > AI Services > Society

Currently, Hyperscalers are funding their Data Centers through debt, equity raising, and current cashflows. AI Models are not yet profitable enough to self-fund their AI computing costs, requiring Venture Capital to Foot the Bill. There has yet to be a clear revenue stream from Society purchasing AI Services due to the benefits promised by the Pro-AI Advocates.

This would make Memory Manufacturers uneasy about ramping up production to meet the current demand. If it dries up because the expectations of AI were too high, they are the ones who are going to experience the pain (among others).

The scenarios are quite Limited:

If Memory Manufacturers increase production, they can either make more money through higher production or completely threaten their business. If Memory Manufacturers maintain production (or increase slowly), they will experience higher margins or business as usual.

• Increasing production means Profit or Bankruptcy

• Maintaining Production means Profit or Business as Usual

Although new competition may arise, that’s a later problem that can be managed without threatening bankruptcy.

Furthermore, consider the environment we are in. Higher oil prices, higher inflation, higher interest rates, geopolitical instability. Is now a time to take big risks?

How to Trade This

This is the price action of SKHY since it IPO’d

This is the price action of NVDA over the past 9 months

I see lower lows and lower highs. The AI Data Center narrative is being challenged for all sorts of reasons.

It’s worth having some level of caution with the AI Data center narrative. If you want to be bullish on the Data Center narrative, you need to see the whole supply chain benefit and grow together. That is what I am going to be watching out for. If you do not see the whole supply chain growing, any individual growth will not be sustainable.

Individual news within the supply chain paints a picture. But the most important piece of the puzzle is Society purchasing AI Services driven by AI models leading to some form of value generation for society that can be specifically pointed to. Until then, the technology being built is still in Beta mode and needs improvements to get to the point of value generation. Who will be paying for the improvements remains to be seen.

When you find the point of value generation, the trade you should make will be obvious.

I hope you enjoyed today’s article. If you like my content, please consider liking and subscribing. Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop an explanation of what is driving the price action. Then we derive market lessons to help us become better traders.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• META announced they will start selling AI compute power, challenging the AI Narrative that compute is short in supply, necessitating heavy capital investment in datacenters

• A weak jobs numbers on Thursday lowered concerns that the Fed may hike interest rates in September

• Analyzing META’s announcements is more nuanced than just a binary decision of “Did the bubble popped or not?”

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Indexes

Price Action for Indexes were interesting this past week. The Nasdaq 100 performed the worst for the day and, surprisingly, the Dow Equal Weight performed the best. This suggests that capital is now flowing from the highly valued AI names into blue chip DOW names in a “Great Rotation” towards safety.

There are a few reasons for this including META’s surprising announcement that they will transition to selling excess compute as well as the jobs report on Thursday that will be discussed below.

Industries

Again, technology performed the worst with both Technology and Telecom with > 2 STD declines for the day led by META’s Announcement of transitioning to selling excess AI compute power capacity. This fundamentally challenges the AI data center narrative that current capacity is limited and the only way to satisfy AI demand is to build more data Centers. When META as one of the major hyperscalers starts selling “excess” compute, the market is wondering what’s really going on in the AI industry. I go further in depth in the Market Lessons section of this article.

META’s announcement is the main story for the week. However, we shouldn’t ignore how Consumer Staples, Health Care and Utilities performed well for the day after the jobs report as part of the risk-off rotation. Healthcare has done well for the month, week, and day timeframes while underperforming YTD. Therefore, it is worth investigating further if there are any healthcare growth names that markets can rush into. UNH and CVS come to mind as names worth investigating further.

Bonds

Bonds did poorly early in the past week as part of markets pricing more than a 60% chance of a Fed rate hike. Thursday’s jobs report had Nonfarm payrolls rising by 57,000 well below the 115,000 consensus and slower than the downwardly revised 129,000 in May with April and May estimates revised lower by 74,000. After the report, Fed expectations of a September rate hike fell from 64% to roughly 50%. This was demonstrated in the 1 day upturn of bond prices but did not overshadow the damage done earlier in the week.

Commodities

Oil continues its downward descent as Hormuz flows surpassed 10 million barrels per day, the UAE restored exports to over 3.9 million barrels daily, and Iranian exports jumped above 40 million barrels following the lifting of the US naval blockade. Positive progress has been made between the US and Iran which is reflected in the price action.

Silver rallied aggressively, contrary to the downturn in tech, as part of the unwinding of Fed rate-hike bets as well as beliefs that inflation has tempered. Gold participated in this boost, albeit, to a lesser extent. However, Copper did not participate as much and was relatively flat for the week compared to the other metals.

Bitcoin also bounced off deeply oversold levels rising 2.56% following the June jobs report miss, bouncing bitcoin back above $60,000.

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Market Lesson for the Week

The most important development is META’s transition to sell excess AI compute power capacity. This is a very big deal that needs to be explained in greater detail so you can make sound decisions about your portfolio moving forward.

META’s Position in the Big 5 Hyperscalers

The 5 big hyperscalers are GOOG, AMZN, MSFT, META, and ORCL. META was the weakest of the bunch because it focused on developing AI on its own for the purposes related to advertising efficiencies rather than selling computing power like the others. The market was not convinced that advertising alone warranted such high capital investment and preferred the business model of GOOG and AMZN.

The AI Thesis

The Fundamental AI thesis is based on the belief that there is a large demand for AI services and, therefore, AI compute. Consequently, this demand can only be satisfied with large capital investment in AI Data Centers. This has been the prevailing narrative to justify large investment from Private Equity, large issuance of stock, borrowing large sums of money, and significant declines in operating cash flows. Thus, if the investment was made, the customer would be ready with a fistfull of cash due to how amazing AI is (and will become). This explains the significant bottle necks and shortages previously in Silver and now in Memory.

The AI Thesis Challenged

META’s announcement challenges the AI Thesis because META should not have excess capacity if (1) AI is so amazing that all processing power needs to be used for AI; (2) META is experiencing benefits from AI to justify the cost of investing in building data centers. The fact that META has excess capacity suggests that either AI is not so amazing and further investment in building data centers is not necessary.

This could certainly be a fault of META alone. Perhaps they are AI losers, their models suck, and their implementation of AI is woefully below the competition to the level of actual incompetence. However, that’s a very extreme view that would need more evidence to corroborate.

It’s more likely that something is going on and many people are calling META’s announcement to be the beginning of the AI bubble bursting.

The Trade

It’s very tempting to think in binary terms when trading. Prices either go up or down. What more do you care about?

I’ve come to appreciate reflecting on the different players to understand how price action could play out. It’s more than just sellers and buyers. Allow me to demonstrate.

The Relevant Participants:

• People holding AI Equities and are long the AI Narrative

• People not yet holding AI Equities (or holding less than what they wish to have), concerned about the potential over valuation

• People Shorting or wanting to short AI Equities aggressively

• People who are undecided

• People in META transitioning their capital expenditures to selling AI compute power

• People finding new competition in this space like CRWV and NBIS

• The Hyperscalers who are planning to spend billions in further Data Center buildouts

• Data Center Component manufacturers (e.g. NVDA, MU, AVGO, CRDO, and more!)

• AI Models - Open AI, Anthropic with a lot of debt

• Private Equity with a lot of debt

• And more!!!

So how do these connect?

It is in no one’s interest to announce the death of AI, even if it is potentially true. META was the outlier since they did not have a cloud service. Now that they are potentially offering to rent out compute, they are potentially in line with the other hyperscalers. However, META has not produced a convincing narrative why the market should not interpret this shift as a sign that AI compute demand is not as high as projected.

NVDA (and other component companies), AI Models, and Private Equity backing nearly the entire industry all have an incentive to spin this in a positive way. They are likely chatting with Zuckerberg right now to sort out what the store is going to be over the wonderful July 4th weekend. At least, that’s what I would be doing if I were any of those actors. “DUDE! We’ll stop making fun of you for your pathetic use of AI just for advertising. Just don’t screw this up for the rest of us! DOOOODDDDD!!!”

What could they say?

• They could focus on how AI is more than just for advertising and that META is not structured to take advantage of that. So diversification of their compute is a good move on a business level (golf clap)

• But they need to then answer for the significant revenue decline CRWV and NBIS will experience when their contracts with META are no longer needed.

• Solution: AI Models could announce taking up all of their compute from both CRWV and NBIS because they created a brand new model that needs it asap. And with more supply, compute is cheaper and we’re THAT much closer to AGI. Woohoo!! THis is just a small speed bump along the way.

• Private Equity breathes a sign of relief.

• Some money will be shuffled to META just to keep them happy. And the AI narrative has been saved!!!

The above is not a prediction but just an example of how things could play out. I write the above to illustrate that the multiple players makes the assessment far more complex than “bubble popped” vs “bubble bigger”. Each of these players have many levers that they can pull to boost the AI narrative. But there are also events that could further deteriorate the AI narrative. When it deteriorates further, the levers the players can pull become less effective.

That is why the psychology of the market participants is so important. Namely

• People holding AI Equities and are long the AI Narrative

• People not yet holding AI Equities (or holding less than what they wish to have), concerned about the potential over valuation

• People Shorting or wanting to short AI Equities aggressively

• People who are undecided

These people are not a monolith and they will have a wide and diversified series of opinions about the subject. These opinions line in a spectrum that is easy to outline as either strong bull or bear cases. However, the trade is acknowledging the space in between and keeping track of the information as price action reveals itself. Easier said than done, of course.

META signaling excess capacity is not good no matter how you slice it. I expect prices to further decline until we hear from proponents of AI pointing to other data points that support the AI narrative. When those positive AI narratives result in further negative price action, keep selling. When negative commentaries about AI begin to hit mainstream media with doom scenarios, going into detail about the level of debt, and how challenging it will be to service this debt (a fact that has always been known by the markets since day 1), then watch for the selling to stop.

When the selling stops after continued negative news (especially negative main stream “analysis” news that begins to pervade every corner of the internet), a couple of things have happened

1. Many People Holding AI would have sold it by this time. They will have gone from holding AI Equities to not holding AI Equities and potentially wanting to return. They also may potentially be in the undecided group.

2. The only ones owning AI Equities at this point are the only ones left that will never sell. They are the high conviction AI holders. They may even start to buy more.

3. People shorting have maxed out their risk limits on the trade. No more shorts to make prices go down more, even in the face of negative sentiment.

When this happens, Shorts will close their position and there will be a sharp rise in AI Equities. Whether this is then picked up as a sign of recovery remains to be seen. The undecided and previous owners begin to crunch numbers, wrestling with both fear of losing money and FOMO. They will then come back based on price action so long as the news-flow remains ambiguous about where the AI narrative is going. Since we’re going into the summer, we may find a light news cycle.

Honestly, this is a fairly difficult concept to share. I’ll probably need to refine it in future articles. But the concept is fundamentally “watch out for news failure” I’ve discussed in previous articles. However, with so many discussions about the ramifications of META’s announcement, I felt it would be best to go into “watch out for news failure” in greater detail, highlighting the psychology of the different actors. I hope you can see how analyzing things this way (in conjunction with the fundamental assessments of the AI narrative), can help you make better decisions on your portfolio.

I hope you enjoyed today’s article. If you like my content, please consider liking and subscribing. Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop an explanation of what is driving the price action. Then we derive market lessons to help us become better traders.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Market rotation from Technology to Defensive Stocks after Open AI delayed its IPO

• Commodities moved the hardest with Silver falling > 10%, Oil falling > 8%

• I discuss the AI Supply Chain and the markets concern of an AI funding gap

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Indexes

The biggest loser for this week has been the Nasdaq 100 with money fleeing megacap tech, AI and semiconductors and flowing into defensives. We find that Market Cap weighted Nasdaq 100 underperformed its equal weight counterpart. Market Cap weighted S&P 500 closed the week at a loss whereas its equal weight counterpart was flat, suggesting that much of the downturn was from Megacaps, in particular, the AI Hyperscalers which has been outperforming the first half of the year.

This comes after the New York Times reported that Open AI will delay its IPO another year, prompting concerns about whether future AI infrastructure spending can be sustained. I will discuss this further in the Market Lessons section below.

Industries

The industry’s view shows that money fled from Technology to Healthcare and defensives like Utilities and Consumer Staples. This is a classic sector rotation from high risk assets to low risk assets.

The technology decline comes with the backdrop of inflation concerns leading to higher interest rates. However, PCE came in line at 4.1% and oil prices are dropping as US-Iran negotiations progress. With MU reporting positive Q3 2026 one would have expected the AI Data-Center narrative to continue. However, the IPO delay from Open AI that was due to SPCX’s IPO’s poor performance caused significant concerns that funding may be running out. When positive news leads to negative price action, one needs to pay very close attention because it signals all the bullish opinions are in and there are no marginal bulls willing to buy at higher prices.

Healthcare was up roughly 8% for the week. It has been a laggard YTD at only 3.58%, suggesting it was deeply under owned in portfolios. Biotech lead gains in Healthcare along with Pharmaceuticals and Healthcare Services. When you can’t find growth in tech, there’s always the possibility of a drug discovery making big gains.

Real Estate benefitted from the tech selloff as the market sought cash flowing assets over speculative growth. Real Estate has been having a low correlation to the AI trade for the past year making it a good addition to balance risk in a portfolio. Furthermore, the in-line PCE and declining oil prices supported the narrative that inflation, although high, has peaked. If talks of a recession begin, we can expect rates to decline drastically with Real Estate being the primary beneficiary down the line.

Utilities also gained in the past week due to the sector rotation from Tech to defensive names. However, the added benefit is the expectation of declining oil prices leading to lower costs for Utility companies, making it a solid addition to a portfolio during these volatile times.

Bonds

Treasuries were flat for the week after an in-line PCE print, suggesting the market has priced in the fears of inflation and interest rate hikes. Corporate bonds were also flat but high yield bonds were slightly down. This should be watched as concerns of creditworthiness is one of the early signals of a larger more widespread downturn.

Commodities

Commodities were the biggest movers for the week along with Tech. Silver down > 10% with Oil down as well. Bitcoin continues to decline.

Silver’s > 2 STD decline was the largest risk-adjusted move related to the tech selloff. This was a combination of the tech selloff above, rate hike odds at 83%, and a stronger dollar which led the outsized move. Silver’s pivotal role in semiconductor production and the AI Datacenter build out made it a primary target to sell after its meteoric rise at the end of last year.

Oil declined > 8% for the week as the Strait of Hormuz transits accelerated following progress towards a US-Iran peace deal. Gulf exports have been restored towards 75% of pre-war levels and Saudi Arabia began loading tankers at Ras Tanura signaling a major regional output ramp. However, progress remains tenuous as during the writing of this article as the US and Iran have begun strikes yet again, blaming the other for failing to adhere to the ceasefire agreement.

Bitcoin continues its decline with a > 1 STD move for the week due to being caught in the broad risk-off tech sentiment. Bitcoin does not provide cash flows, tech is being disfavored, capital is seeking to de-risk into cash, and the price action of Bitcoin is downward. These factors lead Bitcoin to underperform the market.

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Market Lessons

We need to have a serious discussion about the AI Data Center narrative. It has been an evolving theme this year. Your view will significantly influence how you manage your portfolio and whether or not you are successful.

I’ve discussed AI in previous Price Action Week-in-Reviews in the past. This is an overall summary of those article:

• 5/3/26 Concentration in AI - I outline the major hyperscalers and the magnitude of their proposed spending. I discuss my concerns about the AI Data Center Supply chain as overall economic growth is concentrating into merely AI Data Center spending.

• 5/10/26 AI Observations - I acknowledge that the AI Data Center buildout is going exponential, despite my concerns. I outline my strategy to take advantage of it which includes becoming more bullish when confirmatory observations support the AI narrative. These observations are ones outside of earnings calls, company statements, and hype articles. They focus on observing the growth of AI and its impact in the real world.

• 5/31/26 AI Supply Chain - Here, I go deeper into the AI Supply chain. I talk about bottlenecks within the supply chain that can bring outsized returns for the AI Datacenter buildout narrative. The next step that is needed is AI Services to start producing value.

Funding the Supply Chain

To start off, I want to outline the AI Supply Chain again:

Materials > Components > Hyperscalers > AI Models > AI Services > Society

In my previous article, I talk about how the hyperscalers are spending an exorbitant amount of money to build out the AI Data Centers. The funding for these data centers can only come from (1) Debt; (2) Equity; (3) Current Cash Flows. When these are threatened, the AI Data Center narrative begins to weaken.

Debt is under threat from concerns of rising interest rates in the future, alleviated by oil prices going down, possibly leading to inflation declining and a more dovish Fed in the future if the economy begins to show signs of weakness. Equity Offerings happen but they dilute current shareholders. Finally Current Cash flows aren’t being generated from Data Centers. It is being generated by the core businesses of GOOG, AMZN, MSFT, META, ORCL. There is an expectation in the future that once the Data Centers are built, the AI Models will start running, powering AI Services, and Society will pay money for this new technology as it increases productivity.

For today’s article, I want to focus on the relationship of the AI Models to the Supply chain and explain why Open AI delaying the IPO is such a big deal (potentially threatening the entire supply chain).

The Problem with the Numbers

Open AI and Anthropic are the largest AI Models and they intend to rent out compute from data centers once built. They’ve promised this through purchase commitments

Open AI’s purchase commitments:

• Oracle roughly $60B a year for 5 years ($300 Billion Total),

• Microsoft Azure - $250 Billion

• Amazon Web Services - $38 Billion

• Coreweave - $22.4

• Total of $610 Billion

*Sam Altman cited $1.4 Trillion in total infrastructure commitments over 8 years

Anthropic’s Purchase Commitments

• Amazon Web Services - Over $100 Billion to AWS over 10 years

• Google - $200 Billion over 5 years

• Microsoft Azure - $30 Billion

• Total of $330 Billion

The logic is that the AI Models are amazing and will soon be getting a lot of Revenue to fund these commitments. The Revenue will come from companies seeking to provide AI services powered by the AI models. These AI services will provide various offerings to society. Therefore, Society will fund the near $1 Trillion bill ($610B + $330B = $940 Billion).

Anthropic reported a $37 Billion annualized run rate as of mid May 2026 and Open AI reported a $25-$33 Billion run rate in 2026. The story is about hypergrowth of Revenue with the companies still reporting losses. Critics of the Revenue numbers say that the “annualized run rate” can be manipulated as it is calculated by taking one week of Revenue and multiplying it by 52 weeks. Therefore, the AI model can offer a month of free services, add more subscribers, use them as potential revenue in the future, and claim hypergrowth when no money actually reaches the AI model.

This matters because the money being spent by the AI models for compute is currently from venture capital. To continue moving forward, more funding will be needed. If Cash flows from customers (society) is not currently available, the only thing left is Equity and Debt. Private Equity has already invested roughly $185-$190 Billion to Open AI cumulatively and $125-$132 Billion for Anthropic. The total amounts to $310 - $322 Billion. With Nearly $1 Trillion of compute spend committed, the shortfall of $700 Billion needs to be filled.

The hope was for Open AI to issue its IPO, opening a new avenue for funding. This comes with the backdrop of threats of inflation and higher interest rates, making debt unattractive. However, with the IPO delayed another year, the market is concerned the entire AI Supply chain will fall apart.

The Big Take Away

Let’s review the AI Supply Chain once again:

Materials > Components > Hyperscalers > AI Models > AI Services > Society

Money is not yet flowing through from Society to AI Services. AI Models are reporting an annualized run rate of about $70 Billion ($37B + $33B = $70B). However, the annualized run rate runs into criticism of being manipulated. Therefore, the Supply chain is being held up by AI Models paying Hyperscalers for compute funded through Private Equity. The Supply Chain needs to be completed with society paying for the AI services being offered.

With all of that, this is the big Market Lesson for the week:

To play the AI Data Center Buildout narrative, you need to have a clear understanding of the game being played and the risks involved.

The market constantly has 2 narratives playing: The Bull case and the Bear case. At any one time, one case takes over while the other one is threatened. However, all of it can reverse on a dime based on developments. If you do not know both the Bull Case AND the Bear case, you will not understand the fundamental importance of various developments.

Bull Case

AI Hypergrowth is real and it is only matter of time for a great product to exist that will hyperscale the revenue of the AI models to fund the Data Center Buildouts. The current reported revenue totals around $70 Billion but let’s say it’s $100 Billion. If this continues to grow exponentially, the $1 Trillion commitment is easy to manage. Let’s not forget that this revenue growth is exponential. It could easily double in a couple of years to $200 Billion and the services being offered is easily a $1 Trillion industry. The growth is real because the service is groundbreaking and all of that money can be easily be spent on compute. WHen it comes to profitability, a balance between compute costs and AI Service demand will emerge.

Bear Case

AI Hypergrowth isn’t happening because AI Services overpromised and underdelivered. There are currently no AI Services that are worth the $1 Trillion commitment for culture compute. When AI is involved, it makes big mistakes, makes actual workers slower, and the gains in efficiencies have not been clearly demonstrated. AI needs more development to get to the point that AI proponents claim which means more funding. Private Equity is already > $300 Billion into investing in Open AI and Anthropic, but has invested far more in the overall AI Supply chain. They’re tapped out. Debt is becoming more expensive through inflation and higher interest rates. And the most recent update is that the IPO route is being delayed for a year. AI technology is great but too expensive for society and won’t be profitable for a very long time.

My Case - And How I Play It

I believe AI models are great summarization machines and useful to digest large amounts of data into manageable formats. It is not intelligent, it does not have a theory of mind, it is not able to think the way humans do. If we treat it more than a summarization machine, it will always fail us. But if we understand its limits, then it can be useful, but the usefulness is limited compared to the promises of Artificial General Intelligence.

I don’t claim to know what will happen in the future with AI. I’m not an AI expert, nor am I computer scientist. I’m a psychiatrist who trades the market and my edge comes from understanding market psychology.

Bull and Bear narratives take over the markets depending on the most recent news. Right now, the news is that Open AI is delaying their IPO which is counter to the narrative of hypergrowth and ability to fund. The market is drying up with respect to areas of growth and cheap debt. This Bear narrative will continue…until it doesn’t.

When it doesn’t, it will become a Bull narrative. When will it become a bull narrative? I don’t know when, but I know what it looks like. I spoke about it in my previous article on Market Psychology.

Markets do their own thing and they consist of many different participants. The ones that are Bullish buy and the ones that are Bearish sell. If everyone that is Bullish on a narrative bought into the narrative, the only way for the price of that narrative to go higher is to convert the current Bears into Bulls. If this does not happen, the price cannot go up, regardless if the narrative remains true.

That’s what happened when MU released its Q3 2026 earnings. Higher Revenue, EPS, Margins, and projections. But the AI narrative gets slammed by Open AI’s delay of IPO. There are no more buyers right now and the market is de-risking on technology in favor of other areas that were underloved the past year.

This is called a news failure and it is a powerful tool to understand which constituents are driving the market. When you see news failure, you have to let go of fundamentals and trade the price action. When the narrative begins to turn, some bulls turn into bears. This continues until negative news no longer causes the price to drop further. That’s when you know you’ve exhausted all the Bears. The cycle then continues.

However, to do this, you need to understand what news matters. You can only do this by understanding the problem at hand. For the AI Data Center Narrative, it is the fragile AI Supply Chain. The problem outlined above is a funding issue.

If funding is the biggest factor, then issues about NVDA creating a new chip (that is more expensive), components becoming more expensive, increased hyperscaler spending projections won’t be helpful. We want to see increased revenue for AI Models and/or AI Services. There needs to be a $1 Trillion value from society fed into the system. Until then, the AI bet needs to be funded with either Debt or Equity.

When you understand this, you can watch for shifts in society and place your bets accordingly. When the Bull narrative runs, I plan to buy. When the Bear narrative runs, I plan to sell and short. When there are news failures, I begin to reverse. I continue to observe the world around me for corroborative evidence of either narrative.

I hope you found this helpful. If you liked my content, please consider liking and subscribing. Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop a theory of what is happening in markets. From that theory, we deploy capital intelligently to manage our money on our terms.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Oil collapse drivers the week after a potential US-Iran peace agreement

• Hawkish Fed with new Federal Chairman Kevin Warsh holding interest rates at 3.5%-3.75%. However, the dot plot turns hawkish

• I go deeper into how to understand and keep track of FOMC policy meetings

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Indexes

Two major events drove markets this past week. The first was the de-escalation of the US-Iran conflict (still ongoing) and the second was the first FOMC meeting with Kevin Warsh as Federal Reserve Chairman.

Brent fell over 10% for the week as investors welcomed the US-Iran interim peace agreement. Tankers carrying stranded crude began exiting the waterway and Kuwait said it would increase production. The expectation is that a conclusion to the war would decrease inflation and need for interest rate hikes.

The Fed held its benchmark rate at 3.5% - 3.75% with a unanimous 12-0 vote. However, the dot plot turned hawkish with the 2026 median rising to 3.8%, implying a hike. Policy makers pushed rate reductions into 2027 to 2028 as they weighed risks of continued inflation and raised inflation outlook to 3.6% headline and 3.3% core.

The Nasdaq and Russel 2000 made the biggest gains for the day on Friday with continued news of a possible peace agreement. The rebound was concentrated to larger market cap names as the recoveries benefited the market-cap weighted indexes more than the equal weight indexes. This is likely due to the concentration of Capital intensive AI investments being made by megacap companies requiring more borrowing in the future, making them more sensitive to interest rates than typical.

Industries

Technology performed the best with the market song with industrials with energy being the biggest loser for the week. This comes off the heels of decline in Oil from a resolution to the US-Iran conflict. The Thursday of trading showed a risk-on framework with Technology and Consumer Discretionary having a > 1 STD to the upside move while Consumer Staples, Health Care, and finance had a > 1 STD move to the downside.

This price action can be explained with the developments of the US Iran conflict as well as the FOMC meeting.

Bonds

Bonds improved for the week which suggests that the hawkish Fed signaling possible rate increases and projecting higher inflation was overshadowed by promises of a peace deal possibly over the weekend. The expectation was to have a meeting on Friday 6/19/26, however, that meeting was postponed/canceled (the media seems to be using the word “scrapped”), leaving developments uncertain.

The bond market appears to believe that much of the inflation is being driven by high energy prices so once the source is identified, inflation will be managed and interest rates will not need to rise to combat it.

Commodities

The biggest movers was oil with Oil falling roughly 15% for the week with a > 3 STD move based on the developments discussed above. Notably, metals gained for the week with Copper and Silver rising as consistent with the risk-on theme. However, Gold makes a counterintuitive upward move as well, likely related to decreasing bond yields making gold more attractive having a more significant impact than a risk-on sentiment from US Iran de-escalation. Bitcoin follows the same risk-on sentiment, after suffering significant losses YTD.

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Market Lesson for the Week

The theory behind the Price Action of Asset classes is fairly simple. US Iran potential peace deal overshadows FOMC’s hawkish tone since rising oil prices are driving FOMC’s hawkish tone.

I remember when I started trading, I would listen to a lot of people talk about markets, the economy, and politics. I felt so smart listening to podcasts, keeping up to date with news articles, scrolling through social media about people’s opinions on what would happen next.

Then I learned I wasn’t so smart. I was just wasting my time.

We learn about markets through social media. Sometimes we’ll get a morsel of a connection, an explanation of the chaos. If we’re lucky, we’ll go to school to understand economic theories, financial structures, and even run through some simulations and case studies! Woohoo!

However, as I grow with my time in substack, I’ve come to realize that I wish someone would have explained things more cleanly. More specifically, I wish someone would have saved me time, cut out all the excess jargon, and explained how the Federal Reserve works specifically for the purposes of trading.

Don’t get me wrong, there are a lot of people out there who are really great, expert economists on how markets function, financial experts who understand the inner plumbing of the Federal Reserve far more than I could ever try to understand in my lifetime.

But I just want to trade. I want to trade to make money so I can live the life I want to live. I have a full time job as a doctor and I don’t have time for things that doesn’t affect the bottom line. This isn’t a hobby. This is a means to improve my life in a way that my 9-5 can’t. It’s a means to help me manage my money on my terms.

So, as the saying goes, “Be the change you want to see.”

If you’ve read this far, you’ve probably more intelligent than the average person about this matter. However, if you give me a chance, I hope you appreciate the simplicity of how I plan to explain the Federal Reserve in a way that is hyper-focused on trading so you can spend more time on the things that truly matter in your life.

Brain Meets Wealth Primer on the Federal Reserve

(1) What does the Federal Reserve do?

The Federal Reserve (the “Fed”) is the central bank of the United States. It sets monetary policies to ensure that the country’s money and banking system is healthy. It can set interest rates which is the rate that banks can charge to each other for overnight loans. It is essentially the “cost of money”.

When the economy is weak, the Fed tries to cut rates to make money “cheaper”. This expands the amount of money available by making lending and borrowing cheaper and easier. When prices are rising too fast (inflation), the Fed then increases interest rates.

The Fed also supervises and regulates banks. They act as a “lender of last resort” stepping in so the system doesn’t seize up. It operates the plumbing of the payment system such as clearing checks, moving money between banks, issuing physical currency.

The Fed also has other tools at their disposal. But that’s a discussion for another day.

The Fed’s main objective has been (1) Maximum Employment and (2) Stable prices. Maximum employment is defined as “as many people who want to work should be able to find jobs”. But Stable Prices is a more specific target of 2% inflation over the long run.

(2) How to Keep Track of the Fed

The Federal Reserve has a Federal Open Market Committee (FOMC) which is a group inside the Fed that votes on interest rates. They meet 8 times a year which can be tracked in this calendar: FOMC Calendar

There are essentially two things that matter in every FOMC meeting

• The speech the Federal Reserve Chairman makes

• The Dot Plot

Federal Reserve Chairman Speech

When I started, I used to think that the speech was just a speech. However, it’s actually more methodical than that.

The Federal Reserve Chairman Speech is a structured templated document that changes incrementally. The changes you see from today’s speech versus the last meeting’s speech tells you everything you need to know about the policy of the Fed moving forward. They have the following categories:

• Open Economic Assessment

• Forward Guidance

• Balance of Risks

• Vote Tally and any Dissents

You can find a transcript of the speech by going to the FOMC Calendar, clicking the Press Conference link, and then finding the transcript there.

The Dot Plot

Every year, there are “Summary of Economic Projections” that comes out of the FOMC meetings in March, June, September, and December which is four out of the 8 meetings. Within the “Summary of Economic Projections”, there is a Dot Plot which each Fed policymaker (the Governors and regional Fed presidents, about 18-19 people) anonymously mark where they think the federal funds rate should be at the end of the year, the next couple of years, and over the “longer term”. Each person’s view is a single dot. When you stack those dots on a chart, with interest rates level on the Y axis and time on the X axis, you get a scatter of dots showing the whole committee’s expectations.

Here’s the most recent dot plot:

However, to understand what is going on, you need to compare it to last quarter’s Dot Plot

Here, we see that in March 2026, the scatter plot was below 3.75% for 2026 and remained below 4% for 206 and 2028 with longer term below 4% as well. However, the most recent update shows that the 18-19 governors have raised their expectations with many of them believing that rates need to be higher either in 2026 or 2027.

Therefore, it’s not just a question of whether rates go up or down now, but rather, a question of what the Committee believes as a cohort. If they’re all in agreement, we can have more certainty in the future, but if they are in disagreement, it builds in risk of what interest rates will be in the future.

(3) Between the Fed Statements

This is the part that people allude to but they don’t say explicitly, especially when it comes to trading.

People can trade the FOMC meetings by placing a bet prior to the meeting and coming out a winner (or loser) after the meeting. However, a lot of the expectations are built in based on the economic data that develops between meetings. The economic data is directly related to the Fed’s two goals of (1) Maximu Employment and (2) Price Stability.

Therefore, the economic reports that are the most critical fall into the following tiers:

• Tier 1 - Jobs Report, Consumer Price Index, Personal Consumption Expenditures

• Tier 2 - Retail sales, ISM Services, Jobless Claims, JOLTS

• Tier 3 - Producer Price Index, ISM Manufacturing, GDP

This isn’t a hard and fast rule. Priority shifts to whatever the Fed is more concerned about at the moment. If it’s about growth, their policy will hinge on results of ISM Services and Manufacturing, even GDP. However, since we are concerned about inflation, the Fed (and the market by association) is concerned about CPI, PCE, and PPI.

(4) CME Fed Watch - A tool of where the market is positioned

Finally, it’s not enough to simply track and interpret the Fed’s policies with the information above. You need to juxtapose that with market’s expectations. That’s where CME FedWatch comes in handy.

CME FedWatch is a free tool from CME Group that tells you what the market thinks the Fed is going to do in upcoming meetings, expressed as probabilities. CME runs a futures market in federal funds futures. These are contracts whose price is tied to where the fed funds rate actually ends up. Because those contracts are bought and sold by people putting real capital at risk, the prices embed a collective forecast of future prices.

Fedwatch takes these pries and converts them into plain-English Odds for each upcoming FOMC meeting. This is how it looks:

Clicking through the various areas will give you the market’s pricing of expectations for the different FOMC meetings.

(5) Trading is about Consensus vs Reality

Trading on Federal Reserve Policy is a three step process:

1. Understand what the Federal Reserve is doing

2. Understand what the Market Believes

3. Determine whether you agree or disagree

If the market has an overwhelming consensus and you disagree, there should be a very strong Reward to RIsk ratio baked in for you. If you agree, there could also be cheap insurance to protect your book if there’s a part of you that believes something unexpected might happen.

Trading around Federal Reserve Policy is not just about identifying whether the Fed will cut or increase interest rates. It’s about understanding the market’s position relative to the statements made by the Fed about their policy.

I hope you found today’s Market Lesson interesting. If you’re interested in me going deeper on how to trade FOMC meetings or how to structure your portfolio around FOMC policy, let me know in the comments and I’d be happy to write more about it. If you’ve enjoyed my content thus far, consider liking and subscribing. Until then, Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop a theory of what is happening in markets. From that theory, we deploy capital intelligently to manage our money on our terms.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• A potential peace deal drove price action this past week with Oil prices down and concerns of Inflation leading to higher interest rates easing with it

• The AI de-rating continues from Friday of last week as part of an overall flight to safety rotation

• Market Lesson for the week will discuss understanding how market psychology is not a monolith

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Indexes

There were two big market drivers this past week. The first had to do with hopes of a peace deal between the US, Israel and Iran. The second had to do with the AI/semiconductor de-rating that began the prior week, a sell-off triggered partly by AVGO’s failure to raise AI chip outlook.

Notably, CPI and PPI were released this week. CPI Inflation was lower than expected at 3.8% with the market expecting 4.0% and Core Inflation at 2.8% with the market expecting 2.9%. PPI came in at 6.5% with the market expecting 6.8% and Core PPI coming in at 4.9% with the market expecting 5.3%. Surprisingly, PPI Ex-Food, Energy, and Trade was higher than expected at 5.1% with the market expecting 4.4%.

However, the effect of the CPI and PPI print were dwarfed by Trump’s announcement of canceling Iran Strikes scheduled for Thursday 6/11 which resulted in talks of a potential peace deal thereafter.

The market-cap weighted indexes fared worse than their equal weight counterpart with the Nasdaq experiencing the worst decline for the week versus the other indexes. This is due to the fact that the AI/Semiconductor narrative is driven by large Megacaps. When AI does well, Megacaps outperform and when they do poorly, they underperform.

Industries

The biggest winner for the past week has been Consumer Stapes and healthcare as part of the flight to safety. It is also important to note that Real Estate and Financials did better, likely due to the prospect of a peace deal leading to lower risk of inflation and, thus lowering interest rates.

Technology and Telecom did the worst as part of the AI/Semiconductor de-rating that began Friday of last week.

Bonds

Bonds performed better this past week due to the prospects of a peace deal sharply lowering oil prices, leading to lower risk of inflation and decreased need for the Fed to raise interest rates. Longer term treasuries were affected more than shorter term treasuries which is consistent with an easing inflation narrative.

Commodities

The potential peace deflated the entire commodity/inflation premium complex with Oil, Gold, and silver declining > 1 STD for the week and Oil declining > 3 STDs for Friday. The logic is simple. No more war means the Strait of Hormuz will open and Oil supply can meet Oil demand afterward. This will lower the price of oil and reduce inflation fears. The Fed, as a result, will not be as pressured to keep interest rates high to fight off inflation.

Bitcoin is flat for the week, signaling a pause of the > 3 STD decline for the past month. Whether this is the beginning of a reversal or merely a pause in selling remains to be seen. I detail the major drivers of the decline in last week’s Price Action Week-in-Review. So check it out if you’re interested to learn more.

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Market Lessons for the Week

The main drivers of price action for the week is quite obvious based on the promise of an end to the US-Iran conflict. The rationale of lowering Oil Prices reducing inflation and interest rates has already been discussed above as well as the last couple of weeks.

For today, I felt it was a good opportunity to talk about a rather complex concept about the psychology of markets. I believe given the simplicity of the developments of the week, it would be a good time to do so as it can help you understand how markets work on a deeper level and improve your trading.

Markets are not a Monolith

A lot of the time, market commentators tend to refer to markets as an entity of its own. “Markets reacted to X” or “Markets were volatile” or “Markets shrugged off…” I’m guilty of this as well. This particular way of phrasing things is helpful in a linguistic sense to get a point across. The price of the thing you care about went up or down for X, Y, Z, reasons.

However, I’ve come to learn that this is a very deceptive way of understanding what is happening in the world, especially in markets. Markets do not behave like a Monolith where every participant is thinking the same thing. Quite the opposite. Markets are filled with a diverse group of participants. There are scalpers, algorithms, swing traders, momentum traders, investors, institutions, pensions, insiders, etc. They all have different motives, goals, and perspectives. When they fiercely disagree, we can have high volatility with major swings. When their opinions about an asset’s price converge, we get a consensus which builds until something changes which creates a violent move to the exits.

This is relevant for our current time because Trump’s handling of the Iran Conflict (and the broader economy) is a polarizing topic. Some people believe he is doing a good job whereas others believe he is doing a poor job. However, everyone would likely agree that uncertainty is the only certainty we have. Uncertainty of how Trump will react, what policies he’ll enact, and what policies he’ll actually be able to enforce.

With so much uncertainty, all market participants will be approaching this risk a different way. Based on the economic and market environment, some participants may be driving price action disproportionately compared to others.

A Simple Example

Let’s say there’s a company that is doing very poorly. Revenue is down, margins are lower, and earnings are declining. Everyone knows the company is bad and is not worth the current price. We then see the price of this company go down. Investors stay out, speculators begin to short, algorithms handle the price action on the way down. There might be some swings, some rumors here and there about a turnaround. The ones with deep knowledge aren’t interested. Retail traders might talk about it if it begins to pop up on popular screeners related to finding value.

If the company hasn’t gone bankrupt, it eventually hits a space where the people holding it are holding it for other reasons beyond price appreciation (e.g. insiders, pension funds, etc.).

This is the interesting part. When the company reaches this phase, it suggests that there is no news that could possibly bring the price of the company lower. Why is this? Because everyone holding the company is not holding it for price appreciation. They’re holding it for other reasons. Therefore, when there is more bad news, everyone who wanted to leave has left. Everyone who believed in the company is gone. Therefore, more bad news doesn’t surprise anyone and doesn’t cause any of the current owners to sell.

I want to emphasize current owners. Are they losing money? Yes in unrealized losses growing. But are they selling? No. Why? For reasons. Their own personal reasons related to their strategy. The consensus is the company is bad. But the current owners are holding for reasons outside of profitability and, therefore, the price action of the company changes to just the perspective of those participants.

This is where people become confused. “Why did the stock go up? The news was really bad!” or “Why did the stock go down? It beat all Revenue and earnings estimates!” The reason is because “the market” isn’t a monolith. The people who are driving the price action can have a completely different perspective/strategy compared to the majority of the population.

Why this Matters

This heavily matters during times of great uncertainty and volatility. We are there with the Iran Conflict. Every day is a new update that switches the script on what might happen next. However, there are times when the market moves in contradictory ways. Talk of escalating war is met with new highs in the markets. Or talks of de-escalation results in a minimal reaction from markets.

The price reaction to the news is something that people try to predict. However, it should also be used to assess the market’s positioning. But when we say “market’s positioning” we shouldn’t stop there. We should try to segment “which part of the market” we’re talking about.

Applying this to Now

The S&P 500 has reached new highs compared to the previous high in the beginning of the year. The downturn in the beginning of the year was caused by a mix of factors from high concentration in technology stocks to issues with high valuations as well as the beginning of the Iran Conflict.

This is the key part - Everyone who was concerned about AI Tech, the Iran Conflict, and high valuations left the market. They were gone and for as long as they were concerned, they did not wish to return. However, the market reached new highs by June 2026.

One would say “the market rallied to new highs” or “the market reversed its sentiment”. However, that would be an incorrect way to view it. I believe a more accurate way to view it is the following

• People concerned about the Iran Conflict escalating left and put their money into safety assets

• People concerned about the AI bubble sold technology stocks

• People concerned about high valuations were not interested in buying stocks at this price

What does that leave us with? It leaves us with a population of

• People who don’t believe the war will be prolonged

• People who are bullish on AI Data Center Buildout

• People who are unconcerned about valuations due to beliefs that earnings will catch up in the future

When the market began rallying after the low in Mar/Apr 2026, the next bull run up was led by AI Data Center Buildout and discussions about ceasefires and easing of conflict. Does this mean those people “won”? Not necessarily. It just means they’re driving the market price at this time while those who remain bearish are staying back.

As the bulls drive the market, look at the thesis

• The US and Iran will stop the war and come to a resolution

• AI Data Center Buildout is a 100% Sure Bet and wave of the future

• Valuations don’t matter

And what will shake the bull’s confidence?

• The US and Iran begin to fight again

• Inflation is higher than expected, leading to higher interest rates and potentially stalling fundraising for AI Data Center Buildout

• Investors focused on value will not buy at these levels so there’s no one to sell to. All the Bulls are in.

The movement of markets should be viewed more from a lens of positioning rather than profitability, especially during volatile times where uncertainty is high. This is because different market participants will calculate and estimate different levels of profitability. The ones who are more optimistic will act first, reap the most reward if right but lose the most money if wrong. The ones who are more cautious will reap less reward but will lose less if wrong.

So what’s the psychology of markets now?

• The Bulls are holding the bag

• AI Data Center Buildout Must happen or else absolute disaster will ensue

• People will be aggressively hunting for yield by investigating recovery stories based on Valuation strategies

What to do Next?

As the markets converge into developments of the Iran conflict, it will be more important to talk about market position relative to news rather than the outright bullishness or bearishness of the news. If you see good news leading to negative price action, it suggests all the optimistic people have been exhausted. If you see bad news leading to positive price action, it suggests all the pessimistic people have been exhausted.

Try to avoid viewing the market as one actor. Try to segment the different types of viewpoints. In doing so, markets will make more sense during times of high uncertainty and volatility.

I hope you found this helpful. If you did, consider liking and subscribing!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop a theory of what is happening in markets. From that theory, we deploy capital intelligently to manage our money on our terms.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• NVDA announced new PC processors that lifted Semiconductors

• Energy reversed prior week’s selloff as Iran halted peace talks and renewed Hormuz-closure threats

• Hot Friday jobs report flipped sentiment to risk-off

• Bitcoin was a standout for the week with a > 4 STD move to the downside

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Indexes

The price action for this week reads like two half weeks. Markets front-loaded the AI/semiconductor and Energy into fresh record highs through mid-week. However, it reversed into a sharp Friday risk-off after a hot jobs report created concerns that the Fed will have less reason to consider a rate cut.

We can see that the Nasdaq outperformed the other indexes for the month with > 1 STD move but became the biggest loser for Friday. When we compare market cap weighted to equal weight indexes, we find that the S&P and Nasdaq equal weight outperformed their market cap counterparts. This suggests that the downturn resulted in a concentrated softness in megacaps, reversing their strength in previous weeks.

Industries

The story of two half weeks can be seen in the industry splice of the Price Action Week-in-Review. We find that the outperforming sectors for the week have been Technology and Energy with the lowest performing section being Consumer Discretionary and Communications. For Friday, there was a risk-off rotation which explains the focus on defensives such as Consumer Staples, Healthcare, and Utilities with Technology and Telecom Underperforming. Financials and Real Estate also performed well on the risk-off sentiment, likely due remaining stable in the risk-off rotation from overall underperformance throughout the year.

In Technology, the positive gain for the week was led by the AI hardware surge. NVDA unveiled a new PC processor which led it to climb more than 6%, bringing DELL and HPQ up 10% and MRVL rallied more than 22%. The gains were given back on Friday due to the positive employment report causing markets to be fearful that a rate cut would not happen soon. With inflation currently hot and jobs stable, the likelihood of a rate cut becomes small and the possibility of a rate rise to hold back inflation becomes higher. Higher rates means the large AI Data Center spending plans will become more expensive.

Energy rebounded, reversing prior week’s ceasefire/Hormuz-reopening selloff. Iran reportedly halted all indirect peace negotiations with the US and threatened to fully close the Strait of Hormuz following Israel’s attack on Lebanon.

Consumer Discretionary declined significantly but this is more of a concentration story. Amazon and Tesla are 47% of the ETF that tracks consumer discretionary names. TSLA fell 4.11% Friday amid crypto losses that reduced its bitcoin holdings by over $220 Million, subdued sentiment and rate hike expectations.

Communication Services was dragged by its largest constituent, GOOG which dropped 4% after announcing it would raise $80 Billion from stock sales to fund its AI buildout, including $10B investment from Berkshire Hathaway.

Bonds

Bonds were all negative for the week with longer term and high yield bonds performing the worst. This was largely due to the jobs report where nonfarm payrolls jumped 172,000 versus a consensus of 80,000 with unemployment steady at 4.3% and average hourly earnings up 0.3% for the month.

Yields jumped in response with the 10 year rising 5 bps to 4.534%, the highest since 5/21/26. The 2 year climbed 7 bp to 4.115% and the 3 year popped to 5.021%. The markets priced a 70% odds of a rate hike by the end of 2026 and trimmed the chance of a rate cut at the Jun 16-17 meeting.

Commodities

Crude Oil was significant due to continuing developments of the Iran/Hormuz re-escalation discussed above in the energy section. WTI rose 4.56%, a > 1 STD move but prices gave back some gains on Friday.

However, the big mover this week was Bitcoin, logging its worst week since February with a > 4 STD move versus every other asset class. This is due to a record stream of spot-ETF outflows with capital flows rotating towards hotter trades like AI infrastructure and SpaceX IPO. US Spot Bitcoin ETFs saw an estimated $2.8 - $3.5 Billion of net outflows over 10-11 consecutive concessions. Michael Saylor’s MSTR disclosed that they sold $1.8 Billion in a single day, the latest since Feb 2026. Bitcoin fell from $72,840 to a low of $61,500.

I’m thinking about converting “Theory Time” to “Market Lesson for the Week”. We’ll see how that plays out in the next coming weeks.

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Market Lesson for the Week

Friday’s reversal is a reminder that when stocks have a strong rally, the downturn is usually aggressive as well. This is because consensus builds during strong rallies and when there is even a slight hint of weakness, everyone leaving the exits creates volatility.

It’s too soon to determine whether or not the downturn will continue, grow into something bigger, or just be another “buy the dip” moment. If the markets are hyper-focused on interest rates, the next CPI and PPI reports coming this week will be necessary to watch as the Fed meets the week after (6/16-6/17) to discuss the policy for the rest of the year.

I’m personally reducing risk in tech during this market rotation. If markets bounce back and show strength on Monday, I’ll return. If not, I will look into defensive names that will be strong should CPI and PPI come in hot.

Let’s talk about Crypto

Crypto was the big mover, a break from the past couple of weeks where Crude Oil and AI narratives stole the show. This is a good time to discuss what I believe are the fundamental drivers of the decline as well as what we might expect in the future.

To start, I want to re-cap the Bull Case, the Bear Case, and then go into the “Now Case” for Crypto.

The Bull Case

The Bull case for Cryptocurrencies was that it was a decentralized protocol that would allow people to exchange it to represent value. It was essentially “money” that you can’t debase, or seize. It was something that was scarce (fixed supply enforced by code, not a central bank), that no government could inflate, freeze, or confiscate. Some cryptocurrencies had other protocols that allowed them to be programmable, becoming an ownerless computer where contracts execute automatically and can’t be censored or reversed. The idea is that the block-chain technology would eventually allow any asset to be tokenized and traded this way.

This was the future of Cryptocurrencies like Bitcoin.

The Bear Case

The Bear Case for Cryptocurrencies was that it inherently has no useful function outside of being a medium of exchange. It is also too volatile to be used as a medium of exchange or currency and hasn’t been used as a widespread currency for the past 15 years since its inception. The computational costs are large for what it seeks to do and the decentralization benefit is mostly theater as middlemen are needed everywhere such as centralized exchanges and custodians. Furthermore, there have been many instances where cryptocurrencies were the primary vehicle for fraud and collapse, leading some to believe that pump and dump schemes are a structural part of cryptocurrencies (as they are inherently anonymous), not just an issue with bad actors.

The Now Case

I probably did not do the Bull and Bear Cases justice as a lot of discussion has occurred on Cryptocurrencies since its inception. But I believe it is an adequate overview for what I’d like to discuss regarding what is happening “now” for “The Now Case” that is most relevant to traders.

Bitcoin has been known for going up in value. People purchased it because it maintained value over time. During this time, futures were created for it as well as ETFs. For a period of time, Funds were purchasing Bitcoin Exposure through ETFs and simultaneously shorting CME Bitcoin futures against it. The position was meant to be delta-neutral (no directional view on Bitcoin). What you were able to harvest was the basis (the premium futures traded over the spot price which the fund collects as the two converged into expiration. This was known as the “carry trade” for Bitcoin.

The Carry Trade only works when the annualized basis (premium of futures) is greater than the risk-free rate plus capital costs. As bitcoin fell from > $120,000 to under $70,000, this basis compressed and once the yield dropped below the risk-free rate plus capital costs, the trade is dead and the leveraged fund unwound the Carry Trade. Unwinding means selling the ETF and buying back the short futures. The rising interest rates has caused the risk-free rate to rise, creating a greater hurdle for funds to be in the trade. The recent rate repricing forced a rapid unwinding among funds. Unwinding asymmetrically affects bitcoin because Futures are cash settled but ETFs backed by real Bitcoin are forced to close their real Bitcoin positions when funds sell the ETFs.

The big question is whether the downturn can be completely explained by the unwinding of the carry trade. The reality I see (as a trader) is that people purchased Bitcoin because the price is going up, end of story. The bull case of a future decentralized currency, tokenization of stuff, Web3, blah blah blah didn’t matter. People bought Bitcoin because it was going up. End of story. And, therefore, when Bitcoin is going down, people will sell it because…well…it’s going down.

Bitcoin failed to be a store of value during moments of risk-off sentiment in the markets because the price is going down. It has become a self perpetuating cycle. It’s gotten to the point where even Michael Saylor, one of the biggest proponents of Bitcoin, has to sell $1.8 Billion in a single day to stay afloat.

What happens Next?

This is the Big Question, isn’t it? Except it’s not.

The Big Question isn’t “Will Bitcoin return to previous highs?”

The question I care more about is, “What is the future of Bitcoin with AI and Quantum around the corner?”

The world is investing in AI and, to a lesser extent, Quantum Computing. A lot of discussion revolves around when these two technologies reach their intended destination. For AI, it is Artificial General Intelligence where it behaves like a human would. For Quantum, it’s about whether we unlock the Exponential computing powers of Quantum Computers as promised, breaking free from the limits of binary logical coding. When these two technologies reach their final destination, won’t the Cryptocurrency infrastructure be completely decimated with hacks?

Public-key cryptography rests on math problems that are hard for classical computers to solve but easy for quantum computers. Artificial Generalized Intelligence might not be able to break the cryptography, but it can attack the people and smart-contract code in the crypto infrastructure. Agentic AI could scan smart contracts for bugs, draft explicit code, and execute attacks at machine speed, collapsing the time between vulnerability and discovery. At the very least, the narrative could unfold as such.

As it stands, the cryptocurrency narrative cannot survive alongside the AI and Quantum narrative. The market is pricing for the AI narrative world and can easily exist without using a single cryptocurrency protocol. It is not to say Crypto will go to 0, but rather, Crypto had its day in the sun and if it is a technology that garnered much attention after the past 15 years, it’s potentially becoming old tech with newer tech making it obsolete. That’s how technology works. It’s great and then becomes obsolete.

I believe this is the fundamental driver of the downturn in bitcoin (and the cryptocurrency space). There is more money to be made with the AI Data Center Narrative as well as the Quantum development narrative. The Quantum Computing narrative supports the AI Data Center narrative even though Quantum Computing still has more development to go before becoming commercially viable. Even the space narrative for Data Centers in space is consistent with the AI narrative and can co-exist peacefully with each other. Cryptocurrency, however, cannot. Until it can, people will have no reason to buy. They will not necessarily have a reason to sell but when there are better opportunities, they will so their money can be made elsewhere.

It is a self-perpetuating cycle. The same self-perpetuating cycle that fueled Bitcoin’s rise. It will continue until the hold-forever people have it and people forget about it. Then it will rise again and people will buy because it is rising.

Therefore, I plan to ride the wave down. I will watch when bad news results in positive price action. When that happens, all the bears have left and the only ones holding are perma-bulls. I will then add to my position as the positive price action reinforces itself. During this time, the cryptocurrency narrative will be quiet until it starts gaining traction. Then people will be talking about how Bitcoin gained X% over Y days which will create FOMO amongst retail traders. And the bull market can begin again. This is not investment advice. Just a lesson the market is teaching me today.

I hope you enjoyed today’s article. Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop a theory of what is happening in markets. From that theory, we deploy capital intelligently to manage our money on our terms.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Technology outperforms the market after an in line PCE of 3.8%/core 3.3% and a Q1 2026 GDP revision down to 1.6%

• Crude Oil fell 8% on preliminary US-Iran agreement to extend the ceasefire and ease the Strait of Hormuz shipping.

• With AI data-center spend the dominant driver of GPD and equity valuations, a heavy focus on analyzing and understanding the AI Supply Chain is critical to trading this environment.

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Index

Technology outperformed the other major indexes for the past week. Also, the indexes outperformed their equal weight counterparts as well. This suggests that gains have been concentrated into larger Megacap/AI names rather than a broad based bullish move.

The main themes of the move was the PCE print of 3.8% and core at 3.3%, in line with forecasts, downward Q1 2026 GDP revision to 1.6%, and collapsing oil prices from developments of a US-Iran resolution.

Industries

Technology stole the show as a clear leader with a near 3 STD move for Friday. This was led by DELL up 42% this week (up 32% on Friday) and SNOW up 48% on positive earnings as AI service businesses lifted guidance, completing the AI supply chain.

Energy was the biggest loser, dragged down by crude oil collapse which will be discussed in the commodities section.

Bonds

Bonds gained for the week up from previous declines due to fears of inflation. This is likely due to a rebound from in-line PCE print and declining Oil prices allaying worsening inflation fears, suggesting that inflation and interest rate concerns have been priced in.

Commodities

Crude Oil collapsed ~8% for the week, a > 2 STD move compared to other asset classes. This was due to the US and Iran reaching preliminary agreement to extend a ceasefire and ease restrictions on shipping through the Strait of Hormuz.

Crude collapsed ~8% for the week, >2 STD move compared to other asset classes. This was due to US and Iran reaching preliminary agreement to extend a ceasefire and ease restrictions on shipping through the Strait of Hormuz. Although developments between the US and Iran can happen rapidly, the general trend has been towards resolution.

Natural gas decoupled sharply higher on a smaller than expected EIA storage build of 92 Bcf for the week below the forecast of 95-96 Bcf and under the prior year’s 104 Bcf. It was likely due to a rebound off a depressed base, not necessarily a fundamental regime shift.

Bitcoin declined for the week falling as equities rallied and failed to rebound after the ceasefire developments and risk on narrative took over. It remains one of the poorest performing assets YTD and has not been able to maintain any up momentum that starts.

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Theory

Tech and Energy continue to steal the show as market gains become more concentrated. Q1 2026 GDP was revised to 1.6% from 2.0%. When the GDP print was announced to be 2.0% for the quarter, AI was reported to have driven two thirds of Q1 2026 GDP growth. Now that G It is potentially higher if GDP was decreased to 1.6%.

It is important to face the reality that AI Data Center Spend is the biggest, if not the only contributor to GDP growth and, consequently, rising valuations in the stock market. The society, collectively, has gone all in on AI investments, potentially at the expense of other investment opportunities. With $1 Trillion in AI Data Center investments, it must produce more than $1 Trillion in value for society or else it will have significantly suppressed overall Economic growth.

This is Society’s big AI bet and, therefore, trading is heavily centered on the AI Supply Chain.

I shared my concerns about the AI Supply Chain here. I believe it would be a good time to discuss the AI Supply Chain further to better trade it.

This is the AI Supply Chain:

Materials > Components > Hyperscalers > AI Models > AI Services > Society

Materials like Silver, Copper, Silicon are used to create components. Those components like semiconductors, wires, controllers, colling systems, and even concrete and roofs are needed to build out Data Centers. The Data Centers are being built out by Hyperscalers with the major ones being MSFT, AMZN, GOOG, META, ORCL. The Data Centers then rent out computing power to the AI Models which, for now, are ChatGPT and Anthropic. Finally, Software companies can use those AI models to power their services for Society whether it be individuals or businesses.

Bottlenecks are where prices melt up the most and garner the most attention. Previously, the bottle neck was in Silver. Later became Memory components (MU, RMBS). From time to time, Energy became a bottle neck as well. As AI Data Centers are aggressively being built, the supply chain might not have caught up, causing prices to rise as the Hyperscalers are competing against each other to finish their projects and assume dominant market share.

What’s the next bottleneck? Many people will have different opinions on this. However, I believe the next move up will have to be AI services. Many Software companies were significantly downgraded due to the SaaSpocalypse. But many of those companies are integrating AI to improve their productivity and workflows. SNOW and MDB released earnings with SNOW having an impressive 48% gain for the week but MDB with a less impressive 3% gain. PLTR remains the most popular pure-AI-software momentum play with MSFT and CRM emerging as beneficiaries of offering AI services. NOW is a heavily watched name that has been moving aggressively as it sells enterprise workflow-automation software and repositioned itself around AI branding itself “the AI control tower for business reinvention”.

To re-cap, AI Services is the last part of the AI Supply Chain that needs to show growth for the entire AI narrative to continue. We’re already seeing the beginnings of growth in that area. As the returns are high, the risks are higher as well. Therefore, a heavier focus on risk management will be necessary when trading the AI Supply Chain.

If you enjoyed this article and would like more, consider subscribing and leave a comment below. Until then, Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop a theory of what is happening in markets. From that theory, we deploy capital intelligently to manage our money on our terms.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Risk off continues on structural inflation and Hawkish Fed repricing

• Commodities were the main story driven by US-Iran progress and Philly Fed Shock

• The Market punished growth and rewarded Defensives and Value as a result

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Indexes

Markets were relatively flat this past week. Equal weight outperformed the corresponding indexes which suggests underperformance of the larger megacap names. The Price Action Week-in-Review for Indexes shows us a clearer picture:

Here, we see that growth names were hit the hardest with value names generally flat. This pattern is also seen when you compare names within the Russell 2000:

Once again, we see growth names doing the worst although for the Russel, stocks were down overall for the week.

This appears to be a continuation of a risk-off sentiment discussed last week caused by CPI and PPI running hot, leading to fears of inflation. The confirmation of Kevin Warsh as Fed Chairman further spooked markets due to his hawkish reputation. Now there are concerns of a possible rate hike which have been rising and expectations of a rate cut have been extinguished. CME Fedwatch shows the market is pricing a 4% rate hike by June, 18% by july, 40% by September, 50% by October and 60% by December.

Industries

The biggest winners this past week was in Energy and Real Estate and the biggest loser appears to be in Materials and to some extent Industrials.

Energy gained this past week but appears to have been driven by cash flow names such as Exxon and Chevron rather than a commodity led move as oil declined ~1% for the week. These mature high-cash flow 3.5% yielding defensive names are preferred during a risk-off situation.

Real Estate also gained this past week which is counterintuitive given the risk-off sentiment. However, positive economic indicators supported a rally with housing starts at 1.465M, greater than the forecast of 1.45M and Building Permits MoM increasing 5.8% rather than the 0.5% forecast. Also, Pending Home Sales increased 3.2% compared to the forecast of a loss of -0.5%. The leading economic indicators fared much better than expectations.

Materials did poorly due to the drastic decline in metal prices due to progress in the US-Iran Negotiations and falling oil prices. This will be discussed further in the Commodities section.

The Industrial industry did poorly after the Philadelphia Fed Manufacturing Index was -0.4, plunging 27.1 points in May from 26.7 in April against a consensus of 17.6. This is the most forward looking regional manufacturing read which is why capital left more so than other industries.

Bonds

Bonds told us the macro story for the week. Shorter dated yields were unchanged but the longer end of the curve did poorly, with the 10Y yield hitting 4.61% and 30Y yield hitting 5.13%. This is a continuation of the Post-Warsh Confirmation along with structural inflation driving expectations of higher interest rates.

What should be noted is that credit held up well as corporate bonds did not decline significantly relative to Treasuries and High Yield bonds were relatively flat for the week. This suggests the market is concerned about rate risk and term premium rather than fear of recession.

Commodities

Commodities were the most volatile asset class for the past week and, arguably for 2026 as a whole.

Copper sold off as progress in the US Iran Negotiations lead to falling oil prices, reducing the premium previously paid for the metal. Copper production requires a lot of energy and when oil prices are high, copper miners can shift those costs to customers. When oil prices begin to fall, those higher prices are no longer justified. This combined with the expectation of lower industrial demand due to the Philadelphia Fed Manufacturing decline surprise led to the aggressive downward move in the metal.

Gold also fell due to the increased expectation of inflation leading to rate hikes as gold is a non-cash flowing asset.

Silver often lies between Copper and Gold, as it is both a monetary as well as an industrial metal. So it absorbed two unrelated negative shocks simultaneously. The dual nature works well for silver when both monetary and industrial demand are rising together but when they both become negative, it can become a major liability. Furthermore, Silver’s position was wildly extended to begin with due to the shortage that occurred in the beginning of 2026 led by insatiable AI Datacenter demand. The industrial demand has since declined and there are also developments that may lead to less silver being used for electronic applications.

Oil was only modestly weaker even as US-Iran negotiations continued. This is also likely due to the recognition that the Iran War has made longer lasting damage to supply infrastructure that will take longer than just a day or even a month to resolve itself.

Natural gas was the lone winner this past week. The the biggest driver was a heat wave across the Southern and Eastern US that boosted cooling demand and gas-fired power generation.

Bitcoin with its sharpest weekly drop consistent with the broader risk-asset and precious metals unwind.

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Theory Time

A lot is going on this week but the main driver of asset prices is inflation leading to higher interest rates. This is a continuation of last week’s theme. A hotter than expected CPI and PPI hinted that the rise in prices was not solely due to high oil prices. I spoke about how I believe that inflation has become structural since the tariffs as it has broken the global economic engine previously in place prior to Trump’s Liberation Day. Less efficient production of goods and services means higher prices.

The market sees this and is positioning accordingly. This doesn’t mean that everything will crash into a great recession or depression tomorrow. There are a lot more steps that need to happen before that. It just means that growth cannot come from cheap interest rates until inflation is in control. Therefore, cashflowing assets are preferred over ones that promise earnings in the future. That is why growth stocks did so poorly in the past week.

If you’re an investor, that means shifting to defensive names, preferring dividends for the time being, and re-evaluating your holdings to determine if it is something you want to continue to hold.

If you’re a trader, it means growth is going to be harder to find.

The Economy vs Markets

Traders make money from markets, not the economy. The economy dictates the flow of money that eventually reaches the markets that traders trade.

Just because the economy has a risk of inflation doesn’t mean you can’t make money. It just means you need to be aware of the shifts in perception.

Currently the perception is shifting from an “inflation will die down and interest rates will fall” narrative to “inflation will not die down and interest rates will rise.” That’s a dramatic shift. The market tends to move in extremes when there is uncertainty so it is worth continuing to watch when this shift moderates.

The US-Iran negotiations continue to create uncertainty. I completed a “Drivers of Oil Prices” series to help me work on a solid framework on determining the nature and character of the shifts in perception. I’ve been testing it out for the past month or so and I’m liking the results so far.

AI Data Center build is the only area growing aggressively right now. This is based on high projections of further investment into building out Data Centers for AI services. There will likely be an extreme in sentiment that will fall. And after it falls, there will also likely be an extreme in sentiment as well.

Real Estate has been getting beaten hard but recent economic releases point to a possible beginning of a recovery. Although the inflation and high interest rate overhang limits that possibility, it also suggests that if those issues moderate, Real Estate may be in for a major recovery. Alternatively, the current bounce could result in a correctional decline to continue the downward trend.

These are just a few examples of how to view the current market. Normally, I’d talk more specifics, but I’m a bit strapped on a personal level but hope to pick things up in the upcoming months. In the meantime, I appreciate the support you’ve provided for the substack. I hope you found the information helpful. Let me know if you have any questions in the comments. I would be happy to help guide you in the right direction.

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop a theory of what is happening in markets. From that theory, we deploy capital intelligently to manage our money on our terms.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• The Nasdaq’s outperformance is maxed by an extremely narrow market

• Inflation surprise in CPI and PPI resets rate-cut expectations

• The inflation we are seeing is structural

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Indexes

We find that the Nasdaq pulls out ahead versus the other indexes, driven by continued AI semiconductor performance. When we take a closer look, we find that the gains are staggeringly narrow. The S&P and Russell Equal Weight indexes barely moved for the week, suggesting that the outperformance on the Market-cap weighted indexes is driven by just a few large-cap players.

This can be more easily seen in the Price Action Week-in-Review:

Megacaps outperformed while mid to lower-caps underperformed. The difference is staggering. Wallstreet is treating the Nasdaq 100 as the primary vehicle for the AI infrastructure spend discussed last week. NVDA rallied 20% in seven sessions through May 14th approaching $6T market cap.

Friday took a major turn for the worse due to higher inflation and Hawkish Federal Reserve Chair Kevin Warsh’s confirmation removing hopes for rate-cuts in the near future.

Here are the results of the CPI and PPI for the past week:

From TradingEconomics.com

Headline Inflation was expected to be 3.6% but ended up being 3.8%, higher than expectations with 3.6% already above the 2% target for the Federal Reserve. Core inflation was also above expectations at 2.8% above the 2.6% forecasted. High Energy prices were a major contributor with those costs passing through to Food. However, these increases costs pass through to Shelter and Airfare which eventually reach core inflation.

From TradingEconomics.com

CPI was concerning, however, PPI was much worse. PPI excluding Food, Energy and Trade fared worse with inflation being 4.4% above the forecast of 3.7%. If we include Food, Energy and Trade, it is 5.25% above the forecast of 4.1%. PPI is often considered a leading indicator of CPI, suggesting that these costs from producers will eventually reach the consumer.

The biggest driver for PPI increases is increased energy prices from the Iran/Strait of Hormuz story. “More than three-quarters of the broad-based increase in April can be traced to a

7.8-percent jump in prices for final demand energy.” This led to transportation services rising 5% which is an outlier in the data in non-pandemic circumstances.This was caused by a direct fuel-plass through plus capacity tightness in transportation.

What was surprising and concerning is that Services index accelerated 1.2%, the biggest monthly gain since March 2022 and two thirds of the move was attributed to a 2.7% rise in trade services. This is a sign that tariff costs could be starting to have a larger impact on prices. Trade and services in PPI measures retailer and wholesaler margins. A 2.7% margin jump in a single month tells you the sellers are passing through cost increases to their customers.

When you strip out food, energy AND trade services, inflation is still accelerating. This part is harder to dismiss than “just the Iran war” and therefore, “only temporary”.

Industries

Technology led the gains as part of the AI Datacenter buildout growth story with Telecom participating in that as well. Semiconductors continue to stand out among tech:

Philadelphia stock exchange semiconductor index leaped 60% in six weeks and Micron surged 38% last week alone.

Due to rising concerns of inflation leading to lowered hopes of a rate cut by the federal reserve (and some possible expectations of a rate hike), rate sensitive cyclicals are on the decline such as Banks, Real Estate, Home Builders, retail.

These industries typically need lower interest rates for consumers to be willing to spend more. If inflation fears continue, we should expect to see continued declines for these industries.

Bonds

Bonds sold off due to worsening inflation fears. We find that this was a duration driven more, not so much a credit event as high yield bonds remained relatively stable for the week. It can be seen more clearly on the Price Action Week-in-Review for Bonds:

Longer term bonds declined more as the impact of future interest rate expectations will affect them more.

The market is currently implying no rate cut for June and July with some anticipating even a rate hike in September.

With Kevin Warsh, known to be hawkish, as the new Fed Chair, the market is concerned about the Federal Reserves’ reaction if inflation worsens from here.

Commodities

Oil climbed this past week as the Strait of Hormuz remained effectively closed as the US-Iran ceasefire grew more confrontational. The IEA warned that the oil market could remain undersupplied through October even if the conflict ends. This further adds concern not only for inflation, but the broader global economy as it cannot be sustained with continued high oil prices.

On the metal’s side, Copper’s bullish move was extended due to further AI data center demand and China’s clean-tech export boom. Gold, on the other hand, declined due to concerns that inflation may cause the fed to even possibly raise interest rates, making Gold (a non-interest rate bearing asset) less attractive. Silver is caught in the middle but experienced a 8.59% drop, > 3 STD decline likely due to the inflation print but also findings that the silver supply deficit has been shrinking according to UBS.

Finally Bitcoin declined likely due to a risk-off sentiment after inflation fears spread through the market. Funds are seeking to reduce risk, placing their capital into growth names related to AI Data Center Spend which is the only part of the economy that is growing. Bitcoin, a non-interest bearing asset, is not as appealing.

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Theory Time

The big hot topic item this week is Inflation. It has become a bigger issue than the Iran war and Oil prices. Inflation came in above expectations and cannot be explained just by higher oil prices.

To gain some perspective, let’s re-cap how we got here

1. Trump announces Tariffs and there is a lot of concern about breaking the global economic engine

2. Tariffs are implemented and a government shutdown prevents the typical economic reports to come out in a timely fashion

3. By this time, there are concerns about economic growth.

4. Growth comes from AI data center spending and doesn’t stop. It creates some bottle necks along the way (e.g. silver, memory)

5. There are concerns about inflation but they do not appear. There are hopes for rate cuts to stimulate growth outside of just AI data center spending

6. US invades Iran and Oil prices spike to record levels

7. Inflation picks up but the markets expect it

8. Now, Inflation picks up and markets are surprised that it’s not just caused by Oil

Prior to the US-Israel-Iran War, the global economy was already on shaky ground due to tariffs being applied haphazardly. Businesses could not plan for the future due to uncertainty about the costs of investing in increased capacity. Therefore, capital projects were put on hold in favor of waiting for greater clarity on the direction of the economy (the global economic engine).

Companies are not incentivized to produce more unless there are signs of economic growth. If the only signs of economic growth is in AI data center spend, all other sectors are incentivized to maintain their current output. This is especially the case if China is being hit with tariffs, threatening demand.

Tariffs created inefficiencies in the global economy and increased inflation is a natural consequence of this inefficiency. It can be mitigated with companies diversifying their supply chain but only with planned coordination. There was no planned coordination with any of the tariffs. The US-Israel-Iran War poured salt on the wound, literally halting parts of the global economic engine which results, again, in inefficiencies and higher prices (inflation).

The deterioration of the global economic engine is measured by economic growth. When growth is lacking, the market seeks guidance from the Fed to help stimulate growth and prevent catastrophic recessions/depressions. The Fed, armed with monetary policy, can only do so much. But it has been the go-to savior of previous threats of growth ever since I can remember (and has been woefully incapable of preventing catastrophic financial crises in the past).

Currently, the market desperately wants interest rates to decline to make the cost of borrowing money cheaper, allowing for more investments to be made. However, I take issue with this. The problem isn’t a monetary one, it’s a structural one. The global economic engine has a wrench in it. We need to address the wrench and fix the damage, not throw capital around the wrench.

So if Inflation runs amok, the Federal Reserve will have to raise rates to prevent further inflation. This doesn’t solve the global inefficiencies problem. It just decreases demand and prevents people from buying things at higher prices.

If Inflation is resolved, the Federal Reserve will cautiously decrease interest rates. If unsuccessful, inflation will remain high due to the structural inefficiencies discussed above. If successful, we should be able to start seeing growth outside of AI Data Centers.

What Happens Next?

The media will oscillate between “Inflation is going through the roof!” to “Inflation has been conquered!” as the markets rise and fall. Make no mistake, markets will do what they want and the media will follow. It is not the other way around.

If the inflation narrative is as sticky as I wrote above, then the media’s “Inflation has been conquered!” narratives will be hardly met with Inflation-centered catalysts all along the way.

If I’m wrong and Inflation is actually being conquered, I should be able to read about growth outside of AI Data Center Spending. If I start finding growth in other sectors besides ones dominated by decisions of a handful of megacap corporations, I’d feel more comfortable that we’ve accomplished a “beautiful deleveraging” and can go into our next bull run.

Therefore, the way I plan to manage my money on my terms is to keep track of the inflation narrative and keep an eye out for growth narratives outside of tech. Once I gain clarity there, I can deploy capital with confidence.

I hope you enjoyed this week’s Price Action Week-in-Review. If you want to see more, consider subscribing.

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop a theory of what is happening in markets. From that theory, we deploy capital intelligently to manage our money on our terms.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Oil prices collapsing due to hopes of an end to the Iran War

• Strong April Jobs Print

• AI drive semiconductor continues to breakout

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Indexes

Nasdaq stole the show this past week with a 1.54 STD move compared to every other asset class. The Nasdaq Equal Weight underperformed the main index, suggesting it was the larger caps that drove the move. The April Jobs report on Friday also contributed to the bullish move in indexes with unemployment steady at 4.3% and payrolls rising by 115,000 last month instead of the median gain of 65,000 by Economists surveyed by Bloomberg.

Industries

Technology is the clear outlier among the sectors. When we take a closer look at an Industry specific Price Action Week-in-Review, we find that the biggest movers is in Semiconductors:

This continues last week’s theme of the Semiconductor rally after the big 5 datacenters raised their guidance on AI Data center spend. Four main catalysts continued this theme for semiconductors. AMD reported Q1 earning on Tuesday 5/5/26 and guiding for about $11.2 Billion in revenue vs expectations of $10.52 Billion for Q2, implying 46% y/y growth. MU rallied 38% over the week closing on Friday up 15.5% due to HBM (high bandwidth memory) capacity being sold out for 2026 under fixed-priced contracts. On 5/8/26, Apel and Intel reached a preliminary agreement for Intel to manufacture some of Apple’s chips ending with Intel rising 13.96% on Friday. Finally, the Jobs report above alleviated concerns about a weakening consumer/labor market.

Energy performed the worst due to the selloff in Oil which will be discussed in the commodities section. Utilities also did poorly due to the rotation away from defensive sectors and aggressively into semiconductors.

Bonds

Bonds were positive for the week but down to flat YTD. With Oil prices dropping and job numbers strong, inflation and recessionary fears declined.

Commodities

Oil dropped precipitously in the past week as Trump paused the US naval escort program through the strait of Hormuz. Bolstering hopes that the US-Israel-Iran war will soon come to a conclusion. YTD gains on Oil remain high but can quickly reverse as the economic engine returns to normalcy.

Silver continued its rally this past week likely due to rising guidance for AI semiconductor demand and AI datacenter buildout along with demand for solar and EV industries. Copper also participated in the bullish metals move as declining oil prices reduce input costs and hopes for increased demand after a resolution to the US-Israel-Iran war brings hopes of industrial growth

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Theory Time

This week’s price action is a continuation of last week’s themes of Oil Volatility and AI Data Center spend with a boost of a Strong Jobs Report. I expressed my reservations about the AI services supply chain where Data Centers can be built, yet, the Revenue has yet to be established. However, it appears the market is paying for growth for the Data Center components with the current Semiconductor melt up.

I’ve been transparent about my reservations about AI growth. However, this does not make me a permabear. It is also not a good attitude for trading.

Some of my friends are all in on the AI revolution. They have great expectations of AI transforming our lives, developing into Artificial General Intelligence, and being put into robots to essentially replace the bulk of the human labor force.

Some of my other friends have their reservations. Some of it built on fear and cynicism, a bit of it backed up by facts and findings here and there. They believe that AI is overhyped, that we are in a bubble, and the bubble will pop similar to the dot-com bubble and/or the 2008 financial crisis depending on how pervasive the industry becomes.

I try to be moderate and ask critical questions along the way towards growth. Although I had my reservations last week, I put on a SOXX position because it’s the only growth story in town. Every company growing is connected to some sort of AI data center spend. It’s either that or go long Oil during a time when geopolitical tensions are beginning to ease. Since I was “forced” to participate in the semiconductor growth story as part of a concentrated portfolio, I felt an out of the money SOXX call option position would be my best bet to participate in the growth narrative while also limiting my losses should the narrative decide to rapidly reverse itself.

So how does one determine if and when the narrative changes?

That’s the fun part of trading. You can look around to see the obvious.

Observing the World

I remember a lot of people being bullish on NKE prior to their last quarterly earnings. I personally am not bullish NKE because of one reason: I do not see people wearing more Nike Sneakers and clothing on the street. The same goes for LULU. I see young women preferring baggier jeans, less yoga pants. In fact, I see the past generation still obsessed with the tight yoga pants look which is beginning to look dated.

I’m not a genius nor am I claiming to be one. Rather, I’m trying to demonstrate a simple concept that seems to allude most market participants: If you look at the world around you, it will tell you what is happening.

The AI Revolution debate is the hot topic driving much of the price action for the past 2 weeks. It is the main driving force for the S&P 500 reaching new highs. There are a lot of experts talking on both sides of the narrative with people digging their heels and “casting their ballots” on whether they believe the AI revolution will happen as expected and intended. Everyone has an opinion but I noticed few of them trade those opinions (and become consistently profitable).

This is particularly why I try not to hold strong to any particular opinion. Opinions don’t make money. Trades do.

But how does one trade with a weak opinion/conviction?

If you look at the world around you, it will tell you whether the growth story is intact.

What does the world look like if the AI Revolution is in full force?

• AI is starting to do tasks that people do with ease

• AI is incorporated into our daily lives seamlessly

• AI data centers will be built in our backyards

• AI services will proliferate for various specific uses

• People using AI will say they are more productive with it

• Robots will begin to do tasks that they could not do before

These are the markers I’m looking for to gain conviction about the AI Growth story. Revenue, margins, backlogs are built on the foundation of real world change. This real world change appears to be hidden from financial wizards in ivory towers focused on growth narratives and earnings reports.

What have I observed thus far as we progress towards an AI Revolution?

• AI becomes more impressive every day, but somehow, claude became dumber every now and then

• AI is being used by programmers and researchers, but somehow, it does some devastating things like deleting an entire company’s database in 9 seconds

• People are protesting AI Data centers being built in their backyard

• I see various AI services being built but they all look like white label Chat GPT and Anthropic. Why go to them when I can get to the source?

• I hear that AI can write 80% of code but I’m also hearing that reviewing the code takes more time than writing it and it might be making programmers slower

• I do not yet see robots powered by AI and every time I do, it’s a maneuver that is scripted, something robots have been able to do for a very long time. I am hopeful though, but I haven’t seen it yet in a mass produced way.

I’m not being a permabear or a cynic. I would love for great technological revolutions to happen. When APPL was growing, I saw more people using IPhones and people raving about how much it can do. When TSLA was growing, I saw more Tesla cars on the street and customers loved a ton of its features. When CMG was doing well, people were raving about how good the burritos tasted and how great of a deal it was.

Real growth shows signs in the real world. Bubbles and overreactions happen when prices stray from the real world. So if you have a pulse of what’s happening, you’ll get a true sense of the narratives worth having conviction and the ones to approach with caution.

Until I see the promises of the AI Revolution come to fruition, I will have to remain cautious to preserve my hard earned capital. That’s how I want to manage my money on my terms.

I hope you enjoyed this week’s Price-Action Week-in-Review. Happy Trading!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop a theory of what is happening in markets. From that theory, we deploy capital intelligently to manage our money on our terms.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Market concentration intensifies as Hyperscaler capex confirms AI buildout

• Macro headwinds across bonds and commodities continue based on concerns of rising inflation and interest rates

• Dominance of Oil and AI create a diversification problem

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Indexes

Headline index returns were relatively quiet for the week. But for the month, we have a > 1 STD outlier with Nasdaq 100 for the month. I added Equal weight comparisons to the usual Indexes I talk about as I feel it would be helpful to understand the breadth of the market returns.

Equal weight indexes show a lower performance compared to their market-cap weighted counterparts. In particular, Nasdaq 100 outperformed for the month whereas equal weight indexes performed drastically less during the same time period. This suggests a common theme that the indexes are concentrating into the biggest companies. Namely, NVDA, GOOG, AAPL, MSFT, AMZN and more.

Where is the growth coming from? AI infrastructure spending. On 4/29/26 MSFT, AMZN, META, GOOG reported increasing estimates on future AI infrastructure spending (much of it due to higher prices of components). This was a major theme last week and deserves further discussion in the Theory section.

Industries

The biggest performers for the week are Telecom and Energy.The biggest losers appear to be in Materials. We’ll discuss Energy and Materials in the Commodities section.

Telecom has been outperforming but following the AI infrastructure theme through optical networking, IP routing, and data-center interconnect names seeing massive demand from AI Hyperscalers. As examples, CIEN is up 47% so far in 2026 as a provider of high speed optical networking and data interconnect products. NOK Q1 operating profit surged 54% with revenue from AI specific clients jumping by nearly half. The stock has doubled YTD. Verizon beat-and-raised guidance on 4/27/26, discussing conversations with Hyperscalers and cloud providers about supporting AI infrastructure. Telecom is no longer about high dividends and regular cash flows. It holds the necessary components to further build out AI data centers and run them.

Bonds

Bonds performed poorly this past week with longer-term bonds doing worse than shorter term bonds. Bonds were concerned of rising interest rates due to worsening inflation through ISM Manufacturing prices rising, new orders increasing faster in April, and core PCE prices accelerating in March. This along with three hawkish FOMC dissents during the FOMC meeting this past week led to a greater expectation of higher rates resulting in declining bond prices.

Commodities

Gold was down for a consecutive week as concerns of higher interest rates weighed bonds down, creating higher yields. Higher yields means Gold and other precious metals are a less attractive asset to hold.

Copper’s decline has more to do with a weakness in demand. Despite the AI-data-center copper demand narrative, the rest of the economy continues to be held back from tariffs, concerns of inflation, higher oil prices, and now rising interest rates and bond yields.

Oil continues to be the most volatile asset class due to the US-Israel-Iran War. As peace talks stalled, Oil continued to rise until Friday’s pullback based on the Iran peace progress. This is how it played out:

• 4/29/26 - Trump confirms the blockade is the strategy

• 4/30/26 - Military briefing from CENTCOM Commander Adm. Brad Cooper on new military options with a plan for a “short and powerful” wave of strikes on Iran which led to an escalation of risk.

• 4/30/26-5/1/26 - Trump administration argued the 60 day clock no longer applies because of the ceasefire.

• 5/1/26 - Iran’s new peace proposal

It is difficult to tell whether this concludes the US-Israel-Iran War. Although Oil prices have declined, the risk remains. To learn more, check out my 5 part Drivers of Oil Prices Series starting here.

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Theory Time

The Drivers of market prices this week is a continuation of themes from last week related to a concentration of money flowing into Oil and AI Infrastructure Spending. Ever since the beginning of the US-Israel-Iran war, Oil’s volatility has caused ripple effects across the economy through the form of inflation and uncertainty. It has been challenging to trade so I opted to learn more about Oil. The end result is the 5 part Drives of Oil Series that you can find here:

• Drivers of Oil Prices [Part 1] - Intro and Getting Exposure

• Drivers of Oil Prices [Part 2] - Fundamentals of Supply and Demand

• Drivers of Oil Prices [Part 3] - Macro Regime

• Drivers of Oil Prices [Part 4] - Momentum and Technical Indicators

• Drivers of Oil Prices [Part 5] - Geopolitical Concerns

This has helped my understanding of Oil prices immensely. I hope you find it helpful too.

Now that Oil is now sorted, the next logical step will be to investigate AI Infrastructure Spending

Understanding the Supply Chain of AI Infrastructure Spending

The first step is to lay down the supply chain for AI

Raw materials (Silver) > Semiconductor Components > Data Centers > Cloud Services > AI Software > End User

Anthropic (AI software provider) ended at $9 Billion annualized revenue in 2025, crossing $30 Billion in April 2026 passing Open AI’s $25 Billion reported Revenue. Recently on 4/27/26, OpenAI’s revenue fell short of expectations. Although the growth is astounding, is it enough to fund AI Infrastructure Spending Growth?

The Top 5 hyperscalers with a little over 50% of data center revenue is the following:

• Microsoft (MSFT)

• Amazon (AMZN)

• Google (GOOG)

• Meta (META)

• Oracle (ORCL)

MSFT, AMZN, GOOG, and META all reported earnings on 4/29/26 after hours. Prior to the earnings, Cap Ex for 2026 was estimated to be between $650-$690 Billion, a drastic increase from $399 Billion in 2025. This is a breakdown of the Cap-Ex expectations of the big 5 Hyperscealers over time.

Much of the increase in the CapEx was based on higher component prices.

So do these hyperscalers have the money to fund the AI Buildout? Sorta.

Combined Operational Cash flow is $577 Billion. When we compare this to the previous $650-$690 Billion intended spend, it’s very doable as long as you use ALL operational cash flow for Infrastructure spending. That is why the 4/29/26 earnings report was so important. We needed to see if the Infrastructure spending was actually happening.

We found it was and that more spending would be expected (in the form of higher prices for semiconductors).

Therefore, based on the supply chain, the AI Data Center Buildout is being funded by a significant portion of cash flows from Hyperscalers. The belief is that they can take these data centers, charge AI Software developers like Open AI and Anthropic to access the data centers, and ultimately build out the future of AI productivity.

Money flows to metal miners to gather rare earth metals like silver. Semiconductor companies like NVDA in conjunction with TSM build out the semiconductors to place into Data Centers. Since Data centers need other components, other companies like MU, CRDO, ALAB, VRT, CIEN also benefit. The money comes from the current cash flows of Hyperscalers.

If the investment in AI Data Centers does well, Hyperscalers will have great monopoly power on access to compute power. However, if the Investment in Ai Data centers does not do well, it would have resulted in a large investment of capital causing a significant reduction in cash flows.

My Concerns

I’m concerned about the overall health of the AI Infrastructure Supply chain.

Data centers do not create value to society. An AI interface does not create value to society. Value to society is created when people in society find usefulness for a product or service enough so that they are willing to spend their own money for that product or service.

Money is being spent in the middle of the AI supply chain by Hyperscalers to build out a future where we integrate AI into our society.

This means that money needs to eventually come from the right side of the supply chain or else the Hyperscalers will be paying the entire bill (and their investors)

There is a lot of controversy about the extent and role of AI in our lives. Stories of AI taking over jobs as well as others of AI being really incompetent. Hyperscalers and AI software companies like Anthropic and OpenAI are incentivized to build a narrative where AI is an existential threat and must be achieved at any cost. But the realities are surfacing and there are concerns of an AI Bubble.

The problem with the “AI Bubble” isn’t so much that a Bubble possibly exists. The problem is the lack of diversification for a portfolio. For the past month, the only two stories was Oil and AI domination. There were no other areas of the economy doing anything and there was a period of time when correlations were converging to 1 across asset classes. Although money can be made, the risk is significantly higher when the wealth is concentrated in a few industries/sectors/companies. If the bet doesn’t work, you’ve lost a significant amount of money.

If the general public does not benefit from AI, they will not be able to fund the AI Supply chain and it will have a high risk of collapsing through a significant downward re-rating. Do I want to be a part of that? I’d prefer not to. I can’t put 100% of my portfolio into the AI Infrastructure Spending theme. That would be irresponsible. But when every industry that is rising solely due to AI infrastructure spending, it is difficult to avoid. A list of 10-15 of the highest growth names all connected to AI is not diversification.

Therefore, I’m forced to put my eggs in the basket, and watch it very closely. I’m not happy with this, but that’s how I plan to manage my money on my terms.

I hope you found this article helpful. Consider subscribing for more content!

This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop a theory of what is happening in markets. From that theory, we deploy capital intelligently to manage our money on our terms.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Ceasefire bounce drove the week of returns as oil prices declined but then rose again

• Semiconductors were the standout industry as the only place where growth continues

• Oil dominates commodities and metals behave counter-intuitively

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Indexes

The biggest driver for the week was the classic “ceasefire bounce” where Trump extended the US-Iran ceasefire on Tuesday 4/21/26. Oil pulled back from the highs of the prior week and rate-sensitive, domestically oriented names previously down due to Iran-driven energy/inflation premium snapped back the hardest. Small cap stocks carry 32% of floating rate debt vs 6% of the S&P 500 so they react asymmetrically from issues dealing with energy-cost/inflation/rate. Thus, the Russel 2000 outperformed the other major indexes.

However, this outperformance is fragile as sensitivity to the war goes both ways. Analysts estimate that 41% to 46% of Russell 2000 companies cannot cover their interest expense with operating profits and the Strait of Hormuz situation re-deteriorated on Thursday/Friday. The market is hoping that with the new Fed chairman, future rate cuts and decreased interest rates will prevent a major economic catastrophe, allowing for business as usual once all the volatility clears.

Industries

The biggest mover for Friday was Technology, but more specifically, Semiconductors. Here is the Abridged Price Action Week-in-Review for the industries

Semiconductors significantly outperformed other industries the past week as well as the last day. The rationale behind the move is directly related to the ceasefire removing the war premium placed on chip names which was the most punished slice of tech during the Hormuz closure. Due to the greater impact on the way down, Semiconductors snapped back. This was also buoyed by positive reports from semiconductors that growth is greater than ever. $TSMC reported 35% revenue growth and 38% EPS growth with 2026 capex guidance raised to $52-$56B up from $40.5B in 2025 on 4/16. $NVDA rose 5% on Intel’s strong data center print as confirmation that NVDA’s pipeline remains strong as well. The message is clear, AI data center spending is not slowing down and this is potentially one of the few, if not the only, area of growth for the economy.

Software declined for the week due to results of ServiceNow and IBM. Service Now sank 18% on Thursday when it stated that conflict in the Middle East created a headwind for quarterly subscription revenue. IBM beat but only maintained guidance. Due to the acceleration of data center builds, the AI consuming software theme continues. Friday had a major bounceback but only clawed back half of the loss experienced on Thursday as the AI displacement of SaaS thesis continues.

Aerospace and Defense performed poorly due to the renewed Hormuz tension causing Oil prices to spike to $105/bbl. However, upon closer look. $LMT missed in both revenue and EPS with free cash flow deeply negative during the most pro-defense spending environment in decades. The Middle East war should have lifted $LMT’s numbers but they came in flat. Defense names have done well in February on war-premium positioning but the question was whether a defense bill of 2.6% of GDP was sustainable given the US deficit.

Transportation moved on the fuel-cost-margin-compression them. Rising oil prices makes trucking and airline costs higher. $AA slashed its full year 2026 EPS outlook due to surging fuel costs from the Iran war and they are 50% reductions driven solely by higher jet fuel prices. Also, IEA’s April Oil Market Report flagged that flight cancellations across the middle east, parts of Asia and Europe have led to a drop in fuel consumption which would lead to an unambiguous detriment to transportation.

Home builders had a > 1 STD move with three drivers, despite tepid housing fundamentals. The first is DR Horton’s earnings beat where Net Sales orders were +11% y/y signaling there is still demand even with worsening affordability. The second is the falling lond end of Treasury yields which is often a leading indicator home builders stocks will rally due to lower mortgage rates. Finally, Homebuilders have a lot of similarities with small caps in that they’re domestic, typically have heavier floating rate debt loads, are inflation sensitive, and demand sensitive. So the ceasefire-drive small cap recovery disproportionately affected Homebuilders as well.

Bonds

Long duration US treasuries outperformed shorter duration treasuries after Fed nominee Kevin Warsh’s confirmation hearing reinforced the message that the Fed is on hold for most of the year.

Commodities

Oil gained around 7% for the week as the Strait of Hormuz situation deteriorated. Iran imposed control of the strait shortly after declaring it open the prior Friday, the US Navy seized an Iranian container ship, peace talks stalled, and Trump ordered the navy to fire on minelaying vessels.

Gold and Silver had counter-intuitive readings, falling despite active war. The logic is that the continued war has forced investors to prioritize liquidity and higher-yield assets over metals with markets preferring US treasury yields and a stronger Dollar as a safe haven. Higher oil prices from war have lifted inflation expectations, pricing in fewer Federal Reserve rate cuts and possibly tighter policy for longer, leaving non-interest bearing assets disfavored.

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Theory Time

The theory behind the price action is fairly obvious, largely because it has converged into what will happen to the US-Israel-Iran war. This has been the theme prevailing for the past month.

Two other themes, Data Center Buildouts and Saaspocalypse have also played out this week as AI data center builds appear to not be slowing down.

When I started Brain Meets Wealth in late 2025, my goal was to demonstrate how to manage a diversified portfolio filled with a mix of ideas so that you could benefit from both diversification and higher returns relative to risk. The purpose was to help you manage money on your terms where you could choose what growth stories to participate in and what risks to avoid.

However, I could not anticipate that markets would converge onto a single event related to the US-Israel-Iran war with Oil prices skyrocketing. My previous work on markets focused on equities but the clear driver of all price action is in Oil.

This is what prompted me to investigate drivers of Oil prices in a 5 part series:

• Drivers of Oil Prices [Part 1] - Intro and Getting Exposure

• Drivers of Oil Prices [Part 2] - Fundamentals of Supply and Demand

• Drivers of Oil Prices [Part 3] - Macro Regime

• Drivers of Oil Prices [Part 4] - Momentum and Technical Indicators

• Drivers of Oil Prices [Part 5] - Geopolitical Concerns

I’ve found the ultimate scoresheet helpful in determining what Oil Prices will do next and it has helped my interpretation of the current macro landscape with Oil being such a predominant factor for the current market. I’m contemplating whether I should create a separate series on regular updates about Oil Prices. It would have to be behind a paywall. Let me know if this interests you.

What also appears to be unavoidable is a deep dive into semiconductors and software. My previous process was the following:

1. Review the Price Action

2. Identify areas of interest

3. Develop a Diversified portfolio of ideas

I used to have multiple areas to investigate where, if placed in a portfolio, would create a diversified set of positions. One position might lose while another might win. The winners would compensate for the losers since my R/R > 1:1. Now, all positions are directly impacted by a single macro event. Oil Prices matter a lot and Semiconductors are pretty much the only growth story that exists.

I’ve adjusted my previous process by learning more about Oil. Now I will need to do a deep dive on Semiconductors since it is pretty much the only growth story holding up the rest of the economy. I’m going to have to transition (for the time being) from a diversified portfolio to “put your eggs in a basket and watch that basket closely”.

Note I didn’t say “all” my eggs in a basket. Rather, options allow me to leverage my positions while also limiting my losses (if done right).

This is what I want to do with my finances but I DO NOT believe this is advice for everyone to follow which is why I did not put it in a “what to do next?” section. Putting all your eggs in one basket is a personal decision on reward to risk along with a strong and clear sense of one’s edge in the markets.

Markets are currently uncertain, volatile, and illogical at times. During these periods, I increase my risk management techniques and I find opportunities to learn. I’ve learned about Oil as above and the next step is to do a deep dive into semiconductors.

I plan to share my findings along the way. Subscribe if you want to see more!

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Summary

Ceasefire bounce drove the week. Trump’s extension of the US-Iran ceasefire on 4/21 sparked a rally in rate-sensitive, domestically-oriented names. The Russell 2000 outperformed major indexes due to small caps’ outsized exposure to floating-rate debt (32% vs. 6% for the S&P 500), though this gain is fragile given that 41-46% of Russell 2000 companies can’t cover interest expense with operating profits.

Semiconductors were the standout industry. Chip names snapped back hardest from the Hormuz-driven selloff, boosted by TSMC’s blowout report (35% revenue growth, capex guidance raised to $52-56B) and NVDA rising 5% on Intel’s strong data center print. AI data center spending shows no signs of slowing and remains arguably the only real growth story in the economy. Meanwhile, Software lagged (ServiceNow -18%) as the “AI displacing SaaS” thesis continues.

Oil dominated commodities, metals behaved counter-intuitively. Oil gained ~7% as the Strait of Hormuz situation deteriorated (Iran reasserted control, US Navy seized an Iranian ship, Trump ordered fire on minelaying vessels). Gold and silver fell despite active war as investors prioritized liquidity, Treasury yields, and a stronger dollar over non-yielding metals.

I hope you enjoyed this week’s Price Action Week-in-Review. Happy Trading!

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This is where we analyze the Price Action over the past week across different asset classes to identify outliers. From the outliers we develop a theory of what is happening in markets. From that theory, we deploy capital intelligently to manage our money on our terms.

If you are new here and would like to learn how to understand the Price Action Week-in-Review, click here for an Introductory Primer

Let’s get into it:

Executive Summary

• Broad rally across indexes driven by US-Iran Peace Optimism

• Commodities with the biggest move - Oil dropping sharply, Silver and Bitcoin > 1STD moves

• Inter-industry correlations are easing

• Recommendation is to Focus on Risk Management over prediction

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Indexes

All four posted strong weekly gains with Nasdaq posting the highest 1.18 STD and the Russell at 1 STD for the week with the S&P 500 at 0.70 STD. The rally was driven by sustained optimism around US-Iran Peace agreement. The S&P 500 and Nasdaq 100 hit fresh record highs on Wednesday 4/15/26. Tech-heavy Nasdaq benefitted from broad re-engagement with risk while small caps rallied on the combination of easing geopolitical tensions, collapsing oil prices reducing inflation pressure, and renewed prospects of Fed rat cuts (which generally disproportionally help interest-rate-sensitive domestic names in the IWM).

Industries

With the Industries section, we find Technology leading the way at a 1.77 STD move with Energy and Utilities being the biggest losers. The rational is part of the overall escalation of the US-Iran Conflict, reversing previous trends towards safety assets and away from risk assets.

Reviewing a Price Action Week-in-Review for Industries shows that Software and Tech are leading the recovery:

Notably, the market cap weighted S&P 500 and Nasdaq 100 are heavily concentrated into semiconductors since the largest companies in America happen to be related to semiconductors (NVDA, APPL, MSFT, GOOG, AVGO to name a few). THe concentration of the indexes has been the highest over the past 2 decades:

Source

It is something to keep in mind as we understand the moving parts of the economy

Bonds

Bonds underperformed the overall market moves posting small weekly returns but overall negative for YTD. This suggests fixed income was digesting the macro shift in an orderly fashion.

Commodities

Our largest movers occurred among the Commodities (not surprisingly). Oil dropped with the largest drop happening on Friday due to Iranian Foreign Minister Seyed Abbas Araghchi declared the Strait of Hormuz “completely open” during the ceasefire between Israel and Lebanon, raising hopes of easy supply disruptions. This was followed by President Trump’s remarks that the war with Iran “should be ending pretty soon”.

Precious metals rallied on the risk-on backdrop with Silver posting a 1.3 STD move. Gold rallied 2% for the week supported by expectations that a continued escalation could reduce inflation risks and limit the need for central bank tightening. Bitcoin with a 1.05 STD move broke $75,000 on 4/17/26 for the first time in 73 days, signaling a potential end to the consolidation phase bolstered by massive institutional buying.

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Theory Time

Markets have been rallying due to increased hopes for a final resolution in the US-Iran Conflict. Last week, I spoke about high correlations among industries which caused concern about the fragility of the bull run. I spoke about adding more as the rally showed more signs of support. To follow-up on that logic, we now see correlations dying down which is a good sign:

As of the writing of this article on Saturday 4/18/26, Iran threatens to close the Strait of Hormuz once again.

On a weekend, no doubt. Everything keeps happening on a weekend.

The theory behind price action for the past few weeks has been easy. It’s all centralized on the US-Israel-Iran war. Therefore, the key to withstanding the volatility will be strong risk management. You literally can’t control what’s happening in the world right now.

What to do Next?

If you’ve been following my work over this time, you will have seen the strategy to protect your capital during times of high volatility. I believe now is a good time to give you the simple playbook on how to be both defensive with your capital while also being aggressive with any rebound white minimizing FOMO.

Strategy to Scale back:

Step 1: When VIX starts to rise, you reduce your position size.

If you have a Long/Short Portfolio, your short positions should be making money. The gains on those will cancel out the losses on your long positions. Overall, you should be able to reduce unscathed or even with a bit of profit.

Step 2: Transition from a fundamental analysis framework into a technical analysis framework.

During times of great uncertainty, everyone will be prompting themselves as an expert but the reality is that there is more uncertainty than certainty. If anyone claims to know what is going on, ask yourself, “why are they telling you instead of just outright making money in the market?” Ask yourself, “If I had a real edge in this time of uncertainty, would I go and blab about it to the world or would I keep it to myself and 10x my capital?”

Finding the people who REALLY know what is going on will be revealed in the price action. It MUST be expressed in price action because that is the LITERAL PLACE people make the ACTUAL MONEY when they have a REAL EDGE.

Step 3: Take a step back and reassess your Edge

Your edge is how you make money. So during times of uncertainty, lean in on your edge. And if you don’t feel your edge is strong enough to trade during market uncertainty, that’s fine. Stay out and take some time to learn.

My edge is bringing a bunch of information together to create a theory about the world. I act on that theory and see things play out. I’m not always right but when I am, the Reward to Risk is pretty high.

There is no theory I have that can help me predict the actions of Trump. Iran is a little more predictable since they are an organization with a large history and clear motives. Trump is the wildcard as he considers that his strength (I believe he said that once in his book Art of the Deal).

Since my edge is about theory development, I spent time developing a strong fundamental understanding of Drivers of Oil prices, something I’ve been putting off since my main focus is Equities. Benefit from my research with my 5 part series starting here.

Step 4: Watch for the Recovery

The recovery will come with price action first but I believe that is caused by the bravest souls who either (1) have an edge or (2) have higher risk tolerance. Rallies can fail and they can fail hard. However, being first to choose the bottom can lead to outperforming everyone else and causing everyone else to have FOMO.

During the recovery, apply strong risk management techniques

1. Tighter Stop Orders

2. Robust Reward to Risk Option Structures

3. Higher threshold to enter into trades

4. Lower Threshold to close positions

5. Fading out winners a little more aggressively

Just to name a few.

This is the basic blueprint I’ve been using. Let me know if you’d like me to elaborate in the comments below.

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Summary

Broad rally across indexes driven by US-Iran peace optimism. All four major indexes posted strong weekly gains, with the Nasdaq leading at a 1.18 STD move and the S&P 500 and Nasdaq 100 hitting fresh record highs on Wednesday 4/15/26. Tech led sectors (+1.77 STD) while Energy and Utilities lagged as the risk-on rotation reversed prior safety-asset flows.

Commodities saw the biggest moves with Oil dropping sharply, especially Friday, after Iran’s Foreign Minister declared the Strait of Hormuz “completely open” and Trump signaled the war “should be ending pretty soon.” Meanwhile, precious metals and Bitcoin rallied (Silver +1.3 STD, Gold +2%, Bitcoin broke $75,000 for the first time in 73 days on a 1.05 STD move). Bonds underperformed but digested the macro shift in orderly fashion.

Inter-industry correlations are easing, which is a constructive sign for the sustainability of the bull run after recent concerns about fragility. However, Iran’s fresh weekend threat to close the Strait of Hormuz reintroduces volatility risk.

The playbook for the past month was all about risk management over prediction. Scale back position sizes as VIX rises, shift from fundamental to technical frameworks during uncertainty, lean into your personal edge (or stand aside), and prepare for the recovery with tighter stops, robust reward/risk option structures, and more aggressive profit-taking.

I hope you found this article helpful. Consider subscribing for more! Happy Trading!