this is the final post in which we have the Premium section available for free. Starting next week, the Premium and Paid sections will be behind the paywall. Click here for more details on the packages.

The Dashboard remains to be regularly updated, and gives you access to all the data and all the technicals, analogs, and macro signals, but the insights coming out of it is something that you pay the premium price for. Or get it for free if you are an investor in Oraclum Capital.

Or in other words, this is the logic:

We did an example of how this works on Wednesday’s mid-week update, on the long bond signal and a fade on the QQQ short (in other words, an ignore of that signal). We will judge the validity of each in a few weeks, just as we did the long oil and long gold signals on Wednesday (both of which delivered quite well).

And then we did a brief analysis on how markets behave after NVDA earnings. The highest probability scenario was market opens gap up overnight (done ✅), and then sells off intraday (failed ❌). NVDA really blew it out of the park with that one, and surprised everyone. Good for them! Incredible company.

The Saturday updates will also comment on the signals and our regular topics, but we’ll have one deeper macro analysis once per month.

For example - in September I will do a deeper dive into how markets behave during the Midterm season (Sep & Oct).

Last week I wrote that September would open with a Fed chair who has no dot plot explaining his reaction function in one speech. On Friday he did exactly that, and the market needed about an hour to decide what it heard.

Kevin Warsh’s first Jackson Hole keynote called inflation the Fed’s “predominant focus,” put the gap on the table - PCE running at 3.7% against a 2% target - and delivered the line of the morning: the Fed must be “confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.”

The 2Y jumped 12 basis points to 4.35%, and money markets took the September 16th meeting from roughly 30% odds of a hike to over 50%. Gold fell 2.9%. The dollar climbed. Equities faded, with small caps down 1.4% on the day. And the 30Y scarcely moved.

To me that last fact is the most interesting reaction of the week.

What Warsh actually said

Three things stood out beyond the inflation talk, and they fit together.

First, he committed to “a discipline, not to a decision” - deliberately refusing to guide markets toward or away from a September hike. Second, he went after forward guidance itself, arguing that in normal times it creates a hall-of-mirrors dynamic where the Fed watches markets that are watching the Fed. And third, he drew a sharp line around the toolkit: short-term interest rates are the “predominant tool,” and the unconventional machinery - the balance sheet, the crisis facilities - should stay in the closet outside genuine crises.

Now put that next to what I wrote about last week. The Treasury is actively managing the long end of the curve through upsized buybacks, starting September 9th. The Fed chair just publicly disclaimed any interest in touching the long end. Whatever you want to call the arrangement, a division of labor has formed: Bessent leans on the 10-to-30-year sector while Warsh points the policy rate at inflation. Each institution now owns one end of the curve, and neither will say so.

Isn’t this exactly like Powell and Yellen in 2023? Yes. It is.

The bond market reaction was immediate. The 2Y referee line I’ve been tracking - 4.26%, the level that separates “hikes are priced” from “hikes are dead” (see chart) - had held all of August, with the 2Y closing at 4.24 last Friday. One speech took it out. The steepener that defined July and August, which peaked at +49 basis points, compressed from the front on Friday while the long end sat still. August’s steepening engine was term premium. Warsh may have just restarted July’s engine, hike pricing, right as the Treasury’s buybacks arrive to work the other end.

The quad update: the line held

Last week the classifier flipped to Quad 3 for the third time in three months, and I gave myself a public test: if the crossing stuck while high yield spreads took out 280, I’d stop calling these crossings shallow. Neither happened. Credit’s 126-day return, the input that decides the call, is back to +0.16% as of Friday against -0.05% at the crossing, and spreads went the other way, from 273 to 263 basis points. Third crossing, third reversion. The Dashboard reads Quad 2 - Inflationary Boom, and the tension of last month has actually eased: the monthly data still says hot manufacturing (ISM 55.6) against a cracked labor market (payrolls -23k), but credit is no longer flirting with the line as of Friday.

One honest caveat before anyone relaxes. The margin is 16 basis points of credit return - a bad week in high yield puts us back on the line, and a Fed that actually hikes on September 16th into heavy post-Labor-Day bond issuance is a plausible author of exactly that week. Let’s wait and see before we react.

Gold: the fence did its job

The July 27th gold signal entered at 4,080, rode to 4,616, and carried a published rule: ring-fence at 4,600, no adds, reduce below. Friday’s Warsh selloff closed gold at 4,455, through the fence, so I reduced. This secured a +9.2% move on what came off, with zero discretion involved, which was the entire point of writing the rule down three weeks ago. The remaining sleeve rides the signal window into mid-October, and a 5×20 bear cross ends it.

Worth saying plainly: the driver flipped. Gold’s August run was priced off intervention logic: term premium compression and a whiff of future money printing. A Fed chair who sounds sincere about fighting inflation with the policy rate is the opposite trade, real rates up and gold down, and Friday was gold taking him at his word too.

The new signal: financials, with real sample size

XLF fired a 5×20 bull cross on Wednesday at 58.26, and it is the strongest new signal on the Dashboard: 70% hit rate over the following 60 sessions, on 33 occurrences, +5 points of lift over baseline. Add the MACD-positive filter, which currently holds, and it reads 71% on 28 occurrences with +7 points of lift.

Two reasons to take it seriously: (1) The sample is three times the size of the crosses I’ve been fading, which is exactly the asymmetry the signal library was built to expose - the same chart pattern means different things on different assets, and only the backtest tells you which is which. (2) XLF’s own bear cross from August 21st reversed within three sessions; that version had ten occurrences and a 40% hit rate.

The macro also cooperates: banks earning a still-steep curve, high yield spreads at 263 basis points and tightening, and a Fed whose hawkishness steepens the argument for financials over duration-sensitive growth. Financials finished the week up 1.2% with the signal three days old.

The analog still in play

The Analog Explorer’s matching the last 120 sessions of the S&P against every 120-session window since 1928, still carries the 2001 analog as the most interesting one. We are drifting a bit, but the seasonality in September favors this one to materialize. This is one of the biggest things I’m paying attention to in September. I mentioned all this last time so won’t go into detail again, but next time we’ll revisit the whole argument with respect to the Midterm price patterns.

Going into September

The rotation shifted under the surface this week: health care, the three-week leader, gave back 2.0%, energy cooled 1.7% while keeping its +8.9% three-week crown, and the money moved toward financials and tech - one of which now carries the strongest signal in the library.

For the book: adding the financials long per the XLF signal, hold TLT with its 82.51 line and let September 9th grade it, and leave the equity fades alone.

And one more, because the Dashboard flagged it Friday: the VIX printed its own 5×20 bear cross, a pattern after which VIX has averaged +21% over the following 60 sessions. With vol in the mid-14s and a September that stacks ISM (Monday), the first upsized buyback (the 9th), CPI (the 10th), a live FOMC at better-than-even hike odds (the 15th-16th), and quad witching (the 18th) into the statistically worst pocket of the year - the back half of September, where all of the month’s average damage lives - index protection is still the cheapest thing on the board relative to what it insures. The 2001 analog doesn’t have to play out for that insurance to be worth owning. It just has to be possible.

Do not get caught offside in a time like that. Worst thing is you’ll burn your insurance premium. Big deal.

Thanks for reading! And thanks for subscribing to the newsletter.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

Today is the first example of how this will work - a middle-of-week Dashboard trigger list and insights coming into NVDA earnings later today, and Jackson Hole on Friday.

The second update comes as usual - on Saturday, with the longer analysis macro pieces (you know, my favorite ones) scheduled once per month, also on Saturdays, whenever appropriate.

1. The Dashboard fired a signal to buy bonds - and to leave Nasdaq alone

Two things fired on the Dashboard this week. One of them is a trap, and it is exactly the kind of trap that separates people who backtest their signals from people who trade off chart patterns because they look scary.

Let me take them in order. And since several of you asked - yes, there is a full scorecard on the oil and gold calls at the bottom.

Long-end Treasuries

TLT fired the 5×20 Bull + MACD Bull Cross on Monday. The 5-day average crossed above the 20-day and MACD confirmed within the window - the double condition, which is the version of this signal that actually earns its keep.

The backtest, under the same conditions we’re in now (Q2 regime, weekly trend aligned, VIX under 25): 70% hit rate over the following 60 sessions, average move +2.3%, and a +10 point lift over what TLT does unconditionally. Ten prior occurrences, so respect the sample size - this is a solid edge, treat it like an edge and never like a certainty.

What makes this one interesting is the calendar sitting behind it. Treasury’s long-end buybacks step up from $2bn to $4bn+ per operation effective September 9. The first intervention rally in mid-August lasted exactly one session, and I wrote then that the follow-through would come from mechanics rather than headlines. A technical buy signal on long duration, two weeks before the buyer of last resort doubles its order size.

On the other hand, the 2-year is pointing the other way. The 2Y yield fired its own bullish MACD signal on Monday (63% hit rate, 35 occurrences), meaning the front end still leans toward higher yields with September hike odds hovering around 30%. So this is a duration trade, a bet on the long end and term premium - it is emphatically not a bet on Fed cuts. The curve, at its steepest of the cycle around +49bp, can keep doing the work.

The trap: the QQQ bear cross

QQQ printed a 5×20 bear cross on Monday, alongside similar crosses in tech (XLK), industrials (XLI) and financials (XLF). If you trade off visuals, this is where you’d start trimming Nasdaq. However, Dashboard says: NO.

Under comparable conditions, this cross on QQQ has resolved lower only 1 time out of 8 over the following 60 sessions. The other seven times QQQ was higher, with an average forward move of +8.8%. That is a 12% hit rate - 20 points worse than shorting QQQ at random. In an Inflationary Boom regime with VIX at 15, the 5×20 bear cross has been a dip marker, and the chart above shows you every one of those red triangles from the past year resolving the same way.

Eight occurrences is a small sample and I won’t pretend otherwise. But small sample or not, there is no version of this data that supports selling the cross. The disciplined read: no short, no panic trim. If you’ve been waiting to add to equities, historically this pattern has been closer to an invitation than a warning.

This is precisely why the Dashboard tracks every signal with its own hit rate instead of a mashed-together “bearish score.” Two crosses can look identical on a chart and have opposite meanings in the data.

Scorecard

You don’t get to only hear about signals when they’re new. Here’s where the two live calls stand.

Oil - the July 7 signal. Up 20.1%. The MACD Bull Cross + RSI Reset fired with WTI at $72.19. It was the highest-conviction setup in the library at the time - 89% hit rate, +30 point lift - and it has delivered: WTI closed Friday at $86.67. The August 4 shakeout tagged the 5×20 bear cross and then reversed within days, which is why the exit rule is the 60-session window and never a single scary candle. We are 36 sessions in, trend intact, 24 sessions left on the clock. A weekly close below the 20-day average is when to pull out.

Gold - the July 27 signal. Up 13.1%. The 5×20 bull cross fired at 4,080 and spot closed Monday at 4,616. The rule from the August 21 issue stands: ring-fence at 4,600, no adds. Note that we are sitting one decent red day away from that fence - if 4,600 gives way I reduce, per the rule, and feel no emotions about it. 24 sessions in, 36 to go.

Two calls, both still open, +20.1% and +13.1%. The library also carries the failures when they come - that’s the deal, and it’s what makes the wins worth publishing.

Elsewhere on the Dashboard: consumer staples fired the strongest bull signal in the whole scan (XLP, MACD Bull Cross above the 200-day - 69% hit rate on 36 occurrences), and the XLF/XLI bear crosses carry modest positive lifts worth watching if credit spreads (HY OAS at 270bp, still below the 280 line) start confirming. Those are next week’s stories if they develop. September calendar: buybacks September 9, CPI September 10, FOMC September 15-16, quad witching September 18.

2. The index on NVDA day

Everyone reports the same statistic after an NVDA print. The stock moved X, the S&P moved Y, and the ratio gets called “pass-through.” I’ve used that framing myself and it turns out to be close to useless, because a single close-to-close number destroys the only structure in the data worth knowing about.

So, I pulled every S&P 500 session following an NVIDIA earnings release since February 2023 - 14 of them - and split each one into two pieces: the overnight repricing from the prior close to the open, and the drift from that open to the close. The two components behave nothing alike, and they usually point in opposite directions.

The overnight is the ordered part

Thirteen of the fourteen sessions opened above the previous close. Mean gap +0.56%, median +0.44%, and the largest was 1.55%. One gap down in four years, last quarter, and it was 0.35%.

That consistency does not extend past the opening bell. Mean intraday drift is −0.59%, median −0.29%, and the sign flips against the gap in ten of the fourteen cycles. The typical shape is a firm open that erodes through the session. Mean drawdown from the open is −1.10% and every single session in the sample traded below where it opened.

So the two halves of the day are doing opposite things, and when you net them into one close-to-close figure they largely cancel.

Almost all the dispersion is in the regular session

The overnight component is tightly clustered - consistent in sign, modest in size, never above 1.55%. The intraday component holds every outlier in the sample. Three sessions gave back more than 1.3% between the open and the close. The widest, November 2025, opened 1.55% higher and closed 3.03% below its open, a 4.6% swing between the two components on the same day.

The asymmetry is one-sided. When the intraday drift is positive it is small: the best was +0.69%. When it is negative it is large. That shape is what the pass-through ratio is averaging away.

Measured against an ordinary day

A pattern is only a pattern relative to a baseline, so I ran the same measures across 59 consecutive sessions with no earnings condition attached.

On an ordinary day, overnight gaps are a coin flip. Up 53% of the time, mean −0.04%, median +0.01%. There is no overnight drift to speak of in this sample, which matters, because the well-known tendency for equity returns to accrue outside regular hours is the first thing that could have explained the result away. It doesn’t. Thirteen or more gap-ups from fourteen, against a 53% baseline, carries a probability around 0.002.

The intraday fade clears the baseline too, though by less: −0.59% against an unconditional −0.03%, and a −1.10% drawdown from the open against −0.71%.

Mean high-low range on an NVIDIA reaction day is 1.43%. On an ordinary day it is 1.28%. Twelve percent wider. That is the finding I did not expect.

The session is not unusually volatile. It is unusually ordered. All the distinctiveness sits in the sequence - open high, drift lower - and almost none of it sits in how far the index travels.

Limits

Fourteen observations. The window runs February 2023 to May 2026, which is an unbroken bull market, and I’d expect a gap-up frequency of 93% to look different in a drawdown regime even with the baseline comparison in hand. Several sessions carried their own catalysts unrelated to the print - August 2023 was a rates day on which NVIDIA closed higher, November 2025 was a broad reversal - and attributing those paths to a chipmaker overstates the case. These are in-sample historical associations. Nothing here forecasts a level or a date.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

• The 9th week of the Q3 competition is up and running - click here to join the action.

• SPY pulled back roughly 1.4 percent last week and extended losses Monday as semiconductor stocks sold off hard, though the Dow held up on rotation into healthcare and materials.

  • Daily chart structure remains bullish above the 100 and 200 day MAs

  • The 4-hour chart shows a clear pattern of lower highs since last week’s peak, reflecting indecisive, choppy price action

• This week is loaded with info: First we get NVDA earnings Wednesday, and then on Friday we get PCE inflation data, consumer sentiment, and the first Jackson Hole speech from Fed Chair Kevin Warsh that could set the tone into September. A brief analysis of both events included 👇
  

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Charts

SPY closed out last week with its first losing stretch in a month, down roughly 1.4 percent as three-week winning streaks snapped across the major indexes. Monday didn’t help the mood. SPY slipped again to around 765, dragged lower by a semiconductor rout (Micron, AMD, Broadcom and Sandisk all took hits after reports that Nvidia is raising AI server prices), while the Dow squeaked out a gain as money rotated into healthcare, materials and other defensives. We keep talking about this rotation and the Dashboard keeps capturing it.

That rotation matters because equal weight S&P has been quietly outperforming, which is a sign this isn’t a broad panic so much as a narrowing of leadership away from the mega cap tech names that carried the tape all summer.

On the daily chart, the longer term picture is still constructive. Price remains above the 100 and 200 day MAs, and the broader uptrend from earlier this year is intact. But the shorter term averages, the 20 and 50 day, are starting to flatten and roll, and daily MACD has drifted toward the zero line after weeks of positive momentum, a classic sign of a trend losing steam rather than reversing outright. Drop to the 4-hour chart and the story sharpens: SPY has been printing lower highs since last week’s peak, each bounce fading before it can reclaim the prior high. That’s the kind of choppy, indecisive tape that typically resolves once a real catalyst shows up, and this week has two big ones.

The catalysts this week

Since there’s two of them, let’s see how they played out over the past few years.

First, NVDA. It is still the most important part of the AI trade, and by extension, for SPY’s tech-heavy top line. Let’s reexamine the market reactions the day after and two days after.

Since May 2024, NVDA earnings beats seem to be the signal to start selling. Seven double beats (both EPS and revenues) were all punished before the end of that week. It’s almost as if the great result immediately triggers profit taking and reloading a few days or weeks later. We’ll probably get the same thing now.

The reaction of the market itself has been 50-50. Sometimes it follows NDVA down (like in Nov 2025, when it finished 1.5% down on the day), sometimes it bounces back up (like in May 2026 or August 2025). No real signal there.

Then on to Friday: PCE inflation, personal income and spending, revised consumer sentiment, and a closely watched Jackson Hole speech from Fed Chair Kevin Warsh.

I know this is his first one, but the market has usually been very excited about Jackson Hole, so let’s have a look at the last 10 years of reactions on the day, and next day of SPX and the VIX.

It all depends on the message. Twice Powell shocked markets, twice he pushed them up. No one really knows what Warsh might do or say, obviously, but if he keeps the narrative from the previous meeting it might be another negative surprise. Remember, there is no more forward guidance here. All we got is what he says on the conference. So unless you wanna live trade it - don’t! - just wait and see. No point in frontrunning that one.

I assume he will touch upon the Treasury’s attempt at curbing yields (see more here), and he will definitely be asked on rate hike expectations for September. Right now, the probability is 60% pause - 40% hike in Sep, and the inverse of that for Oct.

This will get repriced heavily on Friday.

Overall, if PCE comes in soft a reclaim of the near-term highs and a resumption of the uptrend is very much in play. If chip weakness persists and Warsh leans hawkish, look for a test of the 20 and 50 day support zone, with the 100 day MA as the next real line in the sand below that.

The competition

Markets handed forecasters a genuinely tricky week to call, with chip stocks wobbling, defensives stepping up, and SPY stuck printing lower highs on the shorter timeframes. With Nvidia earnings and Warsh’s Jackson Hole speech both landing before Friday’s close, this week’s leaderboard could shuffle fast, so keep an eye on how quickly sentiment flips around those two events.

Predict the markets!

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

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What Bessent did, and what he didn’t do

To me it looks more like debt management with an attitude. The Treasury is buying back its own long paper and funding the purchase with issuance further on the curve. No reserves are created, no central bank balance sheet expands, nothing is monetized - debt is merely rearranged. If you refinanced a fixed-rate mortgage because the curve paid you to, nobody would accuse you of controlling interest rates. That is the same transaction, only scaled up on a massive government level. The top macro desks made this point all week and they are right: this is not QE and it is not yield curve control.

But here is what it is, and this is the part I care about: it is a revealed pain threshold. For months the long end sold off and Washington said nothing. The 30Y touches a 19-year high, and the announcement comes the same day. Bessent just told every bond trader on earth the level where the Treasury’s own budget math starts to hurt. Remember why Trump backed down on tariffs in April 2025? Very similar reason, the 10Y shot over 4.7% in three days, and they needed to reverse course. Then we got that infamous tweet: “now is the right time to buy” and the damage was done. Trump saw how easily and powerfully he can move markets, and 16 months later, his company is selling access to his tweets for a 100k p/m subscription.

DIGRESSION: I wrote a piece on that, saying there is no alpha in Trump’s tweets. Check it out if you have some time.

Anyway, markets do one thing with revealed pain thresholds: they test them. And the test took one session. The 10Y closed at 4.647% on announcement day and at 4.74% on Friday - the entire intervention rally unwound in two trading days, with the curve at +49bp, the steepest of the cycle.

A $4 billion operation against a $32 trillion market was never going to move the level. What it can move is the shape - think of it as a fiscal Operation Twist, run from the Treasury instead of the Fed. And the shape game has a second act that almost nobody is pricing in yet: the more Bessent funds long-end buybacks with bills and short coupons, the more he floods the front end, and the closer we get to the day the Fed has to buy short paper for reserve-management reasons just to keep money markets functioning. That is the moment this becomes a liquidity event. Until then it is merely plumbing.

If you have been with this newsletter for a while now, you might remember this mechanism and how I went on and on about it back in 2023 and 2024.

Yep, you’ve recognized it - it is very similar to the QRA (quarterly refunding announcement) policies that Yellen used to run under the Biden administration. Since Q4 2023 and during 2024 Yellen used short-term bond issuance to replace long-term bond issuance pushing yields from 4.9% to 3.9% in a space of a few months. It was back when Powell kept doing QT and kept interest rates at >4%, so it was up to the Treasury to provide liquidity to markets.

We might just get the same story now, especially coming into the midterm elections. We will be keeping a very close eye on this; it will be the key signal from now on.

The other intervention, and why that one worked

This was the Treasury’s second market intervention in sixteen days. On August 3rd, Tokyo and Washington announced a joint yen intervention - roughly $60 billion transacted in a very short window, with no forewarning, and with the US Treasury participating directly, a gesture Washington has not made for a foreign currency in decades. The dollar had been trading above 163 yen, a 40-year high; it broke below 160 on the suspected flows and fell to 156 once the operation was confirmed, and both governments said they stand ready to do it again.

Put the two operations side by side and you get a clean lesson in what makes interventions stick. The yen operation had surprise, overwhelming size relative to the moment, two governments acting together, and - crucially - it pushed with the fundamentals, since US hike odds were already collapsing and the rate gap was closing. Three weeks later the yen still holds most of the move. The buyback operation had none of those: it was telegraphed by the borrowing schedule, it is small against the float, it acts alone, and it leans against a supply picture everyone can read in the deficit numbers. The market kept the first trade and returned the second one within the next session.

And if you want to know why gold spent August going vertical, that sentence is most of the answer: one Treasury, two managed markets in sixteen days, and a curve whose long end no longer entirely believes the management.

Gold figured this out before the announcement

The cleanest read of the week came from the asset that doesn’t listen to press conferences. Gold is up 14% in three weeks, to $4,603, back above its 200-day, and it barely paused on the buyback news because it had been front-running the logic all month: long-end intervention means term-premia compression, compression means real rates down, and a front-end flood that might one day force the Fed’s hand means a whiff of future money printing. That cocktail is precisely what scarce assets are for.

The Dashboard, I’ll note with some satisfaction, fired its gold bull cross on July 27th (73% hit rate, +15 points of lift, mean +5.2% over 60 days) - three weeks and roughly $550 before the Treasury explained why.

Which quad are we in? The honest answer: on the line

The Dashboard’s daily classifier again flipped to Quad 3 - stagflation - for the second time, on Wednesday’s data. Same mechanism as July: credit’s 126-day return dipped negative (-0.29%) while the 10Y is up 65bp over the window. Same caveat as July too: the crossing is shallow, and the first one reverted in six days.

I read the three crossings in three months as one message rather than three signals: the regime is sitting on the line, and the long end of the bond market is what keeps pushing it over. Which is exactly the variable Bessent just started leaning on. There is something almost elegant about it - the Treasury Secretary and the Dashboard’s classifier are now fighting over the same basis points.

That means we are on the right track here, for sure.

Meanwhile the monthly read went the other way: ISM Manufacturing jumped to 55.6, the highest since May 2022, while July payrolls printed -23,000, the first negative month of the cycle, and core CPI eased to 2.5%, the softest of the tightening era. Manufacturing accelerating, labor cracking, inflation cooling - pick your narrative, the data will support it. The Dashboard’s practical translation: under the Q3 gate exactly one signal is firing, and it’s a financials bear cross with a 12% hit rate - a signal whose history says fade it. When the firing list is that thin and that self-contradictory, the system is telling you to trade small and wait. I take it literally.

The bond market, meanwhile, quietly changed drivers

Recall the referee line: the 2Y against 4.26. It spent August below it - 4.24 on Friday after touching 4.15 mid-month - because the payrolls miss and the soft CPI took September hike odds from 82% to roughly 40%. The front end has moved on from the hike debate. Or at least postponed it until end of October.

But the curve kept steepening anyway, and this is the nuance of the month: the steepener changed engines. July’s steepening was the front end pricing a hike and the long end pricing inflation - bear steepening, uncomfortable but familiar. August’s version is the front end falling while the long end rises on pure term premium - the market charging the Treasury for its deficits, its supply calendar, and now its visible discomfort. A steep curve is good for the credit engine, for banks, for the real-economy cycle; I’ve made that argument for weeks and the financials signals agreed. But a steepener led by term premium at 19-year yield highs is the version that breaks things if it runs, which is why Bessent moved, and why the failure of his move to hold for even a week is the single most important market fact of the month.

Equities: a record, then a fade into OPEX

The S&P printed a fresh record at 7,799 on August 13th, then faded 1.6% into today’s options expiration to close at 7,674, still 8% above its 200-day. The VIX sits at 15.1, which after everything above should strike you as remarkably relaxed. Under the surface, August’s rotation extended July’s message with a twist: health care (+4.4% this week, +7.5% over three weeks) and energy (+7.1%) keep leading, gold beat everything, and tech’s early-August bounce broke again this week (-3.6%). The AI complex made back some ground and gave it back on schedule; the money that left it is still living in medicine, energy equities and hard assets. Breadth actually improved to 11 of 13, so this is still rotation rather than distribution - credit at 273bp agrees.

September, by the numbers

Now the part of the calendar I promised, and I want to do it properly, because “September is bad” is a slogan and the data says something more specific.

Since 1950, September is the only month with a negative average return on the S&P: -0.63% average, -0.3 median. The recent record is particularly vivid: -4.8% in 2021, -9.3% in 2022, -4.9% in 2023, followed by benign years in 2024 (+2.0%) and 2025 (+3.5%). But the average hides the structure, and the structure is the useful part: the first half of September is flat (+0.15% on average since 1950). The entire monthly deficit lives in the back half (-0.79%). And the single worst pocket is the week immediately after September OpEx: -0.74% on average, positive in only 37% of years. One week, most of the month’s damage. As always, doesn't have to mean anything for this year, but it’s something to pay attention to.

Why there, specifically? Start with the options market, because this is an expiration story before it is a calendar story. Through an expiration cycle, the enormous September open interest pins the market: dealers who are long that gamma buy dips and sell rips to stay hedged, which is a stabilizer you don’t see until it leaves. At quadruple witching - September 18th this year - that open interest expires, the pinning force vanishes overnight, and whatever macro pressure was being absorbed gets expressed all at once. Vol seasonality tells the same story from the other side: the VIX makes its annual low in July (17.7 average since 1990), then climbs into September (20.3) and peaks in October (21.6) - about two and a half points of structural vol expansion in eight weeks, right through the unpinning.

Then the calendar piles on. Post-Labor-Day, the desks come back and actually trade the positions summer drifted into - and this September they come back to a market 8% above trend with vol at 15. Corporate bond issuance runs its heaviest weeks of the year after Labor Day, which pressures yields precisely when duration is already the sore spot. Buyback blackout windows open through late September as Q3 earnings approach, removing the single largest mechanical bid under equities. And the mutual fund fiscal year ends October 31st, so September is when tax-loss selling begins sorting the year’s losers - which, this year, means the AI complex that July and August already put on sale.

This September’s own calendar walks straight through the historically weak pocket: Warsh’s first Jackson Hole keynote August 28th (a chair with no dot plot explaining his reaction function in one speech), the first upsized buyback operation September 9th (the market will grade it in real time), CPI September 10th, the FOMC September 15th-16th with hike odds at a very movable 30%, quad witching on the 18th - two days after the Fed - and the JPM collar roll on the 30th. The unpinning lands 48 hours after a live meeting, into the worst week of the statistical year, with the Dashboard sitting on the stagflation line. Call it maximum sensitivity rather than a prediction.

Then there is also this:

The Dashboard’s analog update fits the moment uncomfortably well (expecting another 5-6% decline if it materializes). By distance, the closest matches are still the friendly mid-2000s grind - late 2005, late 2003. By similarity, the most similar is Feb 2001 to Aug 2001 and March 2021. Hot manufacturing, cooling inflation, record prices, narrow-then-broadening equities and a policy apparatus visibly managing outcomes: the profile matches both the great mid-cycle years and the two great tops. The Dashboard is telling you this exact setup has resolved both ways, and the thing that decided it - every time - was credit.

In conclusion: hold the rotation (health care, energy, staples core; financials trimmed after the bear cross, contrarian stats or not), keep the gold sleeve that the July signal built and treat $4,600 as a place to ring-fence rather than add, stay light duration until the long end proves it can rally without a Treasury press release, and carry index protection through the FOMC - vol at 15 into that calendar is the cheapest thing on the board relative to what it insures. In other words, now is the time to buy protection. If the classifier’s third visit to Quad 3 sticks while spreads take out 280, I’ll stop calling these crossings shallow. Until then: small, patient, hedged, and watching the front end of the curve for Bessent’s second act.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

• The 8th week of the Q3 competition is up and running - click here to join the action.

• SPY closed near 776 after a third straight weekly gain, but Friday’s failed retest of record highs signals early hesitation near 780

• Daily trend stays bullish, price above the 5, 50 and 200 day MAs. 4 hour MACD histogram is compressing near resistance, a stall in momentum rather than a breakdown so far. 772 to 775 is the key support zone to defend; a break below 770 opens the door toward 760

• This week: FOMC minutes (Wednesday), Walmart earnings (Thursday), flash PMIs (Friday) and rising oil prices on Iran and Lebanon tensions are this week’s main catalysts.

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Charts

SPY closed out last week near 776, capping a third straight weekly gain but stumbling into Friday after failing to retest Thursday’s record close. The daily trend remains constructive: price is holding above the 5, 50 and 200 day moving averages (roughly 777, 773 and 754 respectively), RSI sits in the mid 60s, and MACD is still positive, all of which points to an intact uptrend rather than a reversal. That said, the RSI creeping toward overbought territory and Friday’s rejection near 779 suggest the tape is getting stretched, and the next leg likely depends on whether buyers can clear the 780 area with conviction or whether the market needs to digest gains first.

On the 4 hour chart, the picture is more cautious. Momentum has flattened after the failed push to new highs, with the MACD histogram compressing rather than expanding, a sign that upside thrust is fading near resistance even though no clean breakdown has occurred yet. The key zone to watch is 772 to 775, the confluence of the 50 day moving average and last week’s consolidation shelf. A clean hold there keeps this a shallow, healthy pullback within the broader uptrend, while a slide beneath 770 would open the door toward 760, the next meaningful support shelf from early August. Above the tape, 780 remains the line in the sand for a fresh breakout attempt.

This week’s macro calendar adds real texture to that setup. Wednesday afternoon brings the minutes from July’s FOMC meeting, a split decision that has grown more consequential after a weak July jobs report and soft inflation data initially cooled hike odds, only for expectations to swing back toward a possible year end hike as markets parse Chair Warsh’s cautious tone. Tuesday delivers a wave of housing and industrial data (building permits, housing starts, industrial production), Thursday brings jobless claims and the Philly Fed index, and Friday closes the week with flash PMIs. On the earnings side, Home Depot already reported Monday and Walmart follows Thursday, rounding out the read on the health of the consumer. Layered on top of all that is rising geopolitical noise: oil has climbed toward the mid 80s on fading hopes for an extended Iran deal and renewed fighting in Lebanon, pushing yields higher and giving the VIX a modest bid. None of this breaks the uptrend on its own, but it raises the odds of a choppier, headline driven week than the steady grind higher SPY has enjoyed lately.

The competition

Records were tested but not broken last week, and this week's mix of Fed minutes, retail earnings and oil headlines out of the Middle East should keep predictors on their toes. Keep an eye on how SPY behaves around the 780 resistance and 772 support zone, since Wednesday's FOMC minutes could be the tiebreaker that decides which way this range finally breaks.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

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• The 7th week of the Q3 competition is up and running - click here to join the action.

• This week’s prediction survey is now open and accepting submissions.

• The survey keeps running on its normal schedule during that stretch, so keep submitting.

• Every week still counts toward the standings.

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The competition

This week’s prediction survey is up and running, giving everyone another chance to weigh in and add to their standing on the leaderboard. As always, thanks to everyone who continues to participate and share their outlook week after week, it’s what keeps this community going.

For today, the survey keeps running right on schedule. Same standings, same stakes, every submission this week counts just like any other week. Submit your predictions before the survey closes!

We will be back next week with our usual Tuesday post with a deeper analysis.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

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I prepared this long read about economics and monetary theory, purely for your enjoyment. Specifically - the monetarist theory of the new Fed governor, Kevin Warsh.

It is clear that Warsh is stepping away from the practice well-established by his three predecessors, Bernanke, Yellen, and Powell. I wrote about this before: his idea to drop forward guidance and economic projections, making the rate decision the key thing to watch and price in after the meeting rather than weeks and months in advance. He wants to bring the Fed back closer to the Greenspan and Volcker eras, where policy was driven by the monetarist theory - maintaining a balanced rate of growth in money supply, rather than the post-GFC hybrid of unconventional (New Keynesian?) monetary policy with QE and fiscal-financial dominance.

But Warsh is not an unknown at the Fed. Quite the contrary. He was one of the key players in stabilizing the markets during the 2008 post-Lehman panic (alongside obviously Bernanke and Geithner), where he took great effort in acquisition talks between banks (like Wachovia and Merrill Lynch) and was in charge of managing what was left of Lehman’s assets. He left the Fed in early 2011, after disagreeing with Chairman Bernanke over QE in particular, stressing that he expects massive inflation as a result. In other words, he was an inflation hawk for his entire career.

He has been repeating the same mantra over time, and mostly been wrong on his calls that inflation will be spiraling out of control. Until, of course, COVID and the 2021 supply chain bullwhip effect.

Understanding why he was wrong then and why inflation eventually did happen is crucial in order to figure out his policy stance, and why he is stepping away from forward guidance and all the other practices done by the previous three Chairs.

To do this, we must first dive into some good old monetary theory.

Monetarism: it’s all about supply

Warsh is a firm believer in the Milton Friedman monetarist school of thought, which rests upon the concept that inflation is always caused by an increase in money supply. Historically, and even conceptually, that was/is true. The hyperinflation episodes of Weimar Germany in the 1920s, Zimbabwe in 2008, Venezuela in 2019, Turkey and Argentina in 2022/23, etc. All these terrible inflation episodes were caused by what people usually refer to as senseless “money printing”.

The monetarist theory is derived from one of the central concepts of monetary economics, the quantity theory of money. It’s a very simple concept, embodied in the following equation (called the Fisher equation):

MV = PQ

Where:
M - money supply
V - velocity of money
P - price level
Q - real GDP

If real GDP (Q) and velocity of money (V) grow at a constant, predictable pace (which they usually do, and this is a standard assumption of the model), any increase in money supply (M) should increase prices (P).

In most cases this is indeed true.

But something happened after 2008 that threw off the entire theory. It took almost 20 years for it to resurface back into the mainstream.

Before we jump into monetarism’s recent ascent, feel free to read this refresher on why QE didn’t result in inflation, and what was so peculiar about COVID that it did. If you already know all that as a regular reader of the newsletter, feel free to skip it.

Why didn’t QE result in inflation?

The post-2008 period represented an entirely new paradigm in monetary policy. The Fed and central banks around the world expanded their balance sheets massively, but not a single one of those economies underwent an inflationary spiral as predicted by standard monetarist theory. How come?

Because, going back to our MV=PQ equation, sometimes V, the velocity of money is not constant. For example during and post COVID it was locked at unprecedently low levels (see graph below). Velocity of money measures the rate of circulation of money in the economy (nominal GDP divided by money supply). When it’s high, there is a lot of money circulating relative to the money supply. When it’s low, the opposite is true - less money in circulation relative to money supply.

You would expect V to be highly correlated with economic activity. As more people have jobs, and the economy is expanding, more money is circulating in the real economy. And usually that was the case. However, ever since the post-2008 quantitative easing (QE) policies from the Fed, the velocity of money indicator is no longer correlated with economic activity in general.

You can see this clearly when you compare it with the employment-population ratio (a great labor market indicator because it tells you if people left the workforce altogether - a particularly important indicator in tracking the 2010s labor market recovery).

Typically V and E-P move in unison since more people having jobs means more spending, and more spending means that more money circulating in the economy. However, ever since the Fed’s QE policies of the past decade, that mechanism has been disturbed for a while. The expansion of the money supply grew much stronger than nominal GDP, meaning that nominal GDP was not driven by excess money supply, or in other words: all this new money created was not being spent in the real economy.

It was (and still is) sitting between banks and the central bank, as the following figure shows, comparing excess reserves of depository institutions (i.e. banks) with the Monetary base (M0). All these reserves of depository institutions are accounted for in the Fed’s balance sheet. In other words, this money never left the banks. What about the billions difference between the two curves? Those are central bank reserves, also something that never entered the real economy.

Also, notice the long series and what it says about monetary base M0 and its impact on inflation in 1970s, when inflation was at double-digits. Nothing, right? Because you are looking at the wrong indicator when talking about money supply.

Basically, while the critics of the monetarist approach were saying that it failed in its inflation predictions in 2010s, the reality is that all this created money never hit the real economy. Monetarism was right after all.

Post-COVID: Why we did get inflation then?

For COVID there is a very typical error that people make when looking at the huge spike in the M1 money supply chart (the blue line below) saying that a huge increase in M1 money supply was the cause of inflation that we still have now. No, that wasn’t the reason.

First of all, the M1 aggregate underwent a change in methodology in April 2020 to include savings deposits in M1. Why? Because the Fed eliminated the reserve requirements for all depository institutions, which means that it was no longer necessary to account savings deposits separately from money in circulation. Here’s an explanation.

Therefore, as of May 2020, savings deposits were no longer only in M2, but are also part of M1. This is why M1 went from 4.7bn to 16.2bn in one month, while M2 growth was pretty much constant ever since 2000s. The Fed didn’t “print” any of that M1 money. It merely moved it from one account to the other (and M2 is unchanged since M2 consists of M1 plus a few other things).

But one thing did go up - and that's currency in circulation. There was a pick-up of pace after 2020. These were the Trump and Biden stimulus checks during COVID. The currency circulation was more affected by fiscal policy than monetary policy, at least during the pandemic. That’s where most of the inflationary effect came from during COVID.

And also because of the post-COVID supply chain shocks, driven by an upsurge in demand in 2021 after we got out of lockdowns and started spending again. I’ve written about those too often and won’t go into it now.

“A return to monetarism” - or how to break the back of very sticky inflation

Even though the massive monetary and fiscal expansions of the 2010s and 2020s did not result in galloping inflation or hyperinflation (as they did in Turkey, Argentina, or Venezuela), it did create a huge, unprecedented systemic imbalance that someone will have to fix. It will be either the bond market or a central bank, but whoever breaks the back of inflation will do so at an immense social and political cost. Probably triggering an economic crisis along the way.

Which brings us back to Warsh and his policy agenda.

Former FOMC member Stephen Miran shares the same view as Warsh, and provides us a good insight into Warsh’s policy parameters. Miran recently co-authored a paper with Nouriel Roubini and Peter Ireland where they call upon a new framework that measures money supply differently by updating weighting monetary aggregates (components of M1, M2, etc.) based on their relative importance, instead of just summing them up as used to be the case. They look at the so-called Divisia aggregates (named after an economist who developed the framework), which differentiate weights with respect to how transaction-based the type of money is, versus how store-of-value it is. The logic is the same as we do with inflation - there is a bigger weight on food and housing than there is for entertainment, for example. These weights get adapted to reflect changing consumer preferences. Monetary aggregates are typically summed up and hence weighted equally, but this is inadequate as an accurate measure of money supply, given that the role of money in the economy today versus hundred years ago has changed significantly. Makes sense.

Their approach enables them to accurately capture deflationary pressures after the 2008 Global Financial Crisis, where conventional money supply methodology would have predicted an increase in inflation. As emphasized earlier, the 2008 crisis was one of the reasons why monetarism and the quantity theory of money have been abandoned by central bankers in the first place - it failed to predict that QE was not going to raise consumer prices (even though it was veeery inflationary for assets like stocks and housing - adding to rising inequality for example, as asset holders kept getting wealthier).

The same novel methodology would have accurately predicted inflation after the COVID shock as well. Note the charts below, the lower panels in particular. The new methodology says that M4 was essentially negative in 2009 (bottom right), and created deflationary pressures. Hence, QE was necessary and it never became inflationary (note the difference in the Divisia M2 growth minus M2 growth, showing virtually no impact on money supply growth in 2010s). At the same time, the new measure did estimate a spike in inflation just after COVID (2021 and 2022), which the older method didn’t pick up well enough (or was not reliable enough). Read the paper here.

Right now, their prediction is that monetary policy is neutral, and that the current level of money supply does not anticipate higher inflation. In other words, the oil-induced inflation shock right now really IS transitory (unlike COVID).

Are we ever going to stop being stimulus junkies?

But there is a catch here.

The massive monetary and fiscal stimulus created thus far is systematically unsustainable. If it starts to deliver sticky inflation - amplified by geopolitical shocks and tariffs - it keeps pressure on central banks to keep rates higher (for longer) which pushes bond yields to higher and higher levels. This makes the whole system sensitive to any sudden abrupt move that might trigger a spike in bond yields (just recall the Liz Truss yield spike in 2024 that almost bankrupt UK pension funds). A 10Y yield approaching 5% is disastrous for the US economy, triggers a massive sell-off in equities, widens the budget deficit, and affects the very creditworthiness of the country. And yes, it too affects US pension funds and pretty much the entire global financial industry.

This is obviously the scenario that Warsh wants to avoid at all costs, but in order to fully avoid it, he needs to start by breaking the back of inflation - sustainably. And only after that resort to reducing rates and simultaneously reducing the Fed’s inflated balance sheet.

I wrote about the issue of becoming addicted to stimulus before. It all started with the 2008 crisis and the initial QE policies which led to money hoarding from banks (shown above) and sluggish growth, until the system became addicted to low rates and more QE. This was great for asset prices, but it created a scenario in which asset prices cannot keep rising without the stimulus. Any attempt to end QE was met with fierce resistance from markets. The damage was clearly done.

And then it got worse. During COVID we got QE on steroids, and are now facing a situation of very high debt levels and budget deficits (even higher than after 2009, when they were such a problem that they led to massive austerity policies). Only this time, the debt has to be serviced at rates of close to 5%, so it is becoming more difficult to raise new debt for fiscal stimuli. And it creates even more dependence of all the buyers of US debt to keep rates low and the stimulus coming. Historically such situations always have their natural conclusions and they often get really ugly.

Essentially, there are three scenarios where we go from here, when the economy becomes overburdened with debt and monetary stimuli:

1. Resort to unpopular economic policies like budget cuts, tax hikes, or deep structural reforms that lead to social tensions. On the monetary side it involves shrinking the Fed balance sheet and/or hiking heavily to kill inflation, creating negative pressure on all asset prices - read: huge sell off in stocks, bonds, all risk assets, housing. AI progress gets halted, tech gets sold off massively. This creates big problems in the short run: social tension, end of capitalism slogans, etc - but fixes things in the long run. No politician (or Fed governor) will ever do this. Not now at least, we’re in too deep.

2. Engage in even more monetary and/or fiscal stimuli (rates low, persistent QE, Fed keeps buying government bonds, government deficits keep rising) in order to simply kick the can down the road and avoid having to deal with reforms. Despite constant short-term boosts, this only weakens the economy in the long run and then it turns into Japan - three decades of stagnation. Or it implodes on its debt and is ravaged by creditors (very low probability of this happening to the US, but in most other countries which don’t have unlimited demand for their debt, this does happen). Seems that Bessent and Warsh - Trump as well - are fans of Abenomics and this just might be the scenario they are looking to emulate for the US. However, contingent on one big bet paying off that avoids a three-decade stagnation.

3. The third scenario - one that actually seems to be the main strategy of the current administration. An all-in bet on a massive productivity boom driven by AI. This way, we get to grow out of our debt problem, and rates come down naturally. The key emphasis is on naturally. By doing it artificially, we mess with fundamental price signals in the economy, and create distortions of capital allocation - in other words, capital starts flowing into unprofitable companies, rewarding business models that it should be punishing.

If, through AI innovation or (still unobservable) derivatives of the AI revolution we see a massive increase of marginal worker productivity, this would then lower the pressure off fiscal and monetary policy to keep greasing the system. This happens slowly over time, and is not likely to pull us out quickly. But this is exactly the long term bet the markets and the administration seem to be making. AI will save the day. It is the dawn of a new era and it will be the next industrial revolution thus providing the necessary productivity boost. Just like the Internet was in the 1990s.

The scenario we get, therefore, is a combination of #2 and #3 - keep adding stimulus, and keep an all-in bet on the AI revolution to deliver a productivity boom that basically resolves the issues of overspending and alleviates any political accountability.

This is the strategy you can expect from the new Fed Chairman. The new monetarism approach has been implanted. The Trump administration is very happy with Warsh even though he is not cutting and will probably hike once this year. But overall, they know he is on the same page - an all-in bet on AI.

We will probably will get there, but the question is do we ride there smoothly, or do we crash brutally first, with immense social cost, before we can go up again.

In any case, going forward, do keep in mind that Warsh will keep stimulating, despite his hawkishness, and that the AI play is the biggest bet for both monetary and fiscal policy. Which only means it will have to crash at some point before we can reap its biggest benefits.

Thanks for reading! And thanks for subscribing to the newsletter.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

• The 6th week of the Q3 competition is up and running - click here to join the action.

• This week’s prediction survey is now open and accepting submissions.

• The survey keeps running on its normal schedule during that stretch, so keep submitting.

• Every week still counts toward the standings.

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The competition

This week’s prediction survey is officially open and ready for submissions. As always, it’s a chance for our community to weigh in on where they see the markets heading next, and to keep building on the track record you’ve been putting together week after week. Whether you’ve been climbing the ranks or just getting started, every submission adds another data point to the bigger picture.

We’re taking the first two weeks of August off, but the survey keeps running right on schedule in the background. Same weekly cadence, same standings, same stakes, nothing changes on that front. So keep the predictions coming, every week still counts toward the leaderboard.

Get your predictions in before the window closes, and thanks as always for being part of the community. We’ll be back with the regular newsletter later in August, but until then, keep the streak going.

Predict the markets!

Stay focused and keep climbing the ranks!

NOTE: For all those new to the whole thing, read more about it here or watch a video of Scott and myself guiding you through the survey, showing you all its features, and briefly explaining how the competition works.

…join the $32,000x competition!

Join our survey competition to get an opportunity to participate in our quarterly ($8000) and annual (3% of our GP’s profits) prize distributions:

Survey

DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

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Lot’s of things we'll cover today, but first some housekeeping.

NOTE #1: I will be out of office the next two weeks, but the newsletter will still be active. The survey will run as usual the next two weeks. You will get a brief reminder on Aug 4th and Aug 11th, as usual, but without a TA element this time. Just a reminder not to forget to participate.

NOTE #2: The Dashboard and premium access will remain free throughout August as well and the official paywall will be lifted on September 1st. You will continue to get immense value for free until then, especially given that I plan to talk more about expectations coming into September and around the Midterm elections once I come back in mid-August.

ORCA Macro Dashboard

NOTE #3: I won’t leave you alone entirely during the next two weeks. Next Saturday I’ve scheduled a long post discussing the monetarist theory of the new Fed governor. It’s an ideal long summer read; an economics piece like I haven’t done in a while, but I think is very important in understanding the long-run context of what the new governor wants to do. I wanted to discuss this today, but too many things happened this week, so I postponed it for next week.

Ok, now we can begin. Today we will cover the following:

• The rotation of the decade: high beta momentum stocks experienced their worst month ever (down 38%), while the SPX was only 2-3% off all-time highs.

• The decline in the AI momentum trade this past month caused an absolute disaster on the Korean market (the entire market plummeted 40% as its bubble burst), but it also pulled down quite a lot of funds domestically, and even produced a few margin calls. Part of this rout in momentum led to a margin call of a large AI-growth fund, Situational Awareness, led by Leopold Aschenbrenner. I argue that their forced liquidation is what pushed the market down 1.5% on Wednesday, NOT the Warsh press conference and the subsequent reaction of the long end of the bond market.

  • I would have loved to see ORCA make money during this rout but we unfortunately had our first negative month this year, down 2.8% (still up 16% gross YTD). Not because we were caught on the bad side of the market, but because we had 4 misses in a row in our signal. Another reminder that the market doesn’t care about what I want :)

• PCE Inflation came in lower, big tech earnings delivered (MSFT, APPL, AMZN), and the Dashboard pulled back into quad 2. Panic averted for now.

The rapid decline of AI momentum stocks

This chart from Hedgeye was widely shared last week on X:

Goldman’s report for high beta momentum stocks performance showed that these stocks (comprised in today’s case with high-growth AI names) had their worst month ever since Goldman collects the data. Worse than 2001, worse than 2008, worse than COVID, or the 2022 bear market. Of course those episodes lasted longer, this is just one month but once momentum breaks it’s anybody’s guess when this might end.

Victims? Two were most prominent.

First was the Korean stock market, which was entering a typical bubble this year, surging on leveraged AI bets (116% growth in H1 2026 - unreal for a composite index of a major industrial country), rising to become the 6th largest in the world based on market cap, until it all came crashing down this week with a total 40% decline since it’s June peak.

How did it go up and down so fast? Leverage. As you may know, when you grow on leverage, the losses don’t need to be big before you start losing it all. A series of correlated smaller losses quickly accumulate and hit margin requirements and forced liquidations, which implies selling at the worst possible moment, which amplifies losses for everyone else and the spiral becomes deadly.

A JPMorgan report noted that the majority of the highest leveraged ETFs in the Korean stock market - about 90% - have been liquidated in this process:

1.6 million Koreans faced heavy losses on their leveraged bets, while almost 400,000 of them got margin called - meaning they lost more than they had in their accounts. These are all retail traders (locals call them “ants”), mostly younger, priced out of owning a home and resorting to leveraged trading to get-rich-quick. They made a shift from crypto into AI this year and they did so in unprecedented volumes. Which makes the crash all the more painful for all these people, and Korea is likely to face another (hopefully smaller) financial crisis.

Leverage was a major player in yet another Fund that found itself in trouble this week - the superstar performer Situational Awareness Fund, led by the 25-y.o. former OpenAI employee Leopold Aschenbrenner. This one was also brewing over the past month, and saw its 30% monthly losses before this week quickly spiral into 67% by the end of Wednesday (as reported by Achenbrenner himself in his weekly letter to his investors).

The SA Fund was a highly leveraged, highly performing AI-momentum stocks growth fund, delivering over 2,000% to its investors since inception, 3 years ago. This year, they were up 400% before the rout in July started. After their 67% loss in July, they are still up 80% YTD, as reported in their Letter. This is very much expected in highly leveraged growth funds like these - volatility will be immense and one has to have excellent risk management tools to stay alive during periods of inevitable drawdowns.

The problem there was that bigger players smelled blood and applied pressure to force them to liquidate positions. Leverage playing out the exact same way as in Korean ETFs - smaller losses can turn into heavy ones very quickly if prices keep falling. Allegedly, other funds began shorting the AI momentum names held in the SA portfolio, which pushed their prices down even more, drawing up margin requirements by their brokers. This forced the $20bn fund to seek more capital to put up with higher margin requirements in order to weather the storm. But it was too late. By Wednesday the book has been forced liquidated. SA had to sell all of its AI holdings on big discounts, and the buyer on the other side was none other than Citadel. Not the first time they are on the other end of such transactions, this is basically their M.O.

In the end, the story generated a lot of backlash against the young PM, mostly on accounts of bad risk management. Still, their investors are making excellent returns, the fund did not blow up, they haven’t done anything illegal, and can very much rebuild from where they are now. This is very far from the stories of Archegos or FTX that many people started to evoke, and the comparison is frankly unfair.

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What got me so interested in the story is the sell-off on Wednesday after the FOMC press conference. The presser delivered nothing special: a hawkish pause, slightly reduced rate hike expectations, and a somewhat stronger reaction on the long end of the bond market - the 2Y went down, but the 10Y and 30Y shot up (more on this below)

And yet the sharp sell in the final hour seemed very unusual to me as a mere response to the FOMC presser. Even with the long end reacting the way it did, it did not warrant such a big equity sell-off. This was a liquidation, pure and simple. AI momentum pulling down a bunch of other names along with it. The proof? A massive bounce back the following two days, while the 10Y and 30Y kept going up. If this was a macro-induced sell-off it would have continued. No, this was a liquidation-driven sell, and a bounce after the portfolio has been scooped.

What the bond market did with the hold

But let’s get back to macro.

The Fed held at 3.50-3.75% on Wednesday, and the decision came with the most hawkish split of the cycle: three dissents in favor of a 25bp hike. Warsh called the hold “especially prudent at these uncertain times” and repeated that 2% is the target, with no soft or implicit target around it.

Now recall the referee I set before the meeting: the 2Y, 48 hours after the presser, against 4.26 and 4.34. The verdict came in fast. The 2Y fell from its Monday 4.32% through the meeting to close the week at 4.26% - sitting precisely on the line, having taken the July hike out of the price and left September fully in it. Futures now put 67% on at least one hike by the September 16 meeting. The front end read the dissents as a promise.

The long end read them as a problem. While the 2Y eased, the 10Y went up - 4.61% before the meeting to 4.72% by Friday - and the curve steepened from +33bp to +46bp in three sessions. The 30Y was even more concerning, going up to 5.2%, the highest level since 2008.

That is a textbook bear steepener, and it is the single most important chart of the week: the front end trusts the Fed to move in September, and the long end is charging more for the wait, because a committee that holds with oil at $87 and core PCE at 3.3% is a committee accepting inflation risk in exchange for time. In other words, the oil-driven inflation shock is transitory.

TLT fell another 1.2% and sits well below its 200-day. The Dashboard agrees with the long end - the 2Y bull signal that fired on July 13th is still live, and duration has not earned its way back into the book.

The data around the meeting fed both camps. Q2 GDP printed +1.5% annualized against 1.8-2.1 expected, with the Q2 PCE price index running 5.1% - slowing growth, hot prices, which is the stagflation drift in one release. June core PCE eased to 3.29% from 3.41%, the first real improvement in the Fed’s own gauge since spring. And GDPNow opened its Q3 tracking at 5.0%, which I’d treat as the usual inflated first print rather than a boom call - the model starts every quarter optimistic and earns its way down. Expect it back down to 2-3% soon.

So the bond market’s position, stated plainly: the hike was not cancelled, it was scheduled. September at 67% with two more inflation prints (Aug 12 and Sep 10) and one payrolls report (Aug 7) between here and there. The 2Y sitting exactly on 4.26 is the market keeping its options open, and whichever way it breaks off that line in August is the next verdict.

Dashboard readings: back to Quad 2 again, but still on alert

Last week I told you the Dashboard’s regime classifier had flipped to Quad 3, that the crossing was shallow, and that a two-day bounce in credit would un-flip it. That is exactly what happened. Credit bounced through the Fed meeting, and as of Friday’s close the Dashboard reads Quad 2 again - inflationary boom, six days in stagflation, round trip complete.

I want to be straight about what that was and wasn’t. It wasn’t a false alarm to be embarrassed about; the classifier did its job, registering that credit had stopped making money while yields kept rising. It also wasn’t a regime change, and I said so at the time - the crossing was four tenths of a percent deep, and the whole point of publishing the caveat was so we would both know what a reversion looks like when it comes. Here is what it looks like:

The margin is still paper thin. HYG’s 126-day return is hovering a whisker above zero, so the classifier will live near this line for weeks, and I’d expect at least one more head-fake in August. The signal count tells you what changed in practice: three signals firing under the Q3 gate last week, sixteen under Q2 now - financials (71% hit rate, the top of the book), industrials (72-73%), staples, and a gold cross. The Dashboard went from benched to busy in one week. That is what a regime sitting on a knife edge does to a gated system, and it is why the answer to “are we still in Quad 3?” is: no, but keep your hand near the switch.

See for yourself:

ORCA Macro Dashboard

July was the month momentum handed over

Now the part that I think matters most for portfolios, because a flat index hid a violent month underneath. The S&P finished July down 0.1%. Here is what happened inside that nothing:

Energy beat the index by 12 points in a single month. Financials by 6.3. Health care and staples by 2.5. On the other side, tech lost 7.8 points to the index and the Nasdaq 100 lost 6.4 - the worst month for the momentum complex since the April tariff episode. Small caps gave up 3 points. The AI leadership that carried the first half of the year spent July being sold to fund energy, banks and medicine.

Three things about this rotation worth saying carefully.

First, it has a macro logic, and the Dashboard called the direction. The regime playbook’s Quad 2 leadership is energy, financials, materials and industrials, and its stagflation-leaning tilt adds staples and health care. July delivered almost exactly that list, in almost exactly that order, while oil rose 24% on the month and the curve priced a hiking Fed. This was the market repricing which earnings streams survive a 4.7% 10Y and $87 oil, and the answer was: the ones attached to the real economy, not the ones trading at the highest multiples.

Second, the Dashboard’s book rotated with it in real time. The financials signal fired July 28th at a 71% hit rate, industrials the same day at 72-73%, staples clustered through the week. The whole top of the current firing list is the new leadership. The oil position from July 7th, which paid +25% at its peak, remains the trade of the month even after oil’s $92-to-$79-to-$87 whipsaw through the ceasefire headlines.

Third, the week ended with a warning against chasing it. Discretionary, the most-sold sector of the month, bounced 6.1% this week; communications rallied 1.8%; tech went flat instead of down. One week doesn’t reverse a rotation, and both XLY and XLC are still below their 200-days, so the burden of proof sits with the bounce. But rotations this fast usually breathe, and adding to July’s winners on August 1st is how you buy energy at the top of its month.

The analogs sharpen the picture. I re-ran the Dashboard’s analog matching on the post-FOMC vector, and the neighborhood moved: the March 2021 reflation-peak match that haunted the book for three weeks dropped out for now (see chart below). The closest company now is May 2006 by similarity and late 2004 by distance - the mid-2000s cluster, a Fed tightening into a real-economy expansion, equities grinding higher with value and energy leading and the index chopping through hiking scares. That cohort’s six-month forward returns were positive but unspectacular, and the toll was rotation, not drawdown. The tail in the list is June 2007, fourth by similarity, same as it ever was - and the thing that separated 2005 from 2007 was credit, which is why HY spreads at 281bp on Monday’s print (the widest since April, on a lagged FRED read, with HYG recovering through the meeting) stay at the top of the watch items into August.

What I’m doing with all three

The regime answer keeps the book in Quad 2 shape with a short leash: financials, industrials, staples per the fresh signals, energy held rather than added after its 12-point month, tech and discretionary at benchmark while they’re below trend but bouncing. The bond answer keeps duration light - a 77% September with a bear-steepening curve is not the setup to buy TLT into - and keeps the 2Y-at-4.26 line as the tell that changes it. The rotation answer is patience: July’s move was the position, August is for letting it consolidate, and the two prints that decide September (payrolls on the 7th, CPI on the 12th) are the next dates that matter. Jackson Hole closes the month, where Warsh gets to explain a reaction function he has so far only demonstrated.

The classifier spent six days in stagflation and came back. The market spent a month rotating as if it means to go there properly. Between those two facts is where August gets decided.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

• The 5th week of the Q3 competition is up and running - click here to join the action.

• This week brings the Fed decision on Wednesday, Microsoft, Meta, Apple and Amazon earnings, and both PCE inflation and the jobs report, making it the most information dense week of the quarter.

• Any positioning would be best to wait until after these events have passed, especially the PCE report on Thursday morning.

• SPY closed last week near 739, about 2.8% off its June 2 all time high of 760, but the broader uptrend stays intact above the 100 and 200 day averages.

  • Key levels to watch: support at 735 and 731, resistance at 742 and 746.

• The VIX easing back to 18, after hitting 20, and both oil and yields sliding back down on a US Iran strike pause both point to a calmer risk backdrop, though chip stocks are lagging beneath the surface.

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Data-heavy week

First thing is the FOMC on Wednesday. The thing to keep in mind there is that we will most likely get another pause, with a hawkish outlook. What the market is not pricing in is a hike (very bad), and a dovish pause. In any case, I would wait for any positioning after Thursday’s PCE print, and after the market digest major earnings overnight from Wed to Thu. Oil has gone down this week, as have the bond yields, so all eyes are again on the Fed signal and the data.

ORCA Macro Dashboard

In the Saturday blog we mentioned that the Dashboard has shifted regimes for now and that it fired a bearish cross on the SPX, similar to the signal it fired on oil a few weeks ago. That was a good call, despite the news of a ceasefire over the weekend, and equities kept dropping (especially tech and semis).

This week we find out whether the analog from 2001 gets realized. We might just get a good idea of how this will resolve over the rest of summer.

Charts

SPY closed Monday around 739, still cooling off after tagging its all time high near 760 back on June 2. The pullback has pushed price beneath the 20 and 50 day averages, sitting near 746 and 744 respectively, but the broader trend remains intact: both the 100 day (around 715) and the 200 day (around 696) are miles below current price, and price has held above the 200 day since April. RSI has settled into the mid 40s, a neutral reading that shows the overbought stretch from June has fully unwound without anything breaking. On the pivot map, first support sits at 735, with a deeper cushion at 731, while resistance clusters at 742 and then 746. As long as 731 to 735 holds, this looks like digestion within an uptrend rather than the start of something worse.

The 4 hour chart tells the same story with a bit more nuance. MACD has flattened out near the zero line rather than rolling over hard, which suggests momentum has stalled rather than reversed, and volume has been unremarkable on the way down, no panic selling, just a grind lower. The VIX has actually eased toward 17 to 18 even as equities chopped around, and crude has slid as the US and Iran paused their exchange of strikes, both signs that the risk backdrop is calming rather than deteriorating. The one soft spot beneath the surface is semiconductors, with names like AMD, Teradyne and Micron getting hit hard even on days the index closed flat or higher, a divergence worth watching heading into a very earnings heavy week.

The competition

With SPY cooling off near 739 and holding well above its longer term trend, this week’s board separates the players who can read consolidation from those still chasing the last breakout. Keep an eye on how forecasts adjust once the Fed decision, four Big Tech earnings prints, and Friday’s jobs report all land in the same five days, because that’s exactly the kind of stretch that reshuffles the leaderboard.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

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ORCA Macro Dashboard

It’s important to keep in mind that this classifier is mechanical. It asks two questions over a 126-day window: is credit making money, and are long yields rising? For months the answer was yes and yes, the definition of an inflationary boom. As of Friday, credit’s 126-day return went negative while the 10Y is up 43bp over the same window, and hit 4.7% yesterday.

Before anyone panics, two honest caveats. The crossing is shallow - HYG is down 0.4% over the window, sitting practically on the line, and a two-day bounce in credit un-flips it. And the main monthly macro classifier, the ISM-against-CPI on the Dashboard’s front page still reads Quad 2, because ISM is at 53.3 and still expanding. What flipped is the market-based read. The market is voting on the regime before the economy confirms it, which is what markets do.

The timing is the actually the main story. The Fed meets Wednesday, July 29, and this piece is the playbook I promised last week.

The bond market has already voted

Start where I always tell you to start: the bond market. The 2Y yield closed Friday at 4.34%, straight through the 4.26% line I flagged as the level that re-arms the hike. It ran five straight sessions higher into Thursday’s 4.35% peak. The 10Y closed at 4.68%, the yield curve at +34bp, and TLT fell another 1.5% - further below its 200-day. The 2Y now trades some 60-80bp above the funds band. In the FOMC rulebook, that is the bond market instructing a hike.

But we knew all that by now.

Except this week, the markets finally listened. On July 15 the expectations on a July hike was at 10%. As of Thursday it’s 36.5%, tripled in nine days, with the entire debate confined to hold-versus-25bp hike. By December the market still leans about two thirds toward at least one hike.

And the reason is obviously, oil.

Oil is running the policy debate now

WTI closed Friday at $90.46, up 11% on the week, after touching $92.35 on Thursday. The US has now bombed Iran for nine consecutive nights, tankers keep getting hit in the Strait of Hormuz, shipping traffic through the Strait has slowed, and analysts are openly writing $100 targets. Gasoline is back at $4 a gallon, which is precisely the input that made the June CPI’s 26.7% twelve-month gasoline number look tame.

The Dashboard was on this before the strikes escalated. The July 7th oil signal I wrote about (the MACD bull cross on a reset RSI, eight winners in nine occurrences, mean +12.7% over 60 days) is now up +25.3% in thirteen sessions - double its historical average move, with most of its window still ahead. I ring-fenced those gains two weeks ago and I’m keeping them ring-fenced. The story was unfolding for a while now, and the Dashboard caught it well in advance.

Here is the mechanism to keep straight: the August 12th CPI print will carry this $90 oil in it. So Wednesday’s committee is deciding whether to move against an inflation impulse everyone can already see on a chart but nobody can yet see in the official data. Warsh killed the dot plot precisely so the committee could react to data instead of steering expectations. The uncomfortable joke is that the data is now arriving through a war.

Equities finally noticed

The S&P closed the week at 7,412, down 0.6% on the week and 2.6% below the June record. The Dashboard fired a 5×20 bear cross on the index itself on Thursday (see the technicals sections), the first since June. Consumer discretionary fell 5.2% on the week and sits 6.5% below its 200-day. Communications lost another 3.9%. QQQ gave back 1.6%.

And what led? Energy, up 3.4% against a falling index. Industrials. Health care. Equities are re-sorting for exactly the regime the classifier just named: own the commodity beneficiaries and the defensives, sell the consumer.

The Dashboard’s own firing list tells the same story in a different way: last week ten signals were live, this week three. Part of that is the regime gate itself - signals now have to clear a Q3 filter with much thinner history. But that collapse is information. In the regime the Dashboard now believes we’re in, its index base rate drops to +1.2% per three months with a 59% hit rate, the weakest quadrant on the board, and it has essentially benched itself. The three survivors: a bull signal on the 2Y yield (69% hit rate in this regime), and the two index bear crosses - which, note well, have historically resolved higher six times in ten even in Q3. The Dashboard is telling us to be careful, nothing more.

Under Q3 conditioning, the sector playbook flips hard: staples (+3.4 points relative per quarter, 68% hit rate), utilities (+2.9, 64%), health care (+2.8, 62%) and energy (+1.6, 56%) on the long side, with discretionary (-3.6, 31%), financials (-2.8, 38%) and tech (-2.4, 39%) the historical losers. Just something to keep in mind if you wanna get defensive.

Credit blinked, once

For six weeks credit was the calmest asset on the board and I kept telling you its failure would outrank every other signal. On Thursday high-yield spreads jumped 9bp in a single session to 277bp - the biggest one-day widening since the April tariff scare, and three points from the 280 warning line I set five weeks ago. HYG closed Friday at 79.23 against a 200-day at 79.16. Veeery close (see chart). Last week’s 80% Dashboard buy signal on credit is being stress-tested at the exact worst moment, and whichever way HYG resolves through that line during FOMC week is worth more than anything the statement says.

For completeness, the week’s other data leaned against the stagflation read: Atlanta Fed GDPNow was revised up to 1.7% for Q2, and the Conference Board LEI fell only 0.2% in June to 99.1, with the first-half decline (-0.3%) far milder than the second half of 2025. Growth is soft, not breaking. The “stag” in this stagflation is still mostly forecast. But that’s exactly why we have the Dashboard, to see this unfolding on markets first before it hits the economy.

FOMC: the playbook (PREMIUM)

Three ways the 2pm statement and the Warsh press conference can go, and what each does to the book:

1. Scenario one: hold, hawkish mouth (prob 63.5%). The committee stays at 3.50-3.75% and Warsh spends the presser acknowledging oil. The front end gets a relief dip that I would not trust for a minute, because September stays live with crude at $90 and the August CPI unprinted. Equities probably rally the day of and chop after. The regime evidence doesn’t change at all on this path. Rotation stays on, duration stays light.

2. Scenario two: the hike (36.5% and rising all week). First hike of the cycle, delivered mid-oil-shock by a chair markets barely know. The 2Y goes looking for 4.50%, long duration takes a second leg down, and a 20x forward multiple gets re-litigated in public. Before you sell everything, remember what the analog work showed: March 1997 was exactly this - a hike into a boom - and it cost equities 9.6% in six weeks, all of it recovered by May, because credit never broke. The hike is only the disaster scenario if spreads go through 300 with it. Watch the pair, not the print.

3. Scenario three: the Warsh wildcard. No dots, no guidance, possibly a short statement and a presser that says less than the market wants. The surprise can cut both ways: a hawkish hold (he talks September into the price) or a dovish hike (25bp framed as one-and-done insurance). The referee is where the 2Y trades 48 hours after the presser, never the statement itself. Above 4.34 and the market believes a cycle has started. Back under 4.26 and the whole three-week repricing was one meeting’s worth of insurance, now delivered or postponed.

The watchlist

Ordered by weight. This week the first two can trade places any day.

1. The 2Y after the presser: 4.26 / 4.34 / 4.50. The whole meeting compresses into which side of those lines the 2Y picks by Friday. Above 4.34, the hike cycle is real and the March-1997 clock starts. Between the lines, nothing was decided and August data decides it. Under 4.26, the front end just told you the oil shock gets looked through, and that is the single most bullish outcome available for equities next week.

2. Credit at the line: HYG 79.16, OAS 280 then 300. Thursday’s 9bp lurch to 277 puts the warning line in reach of any single bad session. A weekly close above 280 flips my read from rotation to distribution, exactly as specified five weeks ago, and above 300 the book goes defensive regardless of what the Fed said. Conversely: HYG holding its 200-day through a hike would be the strongest confirmation the 1997 road is the right map.

3. Oil between $90 and $100. Holding a $90 handle into the August 12 CPI makes September very hard for the committee to skip. A $100 print, which the Hormuz math keeps on the table, turns an inflation problem into a political one mid-Jackson-Hole. The retirement level is unchanged: back below the 200-day near $75 and the entire hawkish case dies of natural causes, though from $90 that is a long way down.

4. The 2021 tripwire: energy versus oil. Not tripped. Energy was the week’s best sector while oil rose 11%, so the commodity and the equities still agree. The signature I’m watching for is XLE relative strength rolling over while oil holds $90 - the week that happens, per the March 2021 analog, I trim energy into strength, stop underweighting tech, and let duration back in.

5. The VIX 25 gate, and the Dashboard’s own silence. Every signal passes a VIX ≤ 25 filter, and vol at 18.6 into a binary meeting leaves less room than the calm surface suggests. The firing list already collapsed from ten to three on the regime gate. If a hike takes the VIX through 25, the Dashboard goes fully dark, and going flat when it does is part of the system’s design.

The premium position

Core per the Q3 playbook: staples, health care, energy overweights; discretionary and tech underweight; small caps untouched at benchmark. Duration underweight holds while the 2Y signal is live and TLT is below its line. The oil sleeve keeps its +25% with a stop that guarantees the trade cannot round-trip. Index protection sized through Friday of FOMC week, bought before Wednesday, not during the presser. Nothing gets added on Wednesday itself - the Dashboard trades regimes, not press conferences.

The calendar after Wednesday: core PCE July 30, ISM August 3, payrolls August 7, the CPI that carries $90 oil on August 12, and Jackson Hole at the end of August, where a Fed that may have just hiked explains a reaction function it hasn’t published.

Next week I’ll discuss the meeting post-mortem, what the 2Y verdict was, and give you a more long-term overview over the next several months. We could be in for a rocky August and September, once again.

Thanks for reading! And thanks for subscribing to the newsletter.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

• The 4th week of the Q3 competition is up and running - click here to join the action.

• SPY is still trading within a narrow range: it pulled back from record highs near 760 to the 742 to 748 zone, with 741 to 744 now the key support to defend

• Daily trend stays intact above the 60-day and 200-day moving averages, but momentum has clearly cooled. 4-hour MACD has flattened rather than broken down, pointing to consolidation over a trend reversal

• This week, Big tech earnings (Tesla, Alphabet, Intel) headline a heavy reporting week and could act as the next catalyst.

• FOMC meets the following week, July 28-29, and with Warsh still inflation-first and oil risk lingering post-Hormuz, expect positioning ahead of it

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Charts

SPY spent last week grinding against the top of its range, stalling just shy of its record high near 760 before rotating back down toward 742 to 748. That pullback has put the spotlight squarely on short-term support. The daily trend remains constructive, price is still holding above both its 60-day and 200-day moving averages, but momentum has clearly cooled from the “buy everything” narrative of a few weeks ago. The 741 to 744 zone is now the line in the sand: hold it and this stays a garden-variety pause inside an uptrend, lose it and the next reference points lower toward 723.

On the 4-hour chart the picture is one of consolidation rather than breakdown. MACD has flattened out after rolling over from its recent highs, and the histogram is compressing rather than expanding to the downside, a sign that sellers haven’t taken control so much as buyers have stepped back to catch their breath. Volume has faded on the pullback too, which usually points to profit-taking ahead of a catalyst rather than a genuine change in trend. A reclaim of the 755 to 760 area would put fresh highs back in play, while a decisive close below 741 would shift the conversation toward range expansion.

That catalyst arrives fast. This week brings the first part of big tech earnings season, including Tesla and Alphabet reporting alongside a packed slate of S&P 500 results and Intel closing out the week on Thursday. On the macro side, the recent cooling in PPI has offered some relief on the inflation front, and the reopening of the Strait of Hormuz has taken some heat out of oil prices, though the situation remains fragile and headline risk hasn’t disappeared. Oil was down on Sunday evening, but shot back up to over $85 during Tuesday.

Fed Chair Kevin Warsh has kept his inflation-first tone intact heading into the July 28 to 29 FOMC meeting, so while that decision falls just outside this week’s window, markets will likely start positioning for it as the week progresses. Between the earnings deluge and the Fed on deck, 741 versus 760 is the range to watch.

UP NEXT: During the weekend, I’ll present an overview of what we might expect from FOMC next Wednesday. Don’t miss it.

ORCA Macro Dashboard

The competition

With SPY parked right between support and resistance and a wall of big tech earnings about to hit, this is exactly the kind of week that separates sharp calls from lucky guesses. Keep an eye on how price reacts around 741 and 760, because whichever level breaks first is likely to set the tone heading into next week’s Fed decision.

Predict the markets!

Stay focused and keep climbing the ranks!

NOTE: For all those new to the whole thing, read more about it here or watch a video of Scott and myself guiding you through the survey, showing you all its features, and briefly explaining how the competition works.

…join the $32,000x competition!

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

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Probably because of the other major implication I keep mentioning - the June print is the rearview mirror, reflecting a declining oil price from May and June (it was $110 in May, $70 by end of June). This week, oil closed another $10 higher, going over $81. So we are still not done with inflation. And yes, markets are still pricing in at least one rate hike this year, and yet another one next year.

Towards the end of July, after the July 29th FOMC, I’ll do a longer post discussing the bigger macro implications of the hiking cycle. It’s not all that clear that these probabilities are accurately pricing in the next moves of the Fed. But if they are, rate hikes will add pressure on an overheating market.

More on this in two weeks. Don’t miss it. And also, make sure to follow our Macro Dashboard:

ORCA Macro Dashboard

Back to bonds and equities. Bond yields unwound on schedule. The 2Y tumbled from its Monday peak of 4.26% to 4.13% by Wednesday. The 10Y also went down from 4.63% to 4.52%. Both still remain elevated, and are still pricing in higher expected interest rates. And remember, the 2Y is the leading indicator of FOMC rates, well above the Fed funds current band of 3.5 to 3.75.

Equities on the other hand did not rip. SPX finished Friday down 1.0% on the day, 1.6% lower over five sessions, 2% below the June peak. NASDAQ was down 3% last week, driven by the semies in particular, and is down almost 7% since its June peak. The VIX closed at 18.77, up 25% over those same five sessions. Still not at a level to cause any real concern, and with equities still very close to all-time highs, mostly trading sideways since mid-May.

The regime engine still reads Quad 2, inflationary boom, where the index has averaged +2.8% over three months with a 77% hit rate across 92 monthly observations. The regime didn’t break.

The tension: June’s print against July’s barrel

WTI closed Friday at $81.52, up 14% in five sessions, and it did not stop at the line. The 200-day average at $74.34 was the level I called the master variable, the line that converts a geopolitical headline into an inflation input. Oil went through it on Monday and has not closed below it since, ending Friday 9.7% clear. The warning in the pre-CPI piece was that the June print would describe a barrel that no longer exists. That is now literal: the report celebrated a 9% monthly drop in gasoline while spot crude traded $11 above where June left it. The Dashboard signal was very accurate:

The July 7th setup (MACD bull cross on a reset RSI, 8 of 9 historical winners, mean +12.7% over 60 days) has already delivered its full average move, +12.9% from the cross, in eight sessions - with roughly seven weeks of its window left.

The Dashboard now carries the follow-on cluster: a 5×20 bull cross with MACD confirmation on oil from July 13th (62% hit rate, 24 instances, mean +4.2%), plus the matching energy ETF crosses. XLE is up +3.7% over five sessions against a decline in equities and sits 12.3% above its 200-day.

So here is the week’s actual event: the front end un-priced a July hike on Tuesday’s number, and oil spent every session since rebuilding the case for one in September.

Credit fired anyway

Under the surface of the selloff, the highest hit rate setup in the Dashboard fired on Thursday: HYG printed a MACD bull cross above its 200-day, a signal that has resolved higher over the next 60 trading days in 80% of 35 instances, the best ratio in the Dashboard right now. XLP fired the identical setup the same day (69%, 36 instances), on a session where staples closed +2.8% and health care +2.2% while QQQ fell 1.6%.

That is pure rotation: financials +5.8% and health care +5.2% over the past month against an index that is down 0.7%, while tech dropped 4.9% over the same stretch.

The complication arrived Friday afternoon: the Dashboard fired a MACD bull cross on the VIX itself, above its 200-day. The edge is modest (45% across 20 instances) but the lift is not +-15 points over the unconditional base rate, the largest lift of anything currently firing. A vol buy signal and a credit buy signal on the same tape is something to watch.

Gold, for its part, quietly reclaimed $4,012 on Friday, one day after its first close below $4,000 since June 24th, still 26% off the January peak and 10% below its 200-day. A rally on a risk-off day is worth noting, and that’s all it is for now - a bounce is not a base. But the day gold starts trading with oil again is the day the inflation trade is fully back. Another thing to keep an eye on.

The analog roads

I promised you the full Analog Explorer walk-through last time, so let’s do it. Quick refresher on the machinery: the engine encodes the current snapshot as eleven macro and market features (ISM level and trend, core CPI and trend, real yields, credit, valuation, breadth), standardizes them against 36 years of monthly history, and ranks every month since 1990 by two different distance measures. The two measures disagree, and the disagreement is the forecast.

By Mahalanobis distance the closest company for today’s environment is November 1996, with mid-1995 and mid-2004 behind it. By cosine similarity the single closest match is March 2021 at 0.763, with March 2000 and January 2007 sitting inside the top eight. So I pulled the actual price history for all six and ran each one 126 trading days forward - six months, the same horizon the engine scores.

Here is the first result, and it surprised me when it came out of the data: the index finished higher six months later in all six analogs. All of them. The three friendly ones went +18%, +13%, +1%. The three unfriendly ones went +16%, +9%, +8%. Even March 2000 - yes, that March 2000 - had the S&P back near its highs by September, before the real damage started. If your only instrument is the index, the Explorer says the next six months are fine.

The 1996 road first, because it’s the base case. November 1996 delivered +18% in six months, and here is what it charged for the privilege. Five weeks in, Greenspan gave the “irrational exuberance” speech - the market dropped for a day and moved on. Then in March 1997 the Fed actually hiked, and the index gave back 9.6% in six weeks. That was the whole toll. The correction was recovered by May and the trend resumed for three more years. Map it onto today and the September meeting plays the role of the March ‘97 hike. You sit through it with the rotation - value and financials carried equities through that entire stretch - and you let credit tell you if it’s something worse. In 96-97, credit never blinked.

Now the 2021 road, and pay attention, because this is the nasty one. The index number looks harmless: +15.6% in six months from March 2021, a smaller drawdown than 1996 even. The damage was underneath. Energy’s relative strength peaked in the first week of March 2021 and then bled 25 relative points against the index by September. And here is the detail that should make anyone long the oil trade sit up straight: WTI went from $60 to $75 over those same six months. Up 14%. Oil was right the whole way, and the energy trade died anyway, because the market re-classified the inflation impulse as peak rather than trend and moved back into the long-duration complex. Tech returned +17.6% over the window against energy’s +1.9%, and the 10Y fell from 1.4% to 1.3% while spot commodities rose.

That is what makes this analog uncomfortable. On the 2021 road, oil holding $80 does not protect the energy sleeve, and the winners are exactly the two things I suggested to be underweight: tech and duration. The commodity being right is not the same trade as the commodity equities being right, and 2021 is the proof.

And the tails. March 2000 and January 2007 both look survivable at the six-month horizon (+9% and +8%) because the collapse in each case started in month seven and later. A six-month analog engine structurally cannot see either one coming. What separated the tails from the benign analogs in real time was never the index: it was credit and breadth. High-yield spreads started widening in the summer of 2007 while the index made its October high; breadth had been rotting for a year by March 2000.

So how do the roads resolve? The Dashboard’s own six-month regime projection leans Quad 3, stagflation, where the index base rate drops to +1.2% per three months with a 59% hit rate, the weakest on the board. Equities are pointing to 1996: rotation into financials and defensives with credit calm is exactly the 96-97 texture. The tripwire between them is the one the 2021 chart hands you: energy relative strength diverging from oil. The week XLE starts underperforming the index while WTI holds $80 is the week the market has voted for “peak” over “trend”, and I will move the book from the 1996 playbook to the 2021 playbook - trim the energy sleeve into strength, stop fighting tech, and let duration back in. Until that divergence shows up, the rotation stays on.

PREMIUM: the watch list

Ordered by weight. The first two decide the next month.

1. WTI holding $74.34. The master variable, now resolved upward with five straight closes above the 200-day. What matters from here is persistence: an $80 handle running into July 29th forces the committee to discount the softest CPI in six years as already stale, and puts the September meeting fully in play. A failure back below $74.34 retires the whole inflation leg within days, and I would treat that as the single most bullish thing that could happen to equities this month.

2. HYG against its signal. The 80% setup is the reason this issue says rotation and does not say distribution. The framework lines are unchanged: a first weekly close in high-yield spreads above 280bp is the transition warning, 300bp says the call is wrong and the book goes defensive without waiting for the Fed. HYG closed Friday 0.7% above its 200-day. If that line goes while oil holds $80, the 2021 road takes over as the base case.

3. The VIX against the 25 gate. Every signal in the Dashboard passes through a VIX ≤ 25 filter, which makes vol the Dashboard’s own off switch. From 18.77, with Friday’s vol buy signal carrying a +15 point lift, a further gap up into FOMC is a powerful signal. I will follow it if it triggers.

4. The 2Y inside 4.13 to 4.26. The post-CPI low and the pre-CPI high now bracket the whole hike debate. Core at 2.6% argues the bottom of the range; 26.7% twelve-month gasoline inflation with crude at $81 argues the top. A break of the 2Y yield above 4.26% before the 29th re-arms the hike against a 20.4x forward multiple; a break below 4.13% says the bond market has decided the oil spike dies on its own. The 2Y’s own bull cross from July 13th (62%, 34 instances) votes for the top side.

5. Breadth going the wrong way. In the June setup I flagged discretionary and communications hovering at their 200-day lines and promised to call it the week they failed together. This is that flag, at amber: XLY closed back below its 200-day on Friday, XLC never reclaimed its own, and breadth is down to 10 of 13 ETFs. The full warning requires the index at new highs on narrowing leadership, and at 2% off the record it is close enough to watch daily. That was the exact configuration inside the 2021 and 2007 analogs.

The premium position

I am long rotation as the vol signal and the credit signal fired within a day of each other. The stagflation lean in the Dashboard’s six-month projection was there before oil added fourteen percent in a week. If oil holds $80 and the VIX spikes, the sequence stops looking like November 1996 and starts looking like the top-eight tail analogs, and no 80% hit rate on credit survives a regime flip.

So, long HYG and XLP per the signals, core-sized. Energy and oil held. Tech at benchmark, nothing added below the June high. Duration light. Protection on before the 28th at whatever vol costs by then; the window where it was cheap closed on Friday. The Q3 JPM collar’s long put at 7,050-7,100 remains the structural floor, now roughly 5% below Friday’s close.

One more thing on the watch list, born from the analog work above: I’m adding the energy-vs-barrel divergence to the regular scan. XLE relative strength rolling over while WTI holds its level is the 2021 signature, and it now has its own alert.

Next week: the full FOMC playbook for July 28-29 - what a hold, a hike, and a Warsh surprise each do to the book, with the 2Y as the referee.

Thanks for reading! And thanks for subscribing to the newsletter.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

• The 3nd week of the Q3 competition is up and running - click here to join the action.

• CPI for June came in at 3.5%, and 2.6% core. This is lower than expected, but remember what we said on Saturday: “May was the rearview mirror, and now June is too. The print will describe a barrel that no longer exists.”

• Futures rallied strongly on the news after pulling back a bit in the regular trading session.

• On SPY, the daily trend remains bullish above the 50 and 200 day moving averages, but 755-760 resistance has now rejected price twice. The 4 hour chart shows a broken rising channel and flattening MACD, consistent with consolidation in a 745-755 range. Key support sits at 745-747 first, then 741-743; a break below opens the door toward the mid 730s

• Big week ahead: After today’s CPI, we still get to hear Fed Chair Warsh testimony (Tuesday and Wednesday), and later in the week we get major bank earnings (JPM, GS, C, WFC, BAC)

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CPI for June

CPI for June was a positive surprise. It was below expectations on both the headline (3.5%), and on the core (2.6%). This is good news, but remember, this reflects a period when oil was going back to mid-60s over the past few months. Last week’s spike in oil (today already over $80) is likely to again hit the inflation data with a two, maybe three months lag.

As I pointed out in the Saturday newsletter:

That sets up a trap in both directions. A soft print takes the July hike odds apart and the tape rips - but the July CPI, the one that lands right before the September meeting, will be carrying this week’s spike. A hot print with oil already back above $70 takes July 29 toward a coin flip, and the equity market, sitting half a percent from its record on a 15 VIX, has priced exactly none of that.

Yes, futures did rip immediately on the news, and then gave back a lot of these gains in the regular trading hours.

The market is acutely aware of the situation. Yes, the numbers are better than expected, but this is far from over.

Charts

SPY spent last week grinding toward its all time high near 760, only to get pulled back down to earth by a familiar culprit: the Middle East. President Trump’s declaration that the Iran ceasefire was “over,” followed by fresh U.S. strikes and a reimposition of sanctions on Iranian oil, sent WTI crude surging more than seven percent over two sessions and knocked SPY back to around 749-753.

On the daily chart, the broader uptrend remains intact, price is still holding above its 50 and 200 day moving averages (roughly 739 and 745, respectively), and momentum readings like RSI sit in neutral territory near the mid 50s rather than flashing exhaustion. But the rejection just below the 755 to 760 resistance band is notable. That zone has now been tested and turned away from twice, and until buyers can close convincingly above it, the more likely path is continued chop rather than a clean breakout.

On the 4 hour chart, the picture is choppier: price broke a short term rising channel on the Iran headlines, MACD has flattened after rolling over, and the tape looks like it is consolidating in a 745 to 755 box while it waits for a fresh catalyst. Support sits first near 745 to 747 (the confluence of the 5 and 10 day moving averages), then a more meaningful floor around 741 to 743 where the 50 day average and a cluster of prior pivot points converge. A break below that zone would open the door to a retest of the mid 730s.

The scenarios into next week hinge less on chart geometry and more on headlines. A bullish case has SPY holding 745 support, digesting the oil shock, and pushing back toward 760 if inflation data cooperates and bank earnings reassure on credit quality and consumer health. A more cautious case has price rejecting again near 755, rolling over toward 741, and testing the market’s patience with the broader range while oil and geopolitics keep volatility elevated. The bearish tail, a sustained break of 741 with expanding downside momentum, would put the market on watch for a deeper pullback toward the 720s, though nothing in the current structure points there yet. Given how orderly the pullback from the highs has been so far, rangebound consolidation looks like the base case, not a trend reversal.

This week brings a dense calendar. Fed Chair Kevin Warsh testifies before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday, and given persistent inflation concerns and the ongoing Iran situation, his tone on rate policy will matter as much as the data itself. Bank earnings season kicks off in earnest with JPMorgan, Goldman Sachs, Citigroup, Wells Fargo, and BofA all reporting, giving an early read on consumer credit and corporate borrowing appetite heading into the back half of the year. Retail sales and additional Fed commentary round out the week. With SPY perched just below all time highs and oil back in focus, this is a week where macro headlines are likely to matter more than chart patterns alone.

The competition

With SPY bouncing between oil headlines and a loaded macro calendar, this week’s leaderboard is shaping up to reward those who called the chop rather than the breakout. Keep an eye on how CPI and Chair Warsh’s testimony land Tuesday, since a surprise in either direction could be the tiebreaker that separates this week’s top predictors from the pack.

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Stay focused and keep climbing the ranks!

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

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The peace framework that dragged oil down from 90-100 to the high 60s fell apart this week. Tankers were hit in the Strait of Hormuz, the US answered with strikes on Iran, and the export exemptions are gone. WTI went from under $69 to almost $75 in two days, and settled Friday at $71.50, up 4.5% on the week.

Here is the part I care about more than the headlines. The day the ceasefire died, the signal library fired its rarest setup: a MACD bull cross on oil landing on a freshly reset RSI. Under the full set of filters I run (regime match, weekly trend agreement, VIX under 25) this has fired only nine times in the historical data. Eight of those nine saw oil higher 60 trading days later, with an average move of +12.7%. No other signal in the book comes close to that hit rate. It is a small sample, sure, but when a nine-observation signal has one loss in it, I pay attention.

The level to watch is the 200-day average at $73.95. We poked above it on Wednesday and faded back under. A weekly close above that line converts a geopolitical headline into an inflation input, two weeks before a Fed meeting that is already flirting with a hike. Not the ideal set-up.

The bond market wasted no time

You’ll recall from the FOMC rulebook post that with Warsh killing forward guidance, the bond market prices the path itself now - and the 2Y yield is the one telling the Fed what to do.

So what is it saying? The 2Y climbed to 4.21%, further above the 3.50-3.75% funds band. The 10Y went from 4.38% to 4.56% in nine sessions, a parallel shift that kept the curve at +35bp. TLT lost its 200-day average along the way. Futures now price roughly 30% odds of a hike on July 29 and about two-thirds odds of a hike by December.

Read that again: the front end firmed up its hawkish lean before seeing a single new inflation number. That’s the bond market doing its job - it saw the barrel turn and repriced the CPI path on the spot. Also, not the ideal set-up into the July FOMC.

Next Tuesday is the whole week

June CPI lands on Tuesday, July 14th at 8:30am, with Warsh testifying before Congress the same morning and the big banks opening earnings season an hour later.

Now the wrinkle most people will miss. June was the month oil fell - from $92 on the 1st to $70 on the 30th, as the peace framework was being priced in. So Tuesday’s print captures the friendliest energy month of the year, and there is a decent chance it comes in soft. May was the rearview mirror, and now June is too. The print will describe a barrel that no longer exists.

That sets up a trap in both directions. A soft print takes the July hike odds apart and the tape rips - but the July CPI, the one that lands right before the September meeting, will be carrying this week’s spike. A hot print with oil already back above $70 takes July 29 toward a coin flip, and the equity market, sitting half a percent from its record on a 15 VIX, has priced exactly none of that.

Of course, a quick resolution of the geopolitical situation and a move of oil back to mid-60ies nullifies all these concerns, but it’s getting a bit tiring watching this never-ending exchange.

The tape flipped back, hard

Two weeks ago the tape rotated to defense - health care and staples firing buy signals while tech rolled over. I said then it didn’t look like a macro shift yet, and this week the market agreed. The whole defensive rotation reversed.

Health care beat the index by almost 12 points over the prior month. This week it lagged by 3. Energy and tech, the two biggest laggards of that same stretch, are now the week’s leaders. That’s a full leadership flip inside five sessions.

The signal library sorted itself the same way. The Technical and Rotation watch in the Dashboard (regime Quad 2, weekly alignment, VIX under 25) now shows 13 signals firing, and the composition is the story: the oil signal above, a fresh 5×20 bull cross on tech (74% hit rate over 60 days), the S&P’s own MACD bull cross above the 200-day (71% across 65 occurrences), communications at 78% on a small sample - and a full cluster of four bull crosses on the 10Y yield itself, which is the library agreeing with the bond market that yields go higher. The health care and staples cluster that led the scan for two straight weeks? Gone. All of it.

Energy’s own ETF crosses fired too, though their historical edge is weak, so I treat them as confirmation of the oil signal rather than a trade on their own.

ORCA Macro Dashboard

Meanwhile, equities partied like the bond market doesn’t exist

The S&P closed at 7,575, up 1.2% on the week, second weekly gain in a row, half a percent from the June record, +10.5% on the year, and 8.8% above its 200-day average. The VIX got crushed to 15.0 - through a week with US airstrikes on Iran in it.

So the bond market spent the week pricing a hotter Fed path, and the equity market spent it buying the dip in tech and closing vol at the lows. These two are describing different Tuesdays. One of them gets to be right, and we find out at 8:31am on July 14th. As mentioned before, the higher probability is on a lighter CPI for June - the rearview mirror of the past month as oil prices kept declining.

And credit? Credit did what credit has done all summer - nothing. HYG closed the week exactly where it opened it, high-yield spreads at 267bp, four basis points off the tights, through the whole headline cycle. Calm credit into a hawkish repricing is the market telling you it doesn’t believe the hawkish path binds. That was the cleanest confirmation of the bull case three weeks ago, and it still is. Its failure remains the cleanest warning. In other words, there is still no room for macro-level panic. Not even close.

What history says about this exact setup

I re-ran the Dashboard’s analog engine this week against the refreshed feature vector - eleven macro and market features, matched against 36 years of monthly history. The nearest neighbors split the same way everything else does right now.

The friendly matches are late 1996, mid-2004 and mid-1995: mid-cycle booms with a Fed tightening or pausing, where equities paid for another year or more. The regime base rate agrees - in an inflationary boom the index has averaged +2.8% over three months with a 77% hit rate, the best of any quadrant on the dashboard.

The unfriendly matches are the ones I keep staring at. The single closest analog by similarity is March 2021 - the month the reflation trade peaked and buying it stopped paying, even though the economy boomed for another year. And sitting in the top eight are early 2000 and January 2007. Both looked like booms until the quarter after.

Same message as the tape: the base rate says stay long, the tails say know exactly where your exits are. Slow summer grind. As Cem Karsan calls it, the Summer of George!

The position

Own what the regime and the signals agree on: the reflation leadership - energy and the oil signal, index momentum, tech - for as long as the barrel and credit cooperate. Keep duration light until TLT retakes its 200-day; four live bull signals on the 10Y say that’s not yet. And with the VIX at 15 into a binary Tuesday, index protection is the cheapest it has been in a month. I rarely say this, but this is the week to own some.

PREMIUM: the watch list

Ordered by weight. The first two move first.

1. Tuesday’s CPI, and the line in the sand. A 4-handle on headline with core at 3% or above makes July 29 a live decision and forces equities to price what the bond market already has. Core at 2.8% or below and the whole nine-session yield backup unwinds by Thursday. Draft your orders for both branches now, not at 8:31 on Tuesday.

2. WTI against $73.95. The 89% signal says higher over 60 days; the fade from Wednesday’s high says the war premium is still being argued about. A weekly close above the 200-day puts the supply shock into the July CPI print and the September meeting. Below $70, the oil leg of the hawkish case quietly dies and the soft-landing road reopens. This is the master variable, same as it was in June - just pointing the other way now.

3. The 10Y at 4.60-4.65%. Four bull crosses on the 10Y are live. Through 4.65% and the equity multiple gets re-litigated - at 8.8% above the 200-day and a 20.4x forward P/E (five-year average is 19.9x), that argument gets expensive fast. If TLT retakes its 200-day instead, the duration underweight comes off.

4. Breadth, and two coin flips resolving as we speak. 10 of the 13 ETFs I track are above their 200-day. Discretionary closed Friday sitting exactly on the line - to the penny, 117.24 on a 117.24 average, which I don’t think I’ve ever seen before. Communications sits just under its own with a fresh bull cross. Both resolving higher takes breadth to 92% and confirms the flip. Both failing while the index makes new highs is the narrow-leadership pattern that showed up in the 2021 and 2007 analogs, and I’ll flag it the week it happens.

5. High-yield spreads at 267bp. The calmest series on the board, and the one that outranks everything else the day it moves. First weekly close above 280bp and the market is pricing the regime transition before the macro confirms it. Above 300bp the whole call is wrong and the book goes defensive without waiting for a committee meeting.

The bear case on my own call

Every leg of the bullish read is already priced. The index is extended, the multiple is above its five-year average, vol is at the lows into a binary print, and my closest historical analog is the month the reflation trade topped. Add bank earnings guiding soft on net interest income right as yields backed up, and a perfectly ordinary 0.4% core print takes 3-4% off the index in a week. The signal edges are real over 60 days, but none of them know what Tuesday holds. Size accordingly - the oil sleeve sized so a ceasefire-repair headline that gaps WTI back to $65 is an annoyance, not an event.

The calendar does the scheduling from here

GDPNow refresh July 16, LEI July 20, FOMC July 28-29, ISM August 3, payrolls August 7, and Jackson Hole at the end of August - where a Fed that may have just hiked gets to explain itself without a dot plot. One structural note to carry: the Q3 JPM collar that rolled on June 30th put the new long put around 7,050-7,100. That’s the level where dealer gamma re-anchors, roughly 6-7% below spot - the structural floor under any CPI tantrum. Do keep this in mind if you’re caught with decent profits on your hedges.

Next week I’ll take the recomputed analogs into the Analog Explorer and walk through what 1996 and March 2021 each did to a book over the following six months, because those two are now the bull and bear case wearing historical clothes.

Thanks for reading! And thanks for subscribing to the newsletter.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

• The 2nd week of the Q3 competition is up and running - click here to join the action.

• SPY is in a consolidation period as we enter July, looking to break above prior resistance to deliver a grind up for the rest of the summer. It is consolidating just below its all-time high near 760, with the broader uptrend intact (50-day above 200-day). RSI in the mid-50s to low-60s and daily MACD flattening suggest momentum is cooling, not breaking down

• Key support sits at 740-745 (20-day average) and 722-725 (50-day); resistance remains the 757-760 shelf. 4-hour momentum has turned choppy amid a sharp semiconductor sector rotation

• FOMC minutes on Wednesday, following Warsh’s hawkish tone last week, are the week’s main catalyst alongside light data (trade balance, jobless claims)

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Charts

SPY enters the week hovering just below its all-time high near 760, printed back in early June, with price action last week showing the classic push-pull of a market that wants to go higher but keeps getting hit with speed bumps. On the daily chart, the structure remains constructive: the 50-day average (around 730) sits comfortably above the 200-day (around 688), keeping the longer-term uptrend intact, while price has spent the past couple of weeks consolidating in the 740-757 zone. RSI sits in the mid-50s to low-60s, meaning momentum is neither stretched nor exhausted, which leaves room to run in either direction. MACD has been flattening on the daily, a sign that the sharp thrust off the June lows is maturing into more of a grind than a breakout.

The 4-hour chart tells the more interesting story. Semiconductor stocks whipsawed hard last week, first dragging the tape lower before staging a sharp comeback into Monday’s session, and that rotation is showing up directly in SPY’s short-term momentum readings, which have flipped choppy rather than trending. Support sits first near 740-745 (the rising 20-day average), then a firmer floor around 722-725 where the 50-day comes into play. Resistance is the 757-760 shelf, the ceiling that has capped every rally attempt since early June. A clean break and hold above 760 opens the door to price discovery into uncharted territory; a failure there, paired with a slip below 740, would put the market back into a rangebound posture rather than a breakout regime.

Unless, of course, we follow this analog from 2001 (courtesy of the ORCA Macro Dashboard):

Analogs are always interesting, but in order to realize this trend over the next 60 days there would need to be some serious catalyst (e.g. FOMC?). Or, should we rather listen to this direct signal:

Your choice :)

This week’s macro calendar is comparatively light but not empty. Wednesday brings the FOMC minutes from Kevin Warsh’s first meeting as Fed Chair, which the market will comb through for hints on the rate path after Warsh’s more hawkish tone last week pushed the 10-year yield up toward 4.5 percent. Trade balance data lands Tuesday, weekly jobless claims and existing home sales follow Thursday, and earnings season is beginning to loom in the background. With no major CPI or PCE print this week, positioning around 760 resistance and Wednesday’s Fed minutes are likely to be the main swing factors for direction.

The competition

With SPY parked just under all-time highs and chip stocks whipsawing traders on the 4-hour chart, this week’s leaderboard rewards whoever called the rotation right. Keep an eye on Wednesday’s FOMC minutes, since a hawkish surprise could be the spark that finally forces a break out of this 740-760 range.

Predict the markets!

Stay focused and keep climbing the ranks!

NOTE: For all those new to the whole thing, read more about it here or watch a video of Scott and myself guiding you through the survey, showing you all its features, and briefly explaining how the competition works.

…join the $32,000x competition!

Join our survey competition to get an opportunity to participate in our quarterly ($8000) and annual (3% of our GP’s profits) prize distributions:

Survey

DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

And, as always, don’t forget to subscribe to the newsletter.

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• Q2 has wrapped up with User25025 taking the 1,400 dollar grand prize.

  • Please note: this week’s survey (June 30th) will still appear under Q2 until it auto-shifts to Q3 tomorrow , no action needed on your end.

    - click here to join the action. Q3 is now officially live.

  • Also, the week is shorter, markets are closed on Friday, July 3rd

• As this is the final day of Q2, we give you a brief overview of ORCA’s performance. We had a great quarter, and are looking to extend the wonderful result even more coming into the second half of 2026.

• SPY trades within a range between 730 and 740.

  • Key levels to watch: a close above 745 to 749 favors a retest of 760, a close below 723 opens the door toward 700

• Holiday-shortened week is data-heavy, with ISM Manufacturing, JOLTS, ADP, ISM Services, and a Thursday-early June jobs report (consensus 172K) all in focus ahead of the July 4th close

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ORCA Q2 performance

Q2 was the quarter the portfolio proved it can do more than monetize panic. April rewarded the transition from defense to participation. May rewarded patience in a low-volatility grind. June tested the structure under less cooperative conditions, where signal path, option decay, and hedge behavior mattered more than broad market direction.

Through April and May, the ORCA BASON Fund compounded strongly, returning 3.90% and 4.45% net, respectively, bringing year-to-date net performance to 16%. June was flat, but far more useful analytically than the headline number suggests. It showed exactly where the system made money, where it did not, and why the two-sleeve structure remains central to the fund.

Comparing it with the key benchmark, the S&P500, it’s more than holding its ground, especially during the big drawdown periods. It’s what a hedge fund is supposed to do, isn’t it?

Finally, looking back one year ago, our bounce back since the October 2025 lows looks even more impressive. It is yet another testament to the resilience of our Fund and our entire process.

Charts

SPY enters the new week trading around 740, still digesting the sharp two-week round trip that took price from a fresh all-time high near 760 down toward 720 before stabilizing. The pullback was driven by a mix of quarter-end rebalancing, an AI-related tech wobble led by memory names like Micron, and the spike in geopolitical risk around the Israel-Iran conflict and Strait of Hormuz shipping. With the ceasefire holding and oil sliding back toward pre-war levels, much of that fear premium has already drained out of the VIX, which eased back from above 20 toward the high teens.

Price has been compressing in a tightening range just under the 745 to 749 zone, with MACD on this timeframe rolling over from positive into flat or mildly negative territory, suggesting momentum has cooled rather than reversed outright. Volume has been unremarkable on the recent grind higher, which raises the usual caution flag about a low-conviction bounce rather than a fresh impulsive rally. The most likely near-term scenarios are either a continuation of this rangebound chop between roughly 723 and 745 as the market waits for fresh catalysts, or a decisive break in either direction once this week’s data lands. A clean break above 745 to 749 on rising volume would favor a retest of the 760 highs, while failure there and a slide back under the 50-day average would put the 700 to 710 zone back on the table.

This is a holiday-shortened week that still packs a heavy macro punch. ISM Manufacturing kicks things off Monday, JOLTS job openings follow Tuesday, ADP private payrolls land Wednesday, and the big one, June nonfarm payrolls, is released a day early on Thursday, July 2, ahead of the Friday July 4 market closure. Consensus sits around 172,000 jobs added, and given Fed Chair Kevin Warsh’s hawkish tilt and the market’s ongoing debate over a possible September hike, this print carries outsized weight for rate expectations. ISM Services rounds out the data slate on Thursday as well. With oil easing and inflation expectations relatively contained despite the Iran flare-up, a labor market that comes in roughly in line with estimates would likely reinforce the current rangebound pattern, while a significant beat or miss could be the catalyst that finally forces SPY out of its 723 to 745 box.

🏆 Q2 Results Are In, Q3 Competition Now Open!

The scores are in, the leaderboard has settled, and it’s time to crown our Q2 champions.

Q3 brings another round of 8,000 dollars up for grabs, and the race for the annual prize, 3% of our GP’s profits, is still wide open!

Now, onto the results. A huge congratulations to everyone who placed in the top 30 this quarter, payouts will be processed within the next two weeks.

Top honors this round go to User25025, who takes home the 1,400 dollar grand prize and grabs the early lead in the annual standings. Well played, and onward to Q3!

Please note: since today is June 30th, this week’s survey will still appear under Q2 in the system, it’ll automatically move over to Q3 tomorrow. So go ahead and submit as usual, nothing extra needed on your end.)

Predict the markets!

Stay focused and keep climbing the ranks!

NOTE: For all those new to the whole thing, read more about it here or watch a video of Scott and myself guiding you through the survey, showing you all its features, and briefly explaining how the competition works.

…join the $32,000x competition!

Join our survey competition to get an opportunity to participate in our quarterly ($8000) and annual (3% of our GP’s profits) prize distributions:

Survey

DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

And, as always, don’t forget to subscribe to the newsletter.

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Before we jump into that, a few words on inflation and oil, the hot topics this week.

The Fed’s preferred inflation gauge ran the hottest in three years, and it barely matters. Core PCE printed 3.4% for May on Thursday, headline 4.1%, both the highest since 2023 and a third straight monthly acceleration (although both coming within expectations). The release landed one day after WTI broke below $70 for the first time since the Iran war began. May is the rear-view mirror. The barrel is the windshield.

At the same time, actual GDP was higher than estimate, as was personal consumption. This once again confirms the inflationary boom regime I keep drumming on and on about:

ORCA Macro Dashboard

Looking through the print

The whole inflation surge this cycle was energy. The war shut the Strait of Hormuz on February 28th, and oil ran from high 60s to a $120 April peak, and that shock seeped into everything else with the standard lag energy shocks always carry. May PCE captures the top of that move, not the unwind. It is the most backward-looking the data will be all year.

The same week delivered the other side of the trade. Oil has fallen for a third straight week, sits near $70, and is down 21% over the last twenty days. The Strait is reopening, Gulf exports are back near three-quarters of prewar volume, Saudi Arabia is loading at Ras Tanura again, and the market has shifted from pricing a war premium to pricing a 2026 supply surplus. The input that drove May’s 4.1% is collapsing in real time. All is left is for the lagged effect to give in too, and that will take some time.

If you read last week’s post, you’ll know all about how Warsh dismissed the SEP projections, skipped the dot plot, and signaled the Committee may not hold a press conference every meeting. Forward guidance is gone, so the market prices the next moves itself, off the incoming data. That makes the macro data even more important than usual, so pay close attention to the June CPI on July 10th, followed by the FOMC meeting on July 28th, and finally the July PCE on the 30th. The next print needs to come in lower, and it will only come in lower if oil stays down. May told us where inflation was. June will tell us whether the peak is in.

Expectations: the bond market eases its lean

With Warsh refusing to hold your hand, the bond market does the job, and this week it relaxed a bit. The 2-year yield, the cleanest leading indicator of the funds rate, slipped to 4.10% from above 4.18% a week ago, with the 10-year at 4.38% and the curve at +28bp. It still trades above the 3.50-3.75% band, so the market has not abandoned the idea of a hike. But the direction is the message: as oil fell, the front end started to take the hawkish lean back out. This was good news, despite the market selling off slightly this week. Always look at the bond market first.

NOTE: Don’t forget to have a look at all of these trends on our Dashboard.

ORCA Macro Dashboard

The tape went the other way

Here is the twist. The disinflation is showing up in oil, in the 2-year, and in gold, all pointing the same direction. The equity tape did not celebrate, however. It rotated to defense.

Technology, the leader for weeks, rolled over. QQQ fell 4.5% on the week and the tech sector fired a fresh bear cross, while the S&P itself fired a bear cross and dropped back under its 20-day MA. In their place, the leadership flipped to defensives and value. Health care was the runaway leader, up nearly ten points on the index over twenty days with a fresh bull cross, financials and industrials behind it, and staples turning up with a cluster of fresh buy signals.

When I require the signal to fire, the weekly trend to agree, the regime to be Quad 2, and the VIX under 25, the only two sectors that clear every gate this week are health care and staples. A month ago that same signal was lighting up technology and industrials. It has rotated to the defensives.

Underneath, the index lost its engine. Tech led the tape up and is now leading it down, while small-caps held their ground and the benchmark stalled between them. A market where the new leadership is health care and staples, with tech rolling and the index drifting, is a market playing defense even as the macro turns friendlier.

Some of this is the calendar. Quarter-end falls on Tuesday, and the JHEQX collar rolls the same day, so part of the rotation is mechanical, books selling the quarter’s tech winners and rebalancing into the laggards. But mechanical flows do not fire bull crosses in health care and staples on their own. The defensive bid is real, and it sits oddly against a disinflation the rest of the cross-asset board is pricing.

I guess we’re gonna have to watch this unfold a bit longer before changing the main macro thesis. Thus far it doesn’t look like a macro shift yet. If inflation has truly peaked, we will get a reversal of these trends. But if not, we might get closer to the stagflation scenario. In my opinion, despite the tech sell-off this week, the probability of a stagflation scenario has gone down. Higher for longer is the play, and like the majority of 2023, it might not be all that bad for equities.

The JPM Collar month-end flows

The structural anchor that typically defines flows at the end of each quarter is the JPMorgan Hedged Equity Fund (JHEQX), roughly an $18 billion put/spread collar that resets on the final business day of each quarter, with the bulk of the flow coming on in the last two hours (from 2pm EST). The Q2 structure now expiring June 30 was set back on March 31st around a 6,500 spot: a 5,210/6,180 put spread against a 6,865 short call, executed at the close.

Mechanics of the Collar and gamma pinning

Every quarter, the JHEQX fund resets its collar on the final business day - typically in the final two hours of trading (starting around 2pm ET). The strategy involves holding a long equity portfolio while simultaneously:

1. Buying an out-of-the-money (OTM) put to protect against a 20% decline.

2. Selling a closer-to-the-money put (often 5% down) to reduce the cost of the hedge.

3. Selling an OTM call to fund the entire structure.

For the quarter ending June 30, 2026, these were the key levels for SPX:

• Short call - 6,865

• Long put - 6,180

• Short put - 5,210

The difference this quarter from the previous one is that the index left the collar behind. With the S&P trading near 7,450, roughly 600 points (9%) above the 6,865 short call, the entire structure now sits far below spot. The 6,180 long put that acted as a shock absorber in the spring is more than 1,200 points underfoot, deep out of the money, carrying almost no gamma. Typically, when the index approaches this level, dealers are forced to sell futures into further price declines to stay delta-neutral, potentially amplifying downside momentum. Conversely, as the index moves away from the level, dealers must buy back futures, which can pin the index to the upper strike as expiration approaches.

However, this time there is no put to pin to and no dealer hedging wall anywhere near current prices. Dealers are long a deep-in-the-money 6,865 call with a delta near one and very little gamma, so their hedge is a near-static short-futures position rather than the reflexive buy-the-dip, sell-the-rip flow that magnetized price to 6,475 in March (and acted as a magnet in the past). In other words, for this expiry the collar is a spent force at these levels, and the tape is trading on its own.

What matters now is the roll. On June 30th, in the final two hours, JPM rolls into a fresh Q3 collar struck around the new spot. If the index rolls near 7,450, that puts the new long put around 7,050–7,100 (the ~5% protection leg), the new short put near 5,950, and the new short call in the 7,750–7,900 zone, with the exact strikes set at the 4pm print. The number to carry into July is that new long put. It lifts the structural support floor by roughly 14% from the 6,180 that governed the spring, and it becomes the level where dealer gamma re-anchors for the third quarter.

The roll itself is a high-liquidity event and tends to lean green. JPM never defends the structure mid-life; it holds through expiry, then rolls, pairing the new entry with a deep-in-the-money 0DTE call to balance the delta through the transition. That can push the tape higher into the close on the last day of the quarter as dealers rebalance, and it typically starts around 2pm EST.

In any case, expected elevated liquidity on the final hours of the day on Tuesday. Let’s have a look at how this happened over the past 5 quarters. Last time I had this chart, comparing the four quarter-ends of 2025:

On March 31st last year, the move was +1.34% in the last two hours of trading, through to peak. On June 30th the move was +0.57%, On September 30th, the move was +0.69%. The only down move was on Dec 31st, -0.58%.

What happened last quarter, on March 31st? A 1.28% move, although it started a bit earlier, around 12:30. But even after 2pm it was a decent move, of +0.6%, still good enough for 0DTEs to at least double.

That’s the whole point here. The move isn’t gonna make a dent in your long portfolios. It is a pure option play opportunity, specifically for 0DTE options.

Having said that, this is NOT a high conviction, all-in type of play. 0DTE options can expire worthless in a matter of minutes if the move goes against you. In the best case, this is a 1% of portfolio allocation, with a very limited risk and good risk-reward potential if the move goes in your expected direction.

If you must, approach it with ease and curiosity, rather than as a game changer.

Thanks for reading! And thanks for subscribing to the newsletter.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

Let’s start with some context regarding the FOMC decision. On Wednesday, as the market was digesting the hawkish tone of the FOMC SEP and dot-plot and selling off heavily into the close, this was my take:

I do think this is an overreaction from the markets today. The Fed is getting ready for a hike this year, but I seriously doubt that we will be entering a new rate hiking cycle. So yes, I do believe that expectations on two rate hikes this or next year are excessive, and that the consensus might be wrong here.

Next day’s price action somewhat vindicates this view but this is far from a foregone conclusion. Especially since the futures on Friday (markets were closed in the US on Friday) were still reactive to geopolitical news.

One thing is certain though - we are getting a new FOMC. The reaction to the SEP and the dots was based on Bernanke’s, Yellen’s and Powell’s FOMCs. This is muscle memory kicking in, forming expectations of Fed’s moves over the coming months, based on their standard forward guidance.

Warsh is bringing something different

For years whatever the actual FOMC decision on rates was didn’t really matter. It was priced in way before that. There were some exceptions when Powell would surprise markets (like the 50bps cut in September 2024), but in general the market reaction was driven not by the headline rate, but by forward guidance; by expectations of what the Fed will do in the following meetings. It was forward guidance what really moved things which is why the Press conference of the Chairman was usually the key thing to watch (I emphasized that many times). And why every Jackson Hole meeting was so consequential - no rate decision, but key messages always came across.

Bernanke pioneered this approach - which Yellen and Powell followed - ensure that the expected moves in rates were priced in ahead of time. This is also why amateur market participants would be confused when the market would sell-off after the Fed cut rates, or rally when it held them. The market reaction was following forward guidance, especially on the 4 annual meetings when the SEP and the dot-plots were presented (Mar, June, Sep, Dec). This was much more important than the headline rate.

Recall the last three Jackson Hole meetings and the reaction after that (see chart below). Recall the December 2024 decision, when there was no change in rates, but SPX fell 3% on a very hawkish SEP and dot-plot and Powell’s message:

All this changes with Warsh.

He didn’t even bother to give his dot-plot and has dismissed the economic projections altogether. The rate decision is once again the key thing to watch. And we might not even get an explanation, as Warsh hinted that they might not hold a Press conference every time from now on, just when they have something important to say.

What this means is that the next meetings should see rates priced in at close to 50-50 odds, and for everyone to do their own analysis of the economic data (inflation, unemployment, GDP growth) to figure out where the rates might be. In other words, the Fed won’t hold our hand anymore!

Oh no! What will we do now??

Don’t worry, I got you.

Or should I say, the bond market can help you. Our most loyal readers will recall the emphasis I used to place on bond yields and their signals for driving interest rates. Typically, the 2Y yield is very closely correlated with the Federal funds rate over time. But more importantly, the 2Y yield is an excellent leading indicator of the Federal funds rate - it’s basically the bond market telling the Fed what to do!

Notice (on the chart) how the 10Y is a coincident indicator (moves alongside the rates), while the 2Y tends to signal where there will be in 6 months time. In 2025 it told us to expect them to be at 3.6%. Now it is telling us to expect them to be at over 4% in 6 months time.

That’s what you should watch! And we will follow it together on our Dashboard.

ORCA Macro Dashboard

All this does, however, imply more expected volatility, more sensitivity to changes in the economy (economic reports becoming more consequential), and a return of the Fed to something closer to a Taylor-rule reaction function. For those unfamiliar, the Taylor rule is often used as a benchmark rate for monetary policy. It is a simple formula that looks at inflation deviation from its target and real GDP deviation from its potential, and calculates the optimal interest rate with respect to those parameters. In theory, when GDP is at its potential and when inflation is at its 2% target, the Federal funds rate should be at 2%.

Historically, over the past 25 years, the proponents of the Taylor Rule approach (John Taylor in particular, obviously) were critical of the Fed in keeping rates too low for too long. This was a very vocal criticism during the pre-2008 financial crisis and particularly after COVID when the Fed was too easy on inflation for too long, allowing it to run rampant. On the other hand, the Taylor rule suggested really high interest rates in 2021/2022 to take care of inflation (although, its proponents argue that if it were applied immediately we would never see inflation escalating, so there would be no need for double digit rates). It is suggesting the same today - optimal rate should be at over 6% due to the inflation we have now.

Even though this might be a monetary policy benchmark from now on, don’t expect it to become actual policy. Not with the Trump administration expecting rates to go down and signalling a temporary inflation shock. The Taylor rule is a guide, it’s not policy. The bond market is still a much more important factor.

The split underneath the regime

What does this mean for the overall macro picture? Nothing yet.

The regime has not moved. It is still Quad 2, inflationary boom: growth above trend, prices sticky, every trading day this month classifying the same way. On the dashboard the position is unambiguous, parked deep in the upper-right quadrant with the six-month path carrying in from the disinflationary-boom side.

What moved this week was the disagreement about how this regime ends. An inflationary boom resolves one of two ways:

• It cools into a soft landing, where inflation fades and the boom matures

• Or it tips into stagflation, where prices stay hot, the Fed keeps tightening, and growth finally breaks.

The bond market is leaning into the second possibility, as I have shown above. The rate side of the world is unambiguous: higher for longer, and the curve believes it.

The barrel

The thing the Fed’s hawkish read is built on is oil, and oil broke this week. The US and Iran (finally?) signed a framework to wind down the war, the agreement went into force, and crude fell to a one-month low. WTI closed near $76, down roughly 9% on the week and about 22% below where it traded a month ago. The energy shock that pushed CPI to 4.2% and forced the hawkish projections is unwinding in real time.

That is the reconciliation between a hawkish Fed and a market that will not sell off. The dots describe the world as it looked through May, when oil was high and the Strait of Hormuz was a daily headline. The market is trading the world as it looks now, with the framework signed and the barrel falling. If oil stays here, the inflation impulse the Fed is hiking against peaks and rolls over, May's 4.2% becomes the high print of the cycle, and the hawkish dots age into a number the committee never has to act on. The market front-runs that outcome. The Fed, working off lagged data and a war that could reignite, cannot. Two different oil prices, two different policy paths.

The tape picked a side

The equity market voted for the soft landing, and it voted with the growth complex in front.

Technology is the strongest sector on the board, beating the index by seven points over twenty days. Industrials sit second at five points of relative strength, financials third. This is real-economy and growth leadership running together, which is the leadership profile of a boom the market expects to mature rather than crack. It is not the defensive, late-cycle mix you see when the tape is bracing for the stagflation exit.

The signal library confirms it without being told. QQQ fired a fresh 5×20 bull cross with MACD already positive, and the technology ETF fired the same pair the same day. When I run the gated scoreboard, requiring the signal to fire, the weekly trend to agree, the regime to be Quad 2, and the VIX under 25, only two sectors clear every gate: technology and industrials, both on bull signals. The book sorted itself into the inflationary-boom growth leaders on its own.

There is one crack in the leadership worth carrying forward, and it is the most important tell in the equity tape right now. The index has not confirmed. The S&P still carries a 5-under-20 short-term cross and has no fresh bull signal, so the sectors are running ahead of the benchmark. And the Russell, which led the bounce out of the early-June lows, fired a fresh bear cross this week and is stalling while tech takes the baton.

A market where leadership narrows to tech while the index and the small-caps stall is a market running on fewer engines than the relative-strength table makes it look. The advance is real, but it is carried by the part of the market with the most room to disappoint if the rate path the bond market is pricing actually arrives.

The two roads

Where this goes comes down to which of the two prices wins, and the framework gives the resolution a name on each side.

Road one is the soft landing, the Q2 into Q1 transition. Oil stays down because the Iran framework holds, the inflation impulse keeps fading, the Fed’s hawkish dots stay theoretical, and the curve that is pricing hikes gets to unwind them instead. The growth-and-cyclical leadership that lit the gated board keeps running, the index catches up to its sectors, and the boom broadens into a disinflationary expansion. This is the 1995 template, a Fed that hiked into a boom and then got to stop, and equities ran for years afterward.

Road two is stagflation, the Q2 into Q3 transition, and it runs through the same barrel in reverse. The ceasefire has broken before, and the price action since February has whipsawed on every headline out of Washington and Tehran. A framework signed is not a war ended. If the deal cracks and oil spikes back, the inflation impulse re-fires, the bond market’s hawkish lean becomes the Fed’s actual path, and the lagged tightening finally rolls growth over while prices are still hot. Tech and industrials do not lead in stagflation. Nothing does. This is the road the two-year is hedging against by trading above the funds band, and it is the worst regime for a book there is.

We are on neither road yet. We are still in the inflationary boom, and this week the leadership confirmed it. The whole game now is watching which way the barrel breaks, because both the soft landing and the disaster share that single input.

Pro position

Own what Quad 2 owns while the boom holds: the cyclical-and-growth leadership the signals are pointing at, technology and industrials in front, financials behind them. Keep the long-duration end light, because the bond market is pricing the next move as a hike and the Fed just told you it agrees. And treat energy as the live wire, because it is the one position whose direction flips the entire regime call.

PREMIUM: the watch list and the positioning

This is the layer that matters most this week: not what happened, but what turns it.

The Quad 2 playbook carries a base-rate tilt drawn from sixty years of history. Overweight the cyclicals and real-economy leaders, financials, industrials, and the energy complex when the barrel cooperates. Underweight long-duration bonds and the high-multiple growth names that live and die on the discount rate. The unusual feature this cycle is that the growth complex is leading anyway, because the thing repricing it is not the rate path but the receding inflation tail. That inversion is exactly why the tells matter more than the tilt. The position is right only for as long as the data underneath it holds, and the data underneath it is one geopolitical price. Here is what I am watching, in order of weight:

Oil and the durability of the Iran framework. This is the master variable, and everything else on the list is downstream of it. A framework that holds keeps crude near or below $76 and keeps road one open. A framework that cracks puts the war premium straight back into the price, re-fires the inflation impulse, and hands the bond market the hikes it is already pricing. There is no version of the next month that does not route through the barrel, which is why I am treating the headline flow out of the talks as a position input rather than background noise. The level I care about is whether WTI holds the low-to-mid 70s. A push back above the 80s on a broken ceasefire is the single fastest way road two opens.

Energy as the first-mover tell. The sector is the worst performer on the board, down 10% over twenty days, RSI down at 34 and deeply oversold, no signals firing, riding the oil chart straight down. That weakness is the correct expression of the macro right now, and I am not trying to catch it. What I am watching is the turn. Energy bouncing off an oversold low with a signal firing is the earliest read that the market has stopped believing the peace, and it shows up here days to weeks before it shows up in a CPI print. Energy is the leash on the whole book, and right now the leash is slack.

Credit. High-yield is the canary, and right now it is calm. HYG held above its 200-day all week, RSI in the high 50s, the bull MACD cross from earlier in the month still in force, the price flat. Calm credit into a Fed that just turned hawkish is the market telling you it does not believe the hawkish path binds. This is the cleanest single confirmation that the soft-landing read is intact, and its failure is the cleanest single warning. A gap wider in HYG, or a break of the 200-day, is the market pricing the transition before the macro confirms it, and it would carry more weight than any equity signal on this list.

Gold. The inflation hedge has been cooling, off about 8.5% over twenty days as the oil tail recedes. That is corroboration of the soft-landing read, not a contradiction of it: when the asset that hedges an inflation scare sells off, the market is voting that the scare is passing. The signal to watch is a divergence. If gold turns back up while oil is still falling, that split is an early warning that the inflation expectations the Fed actually cares about are re-anchoring higher despite the barrel, and it would undercut the entire premise that May’s print was the peak.

Volatility and breadth. The VIX closed near 16.4, down about 15% on the week, back at the calm end of its range and well under the 25 gate that lets signals count in the stack. Low vol plus calm credit is the all-clear the tape is trading on. The thing that cracks it is not a vol spike on its own but a failure of breadth underneath the quiet surface: the S&P never confirming its sectors, the small-cap roll continuing, and the advance narrowing to a handful of tech names while the index drifts. That is the internal decay that precedes the vol move, not the vol move itself.

The order matters. Oil and energy move first, credit second, gold and breadth as the confirmation. If oil turns and energy bounces while credit is still calm, that is a warning to tighten the leash. If credit then breaks, the warning becomes a position change. Waiting for all five to agree is waiting too long.

The bear case on the call

Leaning the book toward the growth-and-cyclical leadership is the right trade in Quad 2 and the wrong trade the instant it becomes Quad 3, and the variable that flips it is the one I have the least control over. Oil this cycle is a geopolitical price, not a demand price. It is being set by whether a framework signed under pressure survives contact with two governments that have broken it before. I am underwriting a macro view on the back of a ceasefire, which means the bullish case and the tail risk share a single input, and that input is not mine to forecast. If the barrel turns, the leadership I am pointing at does not rotate gently into something defensive. It breaks, because the same growth-and-tech names that lead the soft landing are the names that carry the most rate risk if the bond market’s hawkish lean becomes the Fed’s actual path. The two-year already trades like it expects that. So I hold the tilt with conviction and a short leash, and energy is the leash.

Premium position

The regime is Quad 2, the bond market is pricing the next move as a hike, and the equity market is pricing the soft-landing exit because oil cracked. I am on the equity market’s side of that for as long as the barrel cooperates, with the book tilted to the technology and industrials leadership the gated board is lighting up and the long-duration end kept light against a curve that already expects hikes. The whole position is leashed to five tells, and the first two, oil and energy, are the ones that move first. The day they turn together is the day this stops being a rotation and starts being a regime change, and the two-year above the funds band is the market reminding you that road is closer than the calm tape makes it feel.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.

Kevin Warsh, in his first FOMC press conference gave us the following main messages:

• His firm goal is price stability, above all else. He repeated this point over and over.

• No more forward guidance - the official statement was reduced and very simplified, and in the presser he avoided all questions regarding projections and forward guidance. Not ideal for markets, as we will get less info from the Fed going forward. More volatility should be expected.

• He didn’t submit his “dot” in the SEP projection, and basically discarded the dot-plot as something he doesn’t see as that important. He will propose changes to the SEP.

• Doesn’t really care how the market reacts in the short run, but emphasized that markets can expect price stability from the Fed

• Dismissed the idea that his policy stance is restrictive.

Market reaction was negative (1.4% drop in SPX, 1% in NDX), and bond yields spiked (10Y at 4.5%, 2Y at 4.2%) primarily as a response to a hawkish statement and a hawkish dot-plot. Even though Warsh was dismissive of the projections, his presser did not convince markets that the policy stance is not restrictive. And he didn’t really seem to care.

So what about the SEP then? Do we even care anymore? What’s the signal supposed to be now? Until we get the changes in the SEP, this is the only thing the market was given as a gauge of policy expectations.

My read from it is twofold. On one hand, the 2026 inflation projection is much higher than in March (both core and headline), however, if you look at 2027 and 2028, with inflation expected to be back at 2%, it seems that the Committee feels that the current inflationary shock is indeed transitory. That’s something.

But in addition to this, we got a clear signal that the Fed is expecting to raise interest rates this year. A shift from 3.4 to 3.8 is significant, and the long term path has been elevated as well. This was the shocker for markets.

Despite Warsh trying to play it down and rejecting a restrictive policy stance for financial market, it was clear as to what the signal is - a rate hike is coming, maybe even two.

And markets got the message - probability of a September hike is now at 78%, and we might even get another in December.

Ok, now my read on this.

I do think this is an overreaction from the markets today. The Fed is getting ready for a hike this year, but I seriously doubt that we will be entering a new rate hiking cycle. So yes, I do believe that expectations on two rate hikes this or next year are excessive, and that the consensus might be wrong here.

This is my initial feeling.

This doesn’t mean we cannot continue the selling a bit more from here, even though the market reaction was not all that terrible. But I wouldn’t be surprised at all to see a bounce after this too. As always with FOMC decisions, best play is to do nothing and wait it out until the end of the week. That is already tomorrow as this is a shorter week, but best to sit this one out to see the market reaction and then react only if we get a deeper sell-off. I doubt it, but as I’ve been saying, buying protection at all time highs is always a good thing. Buying protection after the sell-off started is not.

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DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.