No edition this week, I’m still on the road. Back next Sunday.

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Daniel

Hello my friends,

I am traveling on vacation for 2 weeks so this is a short edition.

📊 Market Health

My market health score gave back eleven points and price did not follow. Last Friday’s spike to 84 stood on a single jobs report. This week the market had to hold those levels without fresh fuel, and it did, drifting to 73 while the S&P added a third straight weekly gain.

The McClellan summation, the component I leaned on hardest last Sunday, slipped from 347 to 258, still positive but done climbing for now. The slower measures picked up the slack: 56% of stocks still trade above their 200-day average, and nine of eleven sectors keep a majority of members above their 50-day.

On Friday the S&P slipped while the Russell 2000 closed at a record, its fourth straight up day. For most of this year the index rose while the average stock watched. This week the roles swapped.

🚨 Sector Rotation

The leaderboard flipped in five sessions. Energy finished first in price, up 7.7%, and first in participation too, with four of every five members above their 50-day. Last Sunday it was the worst line on the board.

The chronology matters more than the size of the move. Almost five of those points printed on Monday, before any new attack, when weekend strikes on shipping made the reopening talks look stuck. Thursday’s hit on two ADNOC tankers inside the strait confirmed what Monday had already priced. Four months into the closure, with the IEA warning that global stockpiles are draining fast, Brent traded near $90, and no new war was needed to get it there.

The rest of the board says the real-asset bid is spreading. Materials joined the leaders, and financials kept the second-deepest participation on my screen. Technology slid into the weakening column even with the Nasdaq up on the week. Utilities bounced 1.6% in price and stayed dead last in breadth at 37%. The front end of the rate market handed that group its excuse again this week, and the group refused it again. I said last Sunday a sector that ignores good news knows something. I have no better answer this week.

📉 Volatility

The surface is priced for a quiet August that nobody can guarantee. The VIX closed at 14.25, near the floor of its month. The term structure says more: three-month volatility against one-month trades at 1.30, the top of its two-year range. Protection for the next thirty days costs almost nothing while the autumn carries the full premium.

Two details push back on the comfort. The SKEW rose 3% Friday, which reads to me as buyers rebuilding the crash insurance I flagged last week as the cheapest in a year. And crude volatility stopped falling: the sellers who spent July pricing a stalemate covered this week.

🔥 Trade of the Week:

Papa John’s closed Friday at $24.26, a billion-dollar franchise trading four percent above its 52-week low, down 37% this year.

The damage is real and dated August 6. The company beat on profit that morning and the stock still lost 17% in a session, because everything around the beat was ugly: North America comparable sales fell 8.3%, the full-year outlook was cut, and the board suspended the dividend. The market read all three as a franchise in decline and priced it for one.

Here is what I read. International comps have grown seven quarters in a row, and the turnaround has already worked on those markets. Suspending the dividend hands the company its own cash back when it needs it. And the tape has done nothing for six sessions. Six closes within a dollar and change of the low, with volume shrinking from eight million shares on earnings day to one million Friday.

My Bottom board, built to catch finished declines, flagged the name this week. The pieces it wants are all there: a decline old enough to be structural, a capitulation on volume near twice normal, an RSI in the low twenties, and a five-session slope that has already turned positive while the ten-session slope still points down.

• Sizing: small

• Entry: $24.25 first half, $23.53 second half

• Stop: $23.27

• Target 1: $27.20

• Target 2: $30

• Stretch: $33

Cheers,

Daniel

P.S. The app is the daily version of what you just read, the same boards and screeners I run every morning before I trade. Promotion is on for 1 week.

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Disclaimer

This newsletter is for educational and informational purposes only. It is not financial advice.

The content reflects personal opinions shared publicly as a journal. Trading stocks, options, futures, or any financial instrument involves significant risk. You can lose your entire investment. There is no guarantee of profit.

The author is not a registered investment advisor, broker, or financial professional with any regulatory authority including the SEC or CFTC. Always consult a licensed financial advisor before making any investment decisions.

By reading this newsletter, you accept full responsibility for your own trading and investment choices. Past performance does not guarantee future results. Markets are unpredictable.

Screenshots are courtesy of TradingView, VixCentral, and other platforms with which the author has no affiliation. Information shared may contain errors or become outdated quickly.

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Hello my friends,

The market spent this week paying for two different things, and only one of them exists.

The first is a promise. On Monday and Tuesday equities went vertical on strong earnings and on word that the Strait of Hormuz was about to reopen. The Dow closed above 54,000 for the first time in its history, Palantir added 29% in a day, and those two sessions delivered almost all of the week. The reopening is the part that does not exist yet: eight days after the announcement, the strait has not passed a single extra tanker.

The second is a proof. Two employment reports landed this week, a private one on Wednesday and the official one on Friday, and both said the same thing: the job market is weakening. July lost 23,000 jobs against an expected gain of 83,000. That killed the September rate hike, and the asset that responds purest to the price of money answered. Gold rose seven percent to $4,341, its best week since January, while the VIX closed at 14.90, so this was no flight to safety. Gold moved because the rate path moved, on data that has already printed.

The market paid full price for both stories.

Before the boards, the jobs report deserves one closer look, because half of the bad number is calendar. Teachers rolled off summer payrolls, and hospitality shed the staff it had hired for a World Cup that ended. Strip those two lines and the print flips positive. I hold that as a hypothesis until the August report confirms it or kills it.

What survives is still ugly: May and June were revised down by 103,000, and the household survey, the quieter half of the report, shows a quarter of a million people leaving the labor force, with participation at a five-year low. The unemployment rate improved only because people stopped looking.

Lindsay Rosner, who runs multi-sector fixed income at Goldman, counted the pattern: for the third year in a row, “July jobs data saw a mid-summer loss of momentum.”

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

The composite went from 34 to 84 in five sessions, and I distrust any number that moves that fast, so I went to the components. They agree. The McClellan summation, which carried a deficit of 546 two weeks ago, closed at +347 and rising, and a single burst of buying cannot move that measure: it only turns when buyers keep showing up day after day. The selling pressure that owned July is gone, and it was gone before Friday's report printed.

The thing I flagged last Sunday as the thinnest signal of the summer resolved upward: new highs buried new lows, against a Friday one week ago when the index rose while nearly three thousand stocks fell. The share of stocks above their 200-day average broke its freeze too, from 51.5% to 56.2%, a real majority for the first time since June.

Here is the day-by-day, because it splits cleanly between the engines. The composite ran from 34 to 67 on Monday and Tuesday with the promise, gave back eleven points midweek, then jumped to 84 on Friday’s report, and Friday was also the best participation session of the five, with 3,786 advancers against 1,455.

The order of those days matters. The best breadth session of the week came from Friday’s jobs report, so what Friday added, Wednesday’s CPI can remove. I trust the summation: it has been climbing for eight straight sessions. The share above the 200-day I trust less: it spent two weeks frozen near 51.5%, broke out on Monday, and a couple of red sessions would put it right back.

🚨 Sector Rotation

Technology gained 7% on the week, and a cheaper rate path lifts the longest duration cash flows first, which is why the gain belongs almost entirely to Nvidia, Broadcom and Microsoft. The sector still ranks near the bottom in participation at 54.3%, and the median technology stock went nowhere for a second straight week. Last Sunday this was a Microsoft story; it is three names now. If the rate engine were driving equities the way it drove gold, the whole duration complex would be moving. Three stocks are moving.

Financials next. A market that just erased a rate hike should be selling banks, and on price it did: up 1.2% in a week the index made 3.5%. Underneath, nobody left. 72.6% of the sector sits above its 50-day, the deepest participation on my board, two weeks running.

Utilities are the strangest line on the board. The bond arithmetic that explained their collapse two weeks ago stopped working this week: yields fell, the excuse to bounce arrived, and the group finished dead last at 29.8% anyway. A sector that ignores good news knows something the rest of us do not yet. I am watching for it.

Energy is where the money left, down 3.4% with the strait still shut, while its internals held up at 55.2%. That is a war premium coming out, and the volatility board says the same thing with more conviction.

🔍 Pairs Alignment

Last week I named my two live risks as rates and concentration. Rates resolved in my favor and concentration got worse: the cap-weighted indexes beat their equal-weight versions again, and the gap has widened three weeks running.

Stocks against long bonds went the relief way for the first time in a month, and it went from the bond side: Treasuries stopped falling while equities ran. That is the cleanest evidence I have that those two employment reports changed something structural in how this market prices duration, because bonds are slow and they do not move on sentiment.

The pair I am watching into next week is gold against real rates. Bullion took the repricing further than the bond market has agreed to. One of them is early and one of them is wrong.

📉 Volatility

Start with the equity surface, which priced the rate path as a question already settled. The VIX closed at 14.90, the curve sits in contango at every tenor, and nothing on this surface carries any stress at all.

Crude volatility is where I owe you a correction. Last Sunday I framed it as a coin flip: a reopening kills the premium, a dead deal brings it back. Neither happened. Tehran still calls the talks the final stages, a parliamentary committee is reviewing a bill to ban hostile vessels outright. Crude vol fell 11.5% anyway. Sellers of that insurance have stopped pricing a reopening date.

They are pricing a stalemate, and a closed strait nobody will fight over stops paying a war premium even while it stays closed.

One number before Wednesday. The SKEW index, which prices the deep out-of-the-money puts that pay in a crash, sits in the first percentile of its own twelve months, and the VIX in the ninth. Crash insurance has not cost less in a year, two days ahead of the only event I have named as a real risk.

💱 FX

Two weeks ago Japan spent an estimated fifty-nine billion dollars defending the yen, with Washington joining in for its first yen purchase since 2011. I said then that the yen was dead to me as a signal until officials step away, and it stayed dead: a currency that gains 1% while the dollar falls is going nowhere under supervision. The franc, my other fear gauge, did even less.

So neither of the two things that move when investors are frightened moved at all, and the dollar itself barely fell, which rules out the currency explanation for the metals too. What is left is the real rate: price out hikes while inflation expectations sit still, and the return on cash after inflation falls. Gold competes with cash and nothing else.

The strange part deserves its own paragraph, because the mechanics matter.

Washington did not sell dollars to buy yen, which is the conventional playbook. It sold euros. Scott Bessent wants a strong yen and a strong dollar at the same time, so the Treasury reached into its euro reserves, handed the orders to Goldman and Morgan Stanley through the New York Fed, and Europe reportedly found out afterward.

Selling euros was the elegant version, and the elegance is the point. It let Washington strengthen the yen without ever saying that America wants a weaker dollar. But that trick only works while the intervention stays small, and the yen carry system is anything but small. Policymakers are defending an almost impossible corridor: a yen weak enough to keep the global carry trade alive, and strong enough to stop Japan importing an inflation crisis. Every successful defense invites a bigger test, and euro reserves are finite. The next serious round forces the choice this workaround was built to avoid: spending dollars, and saying so.

🧠 My Take

The calendar thins to one event. Nvidia reports August 26. Before that, CPI lands Wednesday at 8:30am, and it is the entire game.

Broadening continues, 45%

CPI comes in soft, the summation keeps climbing, the equal-weight index closes part of its gap, and financials convert the deepest participation on the board into price. The contradiction with my banks paragraph is only apparent: a bank earns the slope, and a front end falling faster than the long end widens its spread, which is why I watch the two-year against the ten-year. Base case because breadth this strong rarely reverses inside two weeks.

Concentration break, 30%

A hot CPI puts hikes back on the table and the three names carrying technology hand back the week. An index built on three companies has no cushion when they turn. Watch the equal-weight ratio for the first sign, because the damage arrives through the index itself and no sector inside it offers cover.

Real assets keep repricing, 25%

The metal is right and the bond market is late. The next Fed move becomes a cut, and the gold bid spreads into everything priced against a cheaper dollar. Capped at 25% because the miners already printed 20% in five sessions, and one payroll report does not make a policy path.

🔥 Trade of the Week:

If the front end has peaked, every real asset gets repriced against a cheaper future dollar. Gold did it in five sessions. Natural gas has not moved, and Comstock Resources closed Friday at $13.41, up 1% in a week the index made 3.5%.

The July 29th print was ugly: revenue eighty million short and a 7.4% drop to a fresh 52-week low. Underneath, production rose 16%, six hundred million from the Pinnacle sale repaired the balance sheet, and second-half guidance was reaffirmed. The miss came from the price of gas, and a cheap commodity is a different problem from a shrinking business.

Then there is the hub: 5.2 gigawatts of gas-fired power with NextEra on the Western Haynesville, a billion cubic feet of gas a day by 2031, and Comstock doubling its wells on that field this year. Last week I bought the turbines. This is what the turbines burn, and it has not been bid.

The honest part

This is the riskiest idea I have run in months. The stock is 52% off its high, under both of its moving averages, in the week’s worst sector, and my screeners cannot see a warm winter or another year of cheap gas. A hot CPI kills the real asset case, and nothing cushions a name that has not moved yet. The payoff is slow on top of that, 2028 through 2031, so it earns a small ticket and nothing more.

Sizing: small. A fallen name, in the weakest sector of the week, with a catalyst three years out.

Entry: half around $13.40, half toward $12.70 on a retest into the July low.

Stop: a daily close below $12.10

Target 1: $15.

Target 2: $16.50.

Stretch: $18.70

See you next week,

Daniel

P.S. The app is the daily version of what you just read, the same boards and screeners I run every morning before I trade. It now comes with a free 7-day trial.

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Disclaimer

This newsletter is for educational and informational purposes only. It is not financial advice.

The content reflects personal opinions shared publicly as a journal. Trading stocks, options, futures, or any financial instrument involves significant risk. You can lose your entire investment. There is no guarantee of profit.

The author is not a registered investment advisor, broker, or financial professional with any regulatory authority including the SEC or CFTC. Always consult a licensed financial advisor before making any investment decisions.

By reading this newsletter, you accept full responsibility for your own trading and investment choices. Past performance does not guarantee future results. Markets are unpredictable.

Screenshots are courtesy of TradingView, VixCentral, and other platforms with which the author has no affiliation. Information shared may contain errors or become outdated quickly.

This content is the intellectual property of the author. Copying or redistributing without permission is prohibited.

By continuing to read, you acknowledge and accept these terms.

Hello my friends,

Three of the twelve Fed voters asked for a hike on Wednesday. Kevin Warsh closed the press conference with “This Fed will not waver,” and the market believed him for exactly one session: the Dow lost 1,153 points, its worst day since April 2025. Then Microsoft reported Azure’s first $100 billion year, Amazon reported AWS growing 37%, its fastest in four years, and the fear was gone. The index closed the week up 1.1%, as if Wednesday had never happened.

Four giants reported this week and the market ran the same test on each: show the revenue. Microsoft and Amazon showed it and gained 15% in a day. Meta raised its spending plan to as much as $145 billion with free cash flow near zero and was sold before the next open. Apple beat its quarter, guided soft, and lost 7% on Friday. Alphabet, which I bought into last week’s panic, rose 11% once its peers proved that cloud spending turns into cloud revenue. The rule this market applies is simple. It pays for proof and it sells promises. Everything below is a version of that rule, so keep it in mind as you read.

The weekend then added two more promises to grade. First the yen:

Japan sold an estimated $59 billion of dollars on Thursday to defend its currency, which had fallen to ¥162.84, its weakest since 1986. On Friday Washington joined in, the first US purchase of yen since the coordinated G7 action of 2011. What that does to my FX page is further down, and it is not small.

Then, late Saturday night:

Iran denied it within hours. A military source told the Fars agency there is "no agreement on reopening the Strait of Hormuz," and added that any passage would need clearance from the Revolutionary Guard's navy. This is the third reopening announcement of the year. April's version lasted two weeks. June's was signed at Versailles and collapsed in three.

So Monday's job is to check the announcement against the tanker count, currently five transits a day against a normal 140. And through all of it, one market ignored every word spoken this week: bonds sold off through the Fed, through the earnings and through the headlines, to 4.75% on the 10-year, the highest of this move.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

The composite score recovered to 34 from 29, and the McClellan summation, which measures whether selling pressure persists from day to day, cut its deficit from -546 to -253. That part is real, and it matters more than the score itself. A summation falling week after week means sellers keep showing up regardless of price; a summation halving its deficit means they stopped pressing. The sellers who controlled this tape for two weeks stepped back midweek, and what worried me most last Sunday broke first.

Friday bothers me more than Wednesday did. Wednesday was fear, and fear I understand. On Friday the index rose 0.7% while 2,963 stocks fell and 2,251 rose, and more volume traded down than up, 7.8 billion shares against 5.7 billion. An index can only print that combination when its biggest members are large enough to outweigh everyone else, and this week two of them were. New highs still beat new lows, 173 to 151, but that margin of 22 names is the thinnest of the summer. Meanwhile the share of stocks above their 200-day average has been stuck at 51.5% for two straight weeks, a majority by a point and a half that refuses to become anything more. I have seen tapes like this resolve both ways. When that number finally moves, I will believe whichever direction it picks.

Less selling is not the same thing as buying.

That is the whole diagnosis, and it is why the score still reads WEAK.

🚨 Sector Rotation

Last week's leader is this week's casualty. Utilities led this board seven days ago at 69.9% internal strength. They sit tenth today at 29.8%, down 4% in price in a week the index rose, a forty-point collapse in five sessions. Nothing about their business changed. What changed is the 10-year at 4.75%. A utility is priced like a bond: slow, regulated cash flows that investors buy for the dividend. When Treasuries pay 4.75% with no business risk, a dividend near 3% with rate risk attached loses its buyer, and the exit is always faster than the entry. Real estate runs on the same arithmetic, plus debt to refinance, which is why it cracked a week earlier; it slid further to 48.3% this week. The rate-sensitive groups are breaking in the order of how much they depend on cheap money, and that order is the most honest tell on this board.

What held is what benefits from higher prices. Energy kept second place at 63.4% with the strait shut, and Saturday’s deal news makes it the seat to watch first on Monday: if tankers actually move, the group that led on war risk has to reprice, and its internals will tell you within two sessions whether the leadership was oil price or something more durable. Financials lead at 68.1%, and theirs is the one rotation with proof behind it: the banks reported strong earnings three weeks ago, and the money that left tech has stayed with them through every headline since. That is what an earnings-backed rotation looks like, and it is the difference between financials at the top of this board and utilities, which got there on fear and left on arithmetic.

Below the leaders the floor is dropping. Only 4 of eleven sectors keep a majority of their names above the 50-day, down from seven last week, and the regime tag reads RISK-OFF. Seven days ago I could tell you the rotation was healthy because the money kept choosing new seats. This week the choice narrowed to two seats and the rest of the theater emptied a little. That is still rotation, but it is rotation with less room for error.

Positioning through payrolls without guessing the number: if yields keep rising, energy and financials keep working and utilities stay broken, whatever bounce they print. If yields fall, the beaten rate groups bounce hardest, and I would trade that bounce with a stop, because a bounce built on one payroll print is fragile until the trend in yields actually turns.

Two corrections so the table does not mislead you. Discretionary’s 6% week is mostly Amazon’s index weight, its internals sit at 53%, middle of the pack. And technology improved to 41.2% in a week Microsoft added 21%, which means the median tech stock went nowhere while the biggest one repriced. Both sectors look better in the price column than they are underneath.

🔍 Pairs Alignment

The newest divergence measures the week exactly: cap-weighted QQQ against its equal-weight version, stretched to 1.35 standard deviations and widening. Same hundred companies, different weights, so the gap between the two is pure concentration, with no sector story or macro story to hide behind. My board gives this spread a half-life of about 20 trading days, meaning stretches like this one typically decay within a month, and the decay can come two ways: the median stock catches up, or the leaders come back.

Stocks against long bonds is the pair that matters: still diverging at 1.32 sigma, because bonds fell again in a week stocks rose. There are only two ways this spread realigns. Yields fall and bonds recover, which is the relief scenario. Or stocks fall to meet them, which is the squeeze. What it cannot do is stay here forever, and there is still no hedge in duration while it decides. Seven of nine pairs sit aligned, none at an extreme. My two live risks, rates and concentration, are being priced at the same time, and both show up on this one page.

📉 Volatility

Wednesday cost the Dow 1,153 points. By Friday you could not find that session anywhere on this board. The VIX closed at 15.99, the 24th percentile of its year, after collapsing 17% on Thursday. The nine-day gauge sits at 13, the vol-of-vol index at its 17th percentile, the tail-risk gauge at its 19th, the curve in firm contango. Nearly every gauge on the surface sits below its own median; what stays elevated is Nasdaq vol and crude, and crude is the story.

The volatility market looked at three Fed dissents, a shut strait and two mega-caps gapping 15%, and priced all of it as finished business.

Crude vol is where the weekend matters. It eased 7% to 63 while the barrel went nowhere and the strait stayed shut, which on Friday looked like carelessness. After Saturday’s announcement it reads differently: the sellers of that insurance were pricing a deal before the deal was posted, the same way the tape often knows before the wire does. Last week I said crude vol was the one protection worth paying for. If the strait reopens, that premium goes to zero. If this deal dies the way April’s and June’s did, the premium comes back. Crude answers first, tonight at 6pm New York time when futures open.

💱 FX

The dollar fell 1.4% in the week the Fed almost hiked, while the 10-year rose seven basis points. A currency that falls while its own yields rise means the selling comes from abroad, because higher yields would otherwise attract buyers, and it usually marks foreign holders reducing Treasuries rather than traders playing rate differentials. That alone was worth a line. Then the sellers got names, and the buyers did too.

Japan spent an estimated $59 billion on Thursday defending the yen from ¥162.84, its weakest level since 1986. On Friday the US Treasury joined, buying yen for the first time since 2011, executed through the New York Fed. The last time Washington did this, it was part of a coordinated G7 response to the Japanese earthquake. This time it is two governments against a market that has been selling the yen for years on the same simple trade: borrow cheap yen, buy everything else. A Reuters photographer even caught the Treasury secretary's notepad at Camp David: "To Do. Buy Japanese Yen, $5-10 bil." History says interventions of this size buy time, and only a change in the underlying policy, Japanese rates rising or US rates falling, buys a trend. Neither has happened yet.

The yen gained 2.2% this week, and in any normal week I would read that as a fear signal, the classic funding currency catching a safety bid. A price supported by two governments carries no signal. It tells me what officials want and nothing about what investors fear, so the yen line is dead to me until they step away, and every yen-based risk gauge, including my aussie-yen barometer, goes on the same shelf.

That leaves the franc as the only clean fear gauge on this board, and it moved: up 1.4%. Gold held above $4,000 through a vol collapse that should have pulled it lower. I am watching the franc line before any other.

🧠 My Take

This market pays for proof and sells promises. It paid Microsoft and Amazon for revenue. It sold Meta for spending without it. It sold the dollar while the Fed talked tough, which is the market’s way of saying that words alone no longer clear. And it will grade Saturday’s deal in tankers, because the two previous deals this year opened the strait on paper and neither survived a month. There is even a clock on this one: the sanctions relief Iran won in June expires August 21, which explains why both sides suddenly want a framework, and why the next three weeks decide whether this announcement was the real one.

The calendar thins out and sharpens. Six of the seven giants have reported; Nvidia remains, at the end of the month. Payrolls Friday at 8:30am is the only hard date on the macro side, with claims at 197,000 and employment costs at 0.9% for the quarter keeping hike odds at 67%. In between, ISM Monday, AMD Tuesday night, Disney Wednesday morning, and a tanker count every single day.

Grind and rotate, 40%

Payrolls print warm, the deal stays ambiguous, and the money keeps paying financials, energy and the two proven clouds while utilities sit broken. Breadth holds its thin majority above the 200-day and the summation keeps healing. Base case because sellers eased all week, and because a vol surface priced almost entirely below its median rarely hosts a crisis the following week. In this tape I add nothing broad and keep working the leaders.

Relief, 35%

Upgraded by the weekend, and capped there by the record. The strait reopens and the tanker count proves it, crude gives back the war premium, hike odds fall, and the median stock, flat for a month, finally moves. The equal-weight index leads, the beaten rate groups bounce hardest, and the 200-day share breaks upward out of its freeze. I cap it at 35 because April’s deal lasted two weeks, June’s lasted three, and Tehran denied this one within hours of the post.

The rate squeeze, 25%

A hot payroll number sends the 10-year toward 4.9% and hike odds toward certainty, and the selling turns broad through valuations, reaching every sector at once instead of one rate-sensitive group at a time. Utilities and real estate already showed the mechanism; in this scenario it stops being selective. Cutting exposure matters more than picking sectors here. A weekly close above 4.90% on the 10-year promotes this to base case.

🔥 Trade of the Week:

First, the book. Alphabet, bought around $319 last Sunday, closed at $356, up 11% and through the first target. The $342 gap filled Friday, a third comes off by plan, the stop rises from $296.60 to the $319 entry, and the rest rides toward $366 with the runner at $402. The calmer version of the trade, waiting for the Fed to clear, cost 11%. And if you sold everything at $342 instead of a third, congrats, five days is a fine holding period and nobody argues with a paid ticket. I keep a runner because the story that repriced this stock is four days old.

Now this week. The company cashing everyone’s checks just printed a record order book.

The setup

Baker Hughes reported last Sunday and beat by 31%, its fourth beat in a row. The line that matters sits below the earnings: orders of $10.5 billion, up 49%, a company record, including 76 gas turbines for data-center power, about 1.3 gigawatts, plus a multi-year deal for another gigawatt of the same. It also closed its $13.6 billion purchase of Chart Industries the same week, doubling down on gas and power infrastructure.

Read that order book against the earnings week. Amazon raised its capital budget to $220 billion, Meta to as much as $145 billion, and a data center orders its power equipment before almost anything else, because without electricity the chips are furniture. Baker sits on the receiving end of the same checks the market just spent two weeks repricing, and unlike the platforms, it books them as orders today rather than as promises of future revenue. Its sector holds the second leadership seat on my board at 63.4%, one of only two groups still leading.

The stock jumped 5.8% Monday to $60.59, pulled back to $58.46 Tuesday, and closed the week at $60.49, a dime under its day-one close. That pattern has a name in the research: post-earnings drift. Investors underreact to large surprises, and stocks that beat big tend to keep moving in the direction of the surprise for weeks afterward. Five days in, this one has not even reclaimed its announcement-day close, so the drift, if it comes, is all still ahead. The stock reclaimed its 50-day average, the 20-day is rising underneath, and the April high at $70.41 leaves 14% of room overhead that the market’s extended leaders no longer have.

The honest part

The weekend added a risk, so it goes first. If Saturday’s deal holds and the strait reopens, energy gets sold before anything else, and BKR trades inside that sector no matter how good its order book is. The order book is also the defense, because data centers buy turbines whether crude trades at $70 or $90, but sector flows do not read order books on day one. So no entry in Monday’s first hour. I let the market grade the deal, then I use the levels.

The rest was already true on Friday. Crude went nowhere all week and the service group lagged it anyway: Halliburton lost 3.3% over the same five sessions, so the group offers no cover if the tape turns. Friday’s candle was weak, higher volume with a close in the bottom third of the range, which reads as sellers using the strength. Payrolls lands Friday and everything cyclical answers to it.

The levels

Entry: around $60.50, half there, half toward $58.50 on a retest of the earnings-week low.

Stop: a close below $57, under the weekly volume point of control, the price where last week’s heaviest business was done. A close below it means the market has fully unpaid the beat, and the idea is dead. No averaging down.

Target 1: $63

Target 2: $65.50

Stretch: $70

Sizing: small. A cyclical recovery trade into a payrolls Friday, in a tape carried by two stocks, with a live geopolitical coin flip over its sector, earns half size.

If options interest you more than shares: September call spreads struck above $57 do the same job with the stop built into the premium. I have no edge on your exact strikes. Size it like the shares, not like a lottery ticket.

See you next week,

Daniel

P.S. The app is the daily version of what you just read, the same boards and screeners I run every morning before I trade. It now comes with a free 7-day trial.

Free trial

Disclaimer

This newsletter is for educational and informational purposes only. It is not financial advice.

The content reflects personal opinions shared publicly as a journal. Trading stocks, options, futures, or any financial instrument involves significant risk. You can lose your entire investment. There is no guarantee of profit.

The author is not a registered investment advisor, broker, or financial professional with any regulatory authority including the SEC or CFTC. Always consult a licensed financial advisor before making any investment decisions.

By reading this newsletter, you accept full responsibility for your own trading and investment choices. Past performance does not guarantee future results. Markets are unpredictable.

Screenshots are courtesy of TradingView, VixCentral, and other platforms with which the author has no affiliation. Information shared may contain errors or become outdated quickly.

This content is the intellectual property of the author. Copying or redistributing without permission is prohibited.

By continuing to read, you acknowledge and accept these terms.

Hello my friends,

Wednesday night Alphabet beat on every line that matters, revenue up 24%, cloud up 82%, and raised its 2026 spending plan to as much as $205 billion. The stock lost 7% the next day. Tesla missed its earnings number by a third and lost 18% on the week. And while those two burned, the S&P slipped just 0.6%, and the chipmakers, the group that was supposed to be the center of this whole scare, closed the week green.

That last part is the fact worth sitting with. The spending fear got its answer: the budgets went up. And the market answered by selling the companies writing the checks and bidding up the companies cashing them. Nvidia gained 2% and Broadcom 3% while the big spenders lost between 3% and 18%. The market has stopped arguing about whether the AI build happens. It moved on to who pays for it.

Underneath the tech drama, a bigger worry showed up. Iran declared the Strait of Hormuz closed and crude rose 10%. Jobless claims printed 187,000, the lowest since 1969. The 10-year yield climbed to 4.68%, its highest since January 2025. Polymarket now puts 71% odds on a Fed rate hike this year, against 12% on a recession. The Fed meets Wednesday. Microsoft and Meta report that same evening. This was the week the market stopped worrying about what tech spends and started worrying about what everything costs.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

The sellers came back. That was the one thing I told you to watch, and on Thursday they returned in force. The composite health score fell to 29 from 39, a second straight defensive week, and this time it is harder to explain away. The share of stocks above their 50-day slipped to 42.3% from 45.5%, no longer a rounding error. Above the 200-day, 50.8%, a majority by less than a point. And the McClellan summation swung from +539 to -546 in five sessions, a collapse of more than a thousand points. Selling that keeps up for a week is a different animal from one heavy Friday.

Friday itself is worth a close look, because the session packed the whole week into one day. Advancers beat decliners 2,905 to 2,315, and yet down-volume outran up-volume 6.4 billion shares to 5.6 billion, with a TRIN of 1.46. The average name rose while the dollars kept leaving the mega-caps. There is the rotation in a single tape. What keeps this board off full alarm: new highs still beat new lows, 248 to 206, the smallest gap in weeks but still positive.

🚨 Sector Rotation

For the first time since June, the top of my leadership board is about power, and I mean the electrical kind. Utilities took first place at 69.9% internal strength. Financials eased to 69.3% from 76.4% and kept their leading tag, the earnings-backed spine still there underneath. Energy jumped to 61.9% and joined them, three weeks of oil headlines finally showing up in the stocks. Seven of eleven sectors keep a majority of their names above the 50-day, one more than last week, in a week the health score fell ten points.

The one that broke tells you what the new driver is. Real estate, last week’s fast climber at 69.5%, cracked to 57.7% the same week the 10-year hit an eighteen-month high. The rate-sensitive group rolled over first, which is what you would expect if yields are now the pressure point. Healthcare slipped below half at 48.4%, the crack I flagged last week still widening. At the bottom, technology fell to 31.6%, communication services sit at 37.4% carrying Alphabet and Meta, and materials remain last at 28.5%. Industrials quietly got stronger, helped by defense, with Lockheed up 10% on a beat-and-raise Thursday and RTX following.

So the rotation continues, but it is heading somewhere new. Three weeks ago the money left tech for balance sheets. This week it left tech for hard assets and the grid, the inflation seats. In a top the money leaves the market altogether. This money keeps changing seats, and I trade off which ones it picks. Which is why I am not cutting exposure here. I am moving it toward what is getting paid.

🔍 Pairs Alignment

Seven of nine pairs sit aligned, none at an extreme, and the two that broke ranks both point at the same corner of the market. Large-cap tech against the regional banks, last week’s only divergence, kept widening to 1.22 standard deviations. The sell-tech-buy-banks trade kept working all week.

The new divergence is the one to study. Consumer discretionary against staples snapped to 2 standard deviations stretched in a single week, the classic sign of a consumer turning defensive. Except the discretionary leg is cap-weighted, and this week it carried Tesla’s crash. Part consumer signal, part mega-cap wreck.

The pair I told you to watch, stocks against long bonds, stayed aligned on the board, and the alignment is the bad news. It stayed aligned because both legs fell together: the 10-year rose fourteen basis points to 4.68% and long-bond funds lost 1.5% in a down week for equities. Last week duration finally acted like a shelter and I told you the haven had shown up. It lasted five sessions. Bonds sell off when the fear is inflation, and inflation is what oil at $90 and jobless claims at a 57-year low smell like.

📉 Volatility

For a month Nasdaq volatility sat at the top of my board and I kept telling you it was the only hedge worth owning. Wednesday night the thing it was pricing arrived: a 7% gap down in Alphabet, a 15% single-day drop in Tesla. And Nasdaq vol finished the week lower at 28.4, still the 90th percentile of its year but coming down. That is what insurance looks like after the claim gets filed. The broad VIX ended at 18.6, down on the week, the three-month gauge above 20, the curve firmly in contango. A week like that, and the index still refuses to treat this as a market-wide problem.

Meanwhile the bid moved to the oil patch. Crude volatility rose 13% on the week to 68, the 76th percentile of its year and climbing. Hormuz is being paid for there, in real premium, and nowhere else on the board. So the tech hedge did its job and got cheaper, and the premium worth owning now trades on the price of a barrel. If I were paying for protection this week, I would pay for it there.

💱 FX

The dollar finished higher against nearly every major on the board, and it did it quietly, which is itself information. The franc, the currency that rallies when the shooting gets real, fell 1% against it, and the yen kept sliding. Zero panic anywhere in the funding currencies, for the fourth week running.

Gold is the exception, and it is the right kind. The metal rose through $4,000 while stocks fell, the first week in a month it behaved like a hedge again. My risk-off recipe, the franc rising while stocks fall and vol spikes together, printed zero of its three ingredients again. So I am not paying for disaster insurance this week.

🧠 My Take

The AI spending scare I watched all month got its answer: the chips closed green while the spenders bled. The market has decided the build is real and moved on to the bill. The new subject is the price of everything. Crude up 10% with the strait closed, the 10-year at 4.68%, a prediction market putting 71% on a hike this year. All of it lands on the Fed’s table Wednesday at 2pm, with Microsoft and Meta reporting that same evening. Rates and capex, both on the record in one afternoon.

Chop and rotate, 40%. The Fed admits the inflation problem without promising a hike, Microsoft and Meta guide the way Alphabet did, and the platforms find their footing. Money keeps paying utilities, energy and financials, and breadth steadies above its 200-day majority.

The inflation squeeze, 35%. Crude holds above $90, the Fed leaves the hike door open, the 10-year presses toward 5%, and the selling goes broad through the multiple, which reaches every sector at once. Real estate already showed you what that looks like. Here, cutting exposure matters more than picking sectors. A weekly WTI close above $95 moves this to base case.

Relief, 25%. The strait reopens, crude gives back the spike, hike odds fall, and the sold platforms snap back with Alphabet leading, since its report was a beat everywhere except in the market’s mood.

🔥 Trade of the Week:

A company that beat on every line got thrown out with the trash.

That is the trade.

Wednesday night Alphabet printed a blowout, revenue up 24% and cloud up 82%, then raised its capital budget, and the market sold it down 7% the next day on that line alone. The market is pricing a decline; the numbers show growth. And the same tape that punished Alphabet for writing the checks spent the week bidding up every company cashing them, so the market clearly believes the spending works. It just does not want to own the bill.

The setup

Google was already sliding before earnings, from the mid $370s to $342 the day before the report. The gap took it clean through, and it closed the week at $319.74. Here is what makes it a trade: all of March this name lived between $272 and $312, and one brutal night gave back everything it had gained since spring yet never touched that base. Thursday’s low was $314.90, above the top of the entire March range. The floor Thursday’s selling could not even reach is the floor I am leaning on.

The honest part

I am buying a gap-down in the sector sitting near the bottom of my board, in a tape that is getting worse, four days before Microsoft and Meta report into the same fear. If those two guide their own spending up Wednesday night and the market reacts the way it did here, this entry gets tested immediately.

The real risk is the story. If “they spend and get nothing back” becomes the accepted view, good numbers stop mattering, because a re-rating does not care about this quarter. Friday’s Chinese-model headline showed how fast a second story piles on. The stop is the only honest answer to all of it, so it does not move.

There is a calmer version of this trade: wait for Wednesday to clear. It costs you the first move and buys you the answer. Defensible too.

The levels

Entry: around $319, half now, half toward $305 to $310 if the mega-cap prints hand it to me.

Stop: a close below $296.60, back inside the March base. Price trades there and the idea is dead. Below it I am gone, and I do not average down.

Target 1: $342, filling the earnings gap, about one times the risk from the first entry, and I trim a third. A small first target is the price of holding through an event week.

Target 2: $366, the pre-slide shelf, about two times the risk, another third off.

Stretch: a runner toward $402, the old closing high, close to four times the risk and a 26% move, if the market rethinks what that spending buys.

Sizing: small. A beaten mega-cap in a defensive tape, with the Fed and two more capex guides landing Wednesday, deserves a starter and nothing more. If it runs to the first target inside a week, take the win and go.

See you next week,
Daniel

P.S. The app is the daily version of what you just read, the same boards and screeners I run every morning before I trade. It now comes with a free 7-day trial.

Free trial

Disclaimer

This newsletter is for educational and informational purposes only. It is not financial advice.

The content reflects personal opinions shared publicly as a journal. Trading stocks, options, futures, or any financial instrument involves significant risk. You can lose your entire investment. There is no guarantee of profit.

The author is not a registered investment advisor, broker, or financial professional with any regulatory authority including the SEC or CFTC. Always consult a licensed financial advisor before making any investment decisions.

By reading this newsletter, you accept full responsibility for your own trading and investment choices. Past performance does not guarantee future results. Markets are unpredictable.

Screenshots are courtesy of TradingView, VixCentral, and other platforms with which the author has no affiliation. Information shared may contain errors or become outdated quickly.

This content is the intellectual property of the author. Copying or redistributing without permission is prohibited.

By continuing to read, you acknowledge and accept these terms.

Short one.

The founding price on the app ends tonight. After that it goes up and stays up.

You’ve heard enough from me this week, so I won’t pitch it again.

If it’s for you, here’s the link.

Claim the founding price

Daniel

Hello my friends,

On Tuesday the biggest banks in America opened earnings season with a blowout. Goldman printed well north of what the Street modeled, JPMorgan and Morgan Stanley followed, and financials finished the week on top of my leadership board at 76.4% internal strength, stronger than where they started. And the index fell anyway. The S&P gave back about 1.5% on the week. Set those two facts side by side, because together they are the story: the market’s strongest sector reported from strength, and the tape sold off regardless.

It sold off in one place. The Nasdaq 100 dropped 4.2% on the week while the equal-weight S&P lost 0.4% and small caps 0.7%. That gap is the whole point. This was not a broad decline. It was a top-heavy one. The money came out of the corner that has carried this market all year, mega-cap technology, and the average stock hardly moved.

Four weeks running I have told you the risk lived in the tech corner, and that if you hedge anything, you hedge the tech corner and leave the index alone. This week the tech corner is where it broke, on a fresh scare over how much these companies are about to spend, and the rest of the market watched from a safe distance.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

The composite health score fell to 39 from 68, a defensive reading, and this is the week to look past the number to the parts. Almost the entire drop came from one session and one thing: Friday’s selling. Decliners beat advancers by better than two to one, down-volume ran nearly 10 billion shares against 4.4 billion up, and the McClellan oscillator sank to -81. Those are the momentum gauges, and on Friday they cratered.

Now look at what did not move. The share of stocks above their 50-day line sits at 45.5%, down from 46.6% a week ago, a rounding error. Above the 200-day, 52%, still a majority. The median stock carries an RSI of 54, the reading of a market that is holding together. New highs still outnumber new lows. Participation barely eroded on the week. What broke was the pressure, the speed of the selling in a single heavy session. When a score falls on pressure while the levels hold, the tape is telling you sellers showed up in force for one day. Now you watch whether they come back.

🚨 Sector Rotation

The leadership board barely moved. In a week that gashed the index, a leadership board that holds steady tells you plenty. Financials still own the top at 76.4% internal strength, up from 74.6%, and they climbed the same week they reported. Real estate jumped to 69.5% from 61.5%. Those two are the only sectors my board tags as leading, and both strengthened while the index fell. At the bottom, technology slid to 40.7% and materials sits alone in the basement at 23.7%. Six of eleven sectors still keep a majority of their stocks above the 50-day, down from seven last week.

So the money that left technology did not leave the market. It rotated into the financial-quality spine this rally has stood on since June, the same names that just backed their charts with blowout earnings. That is the difference between a market that is topping and one that is rotating. In a top, the money goes to cash and every sector bleeds together. This week it moved from the crowded corner to the leadership corner and stayed invested. Healthcare is the one crack in that story. It gave back its June firmness, slipped to 57% internal strength, and lost second place to real estate. One soft leader inside a rotation is a different animal than broad distribution, but I am watching it.

🔍 Pairs Alignment

Eight of nine pairs on my board sit aligned, nothing at an extreme, and the one that broke ranks tells you what kind of week this was. Large-cap tech against the regional banks now sits 1.16 standard deviations stretched and widening, the only pair my monitor flags as diverging. The market sold technology and bought the balance-sheet trade underneath it. Every other spread stayed in its channel, the market’s way of saying the stress stayed inside one relationship instead of spreading through the whole structure.

The pair earning my closer attention is stocks against long bonds, because it finally turned. For two weeks I flagged that Treasuries refused to act as a haven, falling through a weak jobs report and then through live missiles. This week they caught a bid. The spread between the S&P and long bonds is narrowing again, and it narrowed because bonds rallied while equities wobbled, the first time in a month duration behaved like shelter. The haven I kept telling you was missing finally showed up. It came through in the bond market this time.

📉 Volatility

For a month I have told you the same thing off this dashboard: the risk is not in the broad index, it is in the tech corner, and that is the only place worth paying to hedge. This week the market proved it. Nasdaq volatility sits at 29, the expensive corner of the entire surface for a month running, and this week it climbed to the 92nd percentile of its year as the thing it was pricing finally happened. Meanwhile the broad VIX could not hold 19. It finished at 18.8, the curve never left contango, and my composite stress score reads 5 out of 14 with left-tail risk on low. A 4% tech decline, and the index vol complex treated it as a corner event and nothing more.

Two other corners still trade with a pulse. Oil volatility holds the 74th percentile at 60, the one place the second Iran flare and the port blockade are still being paid for. And the nine-day gauge jumped 20% on Friday to 16.9, a single session of nerves heading into next week’s tech earnings. My rule on spikes has not changed: a stress reading has to hold for three days before it means anything, and this one is a day old. Broad index hedges remain a waste of premium. If you hedge, you hedge the tech corner, which spent this week showing you why one more time.

💱 FX

The currency board gave the cleanest read of the week, and for the third week running it said the same word: no fear. The dollar is strengthening across nearly the whole board. The franc, the first place money runs when the shooting starts, sits weak against it. The yen is in a clean downtrend, the currency market telling you the carry trade is on and funding is loose, the opposite of a haven scramble. Gold is moving with stocks, a risk-on posture on my fifty-day read. In a real scare it runs the other way.

Put it beside the bond move and the picture completes itself. The only haven that caught a bid this week was US duration. The franc stayed soft, the yen kept sliding, and gold tracked the tape higher instead of running from it. When equities sell and the one shelter that works is Treasury bonds, while the dollar grinds higher and the carry trade hums, you are watching an orderly rotation out of an expensive corner. Real fear looks different. The recipe I gave you weeks ago, the franc rising while stocks fall and vol spikes together, printed none of its ingredients.

🧠 My Take

The framework pointed at the right corner. For a month my volatility board flagged technology as the expensive, fragile part of this tape, and technology is exactly where the week broke. The read was right. The mistake was the weighting. I filed the tech-corner risk as a side scenario and made broadening my base case, when the board on my own screen was telling me the crowded corner was the story.

So the stance sharpens; it does not turn. Still long, still anchored in the financial-quality leadership, which held every bit of this week’s fire and backed it with earnings. What I will not do is chase the expensive end of technology, the megacaps still parked near their highs, until the spending scare is priced. Buying the wreckage that scare created is a different bet, and it is the one I take below. The worry list is two items. First, Friday’s selling pressure. One heavy session is noise, but if the sellers come back next week, the breadth levels that held this time start following the pressure down, and then it is a real problem. Second, the whole tape now hinges on a single evening. Alphabet and Tesla report Wednesday after the close, straight into the capital-spending fear that started this selloff, and Alphabet’s guidance on how much it plans to spend is the number the entire AI trade is waiting on.

Technology steadies and the top-heavy dip resolves higher, 40%. This is my base case for one reason: the damage never reached the average stock. Equal-weight fell less than half a percent, the median RSI is a healthy 54, and the leadership got stronger.

The tech leg extends and drags the tape, 35%. Alphabet guides its spending aggressively, confirms the fear the chip names flagged, and the mega-cap complex legs lower a second week. This time the weight of those names pulls the index far enough that the breadth levels finally give, and Friday’s pressure turns out to have been the first domino rather than a one-day event.

A broad risk-off, 25%. A tech miss lands on top of another oil escalation, the nine-day vol gauge that jumped Friday keeps climbing, the term structure inverts, and the orderly rotation turns disorderly, finally reaching the names that held. My board has a clean trigger for this one: I flip defensive across the whole book the day the nine-day VIX closes above spot VIX and the curve backwardates. It has not, yet.

🔥 Trade of the Week:

This is the wreckage I mentioned. All week the market dumped anything tied to the AI build-out, terrified those spending budgets are about to get cut. Caterpillar sells the engines and the power those data centers run on, so it got thrown out with the chips, down 20% in three weeks. That is the entire trade. Same catalyst as the whole tape: Alphabet, Wednesday night. If its guidance holds, the names the scare knocked down are the ones that snap back hardest.

The setup

Caterpillar spent 2024 building a base in the low $300s, then ran almost without a pause to $1,065, one of the great trends in the industrials, powered by the data-center and grid spending that needs its engines and turbines. Over the last three weeks that trend took its first real hit. The stock fell from above $1,040 to an intraday low of $838 on Friday, a drop of roughly 20%, and it did it while the equal-weight market barely moved.

Here is what turned it from a falling stock into a trade. On Friday, the ugliest tape of the week, Caterpillar dropped to $838 and then reversed hard, closing the session at $880, forty dollars off its low and in the upper third of the day’s range. A stock that stops going down and closes strong on the worst day of the week is telling you the sellers are exhausting. That reversal off a washed-out low, in a real market leader, is exactly what the contrarian book fishes for.

The honest part

Start with the chart, because it cuts both ways and you should see it plainly. This is a parabola. The move from the low $300s to $1,065 went nearly vertical, and vertical moves do not correct politely. A 17% pullback here can be the dip that gets bought, or it can be the first leg of a much deeper give-back toward the 200-day average down near $720. I am playing for the bounce off Friday’s reversal, and the stop is where I admit the parabola won.

This is also a pullback buy in a defensive tape, with the stock still under its 50-day, so I am buying into weakness and betting it turns. If Friday’s low gives way, there is real air beneath it.

And the whole thesis leans on the data-center spending story holding. The same capital-spending fear that hammered the chips this week can turn on the companies that sell the picks and shovels, and Caterpillar is the pick-and-shovel trade.

The levels

Entry: around $878, Friday’s reversal close, or better toward $855 to $865 on a quiet retest. Do not chase above $895.

Stop: a close below $830, under Friday’s $838 low. Lose that and the reversal failed and the deeper mean-reversion is on. That is roughly a 5% risk from entry, which is exactly why this stays a starter.

Target 1: $955, the shelf the stock broke down from two weeks ago, about 1.6 times the risk.

Target 2: $1,000, the round number and the last support on the way down, about 2.5 times.

Stretch: $1,065, the high, if the leader fully repairs. That is a 21% move from here, and it is why a beaten leader gives you more room than a fresh breakout at its high.

Sizing: a parabola, in a pullback, inside a defensive regime is three reasons to keep it light. Add on a reclaim of the 50-day near $929, once the bounce proves it has legs.

See you next week,

Daniel

P.S. I opened the APP recently. It’s the daily version of what you just read, the same boards and screeners I run every morning before I trade.

The founding price, 50% off the first year, holds until tomorrow, then it goes back to full.

Claim the founding price

Disclaimer

This newsletter is for educational and informational purposes only. It is not financial advice.

The content reflects personal opinions shared publicly as a journal. Trading stocks, options, futures, or any financial instrument involves significant risk. You can lose your entire investment. There is no guarantee of profit.

The author is not a registered investment advisor, broker, or financial professional with any regulatory authority including the SEC or CFTC. Always consult a licensed financial advisor before making any investment decisions.

By reading this newsletter, you accept full responsibility for your own trading and investment choices. Past performance does not guarantee future results. Markets are unpredictable.

Screenshots are courtesy of TradingView, VixCentral, and other platforms with which the author has no affiliation. Information shared may contain errors or become outdated quickly.

This content is the intellectual property of the author. Copying or redistributing without permission is prohibited.

By continuing to read, you acknowledge and accept these terms.

On launch day I made you one promise: the app improves every week. That was twelve days ago. More than twenty features have shipped since. Here are the most important ones.

Congress trades, tracked. Every stock trade House members disclose now lands in the app: who bought what, in which dollar range, and how long they sat on the news before filing. The names Congress is buying get crossed with our own boards, so you see when a politician’s pick also fires on a screen the same day. And if a member trades a name on your watchlist, the app tells you.

The smart money desk got five times bigger. The Whale books now track more than 100 funds: Buffett, Burry, Druckenmiller, Oaktree, ARK and the rest. New on the page: Consensus buys, the names the most funds bought last quarter, and Consensus sells, the crowded exits. Every fund now has its own page, with its full disclosed book and the stakes it just opened and closed. The desk also cross-reads our own screens: which fund favorites sit in a dip today, which names two or more funds bought at the same time, whose past buys actually went on to beat the index, and which insiders are buying their own beaten-down stock. Filings carry up to a 45-day lag, so read all of it as a map of where the big money leans, and let the screens time the entry.

The name page got deeper. The screen I showed you last week kept growing. Every covered name now opens with a PI Score, one number out of 100 that blends the technicals, the fundamentals and the smart money read, with the good signs and the warnings spelled out under it.

My favorite of the batch is the scenario builder. You set your own growth, margin and exit multiple, and the implied five-year value recomputes as you type, bear, base and bull, prefilled from the company’s reported numbers. Next to it, a read of what growth rate is priced into today’s multiple against what the company actually delivered. The gap between the two is the conversation. Add a comps table against industry peers, and how the stock has behaved by calendar month next to its volatility and drawdown, and the two-minute check became a full dossier.

The market got its own floor. A Market map now tiles the biggest US names by size and colors them by the session’s move, so you spot where the money ran in one glance. Click any tile and you land on the name.

Next to it, a Market monitor puts the whole tape on one screen: indices, sectors, industries, funds, countries and macro, with returns across every horizon, trend reads, and where the options money leans on each. Filter it down to what is holding its 200-day, what is overbought, or where the calls are crowding, and export any of it to CSV.

And your own book got tools. Set an alert on any name, a price level or a condition, like the day it lands on one of our boards, and it comes to you instead of you refreshing charts. Watchlists went multiple, one list for holdings, another for hunting, and every name you follow now carries its latest headlines, its next earnings date and its fresh SEC filings.

Here is why I am showing you all this three days before the deadline. Members woke up to each one, and nobody paid a cent more. That is what the membership is: the tool as it stands today, plus everything it becomes. The list of what is coming is longer than the list above, and the price will follow the product up. It will never be cheaper than it is right now.

The honest word from launch day still holds: the app brings the work, and the judgment stays yours. More features widen what you can see. What you do with it is still the job.

Until Sunday, July 19, the founding offer is still open: 50% off your first year, $100 instead of $200, which works out to about $8.33 a month. After Sunday the price is $200 a year, and the founding rate does not come back. If a year up front feels like a lot, there is a monthly option, cancel any time in one click, so you can start small and see it for yourself.

Claim the founding price

Daniel

P.S. The building does not stop on Sunday. The only thing that changes is the price you lock for your first year.

Hello my friends,

On Wednesday the United States struck Iran for a second night and the President declared the interim agreement dead. Brent spiked as much as 7% before settling near $78. The Dow fell more than 800 points at the lows, two days after printing a record high. And by Friday’s close the S&P 500 sat within 1% of its all-time high, volatility ended the week lower than it started, and the single largest options bet on the tape was $41 million against gold.

Hold those four facts next to each other, because together they are the whole regime in one week. A shooting war reignited in the Strait of Hormuz and the market needed two sessions to decide it did not care. In March a headline like Wednesday’s took weeks to digest. This week it took until Thursday morning, when Trump said Iran had called him looking for a deal, and the dip was gone by lunch.

But the index is hiding the bill. The S&P gained 1% on the week and the Nasdaq 1.4%, while the equal-weight index fell 0.4%, small caps fell 0.4%, and the Dow gave back 0.6%. Last week I told you the broad market was carrying the tape while the leaders rested. This week they swapped places. The megacaps and the war trade carried the week, and the average stock handed back a piece of the ground it had just recovered.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

The composite health score slipped to 68 from 75, and the shape of the decline matters more than the number. Friday itself was fine: advancers beat decliners three to two, up-volume doubled down-volume, and the pressure gauge closed at a calm 0.79. The damage sits in the week’s averages, and it undoes most of what I celebrated seven days ago.

Stocks above their 50-day line: 46.6%, down from 50.2%. Above the 200-day: 49.7%, back under half after touching 54%. New highs still beat new lows, but the ratio compressed from four to one down to two to one. The high-low index eased from 80 to 67.5. Every one of those lines was healing a week ago. Every one of them gave ground.

The slow tide I keep pointing you to, the McClellan summation, tells the same story with better manners. It spent a month climbing without a pause. This week it went flat, wobbled through the strikes with the oscillator dipping negative, then turned back up on Friday. Stalled, and then it caught itself. The turn I told you I would respect never came. But this was the first week in a month the tide stopped rising, and I wrote it down.

🚨 Sector Rotation

The trend board barely moved, and that is the news. Financials still own the top at 74.6% internal strength, healthcare next at 65%, real estate at 61.5%. Energy and materials are still the wasteland at 25.8% and 18.8%. Seven of eleven sectors keep majorities above their 50-day. Three weeks now, same podium. Whatever the headlines did, they did not touch the market’s internal ranking.

The week’s money argued with that board for the first time in a month. It bought the two things the trend board hates. Energy, dead last on internals, gained 3.5% as the war repriced every barrel in the Gulf. And tech, which I have spent three weeks telling you the options market was aiming at, got bought back hard: +2.3% on the week, semis +1.6% after a Tuesday session where they dropped nearly 4%. Communications rode along at +2%. Meanwhile the market sold what had been working. Staples fell 2.1%, healthcare 1.7%, industrials 1.8%, utilities 1.2%, materials 3% at the bottom of the pile.

So read the two boards together, because they disagree for an honest reason. The trend board measures what holds. The week’s tape measures what moved. What held was the financial-quality spine this rally has been built on since June. What moved was a two-day scramble into oil because of missiles and back into chips because they got cheap fast.

One follow-up. Few weeks ago I put a healthcare leader up as trade of the week betting the group would firm behind it, and last week the group showed up. This week healthcare gave back 1.7% on price while holding second place on internals, and the name itself sat flat through the mess, up almost 6% since I flagged it. Leaders that refuse to fall while their group corrects are exactly what that trade was built on.

🔍 Pairs Alignment

Seven of nine pairs aligned, nothing at an extreme, and the two that are stretching both point the same direction. Stocks against long bonds is now 1.3 standard deviations wide and widening. Stocks against copper, 1.4 and widening. Equities are decoupling from both the bond market and the real economy’s favorite metal at the same time, and doing it into record territory.

The bond half of that is the one earning my attention, because this is two weeks running now. Last week Treasuries shrugged off a jobs report ugly enough to justify a rally. This week they fell again, about 1.2%, through a live shooting war. Bonds have now refused to act as a haven twice in ten days, once against weak data, once against missiles. Meanwhile look at what the tape sold: utilities, the most rate-sensitive corner of the whole board, closed red on the week even as the index climbed. Real estate held its number-three internal rank, but it sits in the same crosshairs. The bond market is telling you something is bothering it that has nothing to do with growth, and the rate-sensitive half of my leadership board is the first place that worry lands. A slow grind higher in yields is survivable. This week was slow. I am watching the speed, nothing else.

The narrowing spread is its own tell: energy against tech closed a chunk of its months-long gap this week. That was the single cheapest relationship on my board, and it took a war to start correcting it.

📉 Volatility

Now the board I keep rereading. The United States bombed Iran twice this week, and the VIX could not close above 17. It peaked Wednesday at 16.9, faded two straight sessions, and finished at 15.03, down 7% on the week. The nine-day gauge sits at 11, the bottom of its range. The curve never left contango. Vol-of-vol is on the floor at 87. By every broad measure, the options market watched a war restart and priced a nap.

Two corners still refuse to sleep, and they are the honest map of where risk lives. Nasdaq volatility holds the 73rd percentile of its range, the fourth straight week tech vol has been the expensive corner of the board, and Tuesday’s 4% semi flush showed you once again why that premium exists. And oil volatility now sits at 45, the 57th percentile, the one place on the entire vol surface where the war is still being paid for. Even the crash-insurance bid I flagged last week backed off: SKEW came down to 144, the middle of its range. The tail hedgers eased up during a week with actual missiles in it.

The posture stays what it has been for a month, with one addition. Broad index hedges remain a waste of premium. If you hedge equities, hedge the tech corner, which keeps demonstrating why. And if you want to own the war risk itself, the market is telling you it lives in energy vol, because that is the only place the fear still trades.

💱 FX

The currency board gave the cleanest verdict of the week, and panic did not write it. War came back and the haven bid never showed up. The franc, the first place money is supposed to run when the shooting starts, weakened about 0.3% on the week, sliding lower while stocks climbed. The yen finished flat. Gold gave back ground too. The dollar itself kept grinding, its one-month trend higher against nearly everything on the board.

Last week I gave you the recipe for real fear: the franc rising while stocks fall and vol spikes, all at once. This week we ran the live version. Missiles flew, and not one haven caught a bid, not a currency, not a metal.

🧠 My Take

Time to grade last week’s homework, and the market gave me a humbling course. I put 55% on a broadening advance. Wrong: participation shrank. I put 25% on the crowded corner cracking again, and that one half-paid, semis did drop 4% Tuesday, except the crack got bought inside 48 hours. The actual driver of the week, a restarted war, appeared nowhere on my list.

Here is what the week taught me, and it is why I run scenarios at all. The scenarios earn their keep by telling me beforehand what the market will do with whichever headline arrives, and on that count they delivered. A tape with a rising breadth tide and quality leadership absorbed a war in two days, exactly the resilience the framework said was in the price. What the framework did not promise was that the absorption would be free. The bill came out of breadth, and it is the only reason my score fell this week.

So the stance adjusts by degree. Still long. Still anchored in the financial-quality leadership, which came through the week untouched and now reports earnings from a position of strength. What sharpens is the worry list, down to two items. First, the index is a percent from record highs while less than half the market holds its 200-day; that gap either closes from below or it eventually closes from above, and nothing about this week told me which. Second, bonds that fall through both weak data and war headlines are repricing something, and they sit directly upwind of the most rate-sensitive leadership board I have had all year.

The week ahead has a real catalyst at last. JPMorgan opens bank earnings Tuesday morning, the rest of the majors follow inside ten days, and the Street expects every one of them to beat. That is the bar: the market’s strongest sector, reporting from strength, into elevated expectations.

Banks deliver and the tape broadens, 45%. Financials confirm what their internals have said for a month, participation reclaims the 50-day line, and the two-tier market heals from below. This is the base case because breadth wobbled this week without breaking, and the summation caught itself by Friday.

The war comes back for a second bite, 30%. The agreement is dead, the strikes are live, and Thursday’s entire recovery leans on one phone call the other side has not confirmed. Oil vol at the 57th percentile says the energy market is not treating this as finished even while equities do. If crude takes out Wednesday’s high, the two-day shrug gets retested, and I would expect the second scare to cost more than the first.

The index grinds while breadth bleeds, 25%. Banks are fine but not electric, no new headline, and the market repeats this week: flat-to-up index, eroding participation, until August forces the divergence to break.

🔥 Trade of the Week:

First, the book. Last week’s pick, Cadence, never gave the entry. The zone was $355 to $360, the war-week low was $365.63, and the stock closed Friday at $387, up almost 4% since last Sunday’s letter. No fill means no trade, and with earnings two weeks out I will not chase it. Discipline costs you the winners sometimes. It is still cheaper than the alternative.

Now this week, and I am changing buckets on you. Most weeks this slot goes to a leader catching its breath. This week the better setup came out of the other end of my desk, the contrarian book, the one that goes fishing exactly where the sector board says not to look. It found Dow.

Dow Inc is one of the largest chemical producers on earth. Plastics, packaging materials, silicones, the raw inputs behind construction and autos and most of what sits on a store shelf. It is about as cyclical as a business gets, which is the entire point of what follows.

The setup

Everything you can hate about this stock is already public. Two years of industry downturn. An ethylene glut the whole street knows by heart. Weak construction and auto demand. A net loss last quarter, the dividend cut in half last summer, a credit downgrade to go with it. The stock closed the week at $29, down roughly a third from its early-2026 high near $42, and it fell there in close to a straight line, about $34 to $27 in a handful of weeks.

Here is why the level matters. That $26 to $29 band is not a random place to land. It is the zone this stock fought over for most of 2025, the ceiling it finally cleared before the run to $42. Price has now handed the entire rally back and sat down on the breakout line it launched from. This week it wicked to $27 and closed near $29. First touch from above, first bounce.

Buying cyclicals feels terrible at the moment it works. What tells you the moment may be close is when the stock stops going down on bad news, and that is what this week showed. Materials finished dead last again, down 3%, the worst sector on the board. Dow gained 3.6% against that tide. On Tuesday, with missiles in the air, someone paid $2.9 million for Dow calls against $0.4 million in puts, and came back for $2.6 million more on Wednesday. Then on Friday’s close both of my bottoming reads fired on the name at once. A washed-out price parked on a shelf that held for a year, a group everyone has left for dead, and money starting to lean the other way. That is what a bottom looks like while it forms, when it forms at all.

The honest part

Earnings land July 23, eight trading days out, and the Street expects the quarter to swing from a year-ago loss back to a real profit. That cuts both ways: a recovery is already the consensus for this print, and a washed-out stock that misses a recovery bar finds a new floor lower.

This is bottom-fishing, called by its name. The stock sits below its long-term average and the downtrend has not turned. I am betting the sector board is late, and the board is usually right longer than feels reasonable.

The dividend has been cut once already. If the cycle stays down into 2027, cheap gets cheaper, and this becomes the value trap the bears say it is.

And the week’s own theme argues against it: Dow buys its feedstock from the energy complex. A second Iran escalation that sends oil through Wednesday’s high squeezes these margins from the cost side while it scares the demand side.

The levels

Entry: around $28.70, a touch under Friday’s $29 close, or better on any drift back toward this week’s $27 low.

Stop: a close below $26.50, just under the shelf. Lose that and there is air beneath it, the next real support is the 2025 lows down in the low $20s, so a break there says the bottom thesis was simply wrong.

Target 1: $37, the congestion the stock sliced through on the way down, about 4 times the risk from entry.

Target 2: $40.80, into the supply that capped the early-2026 top, if the cycle turn shows up in the numbers.

Sizing: a starter only, smaller than usual. Earnings sit eight sessions out, so keep most of the powder for the print. If the quarter confirms, you add higher and give up the first dollar gladly.

See you next week,

Daniel

P.S. I opened the APP last week. It’s the daily version of what you just read, the same boards and screeners I run every morning before I trade.

The founding price, 50% off the first year, holds until July 19, then it goes back to full.

Claim the founding price

Disclaimer

This newsletter is for educational and informational purposes only. It is not financial advice.

The content reflects personal opinions shared publicly as a journal. Trading stocks, options, futures, or any financial instrument involves significant risk. You can lose your entire investment. There is no guarantee of profit.

The author is not a registered investment advisor, broker, or financial professional with any regulatory authority including the SEC or CFTC. Always consult a licensed financial advisor before making any investment decisions.

By reading this newsletter, you accept full responsibility for your own trading and investment choices. Past performance does not guarantee future results. Markets are unpredictable.

Screenshots are courtesy of TradingView, VixCentral, and other platforms with which the author has no affiliation. Information shared may contain errors or become outdated quickly.

This content is the intellectual property of the author. Copying or redistributing without permission is prohibited.

By continuing to read, you acknowledge and accept these terms.

Pull the chart.

Find the levels.

Figure out who is actually in the name and whether the options money agrees.

Check if insiders are buying.

Check the sector.

Size it.

By the time you were done, either the move had left or your conviction had.

So let me show you the one screen I built to kill it, because if you understand this screen, you understand what the app is for. You type a ticker. The case is already on one page: a technical score and a fundamentals score, both out of 100, so you know in two seconds whether the name deserves your time. The levels that matter, drawn on the chart, including the price where the idea is wrong. And a written read that opens with where it could fail, because that is what I want to know before I put a dollar behind anything.

Scroll once and the part that used to take five tabs is sitting there. Which big funds added to the name last quarter and which ones trimmed, named, from the latest 13F filings. Where the options premium has been leaning. Whether insiders bought their own stock. Filings run on a lag, so treat it as a map of who is positioned. The card says so itself, right on the page.

The other half is where the ticker comes from in the first place. Every night the app reads the whole US market, more than 12,000 names, scores each one, and lines up the fresh ones worth a look, ranked, before the open. So your morning starts from a short list with the case already built on every name in it, and the homework is done before you sit down.

That is what the membership buys: the homework, done on every name, every morning, while you sleep.

The founding price is open until Sunday, July 19: 50% off your first year, $100 instead of $200, around $8.33 a month.

After Sunday it goes to $200 a year and the founding rate does not come back. You can cancel any time, in one click, and if a year up front feels like a lot, there is a monthly option, so you can start small and see for yourself.

Claim the founding price

Daniel

Hello my friends,

Fifty-seven thousand jobs. That is what the economy managed last month, barely half of what the Street had penciled in, the weakest print in months, the kind of number that used to send everyone sprinting for the exits. This time the market read it and bought. Not sold. Bought. When a miss that ugly gets treated as good news, the tape is telling you something louder than any single data point, and it is worth starting there.

Here is the part the single green number on your screen hides. This was not the index roaring back on the backs of its usual giants. It was the reverse. The megacap leaders that dragged everyone down in June spent the week catching their breath, and the broad market carried the load without them.

The Dow, of all indexes, printed its first close above 52,000 in history, the very week it welcomed Alphabet into its ranks, while the Nasdaq-100 those same tech names dominate barely twitched. When the old-economy index sets records and the tech index stalls, the money has already told you where it is going.

One week ago the index fell while the average stock rose. This week the average stock kept climbing and the index followed it up, equal-weight and cap-weight locked together just over 2%, the Nasdaq-100 trailing with a fraction of that. You are not looking at a market that dodged a correction. You are looking at one that never needed it, because it corrected itself from the inside, one rotation at a time. The broad market is carrying this tape now, not its biggest names.

Which brings me back to those jobs. A number that soft, bought that calmly, is the whole regime in one reaction: weak hiring is no longer a warning about earnings, it is a down payment on a rate cut, and the tape will keep reading it that way until something forces it to stop. Unemployment even slipped to 4.2%, and there is the tell inside the tell, it slipped because participation fell to 61.5%, the lowest since 2021. People are leaving the workforce, not finding jobs. The market took the friendly half and left the rest on the table. It usually does, right up until it can’t.

The next two weeks are a holding pattern. No real catalyst until the banks open earnings season, thin holiday volume, and one question hanging over all of it: does the rest of the market climb up to meet the leaders, or do the leaders roll back down to the rest. Everything I track says up. But “says” is not “did,” and July has a way of testing conviction on light volume.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

On the surface, Thursday was a shrug. Advancers barely edged decliners, five to four, nothing to write home about. One layer down, it is a different tape. The McClellan summation, the slow tide I keep pointing you to, kept accumulating at the same relentless pace it has held for weeks, roughly +900 on the week. New highs buried new lows almost four to one. The high-low index is pinned near the top of its range at 80. The strength this week was almost entirely below the waterline.

Last week I told you the day the summation turns is the day this healthy dip becomes something I respect more. It never turned. It kept climbing, and steady accumulation like that is worth more than any one-day spike.

Now the catch, and it cuts against my own caution. Participation is healing faster than I expected. Stocks above their 50-day line jumped seven and a half points, 42% to 49.6%. Above the 200-day, 47% to 54%. That is real ground in four sessions, and it still sits a hair under half. The tide turned hard. The water has not quite cleared the mark. The day more than half this market holds its 50-day, with small caps finally along for the ride, is the day I stop calling this an advance carried by its strongest half.

🚨 Sector Rotation

The trend board is unchanged in character from last week. Financials own it at 75% internal strength. Real estate and healthcare in the high sixties, utilities at 62%. At the bottom, the wasteland: materials, and energy at a brutal 16%, barely one stock in six holding trend. Seven of eleven sectors carry majorities above their 50-day.

The healthcare line is the one I care about. A week ago it read weakening, and I put a healthcare name up as trade of the week anyway, betting the leader would drag the group up behind it. This week the group showed up. Healthcare now sits with the leaders.

Then the price tape, which usually argues with the trend board and this week did not. The money went to financials, up 3.8%, communications, up 3.2%, discretionary, up 2.4%. Offense. And here is what got lost in all the green: tech did not get bought back. After Monday’s bounce it bled Wednesday and Thursday and closed the week red, down 0.3%. The defensive hideouts emptied too, utilities and real estate sold, only staples clinging to green. The bid chose offense, but it stepped around the megacaps that led the market up in the first place.

One name sits atop both boards, and it is the spine of this whole tape: financials. Best trend, best week. Whatever this market is building, it is building it through the banks.

🔍 Pairs Alignment

The cross-asset board barely moved, and under improving breadth that is exactly the confirmation you want. Nothing at an extreme, seven of nine pairs tracking their normal relationships.

Two spreads are pulling apart, and they say the same thing twice. The new one: the S&P against copper, stretched to nearly 2 standard deviations. Stocks are sprinting ahead of the metal that measures real demand. The old one: energy against tech, stretched for months and stretching further. Both tell you what kind of market this is. It is paying up for lower rates. It is not paying a dime for a faster economy.

The pair I watch is stocks against long bonds. Treasuries fell about 2% this week, and here is the part that should bother you: a jobs number that ugly should have sent bonds ripping higher, and instead they closed flat. A bond market that shrugs at data that weak is worried about something other than growth, and supply and deficits are the usual suspects.

It is not a threat to stocks yet. But look at who leads this tape, financials and real estate, the most rate-sensitive names on the board. A slow grind higher in yields, fine. A disorderly one is the single cleanest way this leadership breaks. That is the wire I am watching.

📉 Volatility

Broad volatility went from relaxed to asleep. The VIX fell 12% to 16.15, bottom third of its range, the curve in its usual calm upward slope, vol-of-vol on the floor. By every standard read, the options market sees nothing coming.

Except in one place, and it is the same place I have flagged for two weeks. Nasdaq volatility sits at the 89th percentile, the only vol index still lit up, and its premium to broad-market vol is pinned at the very top of its own range, its richest reading in a year. Two weeks ago the options market pointed at megacap tech. Last week tech fell. This week it kept pointing, and Wednesday semiconductors dropped 5.4% in a session. For three weeks the options market has aimed at tech, and for three weeks tech is where the damage showed up.

One more signal joined it: SKEW elevated at the 76th percentile, near 150. Someone sizable keeps paying for crash insurance while spot vol melts. I read that as healthy, not fearful. A market that hedges its tails while it climbs has not gone complacent, whatever a 16 VIX whispers.

So the posture holds for a third week. Do not waste money hedging the index, it is cheap because nothing on the broad board earns it. If you hedge, hedge the tech. Wednesday was the demonstration.

💱 FX

The dollar finally exhaled. After three weeks of grinding higher it gave back about half a percent, broadly: the pound up over 1%, the euro up 0.4%, the franc firmer, the yen flat. Gold added 1.2%. Nothing here that changes the regime.

The franc is the one line I promised to watch, because last week I told you the day it turns up is the day this rotation risks turning cold. It turned up this week. And it means nothing, for a specific reason.

Real haven demand looks like this: the franc rising while stocks fall, vol spikes and gold goes up. This week the franc firmed while stocks rallied, vol collapsed and breadth thrust. Read together, that is a dollar taking a breather and books squaring into a long weekend, showing up evenly across every major. A haven bid does not spread itself politely across the whole board.

🧠 My Take

The dull road paid, on schedule, and I am not going to pretend I outsmarted it. I told you I would not lean bearish into a rising summation, and four sessions made the case for me. I stay long.

What changes is the tilt. I am still anchored in the quality leadership, financials first, but I am done treating the defensive corners as the destination. The money that hid in utilities and staples is moving onto offense, and I want to be standing where it is going, not where it has been.

The worry list is shorter than last week, and the items on it are sharper. The soft surface I fretted about is healing fast, so it comes off. What stays: participation is still under half, so this thrust broadens or it tires, there is no third option. The bond market is selling off through weak data while the most rate-sensitive groups sit at the top of the leaderboard, comfortable until the day it very much is not. And the crowded corner reminded you Wednesday how fast it sheds 5%.

Here is how I weight the week ahead.

Broadening advance, base case, 55%. The summation keeps climbing, participation clears 50%, small caps join, and the tape walks into bank earnings on a wider base. The deep breadth backs this, and thrusts this strong tend to feed themselves.

The crowded corner cracks again, 25%. Wednesday was the trailer. Semis give back another leg, Nasdaq vol finally leaks into the broad tape, and if yields climb into it, the rate-sensitive leaders take the second blow. This is the scenario the tech hedge is paid to cover.

Summer stall, 20%. Thin holiday volume, no catalyst until the banks report, and the market chops sideways under its highs waiting for a reason.

🔥 Trade of the Week:

Cadence is one of two companies whose software nearly every chip designer on earth has to use. Nvidia, the memory makers, the startups still working out of a garage, all of them build on it.

It is the toll booth of the semiconductor boom. Paid in subscriptions, indifferent to which chipmaker wins, carrying none of the inventory risk that just took 10% off the equipment names in a single day. You do not need to pick the winner of the chip war to own it. Cadence gets paid either way.

The setup

The stock ran about 34% last quarter, peaked near 417 in early June, and has spent the month since drifting lower.

It now sits at 373, roughly 10% off that high, holding just above its 50-day line near 368. The long-term uptrend is intact and momentum has reset to neutral. Nothing about the chart says the trend broke. It reads like a stock catching its breath.

The reason to want it now is simple. The market just put chips on sale, and this week’s single-name flow showed real money buying that sale. Cadence gives you the same exposure with a far steadier business underneath it.

The honest part

Earnings land in three weeks, on the 27th, inside the holding window. A soft print is the clean way this loses.

Tech still reads near the back of my sector board, ninth of eleven.

And read the insider tape before you size it. An SVP sold about $1.7M in late June on a scheduled plan, routine. But the CEO sold roughly $31M in early June, near the highs, and that is the number a bear will throw at you. Weigh it honestly.

The levels

• Entry zone: $355 to $360, on a dip toward the floor of the past month’s range

• Stop: a close below $331, which sits just above the 200-day line

• Target 1: $416, the prior high

• Target 2: $430, if the move has legs

• Sizing: small, and scale in. Keep powder dry for the earnings print inside the window.

See you next week,

Daniel

P.S. I opened the APP yesterday. It's the daily version of what you just read, the same boards and screeners I run every morning before I trade. The founding price, 50% off the first year, holds until July 19, then it goes back to full.

Claim the founding price

Disclaimer

This newsletter is for educational and informational purposes only. It is not financial advice.

The content reflects personal opinions shared publicly as a journal. Trading stocks, options, futures, or any financial instrument involves significant risk. You can lose your entire investment. There is no guarantee of profit.

The author is not a registered investment advisor, broker, or financial professional with any regulatory authority including the SEC or CFTC. Always consult a licensed financial advisor before making any investment decisions.

By reading this newsletter, you accept full responsibility for your own trading and investment choices. Past performance does not guarantee future results. Markets are unpredictable.

Screenshots are courtesy of TradingView, VixCentral, and other platforms with which the author has no affiliation. Information shared may contain errors or become outdated quickly.

This content is the intellectual property of the author. Copying or redistributing without permission is prohibited.

By continuing to read, you acknowledge and accept these terms.

Four months ago I started building something, and today I am handing it to you.

I did not do it alone. Along the way I asked the people who read me, the ones who know how I think and how I trade, what they actually needed. You told me what you use, what you skip, where you get stuck.

This APP is shaped around those answers. That is why I keep calling it ours.

Let me show you around

Today. I open this first. It is the morning glance: what moved overnight, the names I follow, the earnings due this week, and the state of the market underneath it all. Thirty seconds and I know the weather before I place a single trade.

Screeners. This is the core. Every night after the close, the engine reads the whole US market, 12,000+ names, and runs a dozen tested setups on it: the dip buys, the breakouts, the momentum leaders, the squeezes, the unusual options flow, the names quietly bottoming out. What fits comes out ranked, each with a conviction score and a plain read of why it is there. Open any name from the board and the whole story lands on one screen: a setup score and a fundamentals score out of 100, the levels including the price where the idea is wrong, and where the money is moving, the named funds adding or trimming (13F, an inference), the options premium, the insider prints.

Sectors. This shows me where the money is flowing, which corners of the market are leading and which are bleeding. It tells me whether the name I like is swimming with the current or against it, before I size anything.

Themes. The market moves by story. Themes reads the narratives actually pulling capital right now and the names riding each one. It is how I catch a move while it is still a theme and before it becomes a headline everyone is chasing.

Socials. This shows me what the crowd is doing on a name, where the retail attention and the chatter are pointing. Sometimes it is the early tell. Sometimes it is the reason to fade. Either way I want to see it before I act.

Positions. This is where I build and manage the book. Paste what you hold and get a read on every line: trim, hold, add or cut. A calculator sizes each new trade to your account and sets the stop. A watchlist alerts you when your names hit their zone, so they come to you instead of you refreshing charts all day.

One honest word. This is a tool to think with, and it will not print money on its own. You bring the judgment. The app brings the work.

It is only the start. I ship improvements every week, and members get each one as it lands. I want to take this a lot further, in exactly this direction, with you.

Nothing changes with the newsletter. I keep writing every issue, same as before.

Here is the founding offer. For a limited time you get 50% off your first year. That is $100 for the year instead of $200, around $8.33 a month, less than one good trade. When it ends on Sunday, July 19, the price goes back to $200 a year.

Claim the founding price

You can cancel any time, in one click. So the risk is small and the door is open.

I built this for the way I trade, with the people who trade like me. If that is you, come in.

Daniel

• The index sold off from the top, led by the megacap tech I flagged a week ago, while the broad market underneath rose. A cap-weighted decline sitting on top of a market that, stock for stock, finished the week green.

• The rotation deepened into the corners that pay you to wait. Financials, utilities and real estate now lead outright, and technology slid to the back of the pack with energy.

Hello my friends,

Cast your mind back one week. The trend model had not read that clean in months, every index I follow was stacked above its short, medium and long lines at once, and I told you to press it on price while keeping one hand on the door. Then I told you the catch. The warning was not on the price chart. It was in the plumbing: the heavy volume that never confirmed the bounce, the leadership narrowed into the most rate-sensitive corners, and the fear in the options market bunched into megacap tech, the market’s own leadership.

This week the price came down to meet the plumbing. And it came down exactly where I pointed.

Here is the part that matters, the part the single red number on your screen hides from you. The index fell because its heaviest weight fell. Technology, the largest slab of the S&P and nearly the whole of the Nasdaq, took the week’s punishment and dragged the cap-weighted averages down with it. Underneath that, the rest of the market did not just hold. It rose. The equal-weight S&P, the small caps and the Dow all finished the week green, while the Nasdaq-100 gave back close to 5%. The broad market rose while the index fell, because the index is its biggest names, and its biggest names are tech. An average stock climbing in the same week the headline bleeds is not a market coming apart. It is the top of the market coming back to the pack.

That is the unwind I worried about last week, and it is arriving the constructive way. The danger was always that the narrow tape would resolve by the broad market collapsing toward its few leaders. Instead the leaders are mean-reverting toward the broad market.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

Fewer than half the market now holds its 50-day line, down from a slim majority a week ago. More names fell than rose into Friday’s close, the short-term advance-decline turned south, and the composite breadth read dropped enough to flip my dashboard from constructive to cautious. On the surface, this was a soft week.

Now look one layer down. That is where the week tells a different story. The McClellan summation, the slow tide that tracks whether breadth is accumulating or bleeding, kept climbing right through the selloff. New highs still outnumber new lows across thousands of names, if no longer by a landslide, and that is the one breadth read a handful of megacaps cannot fake. Seven of eleven sectors still hold their intermediate uptrend. The deep structure of this market did not weaken this week. It strengthened while the index fell.

Sit with that for a second. It is the whole point. A rising summation under a falling index means rotation. A top looks like the opposite. It says the selling was concentrated, money rotating out of a few crowded names while the rest of the market stayed put. The tape that worries me is the other one, the index grinding to new highs while the summation rolls over and the new-high list dries up. That is distribution dressed as strength. This week was the reverse: weakness on the screen, accumulation underneath.

So I read this as a pullback inside an advance. The kind that refreshes a tired tape rather than ending it, as long as the soft surface does not start dragging the deep breadth down with it. That is the line now. The summation is still rising. The day it turns is the day this stops being a healthy dip and becomes something I respect far more.

🚨 Sector Rotation

The narrowing I flagged last week resolved, and it resolved in the right direction.

Last week I told you a healthy recovery broadens off a base, more groups joining as confidence returns, and that this one had narrowed instead, the bid crowding into a handful of favorites. This week the crowd thinned the expensive names out and the leadership board reshuffled around them.

Financials lead. Utilities lead. Real estate leads. Read those three together and the message is plain: the market is paying up for cash flows, for dividends, for balance-sheet quality, for the rate-sensitive groups that win when the bond market behaves. This is the part of the tape that does well when buyers want to stay invested but stop reaching for risk.

Now read the bottom of the board. The bottom is the story. Technology dropped to lagging, with barely more than a third of its members holding their own trend. A week ago tech topped the momentum tables on a thin bench of giants. This week the bench gave way and the group slid to the back, right next to communications, materials and energy. Energy stays dead last, the single weakest group on the board, a quiet reminder that the rotation here is disinflationary at its core, a bet on rates and growth with commodities left out of the trade.

When conviction thins, money does not leave equities. It climbs the quality ladder inside them. It sells the speculative growth it bought on hope and buys the steady compounders it can hold through noise. The leadership this week, financials and utilities and real estate over technology and energy, is that ladder made visible.

One caution lives inside the good news. The groups carrying the tape, the financials and the real estate, are the most rate-sensitive on the whole board. The market has parked its money in precisely the names a sharp move in yields would punish first.

🔍 Pairs Alignment

Most of the cross-asset board is calm. The pairs I track to flag a regime change are sitting close to their normal ranges, the divergence dial reads low, and nothing is stretched to an extreme. Stocks and bonds are drifting along their usual relationship and the dollar’s move shows up cleanly without breaking anything. When breadth, sectors and spreads all tell the same measured story, it is worth trusting. This week all three say one thing: a rotation, contained.

The one relationship still pulling apart is the chronic one, energy against technology, the widest divergence on the board and the oldest. It keeps the commodity weakness honest and reminds you what kind of rotation this is. Money is rewarding rate-sensitive quality and punishing the inflation trade. The spread between the two has been telling you that for months, and this week it stretched a little further.

What I do not see is the thing that would change my posture. The selling this week was an equity-internal event, a rotation between groups that stayed inside equities and never traveled across asset classes.

📉 Volatility

The broad volatility complex is relaxed. The curve sits in its usual upward slope, the resting state of a market that sees no spike coming, the front-month gauge holding in its normal band, and vol-of-vol is parked near the floor of its range. By the standard reads, the options market is not bracing for anything.

The exception is the one that counts, and it is the same one I pointed at last week. Nasdaq volatility sits near the very top of its range, the only gauge on my board flagged elevated, and it trades rich against the broad market. Read that next to the price action and the picture closes neatly. The options market spent last week telling you the fear was concentrated in megacap tech. This week megacap tech is the thing that fell. The nervous corner was the corner that broke. That is no coincidence. It is the options market doing its job a week ahead of the tape.

So the signal stays narrow and it stays specific. You do not hedge the index off this screen, broad vol is calm and cheap and pricing in nothing. If you hedge anything, you hedge the tech concentration, the single spot that has now shown strain on the chart as well as in the options.

💱 FX

The dollar firmed again, a third week of quiet strength, and the move is broad. It shows up against the yen, the franc and the commodity currencies all at once, the kind of move that comes from a market reaching for dollars rather than one currency falling apart. The Australian and the Kiwi, the cleanest growth-sensitive currencies in the group, are sliding, and that lines up exactly with the energy and materials weakness on the sector board. The disinflation trade is showing up in FX too.

The yen keeps weakening, parked on the soft side, and that keeps the carry trade dormant. It is still the largest single fault line in global markets, the spring that snapped everyone to attention months back, and it still has no near-term trigger now that the Bank of Japan is behind us. Dormant is the right word.

The franc is the one I keep a finger on, the cleanest safe-haven in the group and the first place real fear shows when funding tightens. It stayed soft this week against a weak euro, and that is the tell that keeps me constructive. A firming dollar with a soft franc is risk dialing down in an orderly way. The day the franc turns higher is the day this rotation risks becoming something colder. Not this week.

🧠 My Take

The pullback I told you to expect arrived, in the corner I told you to watch, and it came the constructive way. I am not leaning bearish into a tape where the deep breadth is still rising, the new-high list still leads, and the selling stayed walled inside the most expensive part of the market. I stay long, and I lean into the quality leadership the rotation is paying for.

The caution is the same caution, only sharper. The surface breadth softened this week, the leadership sits in the most rate-sensitive groups on the board, and the options market is still pointing at tech. Last week those were warnings. This week one of them came due. The job now is to watch whether the soft surface stays walled off or starts leaking into the structure underneath.

Here is how the week ahead breaks down.

The orderly path, base case, around 50%. The deep breadth holds, the summation keeps rising, and it pulls the soft surface back up behind it. The rotation does its work, the expensive leaders finish mean-reverting toward the pack, and the broad market that rose this week takes the baton. The breadth backs this one, and it is the path a rising summation usually buys.

The spread, the real risk, around 30%. The tech weakness stops being contained. The nervous Nasdaq vol bleeds into the broad market, the soft surface starts pulling the deep breadth down with it, and the rate-sensitive leaders that carried the tape take the first and hardest hit, exactly because they led on the way up. This is the scenario the tech hedge exists for, and the one I am watching the summation to rule out.

The stall, around 20%. Nothing resolves. The volume stays absent, the surface cannot firm and the deep breadth cannot break, and the tape chops sideways under its highs until the next catalyst gives it a reason to pick a side.

I am long, tilted toward the quality leaders the rotation is rewarding and away from the speculative growth and the commodity laggards. I carry a little downside insurance aimed at the tech concentration, the one corner that has now shown strain everywhere I look. The posture has not changed since last week.

🔎 Options Flow: Smart Money Positioning

The flow tilted bearish on the week, more downside bets than upside. The biggest tickets were not subtle about where they pointed. Heavy puts hit the crypto miners, the high-beta names that run hottest when the tape is loose and bleed first when it tightens, and more puts landed on the emerging-market complex, the part of the world a firming dollar squeezes. When the most speculative money buys protection on the most speculative names, it is telling you it sees the same rotation the sector board is showing.

It was not all defense. A couple of upside bets went into semis and into Taiwan, a reminder that even in a defensive week the conviction in the chip cycle has not died. It has just gone quiet. But the weight of the flow sat on the bearish side, concentrated in exactly the corner this letter has been wary of for two weeks.

Put it next to everything else and the message holds together. Breadth says rotation. Sectors say quality over speculation. Vol says the fear lives in tech. And now the flow says the fast money is paying up to protect the frothiest names. Four screens, one story. Lean long, stay in the leaders, and keep the exit in sight on the speculative stuff.

🔥 Trade of the Week:

A quality leader now pausing inside a strong uptrend.

Elevance is the kind of name this rotation is built to reward. It is one of the big managed-care insurers, a durable compounder with the sort of cash flows that do not blink in a soft quarter, and for a long stretch it was the stock nobody wanted. Then it woke up. It climbed better than 30% over the past quarter while healthcare as a group went flat, and that is the definition of a leader, a name dragging its whole neighborhood behind it.

Here is why it earns the slot this week over a momentum name printing fresh highs. ELV ran hard, then stopped to breathe. It has drifted sideways for a month, eased back about 9% from its high, and this week it held flat while the index sold off around it. That is a chart asking for an entry. You are not chasing a breakout. You are buying a strong name on the dip the rest of the tape just handed you.

The case is the rotation. When the market sells the speculative and buys the durable, you want to own the durable names on the days they pull in. ELV is durable, it leads its group, and it is pulling in. The flat week while the Nasdaq bled is the whole tell. This is exactly the kind of name the money leaving tech is looking for a home in.

Now the honest part. Healthcare as a group still reads as weakening on my sector board, so you are buying a leader inside a soft neighborhood, and a leader can only carry a weak group so far. The entry sits a touch below where it trades now, so let the dip come to you rather than reach for it.

Entry around 379, on a pullback toward the base of the range. Stop a close below 358. Target 424, the prior high.

See you next week,

Daniel

Disclaimer

This newsletter is for educational and informational purposes only. It is not financial advice.

The content reflects personal opinions shared publicly as a journal. Trading stocks, options, futures, or any financial instrument involves significant risk. You can lose your entire investment. There is no guarantee of profit.

The author is not a registered investment advisor, broker, or financial professional with any regulatory authority including the SEC or CFTC. Always consult a licensed financial advisor before making any investment decisions.

By reading this newsletter, you accept full responsibility for your own trading and investment choices. Past performance does not guarantee future results. Markets are unpredictable.

Screenshots are courtesy of TradingView, VixCentral, and other platforms with which the author has no affiliation. Information shared may contain errors or become outdated quickly.

This content is the intellectual property of the author. Copying or redistributing without permission is prohibited.

By continuing to read, you acknowledge and accept these terms.

Hello my friends,

Four-day week. By Thursday’s close the S&P sat 2% above its 50-day, the Nasdaq ran better than 2% on the day, small caps came along, and every index I follow was stacked above its short, medium, and long trend lines at once. The trend model has not read this clean in months. On price alone, you press it.

Cast your mind back one week. We had just taken four ugly sessions in a row, your whole feed was calling the top, and I told you it looked like a flush, forced selling of the kind that says nothing about the companies being sold. Then came the one date I had circled in red, the Bank of Japan. That was the whole risk last week, the chance a hawkish Tokyo snapped the yen higher and unwound the carry trade into a global selloff. It came and went without the shock. The yen stayed soft, the carry trade held, and the worst case I had given real odds to never arrived. We bounced, and we kept it.

So the table looks clean this week, maybe too clean. The warning lives in the plumbing, not the price chart. The vol complex reads calm everywhere except the one place that matters, the fear bunched into megacap tech, the market’s own leadership, on a late-cycle backdrop of high real yields, sticky inflation, and a bond market so calm it ignores a nervous consumer. None of that breaks a clean uptrend by itself. You stay long anyway, with one hand on the door.

Last week the danger was a single circled date. This week there is none, which is the catch. The risk now is quieter and more structural: a narrow, calm tape walking into a tired cycle, with the cheapest insurance I have seen in a while.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

A genuine recovery the big money has not yet validated with size.

The participation is the part you can trust. New highs are burying new lows across thousands of names, the one breadth read a handful of mega-caps cannot fake, and the McClellan summation is still climbing out of the flush. Broad new highs plus a rising summation coming off forced selling is how durable rallies tend to start. The flush did no lasting structural damage.

The volume is the part that keeps me honest. The heavier dollars are still trading on the down side even as more names rise, and the short-term thrust has gone flat while price prints new highs. That last point is the quiet one. Price is making highs the deeper-timeframe breadth has not confirmed, a small negative divergence under a strong surface, the kind that evaporates if buyers commit and becomes the first crack if they walk.

So this is a recovery I hold without pressing. Institutions are letting the bounce happen without chasing it, which tells me they see the same unconfirmed tape I do. I size up when the short-term thrust catches the medium-term strength and the heavy volume turns. Until then, long but measured.

🚨 Sector Rotation

The market is buying the cycle and leaving everything else behind.

The leadership is the reflation triangle, financials and discretionary and industrials out front together. A coherent, confident bet, growth holds and rates behave, the profile you want in an expansion. The trouble is what sits under it. Off a base, a healthy recovery broadens, more groups joining as confidence returns. This one narrowed instead, the bid choosing favorites while the defensives and the commodities drained to fund them.

Technology is the sharpest tell. It tops the board on raw momentum while fewer than half its own members hold their trend, so the index’s largest weight is being carried by a thin bench of names. That is how leadership looks just before it widens or breaks.

Here is the part that ties back to the curve. The two groups doing the most work, financials and real estate, are the most rate-sensitive on the whole board. The market has poured its bet into precisely the names a late-cycle bond move would punish first. Strong leadership and fragile leadership can be the same names, and this week they are.

🔍 Pairs Alignment

The same concentration story, now showing up in the spreads.

Most of the board is calm. Stocks and bonds are drifting back together, the dollar sits in range, and the correlation between stocks has collapsed, which turns this into a stock-picker’s tape where selection pays and the index hides the dispersion underneath.

The one relationship that matters keeps repeating. Large-cap tech is pulling away from small caps and from the regional banks at the same time, the cleanest expression there is of money concentrating into the few names it still trusts. That is the late-cycle reflex, and it lines up with the sector narrowing and the thin tech bench from the screen above. When the same message arrives from breadth, from sectors, and now from the spreads, it stops being noise.

The chronic divergence, energy against tech, is still the widest on the board and still pulling apart. Old news, but it keeps the commodity weakness honest and reminds you the rotation here is disinflationary, a bet on rates and growth with commodities left out of the trade.

📉 Volatility

Calm across the board, with the fear bunched into the one group that leads.

The curve sits in its usual upward contango, the resting state of a calm market, not a warning. Vol-of-vol is at the floor of its range, the market’s way of saying it sees no spike coming.

The one reading that breaks ranks is the one that counts. Tech vol is the only gauge on the board flagged elevated, still near the top of its range even after cooling this week, and rich against the broad market. The options market is relaxed about stocks in general and wary of megacap tech in particular, the same group breadth, sectors and pairs have flagged all week. Four screens now point at one place. The fear is concentrated in one corner, and that corner is the market’s own leadership.

So the signal is narrow. You do not hedge the index off this screen, it says quiet and cheap. If you hedge anything, you hedge the tech concentration, the single spot showing strain everywhere you look.

💱 FX

Currencies are still voting risk-on.

The dollar is firm and the yen keeps sliding, parked near the same line around 160 that had everyone holding their breath last week. The level has not moved, the calendar has. With the Bank of Japan behind us and nothing circled this week, the carry trade the weak yen funds is dormant rather than defused. It still runs, it remains the largest single fault line in global markets, and it still has no near-term trigger. So the tape reads risk-on for now, with the spring left armed.

The franc is the one I keep a finger on, the cleanest safe-haven in the group and the first place fear shows when funding tightens. As long as it stays soft against a weak euro, currencies are endorsing the equity regime. The day the franc turns higher is the day to take the rest of this letter more seriously. Not this week.

🧠 My Take

The clean uptrend is real and the broad participation gives it a foundation, which is why I am not leaning bearish. The caution comes from three things that rhyme: the heavy volume never confirmed the bounce, the leadership narrowed into the most rate-sensitive corners and the fear in the options market is bunched into tech, the exact leadership the rally leans on. I stay long and carry real respect for that gap.

How the week breaks down:

The orderly path, base case, ~50%. The short-term thrust catches the medium-term strength, leadership finally broadens past the cyclical corners, and the market grinds higher off a base that already has wide participation behind it. Expiration is cleared and the buyers who sat out the quiet week step in. The breadth backs this one most.

The repricing, the real risk, ~30%. The tech-vol warning turns out right. A late-cycle catalyst, a hot print or a credit wobble, forces a reprice, the nervous tech vol bleeds into the broad market, and the narrow leadership cracks where it is thinnest. The rate-sensitive leaders take the first and hardest hit, exactly because they led on the way up. This is the scenario the hedge exists for.

The stall, ~20%. Nothing resolves. The volume stays absent, the breadth cannot broaden, and the tape chops below its highs until the next catalyst.

I am long, tilted toward the cyclical leaders and quality pullbacks and away from the commodity laggards. I carry a little downside insurance broad vol makes nearly free, aimed at the tech concentration, the one corner showing strain.

🔎 Options Flow

The largest premium of the week went into upside on a crypto-exchange name and a basket of software, and that software bid sits exactly where I want to be long. So far, so risk-on.

Underneath it, the single biggest hedge on the board was a grab for long-dated Treasuries. That is a desk quietly buying duration, positioning for a rotation into bonds even while it stays long equities. The options-market version of one hand on the door.

The downside bets cluster where this letter is already soft, the high-beta growth corner and the speculative names that run hottest when the tape is loose. When the most aggressive money aims its puts at the frothiest part of the market and pays up for bond protection at the same time, the message holds together: lean long, keep the exit in sight.

🔥 Trade of the Week:

A great business at a price nobody would pay six months ago.

Zoetis is a falling knife, the chart is ugly, and I am putting it here anyway, as a contrarian starter, because the best risk-reward sometimes hides in the name the tape has given up on.

The case is the quality.

Zoetis is the leader in animal health with pricing power that does not evaporate in a year. And it is down roughly two thirds from its 2022 peak of $235, sitting near $78, back to levels it last saw years ago. The selling looks tired, and price is testing a floor the stock based on during the way up. Blood in the streets: you buy it while the panic is loud, before it ever feels safe.

Now the honest part. The 30-week trend is still falling, so you are early by definition, and calling a bottom in a downtrend is the hardest trade there is. No desk is recommending it and the flow gives no cover. If being wrong fast bothers you, wait for the base to build and skip this one.

Entry around $78.71, scaling in toward the prior low in pieces.
Stop $71.50, a weekly close below the multi-year low says the bottom is not in.
Target $95, the shelf it broke down from.
R:R roughly 2 to 1 here.
Size small, a starter position

What kills it is a weekly close below $71.50. That takes out the multi-year low, proves the knife is still falling, and ends the trade. Lose the level, lose the reason to be there.

See you next week,

Daniel

Disclaimer

This newsletter is for educational and informational purposes only. It is not financial advice.

The content reflects personal opinions shared publicly as a journal. Trading stocks, options, futures, or any financial instrument involves significant risk. You can lose your entire investment. There is no guarantee of profit.

The author is not a registered investment advisor, broker, or financial professional with any regulatory authority including the SEC or CFTC. Always consult a licensed financial advisor before making any investment decisions.

By reading this newsletter, you accept full responsibility for your own trading and investment choices. Past performance does not guarantee future results. Markets are unpredictable.

Screenshots are courtesy of TradingView, VixCentral, and other platforms with which the author has no affiliation. Information shared may contain errors or become outdated quickly.

This content is the intellectual property of the author. Copying or redistributing without permission is prohibited.

By continuing to read, you acknowledge and accept these terms.

Price is the output. The inputs sit elsewhere. Every candle is the residue of millions of decisions: who hedged, who covered, who got margin-called, who held. Trading off price alone means reading a summary of a story whose chapters live in other places. In the options book. In credit spreads. In the dollar. In sector rotation.

This piece teaches how to read those other chapters. The ones that explain why price did what it did. The ones that warn you before price moves at all.

What makes a price level real

Beginners draw horizontal lines on a chart and call them support or resistance. The line works sometimes. When it does, the trader gives credit to the line. When it fails, the trader blames the market. Both reactions miss the point.

Levels are made by positioning. Chart geometry rides on top of that fact. Picture a broad index trading near a round number such as an SPX cash equivalent of 2700. If options dealers are short hundreds of millions of dollars of put premium struck at that level, they have a strong economic reason to defend it on the way down and to ride it lower if it breaks. The level is real because of the cash flows tied to it.

The same logic works above price. When heavy call open interest sits at a strike that translates to roughly 275 on SPY (about 2754 on the futures), dealers who sold those calls grow short gamma as price climbs toward the strike. They hedge by selling the underlying. Price stalls. Day after day, you watch the same resistance hold, and it looks magical from the outside. The mechanism is mechanical.

The takeaway is simple. Before you trust a chart level, ask what positioning sits on top of it. If real money is parked there, the level matters. If nothing is parked there, the line on your chart is a coincidence.

Confirmation by other assets

Once you accept that price is the output of positioning, the next question is whether other assets agree with the move.

Late 2018 offered a clean example. The broad market fell hard in October and December. Many traders saw the equity drawdown and asked the standard question. Is this a buyable dip or the start of something worse? Price alone could not say. Credit could.

Three credit instruments tracked equity weakness with 30-day correlations that stood out. Senior loans (BKLN) showed a correlation near negative 76%. High yield bonds (JNK) printed near negative 80%. The widely watched HYG ETF posted near negative 84%. Sign conventions vary by source. What you should read in those numbers is alignment: high yield and equity were selling off together, day after day, with very little daily disagreement between them.

When credit and equity bleed together, you are looking at a real risk-off episode. Dealers, banks, and funds that mark daily are forced to reduce gross exposure across books. They sell what is liquid first. They sell what is needed second. Equity weakness fed by credit weakness has staying power.

When the broad market drops while credit holds firm, the read flips. You may be seeing a technical washout, a vol-pop, a futures stop run. Painful, yes. Sustained, often no.

The discipline is refusing to read the equity tape in isolation. Pull up at least one credit chart every time you assess a sell-off. The five seconds you spend on HYG and JNK could save you from selling the bottom or buying a falling knife.

The chain of causes

Cross-asset reading goes further than confirmation. Many moves you see in one asset are the downstream effect of a chain of causes that started somewhere else.

Take a late-cycle chain. A central bank raises rates. The currency strengthens. Commodities priced in that currency face a headwind because foreign buyers find them more expensive. Energy prices ease. Anything whose cost of production depends on energy benefits or suffers depending on which side of the input chain it sits.

Bitcoin in late 2018 offered an unusual case study. Mining costs are dominated by electricity, and electricity prices follow energy. When the US dollar climbed, oil weakened, and the cost of mining a coin softened. That softer cost let weak hands among miners keep selling without going under, which prolonged the supply pressure on price. The chain ran from monetary policy to currency to energy to mining economics to coin supply.

Memorizing every chain is unrealistic. The habit you build is asking, before you trade an asset, what sits upstream of it. Short on oil? Care about the dollar. Long on crypto? Care about the cost of compute, which means energy, which means oil. Long on emerging market equity? Care about the dollar and the Chinese growth impulse. Every asset has a parent.

Confluence levels in currencies

Currencies offer some of the clearest examples of made levels, because central banks and policy regimes openly tell you which line they care about.

In late 2018, the dollar-yen pair traded near 110.00. That round number sat at a known confluence of moving averages, prior swing points, and policy attention. Short sellers stalked the level all day, waiting for a clean break. Bulls defended it as long as they could. When 110.14 finally broke on a quiet session, the path of least resistance opened. Once enough committed defenders covered, the fuel for the next leg came from their forced exits. The move was mechanical.

That is the second use of confluence reading. A level becomes a battle line because participants have agreed to treat it as one. Trade size builds against it on both sides. When one side folds, the resulting move is larger than the new information would justify on its own. Almost all sharp intraday moves in major pairs around round numbers carry this signature.

The retail mistake is fading these moves on price action alone. The professional habit is identifying the confluence before the day starts, setting a plan for both outcomes (level holds or breaks), and sizing the trade to survive a fakeout in either direction.

The composite reading discipline

Pulling these ideas together gives you a workable discipline. Call it composite reading. It rests on three habits.

First, refuse to let a single asset tell you the full story. Before you accept that equities are weak, check credit. Before you accept that the dollar is strong, check the cross rates. Before you accept that volatility is rising, check the term structure and the skew, beyond the headline VIX print.

Second, grade signal strength by how many independent layers agree. One layer is noise more often than not. Two layers is an alert. Three or more layers aligned is a signal you can act on with conviction. Different traders calibrate the exact threshold, and some regimes never offer three clean confirmations. You must be willing to stand aside when the layers disagree.

Third, put a hard filter on top of any composite. Even when most layers agree, ask one question that could veto the trade. For risk-off setups, that question is whether the classic havens are rallying. Gold should hold or climb. Treasuries should hold or climb. Defensive sectors should outperform cyclicals. If at least one of those flight-to-quality moves is missing, treat the apparent risk-off as suspect. Real macro stress shows up across asset classes, beyond your favorite chart.

A worked example

Picture an evening in December. The broad market has dropped roughly 2% intraday and is sitting on a level you have been watching. Your gut says buy the dip. Before you click, run the composite check.

Layer one is credit. You pull up HYG. It closed down 1.4% on heavy volume, a fresh low for the move. JNK matches. That layer disagrees with the dip-buy thesis.

Layer two is the dollar. You pull up the DXY. It is up 0.6% and broke a multi-week resistance. That layer also disagrees.

Layer three is havens. Gold is up 0.8%. The 10-year Treasury yield is down 6 basis points. Both are doing exactly what you would expect in a real risk-off move. Another disagreement with the buy.

Layer four is positioning. You check the dealer gamma profile. The major weekly call wall sits 3% higher. The put wall sits 2% lower. There is no major dealer support at the current level. Disagreement again.

Four layers, all aligned in the same risk-off direction. The dip-buy is fighting the entire tape. You could still take the trade, only with much smaller size and a tight stop, accepting that you are explicitly fading a unified read. More often, the right call is waiting, watching the layers, and acting when at least two of them flip back in your favor.

Now flip the example. Same intraday drop, but HYG closes flat, the dollar fades, gold and bonds do nothing special, and you see a fresh call wall building at the level you are considering. Three layers now disagree with the bearish read of price. The drop looks technical. A small dip-buy with a planned exit if HYG breaks down later is a defensible trade.

Same chart. Same level. Two opposite trades, each justified by what the other layers were doing.

What this protects you from

The honest reason to do composite work is that it protects you from your own bias. A single chart in a single timeframe is the kind of input your brain interprets through whatever story you started the day with. Five charts across asset classes are harder to twist. The discipline is a forcing function for humility.

Composite reading also protects you from headline trades. The setup that looks irresistible on a five-minute clip rarely passes a four-layer check. When you commit to running the check before each trade, the number of trades you take drops sharply, and the average quality of the ones you take rises. Fewer trades at higher quality is the math of survivability.

Last, composite reading protects you from timeframe confusion. A daily chart says one thing. A weekly chart says another. The same happens across assets. When you see clean alignment from intraday positioning, daily credit, and weekly dollar trend, you are seeing a setup with weight across horizons. That is the kind of trade you can hold through noise.

How it fits a modern workflow

A practical workflow builds a daily dashboard that pulls four or five layers you care about: equity breadth, credit spreads, dollar trend, options dealer positioning, and your defensive sector basket. Score each layer with a one-word verdict such as constructive, neutral, or defensive. When three or more layers agree, run a screen for setups that match that bias. When the layers disagree, default size shrinks, the stop tightens, and you focus on shorter holds. The screener finds candidates. The composite read decides which ones earn a position and how big.

Key takeaways

• Chart levels become real because of the positioning behind them, so always ask what cash flows are parked at the line before trusting it.

• Pull up at least one credit chart before trading any equity sell-off; credit confirms or rejects the risk-off story price is telling you.

• Every asset has a parent. Identify what sits upstream (rates, dollar, energy) before sizing a trade in the child asset.

• Grade conviction by how many independent layers agree: one is noise, two is an alert, three or more is a signal worth committing capital to.

• Apply a haven filter to risk-off reads. If gold and Treasuries are not rallying, the move is probably technical and not a real macro break.

• Market health reads a healthy 77 out of 100. The number is real, but the way the market traded this week is not as strong as that score suggests. More stocks rose than fell, yet the heavy money moved on the down side. Strong on the surface, soft underneath.

• Leadership is getting narrow. Only three sectors are truly leading, all of them tied to banks, housing, and consumer spending, while energy and materials sit at the bottom of the board. When a recovery is healthy, more sectors join in. This week fewer did.

• The fear gauges are pricing almost nothing into Monday, when the Bank of Japan is widely expected to raise rates. A calm market walking into a known, binary event is the whole risk this week.

Hello my friends,

Last week the market dropped hard, four ugly sessions in a row, and your whole feed called the top. A fast drop like that always feels like the end of the world. It usually isn’t. The way to tell a real top from a passing shakeout has nothing to do with the price you see on the screen. It comes down to one question: how many stocks are actually falling with the index?

A real top is slow and quiet. The index keeps climbing for weeks while fewer and fewer stocks come along for the ride. The market rots from the inside while the headline number still looks fine, and only at the very end does it roll over. What we got last week was the other kind of move, the kind I call a flush. The index dropped fast and hard, but most stocks held up underneath it. That happens when big players cut risk all at once, dumping positions for reasons that have nothing to do with the health of any single company. It is forced selling, not a market breaking down. I told you at the time it looked like a flush, and that is what it turned out to be.

Then, in classic fashion, the save came from the top. As the selling pressed, President Donald J. Pump stepped in with a headline, this time a new deal with Iran.

The man has a gift for it. He says the market-friendly thing at the exact moment the tape needs it, and he did it again. Nobody knows yet how long it holds or what the real terms are, so take it for what it is. But the bulls got their spark, and the bounce was on.

So here we are, back near where we started, with the price recovered and the internals broadly agreeing that the worst is behind us. There is one thing still standing in the way, and it is not on any American chart. On Monday and Tuesday, the Bank of Japan meets, and that meeting can move every market on earth. We bounced. Now comes the test.

Below I walk through everything I look at, one screen at a time: the health of the market, where the money is rotating, the divergences between assets, the fear gauges, the currency picture, and the options flow. I keep it plain. The goal is that you finish this knowing exactly what I see and why it matters for your positioning.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

My market health score reads 77 out of 100, and that lands in healthy territory. Before you take that at face value, it helps to know what feeds the number, because the parts that built it this week are telling two different stories.

The first story is genuinely good, and it is about participation. More stocks went up than down by a wide margin, better than two to one. Even better, the number of stocks hitting fresh 52-week highs crushed the number hitting new lows, by more than five to one. That second figure matters more than people realize. New highs and new lows are the cleanest read on whether the average stock is actually healthy, because a stock cannot fake a 52-week high. When highs swamp lows by this much, it means the strength is broad, not just a handful of giant names dragging the index up while everything else quietly bleeds. The momentum measures I track, which smooth out the daily noise to show whether buying pressure is building or fading, are still climbing. On participation alone, this is a market in good shape.

The second story is the warning, and it lives in the volume. Here is the tension. More stocks rose than fell, but the heaviest trading happened on the stocks that fell. Put simply, the rally was wide but thin. A lot of stocks ticked higher, but the conviction behind them, the actual dollars changing hands, leaned to the cautious side. This is exactly the kind of bounce that institutions are willing to let happen without chasing it. They are not selling into it, but they are not backing up the truck either.

So how do I read the two stories together? The recovery is real and I am not fighting it. A solid majority of stocks are back above their longer trend, so nothing structural is broken, and the broad participation tells me the flush did not do lasting damage. But a bounce that the big volume will not confirm is one I keep on a short leash. I will believe the next leg higher when the volume shows up to back it. Until then, I treat this as a market that has stabilized rather than one that has taken off. That distinction is the difference between sizing up aggressively and staying measured, and this week it tells me to stay measured.

🚨 Sector Rotation

Three sectors stand clearly above the rest. Financials are out in front by a distance, with roughly seven in ten of their stocks in good shape. Consumer discretionary, the stuff people buy when they feel confident, sits right behind. Real estate rounds out the top three. Notice what these three have in common. Financials and real estate both live and die by interest rates, and discretionary lives off a confident consumer. That is a very specific bet the market is making: that rates behave and the economy holds up. It is a reasonable bet, but it is a concentrated one.

Below those three, almost everything else has slipped into the middle of the pack. A week ago, consumer staples were leading. This week they faded back, which is a small but telling shift, because staples are where money hides when it gets nervous. Technology improved a little but still is not leading, which matters given how much of the index those names represent. Industrials, utilities, communications, and healthcare are all drifting in that lukewarm middle zone, neither helping nor hurting.

At the very bottom, nothing has changed in a month. Materials and energy are dead last, and it is not close. Energy in particular has fewer than a third of its stocks in any kind of uptrend. This is the commodity side of the market, and it has been the persistent drag on the whole board.

Here is why the narrowing bothers me. Coming off a scare like last week, the healthiest thing a market can do is broaden out, with more and more sectors joining the recovery as confidence returns. That is the opposite of what is happening. The bid is crowding into a few favored corners while the rest fade. When a market gets choosier like this, it is a sign that buyers are still being selective rather than confident across the board. Off a low, that is something to respect, not to ignore. And there is a specific risk attached. The two leaders actually doing the work, financials and real estate, are the most sensitive to interest rates of any group in the market. If the Bank of Japan jolts global bond yields on Monday, which I will get to, those exact leaders are the ones most in the line of fire.

🔍 Pairs Alignment

The next thing I check is how different assets are moving relative to each other, because the relationships between markets often warn you before any single market does. Think of it as listening for one instrument playing out of tune in an orchestra. Most of the time everything moves together in a way that makes sense, and when one pair starts pulling apart, it is worth asking why.

Right now the overall divergence reading is moderate, which is a step up from calm but nowhere near alarming. Most of the pairs I follow are behaving. Stocks against bonds, big tech against small companies, the dollar against its peers, all of these sit close to their normal range, and several are actually drifting back toward the middle, which reduces stress rather than adding it. That is a comforting backdrop. It means there is no hidden fracture building up across the financial system this week.

There is one exception, and it is the same one that keeps showing up. Energy is badly lagging technology, stretched further apart than any other pair on my board. This is not a new signal and it is not a mystery. It is the same weakness the sector screen flags, just measured a different way. Energy simply cannot keep pace, and when one major sector falls this far behind, it is worth keeping in view even if it is not flashing red.

The other relationship I am watching is stocks against copper. Copper is sometimes called the metal with a PhD in economics, because it goes into everything that gets built, so its price tends to track the real health of the global economy. Right now stocks are pulling away from copper, climbing while the metal lags. That gap can resolve two ways. Either the stock market is right that growth is fine, and copper catches up. Or copper is right that the real economy is softer than stocks believe, and equities are running ahead of the fundamentals. I do not have a strong view yet. For now I am simply watching it, and I would get more cautious if that gap kept widening while the leadership stayed narrow.

📉 Volatility

Volatility is just the market’s price for fear. When traders are scared, they pay up for protection and the fear gauges rise. When they are comfortable, those gauges drift lower. Reading them well is one of the most useful edges you can have, because the price of fear often tells you more than the price of stocks.

Right now, almost every gauge says calm. The main fear index sits in the middle of its normal range. The structure of fear over time, which compares what traders expect over the next month against the next six months, is in its normal upward slope. That slope matters. It means traders expect things to be calmer in the short run than further out, which is the shape you get when nobody sees trouble coming soon. The futures that track expected fear over the coming months reinforce this, sloping gently higher from here into year-end with no spike anywhere. My overall fear score, which adds all of this up, reads about as low as it gets. On the surface, the market could not be more relaxed.

There is one gauge that refuses to join the calm, and it is the one tied to big technology stocks. Fear priced into the Nasdaq names is running well above the fear priced into the broad market, sitting up near the high end of its own range while everything else naps. This is the only nervous reading on the entire screen, and it fits perfectly with what the breadth and sector screens already told us. The market is comfortable about stocks in general and twitchy specifically about big tech, the same group that is no longer leading. When three different screens all point at the same soft spot, I pay attention.

Now the part that actually matters for next week. All of this calm is being priced just three days before a central bank meeting that can move every market on earth. That is the danger in cheap insurance. When protection is this inexpensive ahead of a known, scheduled event with two very different possible outcomes, you are not being paid much to take the other side. The market is treating Monday as a non-event. History says scheduled central bank surprises are exactly where the quiet ends abruptly. If you have wanted to add some downside protection, this is the rare moment when it is genuinely cheap to do so.

💱 FX

The dollar is firm against almost everything, grinding steadily higher. The currency that matters most right now is the Japanese yen, and it keeps drifting weaker, sitting near a line around 160 to the dollar. That line is not random. Earlier this spring, Japan’s own government spent an enormous amount of money, well over seventy billion dollars, buying yen to stop it from falling past that level. The market absorbed all of that intervention and pushed the yen right back to where it started. When a government spends that much to defend a line and the market erases it, that tells you how strong the underlying pressure is.

Here is why a sleepy currency is the biggest risk on the board. On Monday and Tuesday, the Bank of Japan meets, and almost everyone expects it to raise interest rates. Because that rate hike is so widely expected, the hike itself is not the danger. The danger is what they say about the future. For years, Japan kept interest rates near zero, which made the yen the cheapest money in the world to borrow. Big investors everywhere borrowed cheap yen and used it to buy higher-returning assets all over the globe, from American tech stocks to bonds in emerging markets. This is called the carry trade, and it is one of the largest hidden sources of fuel in global markets. It works beautifully as long as the yen stays weak and Japanese rates stay low.

The moment that changes, the trade runs in reverse. If the Bank of Japan signals that more hikes are coming faster than expected, the yen can snap sharply higher. Everyone who borrowed cheap yen suddenly has to buy yen back to repay those loans, all at once, and they have to sell whatever they bought to do it. That selling does not stay politely inside the currency market. It travels straight into stocks, because the assets being dumped are stocks. We saw exactly this in August 2024. A single modest hike and a few hawkish words from Tokyo set off a global unwind that took markets down sharply around the world in a matter of days. That was the dress rehearsal. This is the kind of event that can override every healthy reading in the rest of this letter in a single session, and as the volatility section just showed, the market is charging almost nothing to protect against it.

🧠 My Take

Let me put it all together. The bounce off last week’s flush is real, and the broad participation tells me the selling was a positioning shakeout, not the start of a bear market. That is the good news, and it is why I am not bearish. The caution comes from three places. The volume did not confirm the bounce. The leadership is narrow and concentrated in the most rate-sensitive corners. And a central bank meeting that can hit those exact corners is few days away with almost no fear priced in. I lean constructive, but I am carrying real respect for the Monday risk, and my positioning reflects both.

Here is how I see the week breaking down.

The orderly path, my base case at roughly 50 percent. The Bank of Japan raises rates as everyone expects and signals patience about what comes next. The yen stays calm through the meeting. With the event out of the way, the buyers who sat out this week’s thin bounce finally commit real money, the leadership broadens beyond those three sectors, and the market grinds higher from here. The strong participation we already see supports this outcome more than any other.

The carry shock, the real risk at roughly 35 percent. The Bank of Japan hikes and signals that more is coming, faster. The yen snaps higher, the carry trade starts to unwind, and a market that just bounced on light volume gives those gains back quickly. The rate-sensitive leaders, real estate and financials, get hit first and hardest, precisely because they led on the way up.

The stall, the leftover at roughly 15 percent. Nothing resolves cleanly. The volume stays missing, the narrow leadership cannot widen, and the market chops sideways below its recent highs while it waits for the next catalyst.

What this means for how I am positioned. I am staying in the market, tilted toward the three leaders and away from the commodity laggards that keep dragging. I am holding extra cash through Monday so I have room to act on whatever the meeting brings. Because protection is so cheap right now, I have a little downside insurance on, which costs me almost nothing if the orderly path plays out and saves me real pain if the carry shock hits. And I am ready to cut quickly if the yen forces the issue. The whole point of preparation is that you do not have to think when the moment arrives.

🔎 Options Flow — Smart Money Positioning

The last thing I check is the options flow, the large, unusual bets that show up in the market for stock options. These are useful because options are where informed money often moves first, since they offer leverage and a way to bet on a specific move by a specific date. When someone pays a large premium for a narrow bet, they usually believe something.

This week there were a dozen large unusual trades, and on a simple count they split evenly, half betting up and half betting down. The even count hides the real story, though, because the conviction was not even at all. The biggest, highest-confidence trades on the entire board were all bearish, and they piled into one place: the crypto and AI-power miners. Three of these names drew the largest premium of the week, all of it in puts, which are bets that the stocks fall. When the most aggressive money on the board concentrates in one small group like this, betting it rolls over within two weeks, that is a cluster worth respecting.

The rest of the bearish bets pressed exactly where the rest of this letter is already soft. There were large put positions in the semiconductor group and in utilities, the two corners that the breadth, sector, and volatility screens have all flagged as weak. When the flow lines up with the internals like that, it strengthens the read rather than muddying it.

The bullish bets are interesting for where they reached, which was almost entirely outside of big US technology. Money bought upside in gold, in clean energy, in international developed markets, and in a major consumer name. Nobody was paying up for the index leaders or for the big tech names everyone talks about. Step back and the picture is consistent. Under a calm-looking tape, the money that moves with real intent is leaning defensive and reaching away from the crowded American tech trade.

🔥 Trade of the Week:

At about $27.50, you are buying the only satellite radio monopoly in America at a free cash flow yield near 14%, with Warren Buffett’s Berkshire Hathaway as a 37% owner that keeps buying the dips.

The market left this stock for dead, down roughly 50% over five years against Apple, Spotify, and YouTube. Then the story changed. Cost cuts landed, free cash flow jumped, and the stock has climbed about 35% in 2026. It ran to a high near $30, then pulled back about 8% without breaking trend. That pullback is the entry.

Here is the mispricing. Wall Street still prices SiriusXM like a dying business, with Sell ratings and targets as low as $18. But against a $9.3 billion market cap, management guides to $1.35 billion of free cash flow this year, a yield near 14%, on a stock trading around 11 times earnings. The first quarter beat across the board, free cash flow tripled from a year earlier, and churn just hit a record low. 2026 is set to be the first year revenue stops falling in three. The price assumes the business keeps shrinking, so leveling off alone re-rates it higher.

It also fits the week. While the whole letter worries about Tokyo and the carry trade, SiriusXM sits outside all of it, a subscription paid in dollars by Americans in their cars. One honest note: it lives in Communication Services, a weaker group on my own screen, not a leader. I am fine with that. I am not buying it for its sector, and a name this uncorrelated does not need a strong one behind it. My pullback screener flagged it, and part of the recent buying is mechanical, since it just joined the S&P MidCap 400 on June 11.

• Entry zone: $26.50 to $27.50

• Stop: $25.48

• Target 1: $30

• Target 2: $32

• Value target: high $30s to $45 (re-rating case, Street’s high target)

• Sizing: small, scale in

The real risk is the debt, with enterprise value near twice the market cap. But that same free cash flow covers the dividend and the interest with room to spare, and Warren Buffett, who owns 37%, keeps buying near a $32 average, above today’s price. When the most patient money on earth is sitting on a loss on purpose and still adding, that is the asymmetry. I keep it small, respect the debt, and let the stop do its work.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

See you next week,

Daniel

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Hello my friends,

By the time you read this, your feed is a wall of the same word, and that word is “top.”

Friday gave everyone the headline they have been waiting all year to write. The Nasdaq fell 4.2%, its worst single day in over a year, and roughly $1 trillion evaporated off the semiconductor and AI complex in a few hours. The S&P 500 dropped 2.6% and booked its first down week in ten, after a run that had carried it to fresh records earlier in the week.

So the story writes itself. The melt-up cracked, the leaders broke, the bell rang at the top, and the smart move is to sell everything and hide. Half the Substacks you follow published some version of that thesis before the closing bell.

My conclusion is simpler, and it cuts the other way. Friday was not a market-wide rejection of risk. It was a forced repricing of the most crowded, longest-duration equity trade on the board. If breadth breaks next week, I will change my mind. But as of Friday’s close, the market did not confirm the panic.

I owe you some context, because I have spent the better part of two months telling you the top was near. I was the most defensive I had been all year. I still think the risks I flagged were real. But the top I described, breadth collapsing while the index holds, leadership stumbling, bonds catching a safety bid, is a specific configuration, and what happened Friday was the opposite of that configuration. The concentration I warned about for weeks started unwinding on its own. That changes the calculus, and the discipline is to follow the data even when it leads away from where I have been parked.

The index is one number. It is a cap-weighted average dominated by a handful of enormous names, and when those specific names get hit, the index drops hard even if the broader field holds up far better. Friday, the damage was concentrated in the crowded mega-cap and AI names that every fast-money desk and every retail account already owned to the gills.

This was a flush, not a top. A top takes weeks to build. Breadth decays while the headline holds up, and by the time the index gives way the damage underneath is already done. What we got Friday was the inverse: the price led and the breadth refused to follow.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

The bull-versus-bear argument for this weekend lives in the difference between two numbers almost nobody is putting side by side: the index return and the median stock’s return.

The index vs. the market

The S&P 500 fell 2.6% on Friday and the Nasdaq fell 4.2%. Big, scary, attention-grabbing prints, and they are real. But an index is a weighted average, and the S&P in 2026 is more top-heavy than it has been in modern history.

When a handful of trillion-dollar names get sold, the index drops hard regardless of what the other 480-odd companies are doing. So the index return tells you what happened to the giants. For what happened to the market, you look underneath.

Three readings that tell you what the average stock did

My screener tracks the broad market rather than the index. Three numbers, and all three say the same thing: the average stock barely participated in Friday’s selloff.

Median RSI: 51, down from 53. RSI measures momentum on a scale of 0 to 100. Above 70 is overbought, below 30 is oversold, 50 is neutral. The median stock slipped from 53 to 51 on the week. The index fell 2.6%. The typical stock barely budged.

Stocks above the 50-day moving average: 57%, down from 62%. The 50-day line separates stocks in an uptrend from stocks in a downtrend. The share slipped from 62% to 57%, a modest decline but still a clear majority holding its intermediate uptrend.

Overbought share: cut from 10% to 5%. Going into the week, about 10% of stocks were overheated (RSI above 70). By Friday, that number had dropped to 5%. The stretched, over-loved names got pulled back toward neutral. The rest of the market did not get dragged down with them.

The excess came off the top. The broad market underneath stayed intact.

Why this is a flush

A real top builds over weeks of quiet internal decay. Breadth diverges from price for a month or two before the index gives way. What we got Friday is the inverse. The index cracked in a single session and the broad market held up far better than the headline.

Top vs. flush: how to tell them apart

This is the whole distinction in one frame. Print it and keep it.

REAL TOP                          POSITIONING FLUSH
-----------------------------------------------------------------
 Breadth deteriorates BEFORE price | Price falls BEFORE breadth
 Bonds RALLY on growth fear        | Bonds FALL on rate shock
 Weakness spreads sector by sector | Weakness stays concentrated
 Median stock breaks down          | Median stock holds
 Vol grinds higher for weeks       | Front-end vol spikes first
-----------------------------------------------------------------
 So far, most of the boxes on the right are what we got this week.
=================================================================

The honest caveat

The broad market holding this week does not guarantee it holds next week. Breadth is a snapshot, not a promise.

If Monday and Tuesday bring a second leg where that 57% above the 50-day drops toward 45% and the median RSI finally caves, then I am wrong and this was the first crack of a real top. I will be watching the breadth every session. The breadth gets the final vote.

📉 Volatility

If Market Health tells you what the market did, volatility tells you how it felt while doing it. Friday’s move fits the flush read: fear spiked hard and fast, in the pattern of a positioning shock that burns hot and fades, rather than the slow grinding fear that compounds.

The VIX spike

VIX: 15.3 → 21.5, up 40%. The VIX measures how much fear the market is pricing over the next 30 days. A 40% jump in one week is a two-month high. On its own, that sounds alarming.

VIX9D: 12.6 → 23.9, nearly doubled. VIX9D measures the same thing but over the next 9 days only. It nearly doubled in a single session. When the 9-day fear gauge spikes past the 30-day gauge, it means the panic is concentrated in the very short term: traders scrambling to buy protection for the next few days, not for the next few months.

That is the fingerprint of a one-off shock, not the start of a sustained decline. A sustained decline builds fear slowly across all timeframes. A shock spikes the nearest timeframe and fades. Friday looked like a shock: one jobs report, one scramble for short-term protection.

The complacency ratio

I track VIX3M divided by VIX. It compares how much fear the market prices 3 months out versus 1 month out. When the ratio is high, the market feels safe today but expects trouble later. When it collapses toward 1 or below, fear has arrived in the present.

Two levels matter. Above 1.30, the market is at peak complacency: calm today, no urgency, tops tend to form here. Below 0.85, the market is in outright panic: near-term fear has overtaken everything, and bottoms tend to form here.

Going into the week the ratio sat at 1.22, grinding toward the 1.30 complacency ceiling I have been tracking for weeks. By Friday it had collapsed to 1.01. The calm evaporated in one session.

That collapse from 1.22 to 1.01 is the signature of a sudden shock. It tends to reverse as the scare passes and the ratio climbs back up. If it rebuilds above 1.10 next week, the market is digesting the shock. If it stays flat near 1.0 or drops below, the damage is wider than one session.

The rebound is the base case, as long as the broad market keeps holding.

VVIX: the yellow flag

VVIX, the volatility of volatility, went from the mid-80s to about 102. This one cuts against my read.

VVIX measures the price of convexity, what the market pays for options on volatility itself. A jump into the low 100s says the move was not dismissed, that real money reached for tail protection. I would have preferred to see it stay floored. It did not, and I give that its weight. That said, low 100s is elevated but short of extreme: a market that got a scare and bought some insurance.

SKEW: the bid that grew

SKEW measures the price of out-of-the-money put protection, the cost of crash insurance. It rose from 144 to 152 through the week. Crash-insurance demand did not fade into the selloff. It grew.

SKEW has been bid for weeks, high before Friday while the surface was dead calm and the VIX slept at 15.3. Last week, in “The Top Got Postponed,” I told you the surface was calm while the tail was quietly bid. That fragility got expressed Friday, and the tail bid climbed rather than cooled.

This is the one piece that leans cautious. The surface calmed nowhere, and the demand for downside protection rose into the weekend. I am not dismissing it.

🔍 Pairs Alignment

The cleanest way to read whether the damage was concentrated or broad is to line up pairs and watch which one cracked. Three reads, and all three point the same way: a rates shock that hit long-duration rather than a growth scare that hit the economy.

Dow vs. Nasdaq: the value-growth split

On the week, the Dow fell 0.2%. The Nasdaq fell 4.7%.

The Dow is full of profitable, lower-multiple, old-economy names. It barely moved. The Nasdaq is the long-duration growth and AI complex, and it took nearly all the damage.

The same week the headline declared a collapse, the value end of the market sat almost perfectly still.

That is the signature of a rotation out of expensive duration rather than a market-wide flight from stocks.

Cap-weight vs. equal-weight: the concentration read

The cap-weighted S&P fell 2.5% on the week. The equal-weight version fell 0.5%. On Friday alone it was 1.4% for equal-weight against 2.6% for the cap-weighted index.

Strip out the giants, weight every company the same, and the damage nearly disappears. The mega-cap names that dominate the cap-weighted index led the decline, and the broad field behind them barely participated.

For months I have written about the extreme concentration in this market, the whole index leaning on a handful of names. This week the leaders came back toward the pack rather than the pack falling to the leaders. The healthiest version of a pullback.

Small caps: the rate-sensitivity tell

This pair moved against me. The Russell 2000 fell 3.5% on Friday and 3.0% on the week. Small caps did not hold.

But look at why they fell. Small caps are the most rate-sensitive corner of the equity market, the most dependent on cheap financing. A jobs report that kills the rate-cut story and pushes yields higher hits them first and hardest. Their weakness does not automatically make this a growth scare. With yields rising at the same time, the cleaner read is that small caps were hit by the same higher-rate impulse that hit long bonds and mega-cap growth.

Duration got repriced, not the economy.

Stocks vs. bonds: the confirmation

When stocks fall on a growth scare, money flees into Treasuries. Bonds rally, yields fall, the classic risk-off rotation. That is what a real top produces.

This week the opposite happened. Stocks fell and bonds fell with them. The 10-year yield rose 9 basis points to 4.54%. Bonds did not catch a safety bid. They sold off alongside equities.

Stocks and bonds falling together is the sign of a rates-and-positioning shock rather than a recession. And a rates shock that leaves the broad economy intact is the kind of dip I want to buy.

🚨 Sector Rotation

To know whether investors were fleeing the market or shopping within it, watch where the money went rather than where it left. This week it rotated with a clear, deliberate logic.

Where money went

On my weekly sector-ETF dashboard, Energy rose 2.5%. Health Care rose 2.4%. Financials rose 1.4%. Industrials rose 0.6%, and even Staples added 0.6%.

Those are not defensive bunkers where terrified money hides. Energy, Financials, and Industrials are economically sensitive, real-economy sectors. They are also, with Health Care, the cheap, profitable, rate-insensitive corners that get left behind in a melt-up and rediscovered when the froth comes off the leaders.

Money flowed in. Investors shopping the unloved aisles rather than fleeing the store.

A true market-wide liquidation usually leaves fewer places to hide. You would not see six sectors finish green while the index fell. The green was as broad as the red was concentrated.

Where money left

The tech sector fell 5.6% on the week, with XLK down 6.7% on Friday alone and semiconductors hit even harder, the single biggest weight behind the Nasdaq's -4.7%. Communication Services fell 3.5%. Consumer Discretionary fell 5.0%. Biotech (XBI) fell 5.9%.

The losers are the high-multiple, high-momentum, crowded growth complex. The stuff that runs hottest in a melt-up and carries the most hot money. They got flushed, and not gently.

Rotation out of expensive momentum and into reasonable value. The most normal thing a market can do after a long one-directional run.

The Discretionary-Staples flip

One more read. Consumer Discretionary underperformed Consumer Staples this week, a flip from last week’s risk-on configuration. On its own, a caution flag. But set against the Dow holding flat, energy and financials and industrials rallying, and the value end refusing to break, it reads as careful money rotating into steadier ground rather than panic flight.

💱 FX

Now the part where I stop making the bull case and tell you where I could be dead wrong.

There is one real risk to everything above, and it is not in the breadth, the vol surface, or the sectors.

It is the yen. USDJPY closed Friday at 160.2. It broke 160.

Why 160 matters

The 160 level on dollar-yen is not arbitrary. It is the line where the Bank of Japan and the Ministry of Finance have historically stepped in to defend the yen, because a yen that falls too far too fast destabilizes Japan and ripples through global funding markets.

And they defended it. Between late April and late May, Japan spent over ¥11.7 trillion, more than $73 billion, its first intervention since 2024. The yen has erased all of it. The same hot jobs print that hammered stocks widened the US-Japan rate gap and pulled the yen weaker, straight through the line that $73 billion was spent defending.

The market ran the dollar back through 160 in the face of the largest intervention in two years.

The carry mechanism

The yen carry trade is one of the largest funding engines in global markets. Money borrows yen at near-zero cost and buys higher-yielding assets worldwide, including US tech. As long as the yen drifts weaker or holds steady, the trade prints and the borrowed yen keeps flowing into risk.

But the carry trade is short the yen, and a short blows up when the thing you are short rallies. The danger is not a weaker yen. It is a violent snap-back the other way. If USDJPY breaks back under 155, the carry unwind turns live: borrowed positioning gets forced to cover all at once, selling global assets to buy back yen in a self-reinforcing cascade.

We have seen the rehearsal. August 2024, when a modest BoJ hike triggered a violent global unwind in a matter of days. That was off a far smaller spark than the pressure building now.

How I hold both ideas at once

The constructive read on the flush and the fear of the carry hinge. I hold them by sizing.

If the yen sat calmly at 150 with no intervention drama, I would be far more aggressive, because the internal evidence is that good. But it is at 160.2, on a broken line that $73 billion could not hold, with a live path to a carry unwind if it snaps back. That single fact caps my conviction and my position size.

I am adding in the rate-insensitive, real-earnings parts of the market, in measured pieces, with cash held in reserve.

🧠 My Take

Let me clear up what looks like a contradiction. My read of the tape is flush, not top. But my portfolio is still positioned cautiously. Those two things are not in conflict, because they answer different questions. What happened Friday? A flush. How should I be positioned right now? Carefully, because USDJPY broke 160, and that is the one variable that can override healthy internals.

The consensus turned bearish in about four hours on Friday afternoon. That speed is the tell. When a narrative is that unanimous and that easy, my job is to check whether the evidence supports it or whether everyone is reading the same scary headline off the same index print.

This week the evidence does not support the panic. The Dow held flat and equal-weight beat cap-weight. Cheap real-earnings sectors rallied while bonds fell with stocks instead of catching a safety bid. Every one of those cuts against “this is the top.”

So I am buying the rotation, with eyes open and size controlled.

Constructive on the rotation (~45%)

The flush-not-top case, and the internal evidence supports it most directly. The rates shock gets digested over a week or two. The VIX9D spike fades, the complacency ratio re-steepens, and the rotation into cheap profitable sectors broadens the market. The concentration that has worried me all year unwinds in an orderly way, and the index grinds back toward its highs on better internals than before.

The reason this is not my majority case is the yen rather than the internals. If 160 were not broken, I would put it well above 50%.

Cautious (~55%)

Not the consensus top call. The carry-and-rates case, and it gets the larger share for one reason: USDJPY at 160.2 on a broken intervention line.

In this path the rates shock is the front edge of a sustained repricing higher. The 10-year keeps climbing, pressure on the yen builds, and something forces the snap-back under 155 that turns the carry unwind live. The borrowed money that funded years of global risk-taking gets pulled at once, and a narrow flush in the AI names broadens into the cross-asset deleveraging we saw in August 2024.

The crowd is right to be cautious and right for the wrong reason. The reason to be careful is the carry hinge.

What 45/55 means in practice: a call to participate carefully, buy the dip in the safe corners with controlled size and cash in reserve, and be ready to flip defensive fast if the yen forces the issue.

🔥 Trade of the Week: $CI (Cigna)

The business

Cigna is one of the large diversified health-insurance and pharmacy-benefit operators, a real-earnings, cash-generating machine in a sector that caught a strong defensive bid this week. It beat in April, printing $7.79 against a $7.60 estimate, and guides to better than $30 of earnings this year.

At a recent price in the high-280s that puts it under 10x forward adjusted earnings, cheap for a profitable, durable, market-leading franchise. Rate-insensitive, profitable, sane multiple, in a sector money is rotating into.

A quality business on sale.

The setup

The managed-care sector had a brutal 2024-2025. The sector is now recovering hard: UNH back to $399, ELV to $415, CNC doubled off its low to $62. The recovery trade in managed care has been violent, and most of it has already happened.

CI is the one that never crashed and never bounced. It held a range for the past year while the rest of the group went through free fall and recovery. That stability is why it is now the laggard: the peers have 30-100% bounces behind them, CI has been flat.

If the sector recovery continues, CI is the name with the most room to catch up. If the recovery stalls, CI's tight range means the least downside.

The levels

Current price: $289. Stop under $268, below the base that has held on every test, about 7% of risk. First target around $310, the top of the range where sellers have appeared repeatedly. The real prize is a breakout above that range toward the $334-340 area where the stock traded in 2024, and the average analyst target sits around $345.

Risking 7% against a first move to $310 and a real objective near $334 to $345. Reward-to-risk roughly 2.5 to 1, worth taking because CI has spent a year going nowhere while its sector caught a bid. The peers have made their move. CI has all of its move ahead of it and a tight floor underneath.

Next earnings are July 30, outside the swing window, so no binary print to hold through.

The honest risk

The real risk is the regulatory overhang on pharmacy-benefit managers. The PBM business is a recurring political target, and reform headlines can hit the whole group regardless of fundamentals. That overhang is part of why the stock is cheap and part of why it lags. Barclays cut it to neutral on May 26, so the Street is not uniformly bulled up here either.

The stop under $268 is my answer. If the base breaks, I am out around 7% and I move on. I size it so being wrong costs a defined, survivable amount and being right pays multiples of that.

CELH update

Last week’s pick, CELH (Celsius). I flagged it at $33 with a base at $27 to $28. It fell back into the high-$28s this week, closing near $28, testing the lower part of that floor.

The base has not broken, but it is close to the line. $27 is the line. As long as it holds $27, the setup is intact and I am holding. If it loses $27 on a closing basis, the thesis is wrong and I step aside.

See you next week,

Daniel

Disclaimer

This newsletter is for educational and informational purposes only. It is not financial advice.

The content reflects personal opinions shared publicly as a journal. Trading stocks, options, futures, or any financial instrument involves significant risk. You can lose your entire investment. There is no guarantee of profit.

The author is not a registered investment advisor, broker, or financial professional with any regulatory authority including the SEC or CFTC. Always consult a licensed financial advisor before making any investment decisions.

By reading this newsletter, you accept full responsibility for your own trading and investment choices. Past performance does not guarantee future results. Markets are unpredictable.

Screenshots are courtesy of TradingView, VixCentral, and other platforms with which the author has no affiliation. Information shared may contain errors or become outdated quickly.

This content is the intellectual property of the author. Copying or redistributing without permission is prohibited.

By continuing to read, you acknowledge and accept these terms.

Hello my friends,

I have been cautious for weeks, and I still hold the heaviest cash position of my year. But the job every weekend is to read the tape without my bias, and this week the tape moved, meaningfully and mostly in one direction. The index did not roll over into the double top I had been watching; it broke through the February high to fresh records at 7,580. The war premium that kept Brent above $100 with the Strait of Hormuz closed came out of the market fast: oil fell fourteen percent on the month as a US-Iran arrangement moved from rumor toward something real. And the breadth that sat dead flat last week ticked up. So this week I am going to do what I always say I will, which is follow the data where it leads, even when it leads away from where I have been parked.

The summary up front: the constructive case strengthened this week, and several of my reasons for caution quietly went away. What is left on the bearish side is narrower and slower than it was. No longer a war or a double top, but the more patient risks of concentration, complacency, and a Japanese yen still loaded one candle from its line.

Now, layer by layer, what the data is saying.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

Last week the median 14-day RSI across my universe sat at exactly 51.0. Dead, flat, perfectly asleep. This week it ticked up to roughly 52. That is not a stampede, but it is the first time in a month the needle moved in the right direction rather than sideways. More telling: overbought readings rose from 5.3% of the universe to 10%, and the proportion of stocks holding above their 50-day moving average firmed to 55%, with the 200-day line at 57%. A broad rally usually carries 15% to 25% overbought, so the field is firming, not yet broad. The field is not awake. But it is no longer comatose, and that is a real change from the flat-line I described to you a week ago.

Here is the tension that still defines everything. QQQ is up 11.5% on the month. Equal-weight (RSP) is up 4.2%. That gap did not close as the field improved. It widened, from about six points last week to better than seven now. So we have two things happening at once that I have to hold in my head simultaneously: the broad field is marginally healthier than it was, and the leadership is marginally more concentrated than it was. A market can broaden and narrow in the same breath, and right now it is doing exactly that.

The crack I have been waiting for, index at new highs with internals deteriorating and leadership stumbling, did not arrive this week. We got the new highs. The internals stopped deteriorating and quietly improved. And the leadership did not stumble; it accelerated. That is the opposite of the three-part topping configuration I described last week. I have to be honest about that, because the whole point of doing the work is to let it overrule my prior.

📉 Volatility

The VIX closed at 15.32, down again from 16.70 last Friday and 18.4 the week before. Three straight weeks of compression. On the surface, deepening calm, and calm is what precedes tops. The VIX3M/VIX ratio, my complacency gauge, closed at 1.218, up from 1.199. It works like this: the higher it climbs, the more complacent the market; the ceiling where tops historically form sits around 1.30. We are not there yet, but we are grinding toward it, one quiet week at a time.

And here is the one number that does not fit the calm. SKEW jumped to 144.2 on Friday's close, up from 139.5 the day before and back above the 140 threshold I watch, near the elevated readings of mid-May. That is the tell. The VIX measures the price of at-the-money fear; SKEW measures the price of tail protection, the cost of insuring against the big left-tail move. So while spot volatility melted to a three-week low, someone was quietly paying up for crash insurance into the weekend. VVIX held in the mid-80s. Read together, the picture is more two-faced than last week: the surface is calm and getting calmer, but underneath it the tail bid is rebuilding rather than cooling. My triad to watch: VVIX pushing higher, SKEW reclaiming and holding above 140, and the VIX3M/VIX ratio grinding up toward the 1.30 complacency ceiling. All three describe the same thing, a calm surface with fear building underneath it. This week SKEW is the one that lit, back through 140, while the ratio keeps climbing toward that ceiling and VVIX sits quiet in the mid-80s. It is the first wisp of smoke, well short of a fire alarm, and it is the part of this week's tape that keeps my hand near the exit even as the rest of the data pulls me back in.

🔍 Pairs Alignment

QQQ vs equal-weight. The purest concentration read, and it got more extreme, not less. QQQ rode a near-twelve-percent month; strip the mega-caps out and the equal-weight S&P is up barely four. The engine of this rally is still a handful of names.

QQQ vs IWM. Here is the crack in my thesis. Small caps were up 6.4% on the month. They actually kept pace with SPY and beat equal-weight. For two months I have told you small caps were lagging relentlessly, and that the soft-landing trade was being expressed in mega-cap tech and almost nowhere else. This month, the most rate-sensitive, most domestically-geared corner of the market participated. That is a small but real vote for broadening, and I will not pretend I didn’t see it.

Stocks vs bonds. The one that still nags. The twenty-year Treasury proxy is essentially flat on the month, refusing to follow equities higher. The bond market has now spent the better part of two months pricing a materially different path than the stock market. When two enormous liquid markets disagree this persistently, I have learned to bet on the bond market being right. Bonds are run by people paid to be paranoid, stocks by people paid to be optimistic, and in a standoff paranoia has the better record. This is the pillar of my caution that survived the week fully intact.

🚨 Sector Rotation

Technology is up just over 20% on the month, even more dominant than the thirteen percent I flagged last week. The number-two sector is now Health Care at under five percent. But look at the bottom of the table, because that is the story. Energy is down 4.5% on the month. Last week Energy was the only non-tech sector with a genuine pulse, levitating on a war premium with Hormuz closed and Brent above $100. This week it rolled over and bled. This is bigger than a rotation inside the table. It is the unwinding of the entire geopolitical risk trade that I told you was the biggest mispriced macro overhang in the market.

I have to connect this to the news, because the two are the same event. The rumors I mentioned last week, a US-Iran arrangement involving uranium-stockpile surrender and a reopening of the Strait, appear to be moving from rumor toward reality. Oil voted before the headlines confirmed it: WTI fell to roughly $88, dragging the whole oil complex down fourteen percent on the month. And here is the part that matters for everything else: falling energy is a tax cut for every other sector’s margins. The inflationary impulse I was worried would pressure the rate path is deflating in real time. The bear case that ran war → oil spike → sticky inflation → no rate cuts → equities lower just had its first domino pulled out. I cannot keep citing an oil-shock risk that the tape is actively pricing away.

The Discretionary-versus-Staples read rounds it out and leans gently constructive: Discretionary (+3.4%) is now pulling ahead of Staples (+0.2%), the modest fingerprint of a consumer trade that is leaning offensive rather than defensive. A month ago both were jammed together at the bottom. Small change, right direction.

💱 FX

I have said for weeks that the single most important chart in the world is USDJPY, not any equity chart. It closed the week at 159.26, essentially unchanged from 159.16 last Friday. One good candle from 160, and it simply would not move. The most concentrated single point of failure in a concentrated market spent the week perfectly quiet.

The mechanism is unchanged. You borrow yen at near-zero, convert to dollars, buy higher-yielding US assets, increasingly mega-cap tech, where the momentum and the liquidity live. As long as the BoJ stays quiet and the yen drifts weak, the trade prints on two fronts. My working hypothesis remains that this cheap-yen funding is one and the same trade as the equity concentration you see in the sector table, two faces of one trade rather than two stories. The 160 zone is where Tokyo has historically turned from rhetoric to intervention; they spent tens of billions defending it in 2024, and officials have signaled again they will act against excessive volatility.

The asymmetry is what I keep close. If USDJPY pushes through 160 without intervention, the carry trade rebuilds and the mega-cap bid gets another tailwind. That is the bullish path, and it would extend exactly the concentration we already have. But a break back down through 155 is the line where I treat the carry-risk regime as live: funds that borrowed cheap yen would have to sell US assets to repay loans suddenly more expensive in dollar terms. August 2024 was the rehearsal. A modest BoJ hike produced one of the most violent short-lived dislocations in years. Meanwhile the dollar itself eased to 98.9, down from 99.3, a small thaw that slightly loosens the strong-dollar grip. So 159 is still the number I go to bed thinking about. It did not move this week. It also did not defuse.

🧠 My Take

The dashboard still tells two stories, but the weight between them shifted this week, and I am not going to pretend it didn’t.

The cautious story. Concentration is more extreme, not less: tech alone at +20%, the QQQ/equal-weight gap wider than ever. SKEW broke back above 140 to 144, a calm surface over a rebuilding tail bid. Bonds still refuse to confirm the rally after two months. And USDJPY sits one candle from the line, quiet but loaded. That is a coherent, patient bear case. But notice what it no longer contains: no war, no oil shock, no double top. The three loudest, fastest catalysts I was watching all resolved the other way this week.

The story my bias does not want to write. The index broke out to new highs instead of failing at the February level. Oil came off and took the inflation-shock risk with it. Breadth ticked up rather than rolling over. Small caps kept pace. The VIX compressed for a third straight week. I had flagged the war and the double top as the catalysts that could tip this tape lower, and both went the opposite way. When the catalysts you were watching for fire in the other direction, the data is telling you something, and the discipline is to update the positioning rather than keep narrating the old thesis.

So here is where I sit. I am not chasing mega-cap tech at full stretch. Leaning into a concentration rally at the highs is how you get carried out the other way. But I am beginning to put cash back to work, selectively, on names that have already corrected hard. The shopping list stops being homework and starts being a portfolio, one careful position at a time.

Constructive (~55%). The breadth thaw continues, equal-weight closes the gap, the Iran de-escalation holds and keeps oil falling (WTI in the $80s or lower), and AI-infrastructure names confirm that the capex is real and monetizing. The field joins the leaders, and this resolves into a broad bull.

Cautious (~45%). USDJPY finally breaks 160 the wrong way and the carry unwinds; VIX3M/VIX tags 1.30 while SKEW stays bid above 140 (it just reclaimed it Friday at 144); bonds force the rate question back open. That cluster turns concentration-hedging into contagion-hedging fast. The single point of failure has not been defused, only postponed.

🔥 Trade of the Week:

I will say it before the trade, same as always: my caution has softened but not vanished, and I am not abandoning discipline for a single name. But my screeners flagged a setup I respect, and it fits the entire letter, because Celsius has already taken its pain, all of it, and is starting to turn.

Look at the structure. CELH fell from a 52-week high near $66 all the way to $33, cut in half. It then carved a base at $27-28, tested it twice, and held. From that double bottom it has climbed back to $33, about 20% off the low, while my BOTTOM signal has now fired for 11 straight sessions on the name, the strongest persistence read in my screener this week. Rather than pinned at its ceiling like the names I might normally reach for at the highs, it is lifting off its floor. In a tape I am re-engaging with carefully, a name whose sellers are already exhausted is exactly where I want the downside to be small.

The thesis sits in three layers.

First, the business. Celsius is a real consumer brand with energy drinks, shelf space, and distribution, not a multiple-on-vibes story. It is the classic case of a fast grower whose stock got ahead of the fundamentals, then overshot to the downside on the way back. The franchise did not break; the price did. And crucially for this letter, it is a consumer name, not a rate-sensitive one, so no bond-market headwind, which is the risk I keep flagging everywhere else. The honest risk: it is still a sentiment-driven growth name, and a beaten-down stock can stay beaten down longer than you expect.

Second, the bottom. RSI has recovered from oversold to a neutral 55, turning up rather than stretched. The base at $27-28 held on two tests, which is what gives the stop a clean place to live. Volume is heavy enough ($350M+ traded a day) that I can size it without slippage. And there is no earnings report inside the swing window, so no binary event to blow up the setup. This is a structural bottom with an actual turn underneath it, not a falling knife I am trying to catch mid-air.

Third, the asymmetry. If the broadening continues, a destroyed momentum name with a real franchise mean-reverts hard toward the $40s as the shorts cover and the sellers run dry. If the tape wobbles on the yen or the bond market, the downside is already mostly spent. It fell 50% to get here, and the base gives me a defined exit.

🧘 The Philosopher’s Corner

The hardest discipline in this work is not holding a view. It is holding it loosely enough to let the evidence move it. We all know the line about a strong opinion, weakly held. The weak hold is the part almost nobody manages, because a view you have stated out loud starts to feel like a possession you have to defend.

The Stoics had a cleaner way to see it. Marcus Aurelius wrote that if someone can show him he is mistaken, he will change gladly, because what he is after is the truth, and the truth never harmed anyone. What harms you is persisting in your own error. The data this week leaned constructive. My job is not to argue it back into agreeing with the position I have been holding. My job is to update what I do in proportion to what it shows.

See you next week,

Daniel

Disclaimer

This newsletter is for educational and informational purposes only. It is not financial advice.

The content reflects personal opinions shared publicly as a journal. Trading stocks, options, futures, or any financial instrument involves significant risk. You can lose your entire investment. There is no guarantee of profit.

The author is not a registered investment advisor, broker, or financial professional with any regulatory authority including the SEC or CFTC. Always consult a licensed financial advisor before making any investment decisions.

By reading this newsletter, you accept full responsibility for your own trading and investment choices. Past performance does not guarantee future results. Markets are unpredictable.

Screenshots are courtesy of TradingView, VixCentral, and other platforms with which the author has no affiliation. Information shared may contain errors or become outdated quickly.

This content is the intellectual property of the author. Copying or redistributing without permission is prohibited.

By continuing to read, you acknowledge and accept these terms.

Hello my friends,

Still the most defensive I have been all year, and the tape this week did nothing to change my mind. The S&P pressed to new highs while the median stock sat dead, the rally is a handful of mega-cap names and a flat field behind them. USDJPY closed at 159, one candle from the 160 line where carry-unwind risk becomes live. Brent is back above $100 with the Strait of Hormuz still effectively closed and the White House signaling possible new strikes on Iran over the holiday weekend, though rumors of a US-Iran deal involving uranium stockpile surrender and Hormuz reopening are also circulating, which would flip the oil and risk picture entirely.. I think the top is near. I also think the data deserves to be read without my bias, so I will give you both.

I have been cautious for weeks. My cash position is the heaviest it has been all year. I believe, and I have said this in three of the last four letters, that we are close to a local top, that the easy money in this rally has been made, and that the smart move is to hold powder and wait for the pullback that lets me buy quality on sale. This week I am going to tell you what I believe, and then read the tape as honestly as I can, including the parts that argue against me, and let you weigh the two yourself.

The honest summary up front: the data this week did not confirm the top. It also did not refute my caution. It sharpened the exact fault line on which this whole market is balanced. The index keeps making new highs, and the average stock is not coming with it. That sentence is the entire letter. Everything below is me showing you, layer by layer, how deep that gap runs, why it matters, and, crucially, why the gap being real does not mean the crack is tomorrow.

I want to be fair about what that does and does not mean. A narrow market is a fragile market, yes. But fragile is not the same as falling. Sometimes a narrow tape is the early innings of a genuine new leadership regime, think of the first eighteen months of the internet build-out, or the first leg of the post-2023 AI trade. Fighting that narrowness because it offends your sense of “healthy breadth” is an expensive mistake. The question is not “is the market narrow.” We know it is narrow. The question is whether the narrowing is the warning or the trade.

Here’s the recap.

To get the most out of these market recaps and understand the framework behind my observations, I encourage you to read about my methodology here.

📊 Market Health

The first thing I do every weekend is count the field, the broad mass of individual stocks underneath the index. Not the index. The field. The S&P 500 is a capitalization-weighted average; a handful of trillion-dollar companies carry vastly more weight than the hundreds beneath them. That index can keep printing green long after the typical stock has rolled over and started bleeding. So I look at the median stock, and I look at participation.

The single most revealing number in this letter: the median 14-day RSI across my full universe closed the week at 51.0. Dead, flat, perfectly neutral. The Nasdaq is up eight percent in a month. The S&P is at all-time highs. And the momentum reading of the typical stock says it has gone precisely nowhere.

The distribution confirms it. Only 5.3% of stocks register as overbought; only 2.0% as oversold. In a genuinely broad bull market, that overbought figure swells to fifteen, twenty, twenty-five percent. What we have instead is a distribution pinned flat in the middle. The enthusiasm that exists on the index screen simply does not exist in the body of the market.

QQQ +8.4%, RSP +2.0%. That gap is not noise. It is the widest we have seen in months, and it tells you exactly how much weight a handful of mega-caps are carrying. The index is healthy. The market is narrow. Both are true at the same time.

The broader breadth panel confirms it:

Every line says the same thing in a slightly different dialect. Only fifty-four percent above the fifty-day MA, a hair above a coin flip. The two-hundred-day at fifty-eight percent says the longer-term trend has not yet broken, but is losing energy. The near-highs-to-near-lows ratio is the one genuinely constructive line: thirty-four names pressing highs against only five near lows. That is not the profile of a market falling apart. It is the profile of a market that is narrow and stalling, not broad and collapsing. The internals are weak, but they are not bearish.

So I hold two ideas at once. One: the field is asleep, and a sleeping field is a fragility. Two: that fragility has historically been more profitable to lean with than against, until a specific confirming crack appears. The crack I am waiting for is not "low breadth" (we already have that). It is breadth divergence at a new high that the mega-caps then fail to defend. Index at new highs, internals deteriorating, and the leadership itself stumbling. That three-part configuration preceded the 2021-2022 turn and prior concentration cycles. We have the setup. We do not yet have the trigger.

📉 Volatility

The VIX closed at 16.70. The curve is in clean contango, VIX3M/VIX ratio at 1.199. On the surface, calm. But calm is exactly what precedes tops. This ratio works as a complacency gauge: the higher it climbs, the more complacent the market. The ceiling sits around 1.30, and historically that is where tops form, when complacency is at its maximum. At 1.199 and rising, we are not at that ceiling yet, but we are grinding toward it. Below 1.00 is outright panic. So the read is simple: 1.20 and rising = complacency building, consistent with a top forming. The closer to 1.30, the closer the top.

SKEW at 137, below my 140 alert threshold, well below the 145+ readings from mid-May. The crash bid has cooled. Institutions are buying concentration hedges, not catastrophe hedges. The distinction matters: pullback positioning, not crash positioning.

The triad I watch: does VVIX push higher, does SKEW reclaim 140, does VIX3M/VIX compress toward 1.10.

🔍 Pairs Alignment

A relationship between two indices cancels out the common factor and leaves only the divergence. This week, every pair I follow points in the same direction.

QQQ vs equal-weight. The purest concentration read. Strip the mega-caps of their weight and the Nasdaq’s eight-percent month collapses to two.

QQQ vs IWM. Tech outperforming small caps for the better part of two months. Small caps are the most rate-sensitive, most domestically-geared corner of the market. When they lag this relentlessly while the VIX is falling, it tells you the soft-landing trade is not being bought broadly, it is being expressed in mega-cap technology and almost nowhere else.

SPY vs the dollar. Stocks rising while the dollar holds firm near 99.3. A strong dollar alongside strong stocks is typically the fingerprint of foreign capital flowing into the largest, most liquid US names. The marginal global buyer is reaching for the same names everyone else already owns, because those are the only ones that can absorb the size.

Stocks vs bonds. The one that has nagged me for weeks. Bonds are refusing to follow equities higher. The long end has been heavy; the twenty-year Treasury proxy is down on the month. The bond market has spent weeks pricing a materially different path than the stock market. When two enormous liquid markets disagree this persistently, the bond market is the one I have learned to bet on being right. Bonds are run by people whose job is to be paranoid about the future. Stocks are run by people whose job is to be optimistic about it. In a standoff, paranoia has the better track record.

🚨 Sector Rotation

Technology is up nearly thirteen percent on the month, beating the index by more than eight points. The number-two sector, Energy, is essentially flat against the S&P. Everything from Health Care on down is losing relative ground. The bottom of the table is outright red. This is not rotation, the word implies money moving from one sector to another in a healthy cycle. This is one sector levitating while ten sit on their hands or sink.

Energy deserves its own paragraph, because it connects to the biggest macro risk no one in equity-land seems to want to price properly. The US has been conducting military operations against Iran since late February. The Strait of Hormuz, the chokepoint through which roughly twenty percent of global oil transits, has been effectively closed since early March. Energy is the only non-tech sector with any genuine pulse, and it is not because of an organic demand story, it is because of a war that is actively disrupting global supply. Rising energy costs are a tax on every other sector’s margins. When energy outperforms a flat-to-down broad tape, historically the broad tape has tended to follow lower, because the inflationary impulse that lifts oil eventually pressures the rate path everything else depends on. With inflation still running above the Fed’s comfort zone and energy costs elevated, this is not a comfortable backdrop for the rate-cut narrative the equity market is leaning on.

The Discretionary-versus-Staples relationship rounds out the read. Both are barely positive, both lagging, jammed together near the bottom. In a confident expansion, Discretionary pulls away from Staples. We do not have that. Both sitting flat says the consumer trade is neither offensive nor defensive, it is simply absent, ceding the stage to mega-cap tech.

💱 FX

I have said for weeks that the single most important chart in the world right now is not an equity chart. It is USDJPY. It closed the week at 159.16, one good candle away from 160.

The yen has been weakening for one reason above all: the carry trade. You borrow yen at near-zero Japanese rates, convert to dollars, buy higher-yielding US assets, increasingly mega-cap tech, where momentum and liquidity live. As long as the BoJ stays quiet and the yen drifts weaker, the trade prints money on two fronts: the yield differential and the currency move. My working hypothesis is that this cheap-yen funding has helped reinforce the global liquidity bid into US mega-cap tech. The correlation between weak yen, firm dollar, and mega-cap leadership makes it a risk worth tracking, the carry trade and the equity concentration may not be two separate stories, but facets of one trade.

The 160 zone is where the Japanese Ministry of Finance has historically turned from rhetoric to action. They defended it with documented intervention in 2024, spending tens of billions. Several officials in Tokyo recently indicated they could intervene as often as necessary if excessive volatility persists.

The asymmetry: if USDJPY pushes through 160 without intervention, the carry trade rebuilds and the mega-cap bid gets another tailwind. But if 160 holds and the yen reverses, through intervention, rhetoric, or a simple positioning unwind, then for my process, a break back through 155 would be the line where I treat the carry-risk regime as active. Funds that borrowed cheap yen to buy US assets would need to sell those assets to repay loans suddenly more expensive in dollar terms. We have a live rehearsal: August 2024, when a modest BoJ hike produced one of the most violent short-lived equity dislocations in years.

So 159 is the number I go to bed thinking about. It is the most concentrated single point of failure in a market that is already a concentrated single point of failure.

🧠 My Take

The dashboard tells two true stories.

The cautious story. The median stock is asleep while the index makes new highs. The SPX is retesting the February high around 7,400-7,500, same price, weaker participation underneath. That is the structure of a potential double top, and while a double top only confirms on a neckline break far below us, the divergence between this retest and the breadth that accompanied the first high is exactly the kind of deterioration that precedes real tops. Every pair says the same thing four ways. Bonds have refused to confirm for weeks. USDJPY sits one candle from 160. And the macro backdrop now includes an active war with the Strait of Hormuz closed, Brent above $100, inflation still above the Fed’s comfort zone, and a White House that may be about to escalate. Every one of those points cautious on a thirty-to-sixty-day horizon. That is a coherent, mutually-reinforcing case.

The story my bias does not want to write. None of it has triggered yet. The VIX is at 16.7 in clean contango, down from 18.4 last week. SKEW has cooled from above 145 last Friday to 137 now. Both readings moved against my thesis this week: the market is less stressed than it was seven days ago, not more. And statistically, the narrow rally has been a thing to lean with and not against. We have the setup for a top. We do not have the confirmation of one. Last week I flagged Nvidia earnings as the catalyst that could tip the tape lower, it did not. The market absorbed the report and rallied. I owe you that honesty before I give you my lean. The gap between “the setup is present” and “the trigger has fired” can last weeks or months, and being right about the destination while early on timing is, in P&L terms, indistinguishable from being wrong.

Where I sit, no hedging. I lean cautious and believe the top is near. Heaviest cash position of my year. I am not shorting, leaning against a concentration rally that keeps paying is how you get carried out. But I am not chasing it either. Powder dry for the pullback I believe is coming.

Two scenarios with honest odds:

Bullish (~35%): breadth fills in, median RSI climbs off 51, equal-weight catches up, AI earnings next week confirm capex is real and monetizing, and the Iran situation de-escalates enough to bring Brent back toward $80. If the field joins the leaders, this becomes a broad bull and I put the cash back to work without ego.

Bearish (~65%, which is why I lean where I lean): USDJPY rejects 160, the carry unwinds; AI names stumble or guide cautiously Wednesday-Thursday; PCE runs hot; Iran escalates and Brent spikes; and VIX3M/VIX compresses while SKEW reclaims 140. That cluster turns concentration-hedging into contagion-hedging. That is the moment the cash goes to work, first on a tail hedge, then on the shopping list.

We sit between those two scenarios with no trigger yet pulled. The honest position in between is patience. Cash is the position. The shopping list is the homework. The yen and the war are the triggers to watch.

🔥 Trade of the Week:

I will say it before every trade: I am cautious, my cash is the heaviest it has been all year, and I am not abandoning that for a single name. But my screeners flagged a confluence I respect, and it fits the whole letter, because $VRT has already taken its correction.

Look at the chart. Vertiv ran from $120 last summer to a $380 high in May, then pulled back to $327. In a market where everyone is long every mega-cap at full stretch, the names that have already corrected are the ones that often fall less on red days. Their weak hands are already gone, their sellers already exhausted. That is the entire logic of owning VRT into a tape I am cautious on.

The thesis sits in three layers.

First, the business. Vertiv is the picks-and-shovels of the AI build-out: power, cooling, thermal management for data centers. Not a narrative stock. The company that physically keeps the AI infrastructure from melting. Last quarter: sales up ~30%, a ~$15B backlog, guidance raised. This is the real economy of the AI trade, not the multiple-on-vibes layer. The risk is valuation: at a premium multiple, VRT can still de-rate violently if AI capex expectations cool.

Second, the tape. Up huge over the year, but pulled back ~13% from its high. The sweet spot of a continuation setup: a structural uptrend that shook out the chasers without breaking. My Breakout and Pullback screeners fired on the same name, same day. Next earnings are not until late July, so there is no binary event risk inside the swing.

Third, the asymmetry. If the AI capex names confirm next week and the tape holds, VRT rides the leadership it belongs to. If the market wobbles, an already-corrected name bleeds less than the index and often diverges green on a red day. Both ways are survivable. That is why it is the one long I will carry through my caution.

• Entry zone: $318 – $329

• Stop: $289

• Target 1: $360

• Target 2: $380 (retest of the May high)

• Sizing: start 2%, add +1% on a close back above $345, max 3%

🧘 The Philosopher’s Corner

There is a particular kind of pain that markets reserve for the person who is right too soon. You see the fragility clearly. You know, with the certainty of someone who has done the work, that this cannot hold forever. And then it holds. Another week. Another month. And the market whispers that you were wrong, that the people who stayed fully long were the smart ones, that your caution was never discipline but cowardice wearing discipline’s clothes.

The philosopher’s answer is to ruthlessly separate two things the market deliberately conflates: being correct and being vindicated. They are not the same thing, and the market pays them out on completely different schedules. The entire psychological game of this profession is surviving the gap between the two.

Cash, in that gap, is not weakness. Cash is the form of patience. The refusal to let the market’s timing dictate your conviction.

The Stoics had a phrase I keep close in weeks like this: focus only on what is within your control. I cannot control when the pullback comes, whether the yen breaks 160 next Tuesday or next quarter, whether PCE runs hot, or whether bombs fall over Memorial Day weekend. None of that is mine to command. What is mine, entirely, is whether I am positioned to act with clarity when the moment arrives. Whether I have the cash. Whether I have the homework done. Whether I have the composure to buy quality on sale while the crowd is selling.

Being early is only a mistake if it makes you abandon your discipline before the thesis plays out. Held correctly, being early is simply patience that has not yet been paid.

I would rather be early and liquid than late and trapped.

See you next week,

Daniel

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