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If you have been a reader for any length of time, you know that I have asked for a 2-3 year minimum commitment.

Why is that?

The answer is below in plain sight. Not hind sight.

This is my publication barely a year ago.

At time of this post, Moderna is now trading just a few dollars shy of $200.

Even if you missed this entire move, if you had my chat room, you had the below from this morning. We are at time of this post up another 60% from this chat below.

With this stock, today we joined the hallowed ranks of many a ten baggers given by me in last 3-4 years like PLTR, Micron, SMCI, Carvana and now this. Several more.

So now you can see that even if I do not post anything for 2 years, but I find just two 10 baggers in these 2 years for our folks, is this not a decent deal?

Think about it. Noodle on it. Market moves are spread asymmetrically not linearly in time. A stock can be in accumulation phase when no one but few insiders and orderflow discover it and then the sudden moves like today happen extremely fast after the stock has been accumulated. The whole process tho from accumulation to mark up can take 2-3 years.

Stop jumping from furu to furu. Pick any one methodology, whether is it RSI, MACD, Heiken Ashi, or Orderflow — and stick with it.

With emini levels for tomorrow, boy those in power are really trying too hard folks. Like there is no tolerance for even smallest of dips. I don’t know what to make of it.

We saw this today with our level from chat yesterday bought up.

Unless we go and close below 7700, I am a bull here, I think 8000 is poss.

~ tic toc

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Disclaimer: This newsletter is not intended to provide trading or investment advice but solely for general informational & educational purposes. It represents the personal opinions of the author, shared publicly with you as a personal blog. Engaging in futures, stocks, or bonds trading involves significant risk, and there is no guarantee of profit. In fact, there is a possibility of losing one’s entire investment. Utmost caution is advised. Your account can go to zero. The author does not guarantee any profit whatsoever, and the reader assumes the entire cost and risk of any trading or investing activities undertaken. The reader is solely responsible for making informed investment decisions. The owners/authors of this newsletter, its representatives, principals, moderators, and members are not registered as securities broker-dealers or investment advisors with the U.S. Securities and Exchange Commission, CFTC, or any other securities/regulatory authority. Consultation with a registered investment advisor, broker-dealer, and/or financial advisor is recommended. By accessing and utilizing this newsletter or any of its publications, the reader agrees to the terms set forth herein. Any screenshots used are courtesy of Ninja Trader, FinViz, Think or Swim, and/or Jigsaw, with whom the author has no affiliations. The information and quotes shared in this blog may contain inaccuracies, as markets are inherently risky and subject to unpredictable fluctuations. Additionally, the content of this blog is the intellectual property of the author, and its sharing or copying is strictly prohibited. By reading this blog, the reader accepts these terms and conditions and acknowledges that it is intended solely as a personal trading journal and nothing more.

This is indeed an exciting time to be alive. There are opportunities galore, but at the same time there are risks—some known, many others unseen. Unknown.

The detractors point to unsustainable debt levels, slowing growth, creeping competition from technically strong rivals, and an attack on liberal institutions as sources of angst, and hence reasons to be cautious.

Let us take a 360-degree view of what is shaping the world around us.

A lot of this, of course, is noise. For example, I do not pay much attention to the current wall of worry surrounding companies spending billions on CapEx. It does not bother me. A few years ago, the same critics were complaining that companies flush with cash were not spending enough and were failing to invest in the future.

Now it is the same cohort lamenting too much spending on CapEx and investment. So take it with a grain of salt.

But here one nuance is important: Have the mega-caps run out of ideas? Where is our Steve Jobs investing in a once-in-a-millennial technology like the iPhone? What we have instead is a mediocre crop of founders and CEOs who are chasing the same thing.

They may have a different wrapper, a different play on words, but in essence everyone is barking up the same tree.

I do not believe there is any differentiation, per se, in what Google offers or what Microsoft offers. Or, even if you take it to the extreme, you have Musk selling all these futuristic dreams that are far removed from reality.

They are vaporware. For most part.

So anyways, I digress.

What worries me the most is that unlike the internet, unlike USB ports, the iPhone, Search, fiber optics, or any of the hundreds of technologies of yesteryear, the U.S. now does not have any monopoly on this shiny new thing called AI.

As I covered in a previous post, China can also do it almost as well, if not better, for a fraction of the cost.

This is where most of my heartburn lies when it comes to AI and AI valuations. 2026 is not even like 2000, even when the valuations now are more than the 2000 top. Back in 2000, the US was the only game in town. Fast forward some 25 years? Not so much.

Do a thought exercise—bring up a chart of BABA and pore over its financials.

Pick any metric. Let us pick sales.

Alibaba brings in $150 billion a year, which is about half that of MSFT. Yet it sells at less than a tenth of the valuation.

Okay, so maybe it should, because the NVDAs and MSFTs of the world are going to grow their earnings at ten times the rate of BABA? That must be it, right?

Wrong.

They nearly have the same, or similar, trajectory going into the next two to five years.

Why is that? Is Alibaba a fraud company? Does it not have a future? Is Microsoft’s future tenfold better than BABA’s just because it is an American company?

If you take an unbiased view of this, you can see how extended American stocks really are, in particular these fat mega-caps.

The changing landscape for U.S. debt markets.

The other interesting nuance that is shaping these markets is that the traditional funders of U.S. debt have taken a back seat, and the market is now being replaced by private investors and institutions.

We saw this week a record-high yield offered on the 30-year, which was a 26-year high, and similarly high yields on the 10-year bonds, which set a 20-year high.

The demand for U.S. debt remains strong, but private investors tend to be more short-term in mindset. They do not take a long-term view like the Bank of Japan or the People’s Bank of China and hold U.S. debt on their books. They are very finicky about price action and hence are demanding higher and higher bond yields to take 10-year and 30-year duration risk.

The 10-year yield is now 4.7%, and this is a serious red flag for stocks. No one seems to care right now, but soon this will become a major headwind. This is worth keeping an eye on for the next several days to weeks. The seriousness of this situation was amply on display last week when the Fed, in cahoots with the United States Treasury and the Bank of Japan, bought roughly $88 billion worth of Japanese yen.

The superficial reasons provided by this admin were to the effect that this was to aid an ailing long-term ally and was purely a goodwill act. However, the reality is much more nuanced and underlines the pickle the U.S. Treasury is in with an active Treasury head in the form of Scott Bessent.

Traditionally, the U.S. Treasury’s main function is to finance the operations of the government. It does so by issuing a wide variety of bills, notes, and bonds across a spectrum of maturities. Bessent, however, being the seasoned trader that he thinks he is, has been shunning longer-duration bonds altogether and has been aggressively issuing shorter-duration instruments, which have lower yields (meaning the Treasury has to pay less interest) but need to be rolled at potentially higher and higher yields.

Now, the coordinated U.S./Bank of Japan forex operation did lower the dollar about 5% against the yen, but since then, the yen has given up about half of those gains to settle near 159. The only real solution here is for the Bank of Japan to start raising rates, but its current leadership instead wants to do more QE. From a Japanese perspective, raising rates is far more politically risky than simply offloading the U.S. Treasuries that they hold to strengthen the yen against the dollar.

From a U.S. point of view, if Japan starts selling its Treasuries, the yields on these Treasuries could climb even higher! So you can see where this is headed, and equity bulls will not be spared the reckoning from these bond market shenanigans.

You will now begin seeing mainstream financial media print optimistic stories about how 5% on a 10-year is not so bad after all and how we have had higher rates in the past. Yes, but when did we have 5% long-term interest rates when our debt was $40 trillion and creeping higher every day?

Power Corrupts. Absolute Power Ruins.

The third serious risk for our capital markets is the consolidation of power among the same five to ten individuals who control public policy in the U.S. government.

A lot of people on the mainstream side do not understand this, but monopolies are rarely good for you.

The way this manifests is that the guy who controls social media like Twitter and Instagram has an agenda to shape mass thinking. The way they do it is by spreading fear and distrust of the federal government and institutions.

Look, the deep state is nothing new in the U.S., or for that matter any country in the world. In any large system, you will have an entrenched bureaucratic layer that wields enormous power. It is not new, and for the most part it does not interfere with your life day to day.

What matters far more is what percentage of the populace distrusts institutions like the presidency or Congress. If you cannot trust your lawmakers, then you are unlikely to obey their laws, pay your taxes, and be a good citizen.

What happens when a lot of people collectively decide to disobey the laws?

There is a popular uprising.

Now, under no circumstances should my post be construed as me supporting the political class. It is not. In fact, many are corrupt to the bone, and the reason we have distrust among the masses is because many in the political class are sellouts to corporations and foreign interests.

You do not have a people’s government anymore.

In the U.S., earlier you had grassroots movements—civil rights, women’s rights, and labor protections all came from very small, town-hall-level political movements. That is not the case anymore.

You rarely see your senator now. He flies in, spends billions on ads, harvests your vote, and flies back.

Many Americans could not even name their local state representative.

That level of political disengagement is ultimately bearish for the long-term health of the country—and, by extension, its capital markets.

I would also argue that the increasingly monopolistic nature of the mega-cap technology companies is itself a potentially bearish long-term development.

To sum it up, my main worries at the moment:

• I think the AI spend, while justified, has the companies themselves priced to perfection. Trend is your friend until it bends and later I will share my views when I think this friend turns into a foe.

• On top of that, the U.S. alone does not have any sort of monopoly when it comes to this brand-new technology. And the alternatives are far cheaper and could be better.

• To make it worse, the U.S. does have a monopoly on what you can and cannot do with your AI. So it censors; your car seller sells you cars that now have subscriptions to heat or cool the seats, to name a few of hundreds of things which are wrong in this sort of monopolistic system.

• Last but not least, interest rates are an issue. I can guarantee you one thing—in the next two final years of the Trump presidency, the national debt will be closer to $50 trillion than it is to $40 trillion. So whether inflation peaks or not, expect the debt to grow, and along with it expect the debt-service cost to grow.

This does not necessarily mean that stocks will all of a sudden collapse.

Especially if they continue to spend and spend to create liquidity to prop up these markets, then stocks could keep going higher.

I will be frank—I do not know where the top is. It could be here at 8,000, it could be at 9,000, but I do think a fair value in the S&P 500, if I can wait, is somewhere closer to 5,400 than it is to 9,000.

Now, this does not mean we cannot trade at 9,000. It simply means we can also trade at 5,400–6,000. This is obviously looking at the next two years or so.

The reason we are not selling off right now is because the majority have not realized this. Where do you think the Bull market lives? Is it in the charts? In the indicators? In flows? Where is the abode of a Bull market?

It is all in the mind. In the collective mind. If the majority believes in buying the dips, you get bull market.

If you and I realize this and we short 100 shares, there are tens of thousands of shares waiting to buy the dip. You can now see why it is a nightmare for early shorts.

You can be right and too early—which means you are wrong.

Once this view I described above becomes mainstream, the selling will not only be quick, it will be painful.

What has to happen for me to feel confident that the stocks have peaked?

In classic orderflow discipline, what I need to see is a confirmation. When you look at all the prior major busts, going back decades, the bust does not happen overnight. It is often a 1 to 3 year process. So once the markets top, there will be months, if not years of downtrending action. I am not going to simply gamble away my shorts or puts daydreaming of some major collapse when the confirmation is missing.

Now, yes you can have a fast moving covid like panic or a trade war, but when they happen is anyone’s guess and most of those losses are quickly reversed in a v shaped recovery.

What we are talking about is a multi year bear market that just grinds lower slowly but surely. For me to think we have topped, I need to see this market go below 7000 between now and December/January and then remain below it. This is my confirmation of a top. If this happens, I feel reasonable that we are looking at further losses of about 25 to 30% in 2027-2028.

Yes, I miss out on the top 10% of the move but it is ok with me as now I have a confirmation of a top versus punting randomly.

Emini S&P500 Levels for the week

I remain bullish in the short term, as long as below levels hold. I am right now thinking 8000. At the time of this post, we last traded 7800.

Folks, on admin side note as lot of folks have been recently impacted adversely by recent short squeeze, I am offering one of the largest ever discounts in publication history to join orderflow. Use the link below.

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What insane moves folks— SpaceX. Gold. SMCI. Memory. I can go on. And above all emini which has not been able to escape the weekly support or resistance and it is Thursday now.

Once vola…

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The thing with stocks, as in life, is that irrespective of what you did in the past, you can just start fresh today. If you missed out on massive moves earlier, or if you did not have capital earlier, or if you were not even born when the bull market was born, you can mitigate it all by simply starting today.

The long game

Ignore the past and get started in the now. If you are going to get hung up on the fact that the S&P 500 was $600 in 2008, or for that matter $40 in 1980, and it is psychologically tough to get started now because it is $8,000 at the moment, that is just an unfair hand to deal yourself.

The common misperception that only the smartest make money in this field, or only the highly educated, or even the most highly networked individuals with a direct line to the President, make money is a flawed one. In fact, the less smart you are, the better it may be. You may actually make more money. This is one of the only industries or arenas where you can come from any background, social or economic, and make an impact—provided you are consistent and observant.

There are always ideas like a PLTR at 6 bucks or a Micron at 80 bucks being born almost every year. You just have to wait for them, cut your losers, and let your winners run.

Dwelling on the past and noodling over all the opportunities you missed is a mental jail that keeps you locked up forever. This fosters a mindset where you can become overly pessimistic and block out all the fresh information coming in. The world will continue to grow and move on whether you chose to be part of it or not. It has a mind of its own.

One way I address this self negativity tendency is to simply have a DCA-type routine. So regardless of the price, and regardless of what is going on with the macro environment and the world, I set aside a fixed sum every month that I will invest—regardless of what the furus are saying, regardless of whether there are 24/7 reruns of “Markets in Turmoil” on CNBC.

In fact, if there are any “Markets in Turmoil” episodes on TV, I will double my monthly contributions. Don’t ask me why. It just works.

Less is more

Another mistake a lot of folks make is confusing more trades with more profit. Nothing could be further from the truth.

I personally think anyone with a portfolio of more than 10 names should probably just own and hold VOO or a broader-market ETF. In my opinion, 5–10 stocks is the optimal portfolio size. It is easier to track, easier to manage, and so on.

As a matter of fact, I will have 1–2 stocks or ETFs as core positions to benefit from long-term compounding. Then I will have 2–5 hot potatoes to benefit from speculative names. Sprinkle in some short-term options and lottos, etc.

Having 40–50 stocks will not make you more money. It is going to be counterproductive.

The AI conundrum

We are now on the cusp of entering an age where there is going to be no shortage of answers. At the flick of a button, you are now bombarded with answers to anything and everything.

This is what AI has done for us, and it promises to do much more. While on the surface this may appear great, there are implications to this—not only for you at an individual level, but for all of us as a group. As a society.

On the surface, this section may not appear relevant to finance and markets, and may in fact even appear unnecessary, but trust me, there is a reason to talk about this.

The reason I bring this up is because the conventional wisdom right now is that AI is coming for your job and livelihood. While this may be true to some extent, I am here to present my case that AI may end up doing more good than harm. That is, if we take a rational and realistic look at it and do not try to force-feed it to the masses.

Along the way, we will try to answer some other assumptions that are widespread in common parlance today.

When we talk about AI taking your job, or my job as a trader, what we are essentially saying is that AI is now fully capable of writing software, driving a car or an 18-wheeler, or trading stocks. But is that really true? Will it ever be true? And if it is true, will it ever do a good job?

Let us say you write a newsletter like this. To write something, you have to be in a flow state. There are several definitions of a flow state, but at its most primal level, you are tapping into a vast field of consciousness and bringing to life ideas from that field that make sense to you.

Forget about software coding for a bit. Forget about trading. The simple act of tapping into this vast field of consciousness is an act of creation.

When you use AI to write, to trade, to drive, or to communicate with each other, every time you use it, a part of your brain dies. This is the part that enables the connectivity you have with the vital forces of creation.

My advice—don’t.

At least do not use AI in its current iteration if your only use case for AI is to write stuff, reply to emails, or create memes. You should absolutely nip it in the bud right away. And tell this to anyone and everyone you know.

While I have a lot to say about this topic, I feel this is not the right platform. It is more fireside-chat stuff, with a glass of rare Macallan. :)

This brings us to the vision for AI…

At a personal level, I believe AI and what it can ever achieve have been hyped up. Not because it cannot write good emails, or because it cannot create good software, but simply because there is not much money in these types of activities, like writing emails, for the people who create AI.

A $20 subscription, even when subscribed to by tens of millions of people, is not enough to offset trillions of dollars in data center and GPU costs.

The market is not going to sell off on this. Not yet. It is because you and I are too early to realize this. For every dollar you short, there are $100 waiting to buy. The market can stay irrational longer than your short can stay afloat.

As you and I realize this, this view will eventually become fashionable among the masses. Which then leads to the question: What exactly is the use case for AI?

Ironically, while AI has been created to “generate” rather than simply spit back information stored in some database, I am not touching it to generate my emails and memes. Neither should you, as it will atrophy the only thing that you truly own—your mind.

If your mind atrophies because you cannot think anymore—and writing is thinking—then you will not be able to absorb new information and act on it to enrich yourself. This is why I am so adamant that I will not use it and I do not want anyone who will listen to me to use it either.

Speaking of which, why don’t you start your own Substack and start writing? It does not have to be market intel. It can be anything that you enjoy doing, like organic gardening and growing tomatoes. Click the link below and get started.

Start writing today. Use the button below to create a Substack of your own.

This brings us back to the vision for AI.

I use AI to make sense of unstructured information that I have already gathered. Note that I am not asking it to give me easy answers. I do my hard work upfront and then I begin asking it questions. I may ask it questions, not necessarily looking for easy answers, but rather to generate more questions. The more questions you ask, the smarter you become.

In this day and age of easy answers, the man or woman with the best questions will win. This is a fact.

This is where AI can make you better, smarter, and richer. But if you are going to use AI to take shortcuts and get your job done so you can then spend the rest of the day watching short videos on TikTok, my friend, I am afraid to say the future looks bleak.

So in this vision, AI will solve bigger problems for society, but its use cases will be concentrated among bigger organizations, certain individuals, sovereigns, and institutions.

This is the insight I had when I went bullish on PLTR recently, before it moved from 100 to almost 175 at the time of this post, or ServiceNow before it rallied after earnings from 90 to 125, or even ADBE from 200 to 250, or SAP from 130 to 210!

Subscribe now to become part of the Orderflow family, where you get access to off-the-grid themes and ideas, often way before they become popular with the masses. I know there is a small price to pay, but we must pay it to keep it exclusive.

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Other themes

Emini levels

In emini, we continue to see support come in at that support level I shared mid week.

I do not see any earth shattering moves unless that level gets breached. This week we get inflation data on Tuesday. Regardless of the inflation numbers, the market seems to have made up its mind that the FED is trapped and has limited options in face of worsening payroll data and continued price pressure from this silly skirmish in the Middle East.

This is the time that calls for great diplomacy and securing cheaper energy prices, engaging in spreading free trade amongst our trading partners, supporting them to buy more from the US, regaining commerce share lost to China, and investing heavily in our own people to help them fend off this attack from cheap AI alternatives that are coming for their jobs, at least for jobs that do not require a lot of highly skilled labor.

We do not see any of that. Instead what we see is the exact opposite.

Right now, due to the reserve currency status of the US dollar, the price pressures are relatively subdued. As the US can just print money, and the rest of the world must have dollars to trade, it is possible to spread inflation across the world. The day this ceases being the case, we are looking at persistent 7-10% inflation for years to come. This is why I was so bullish on Gold and gold miners like Newmont which within days has rallied more than 25% from that support I shared earlier last month.

Anyways, here’s how I view current S&P500 short term and long term price structure

The earnings are expanding. Driven by strong AI-related investment, analysts now expect S&P 500 earnings to reach roughly $380 per share next year. If AI spending continues at anything close to the current pace, there is little reason to doubt that number.

At the same time, the mega caps are taking on massive amounts of debt. With a few exceptions, they are refusing to issue additional shares because doing so dilutes existing equity. I view that as a signaling mechanism. These companies are effectively saying they are confident enough in future cash flows to take on debt rather than dilute shareholders. If they were far less certain about the future, issuing stock would be the easier route.

Google, in particular, has been issuing shares, which is extremely rare. Roughly $10 billion of its latest $80 billion offering was purchased by Berkshire at about a 6% discount. Google itself is now up around 20% from the support levels I highlighted immediately after earnings.

Then you have what I call the satellite companies of NVDA—NBIS, CoreWeave, AAOI and others that collectively make up the broader data-center trade.

These smaller companies are taking on enormous amounts of debt to expand capacity. I inherently view this group with suspicion, particularly CRWV, although in the short term I think they are probably fine.

It is the lenders I would be worried about.

I pity anyone lending to the likes of CRWV with abandon. At some point in the future, I think they are going to regret it.

For now, though, the picture remains incomplete. We probably will not get much more clarity until NVDA reports later this month.

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Will stocks ever crash?

Will AI companies ever generate meaningful returns on their multibillion-dollar investments?

Can someone short this market and make bank?

My answers—

Yes.

No.

No.

Why?

First, I do think this eventually unravels. Over the next year or two, we are likely to see meaningfully lower prices.

This massive AI investment juggernaut will create value, but that value will accrue to a very small group of people. In my view, it will not turn into the kind of sizable windfall that today’s biggest AI spenders are expecting.

But here is the more important point: anyone thinking this is an easy place to short and watch the profits roll in will likely be just as disappointed.

The problem with being short is that you are fighting, almost single-handedly, against a mob of funds and investors who believe the exact opposite.

For every dollar being shorted, there are a thousand dollars waiting to buy the dip—any dip.

That is why I think this market keeps inching higher and bleeding shorts until they finally give up.

Then, and only then, do we see the beginning of the end of this charade. I will share this in more detail in my weekly post, but long story short, do not step in front of this freight train. Not yet.

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For now, I think any dip into the 7,711–7,720 range could remain support, with the market currently around 7,750. From here, I think we are ready to make a run toward 8,000.

ALM

This is an older stock shared by me here around $10 before it almost ran unto $25.

It’s since been cut in half. Keep an eye out on this action. I think any dips on this can remain supported for another run into 25, and then 35s.

~ tic

Disclaimer: This newsletter is not intended to provide trading or investment advice but solely for general informational & educational purposes. It represents the personal opinions of the author, shared publicly with you as a personal blog. Engaging in futures, stocks, or bonds trading involves significant risk, and there is no guarantee of profit. In fact, there is a possibility of losing one’s entire investment. Utmost caution is advised. Your account can go to zero. The author does not guarantee any profit whatsoever, and the reader assumes the entire cost and risk of any trading or investing activities undertaken. The reader is solely responsible for making informed investment decisions. The owners/authors of this newsletter, its representatives, principals, moderators, and members are not registered as securities broker-dealers or investment advisors with the U.S. Securities and Exchange Commission, CFTC, or any other securities/regulatory authority. Consultation with a registered investment advisor, broker-dealer, and/or financial advisor is recommended. By accessing and utilizing this newsletter or any of its publications, the reader agrees to the terms set forth herein. Any screenshots used are courtesy of Ninja Trader, FinViz, Think or Swim, and/or Jigsaw, with whom the author has no affiliations. The information and quotes shared in this blog may contain inaccuracies, as markets are inherently risky and subject to unpredictable fluctuations. Additionally, the content of this blog is the intellectual property of the author, and its sharing or copying is strictly prohibited. By reading this blog, the reader accepts these terms and conditions and acknowledges that it is intended solely as a personal trading journal and nothing more.

Excellent rallies across the board, very wide breadth, leader orderflow stocks taking full control of the situation — MSFT, GOOG, META, AMZN just to name a few.

Not really much news t…

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You have to bear in mind that market reaction to geopolitical headlines and the actual underlying conflict are two very different things.

President Trump’s comments over the weekend about halting a military strike in exchange for a “rapid deal” and Iran abandoning its nuclear program are naturally going to give algorithms and short-term traders something to chase on Monday.

The immediate assumption being that the Strait of Hormuz could reopen and the situation could quickly de-escalate. But anyone treating one weekend headline as evidence that the broader conflict has been resolved is being disingenuous.

There may be a short-term trade around the headline, but that does not change the structural realities behind the conflict. You cannot use an algorithm-driven market reaction as a valid argument that the geopolitical risk has suddenly disappeared. This thing is headed for a showdown.

Mirage of headlines versus the hard reality. Think Beyond the Headlines.

The current headline narrative is built on shifting foundations. While the US administration claims military strikes are paused pending an immediate deal to end Iran’s nuclear threat and reopen shipping lanes, Iranian state media (both Mehr and Fars) have firmly denied requesting a pause, labeling the claims as a lie and maintaining that the Strait of Hormuz will remain closed as long as US hostility continues.

This is now a pattern.

Deeply entrenched conflicts of this scale do not resolve overnight, especially following decapitation strikes on a nation’s leadership. I do not believe that Iran’s post Mullah power structure can afford to appear to capitulate entirely to military pressure without losing domestic and regional legitimacy. Then, there are other foreign powers like China and Russia which are very much vested in keeping this going for as long as they can.

From my perspective, the trajectory points toward prolonged, volatile negotiations punctuated here and there by asymmetric military escalations, rather than a clean, rapid resolution and peace in the region. Any ceasefire will likely be tactical (to rebuild or reorganize) rather than a permanent strategic end game. I mean just look at Ukraine Russia conflict now almost half a decade old.

The new status quo in energy markets

Iran’s overarching defense policy has permanently shifted toward decentralized, asymmetric warfare. They think they can win.

By blocking the Strait of Hormuz and utilizing proxy forces in the region to strike US-aligned Arab countries (such as Saudi Arabia and in particular the UAE), Iran has proven it can effectively weaponize the global economy. Had it not been for a bunch of AI stocks and a gentle nudge from the President, we will be trading far below the April lows at the moment, not here at 7500!

Look, even if a temporary peace agreement is reached, which I highly doubt, the vulnerability of global energy chokepoints has been exposed. Iran will not permanently discard its most effective leverage. Markets must price in the reality that the Strait of Hormuz is no longer a guaranteed transit route. Now you may think the “cleaner energies” will take over and mitigate some of this damage. Well, we just banned all inverter imports and china happens to be the manufacturer of 80% of clean energy inverters!

The other notion that Iran will wholly and immediately abandon its nuclear program in a single, rapid deal, as indicated by Trump, contradicts decades of Iranian strategic military doctrine. The nuclear program is viewed by Tehran as its ultimate insurance policy against regime change—they are not going to give it up that easily.

So in my view, Iran will likely use its nuclear capabilities as a dial to be turned up or down depending on the immediate pressure it faces, but the core infrastructure and knowledge base will be fiercely protected. We are looking at heighten regional tensions, and hence a premium to the energy markets for years to come. This is a permanent plateau with no backing down now.

If you are focusing on the daily news cycle, you are missing major, multi-year macro shifts triggered by these current policies:

• Massive and Permanent Energy Sector Realignment: A permanent geopolitical risk premium will remain attached to Middle Eastern oil and gas. This accelerates the long-term trends toward energy independence in the West, heavily incentivizing investments in domestic production (US shale as an example), alternative energy infrastructure, and non Middle East/Gulf supply chains altogether. The fact that these AI installations guzzle up an entire city’s worth of energy needs a day will hasten this transition.

• A Ballooning Defense and Security Boom: The US is currently absorbing massive costs due to this war, it is estimated at over $113 billion by mid-2026 alone, and Department of War has requested a record-breaking Pentagon budgets ($1.5 trillion). The long-term trajectory is a sustained boom in defense related capabilities — contracting, drone warfare, maritime warfare, missiles, intelligence. Hence my bullish call on ITA here just a few days ago at 230. Or even a Boeing at 150!

• Shifting Alliances, Gulf State Diversification: Saudi Arabia and the UAE, having faced direct threats to their energy infrastructure, will accelerate decoupling of their long term reliance on the US and US dollar. They do so by not only investing heavily in new oil pipelines rather than rely on the Strait but also they will come closer to China. The world is changing extremely rapidly, on a week by week basis.

To sum it up…

A “rapid peace deal” may provide a brief relief rally in global markets, but the structural damage to US-Iran relations and regional stability has already been done. This is not going to be an overnight fix, and perhaps this is not going to be ever fixed.

The long game is defined by elevated military spending, permanent energy supply chain vulnerabilities, and a Middle East that operates under a constant, low boil threat of asymmetric warfare. Anyone who thinks otherwise perhaps is being too naive.

The end of the bull market?

While all of this is playing out, the AI related investment in the US remains strong.

Valuations remain extremely stretched. The persistent “higher for longer” interest rate environment increases the cost of capital for everyday businesses, pressuring profit margins and consumer spending. Investors naturally begin looking to cycle out of high-growth tech stocks into defensive sectors (like utilities, consumer staples or healthcare) to protect their gains. Some on the Wall Street are pointing to the latest development in the Japanese currency markets, where the US has gone to extreme lengths so as to start buying Japanese Yen— as some sort of carry trade unwind, that portends ill omens for the US stocks.

In my view, against such dramatic background, the AI trade remains an exception, a secular tailwind…

This is why I have been saying for a few weeks now that if you want to see a deeper sell off towards 7200s, you need to see this market begin closing below 7403.

My view is influenced by a key secular trend —

The investment in AI is not currently driven by consumer sentiment, it is being driven by an existential arms race amongst hyperscalers. These companies are pouring hundreds of billions of dollars into domestic AI infrastructure because the perceived risk of falling behind in the AI race is far greater than the risk of overspending. They would rather go bankrupt than be perceived as AI losers.

So, while macro risks weigh, valuations are stifling, inflation is rearing its ugly head again and geopolitics remains a mess, there is one shining light in the risk asset landscape which has so far don a robust job of keeping the ship from sinking.

This 7400 or so level on the emini S&P500 remains sacrosanct. Here a few intermediate levels and some other themes like SPCX going into the week ahead—

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I will keep an eye out on 7480 or so this week as an intermediately key level. I think if we hold this level, we are going to trade into 7537 or so, and a daily close above 7537 sets sights on 7700.

If you are super bearish here, I think it behooves to see us go trade below 7403. Minus this scenario, I do not think this is the best timing to be bearish yet.

From a timing perspective when this bubble bursts, context is key.

This context could appear as early as next month when NVDA reports. Or it could linger on for a year or so more.

I think the greatest risk to the AI narrative is not a broad economic recession, but the ROI time frame. If the hyperscalers spend trillions on data centers and power grids, but the underlying AI software applications fail to generate sufficient revenue to justify those costs within the next 1-2 years, capital expenditure will be slashed. If AI spending slows down at the exact same time the broader economy is struggling, it would likely trigger a severe, cross sector bear market reminiscent very much of the dot-com bubble bursting. Now, this is why even when consumer remains stressed, and border economy is in shambles, the markets have barely budged. You need to see material reduction in CAPEX and most of the big tech earnings have gone, and I have not seen a meaningful dent in the spend. Not yet.

This keeps the AI bullish story at play.

Now, tomorrow if we crash below 7403 then some may come out strongly suggesting this is the end. I beg to differ again. A break of 7400 and an opportunity to buy at 7000 is a gift for me personally. Now for me to change my mind, NVDA will have to flop spectacularly when they report in next few weeks. Minus that, I think line of least resistance remains up.

Some may say “but what about Micron” and the likes of SNDK.

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We are barely down 3% from the all time highs.

As a matter of fact, we are not even in a correction yet.

But.. this could all change quickly.

In orderflow, we do not …

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One surprise was Google stock, wh…

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With key earnings on tap, we should soon see some sort of resolution here in a week or two.

Tesla earnings happens to be tomorrow.

Options traders are very bullish on Tesla, going into the earnings, with most money flowing into calls and the traders calling for a 6% move in the stock.

The stock itself had a very nice day up nearly 3%, buoyed by new robot taxi launches in Florida cities.

From my perspective, I am not questioning Tesla’s prowess when it comes to autonomous driving. What I question is the valuation. I think this stock is very expensive and no other stock comes close.

To make matters worst, you have this market structurally allocating more weight to non Ai players, like AAPL. AAPL for instance now sells at 11 times sales, the highest ever on record. So in my mind, either AAPL is overvalued and TSLA is undervalued, or vice versa, but both cannot be cheap at the same time.

A lot of these companies command a trillion dollar valuations but they should not. Do I think TSLA really is a 1500 billion dollar behemoth?

The way I prefer to play TSLA is that a) if it were to sell down to 350s in near future (probably won’t happen this week or next), and b) the general market remains supported around 7400, I think it is an attractive TSLA set up.

I personally cannot chase TSLA here so close to 390. Now had it not broken 390, we could have a different conversation.

I personally think there are better momentum names out there— did you see action today in AAOI, SMCI, Micron, FCX and dozens more? All shared here in this very Stack just a few days ago? I like what’s been working, not need to reinvent the wheel.

On the general market side, I think the action today was decent. But we need to hold the 7450 level going thru these earnings.

If we retest and hold 7450, I think we could try and make another swipe at 7600. We last traded 7540 at time of this post.

~ tic

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Disclaimer: This newsletter is not intended to provide trading or investment advice but solely for general informational & educational purposes. It represents the personal opinions of the author, shared publicly with you as a personal blog. Engaging in futures, stocks, or bonds trading involves significant risk, and there is no guarantee of profit. In fact, there is a possibility of losing one’s entire investment. Utmost caution is advised. Your account can go to zero. The author does not guarantee any profit whatsoever, and the reader assumes the entire cost and risk of any trading or investing activities undertaken. The reader is solely responsible for making informed investment decisions. The owners/authors of this newsletter, its representatives, principals, moderators, and members are not registered as securities broker-dealers or investment advisors with the U.S. Securities and Exchange Commission, CFTC, or any other securities/regulatory authority. Consultation with a registered investment advisor, broker-dealer, and/or financial advisor is recommended. By accessing and utilizing this newsletter or any of its publications, the reader agrees to the terms set forth herein. Any screenshots used are courtesy of Ninja Trader, FinViz, Think or Swim, and/or Jigsaw, with whom the author has no affiliations. The information and quotes shared in this blog may contain inaccuracies, as markets are inherently risky and subject to unpredictable fluctuations. Additionally, the content of this blog is the intellectual property of the author, and its sharing or copying is strictly prohibited. By reading this blog, the reader accepts these terms and conditions and acknowledges that it is intended solely as a personal trading journal and nothing more.

Reading between the lines, the argument seems to be that the cheap Chinese AI threatens future gains and erodes profitability of large US companies that have invested significantly in AI buildup.

In my opinion, the premise that a significant discrepancy in AI cost structures between the US and China is a primary driver for recent market sell-offs is a compelling thesis. It touches upon fundamental economic principles regarding technology adoption, commoditization, and global competitiveness.

I want to spend a few minutes talking about merits of this thesis and then conclude why it is really a mixed bag and not “winner takes all” sort of dynamic.

The US Cost Structure for AI is Unsustainably High

The core of this argument rests on the capital-intensive nature of current US AI development.

The US strategy has largely focused on training massive, general-purpose frontier models (like GPT-4 or Gemini 1.5 Pro). This approach requires:

• Massive Compute (CapEx): Acquiring tens of thousands of advanced GPUs (primarily NVIDIA H100s/B200s).

• Energy Intensive: The energy required to run and cool these data centers is enormous and growing.

• Talent Scarcity: Highly specialized AI researchers and engineers command premium salaries. These costs alone can run into several hundred million dollars.

• Data Acquisition: The costs associated with securing high-quality, licensed training data are increasing.

These high fixed and variable costs necessitate high inference pricing (the cost per token) to achieve profitability or recoup investments. In other words, in the US everything is far more expensive, compared to China. If the cost of generating intelligence remains high, the number of economically viable use cases is restricted. Businesses will only adopt AI if the value generated exceeds the cost of API calls or enterprise subscriptions. High costs limit widespread, pervasive integration, potentially stalling the anticipated “AI revolution” in productivity.

China Offers “Cents on the Dollar” AI

The second part of the thesis asserts that China has achieved a drastically lower cost structure for AI inference. Several factors contribute to this dynamic:

• Intense Domestic Competition: A price war has emerged among major Chinese tech firms (Baidu, Alibaba, Tencent, ByteDance, DeepSeek, et cetera) driving API costs down significantly, sometimes offering basic models for free to gain market share.

• Open Source Leverage: Chinese developers rapidly adopt, iterate upon, and fine-tune powerful open-source models (like LLaMA 3) rather than always building from scratch, saving immense training costs.

• Hardware Ecosystem: While restricted from top-tier NVIDIA chips, China is developing robust domestic alternatives (like Huawei for instance) and maximizing the efficiency of older or less powerful chips, potentially leading to lower overall CapEx per unit of compute in some specific architectures.

• Government Subsidies and Support: Direct and indirect support can artificially lower operating costs (for example, subsidized energy or tax free land for data centers).

• Lower Labor Costs: Engineering talent, while highly skilled, generally costs less than in Silicon Valley. In fact many of these researches have been poached from Silicon Valley, sort of a reverse “Brian Drain”.

AI Flattens the Technology Edge

This is the most critical implication of the thesis that if good-enough AI becomes extremely cheap globally, the absolute superiority of the US frontier models may not translate to expected economic dominance.

If a Chinese model that is 90% as capable as GPT-4 costs 1% of the price, many businesses will choose the cheaper option for routine tasks. The intelligence provided by AI now becomes a commodity.

• The “Good Enough” Threshold: For many applications (basic customer service, standard code generation, simple drafting), the highest-tier reasoning is unnecessary. A lower-cost, slightly less capable model is economically preferable.

• Focus on Application, Not Models: If the foundational intelligence is cheap and ubiquitous, the competitive advantage shifts from building the model to applying it. Whoever builds the best applications, workflows, and user interfaces wins, regardless of where the foundational model was trained. The application of intelligence, or knowledge is where historically the US always has had an edge. This is why you have Amazon, you have FaceBook, iPhone, an interstate highway system, et cetera.

If investors realize that the massive CapEx being deployed by US tech giants (the so called hyperscalers) might not result in monopolistic pricing power because of cheap, globally available alternatives (either from China or open-source), they will re-evaluate the immense valuations of these companies. The anticipated return on investment or these AI mega-projects becomes highly uncertain.

Nuance is the Devil’s Advocate

While the cost structure argument as a foundation of bear market case is strong, it’s important to consider a few nuances—

1. The Premium for the Frontier: There are high-value, complex problems (scientific discovery, advanced autonomous agents, complex strategic planning) where the absolute best reasoning is required, regardless of cost. The US maintains a lead here, and this segment could be highly lucrative.

2. Ecosystem and Integration: US hyperscalers (Microsoft, Google, Amazon) offer tight integration with existing enterprise software ecosystems. The switching costs and security concerns of moving enterprise data to cheaper, foreign models are significant barriers. I do not see the world moving away from Microsoft Office Products anytime soon.

3. The Open Source Factor: The US also benefits from a massive open-source community (led by Meta, Mistral). The commoditization pressure isn’t just coming from China, it’s domestic as well.

4. Security and Regulation: Geopolitical tensions and data sovereignty laws make it highly unlikely that critical US or European infrastructure will rely on Chinese AI models, regardless of price. In fact the reverse is true. The market remains somewhat bifurcated. This is probably not going to change in next few decades.

The thesis that US AI cost structures are a vulnerability is valid and likely a contributing factor to market anxiety. If intelligence becomes a cheap commodity faster than US companies can recoup their massive infrastructure investments, the economic fallout could be significant.

However, this effect is not absolute. The US likely retains a significant edge in absolute capabilities and enterprise ecosystem integration. The key question for investors is whether the market for premium AI is large enough to justify the current US cost structure and hence the valuations, or if the future belongs to the Chinese cheap but good enough AI. I will leave on this note as a food for thought.

Now the other widely discussed catalyst for late last week's market sell-off was the conflict in Iran. While I currently view this as a non-factor, investors must still account for the unpredictability of Donald Trump’s social media activity. He is now selling premium subscriptions to his feed for up to $100,000 a month. This creates a clear financial incentive for him to generate market-moving 'drama' in order to validate the rather considerable price tag for his subscribers. But again, in overall scheme of things, Middle East drama needs to be weighed less than this new threat from China in form of “good enough” cheap AI.

So what does all this mean for stocks?

Well, depends on which stocks. I do not think that even within the tech space, this dynamic will impact everyone equally.

So, for instance, AAPL has been making new all time highs even when Nasdaq itself has been selling off aggressively.

See below for my thesis in Apple not even a few days ago.

Now, momentum has been thrashed like there is no tomorrow of late. Problem with momentum is that it is a 2 edged sword. The same momentum stock that can go up a 1000%, a 2000%, can also go down 50%, even 80%. See below my recent note on Micron.

When we see structural uncertainty like we are seeing at the moment, we will look elsewhere for good stocks and if I am going to touch a momentum stock in a severe downtrend, I will cut it lose if it accelerates going down, use longer dated cheaper options to play it, or avoid it altogether until it begins showing some signs of balance and life.

Look at AAOI for instance.

This stock had gone up a 1000% from my levels below.

Alas, now it’s been cut in half from recent highs.

So here at 100 dollars, if I am going to touch AAOI, it will have to be either a waiting game for stock to firm up, or use options to play it, minimize potential loss.

One such example is that if you look at 120 dollar, June 2027 call, it is now selling for $43.

43! For a 100 dollar stock!

Such is the level of fear in this market when it comes to AAOI that someone is willing to offer this call at 43 bucks, almost 50% of underlying stock’s current price.

Now usually such level of fear is justified— the market maker fears that the company will go bankrupt or bust soon. Now stocks go to 0 more often than you think they do, but in this very instance, if I am bullish on AAOI in the moment, this call can help lower my MAX loss in case of bankruptcy.

How is that?

If I own 100 shares of AAOI at 100 dollars, this is $10,000 of my capital in AAOI, and if I sell this $42 CALL, I will receive a $4200 credit from the market which will lower my purchase price of 100 shares of AAOI from $10,000 to $5800 (since I received that credit).

Now fast forward to 2027 June, if AAOI zips past $120, I make $6200 on this trade, which is 62% gain for a year. I am assuming the reader understands basic options and how these covered calls work. While this will limit my potential gains on AAOI, at the same time, if AAOI goes to 0 by June of next year, my MAX loss will be 5800 on this trade, rather than $10,000.

Even if AAOI crashes to $ 70 by June next year, I will still have made about a 12% profit on this trade, since I received that call credit.

This is but an example of how downward momentum stocks can be managed, if I must trade them. This works out ok if you have a stock at a decent support level. So for instance, if micron was around 700 at the moment, I will look into such covered call strategies going out 3 to 6 months. Now at 850, it may or may not be such a great strategy in a stock that just lost 35% of its value.

Funny thing with momentum is how fast the narrative shifts. At 1200, Micron was going to be a $5 trillion dollar company and now at 800, it is going to 0!

Reality is rarely so “Black and white”. So for instance, for all the detractors of Micron and RAM, all those robots and agents that will soon be ubiquitous will consume a ton of memory for inference. So, some of these valuations of stocks like Micron are very much so justified. It is really a matter of holding it at fair prices and then be open to tolerating volatility.

These type of option strategies are usually best for range bound stocks or stocks at really good support levels but which can be expected to form a range for next months to year out.

NFLX being another example.

Netflix here at 65 in my view is really at good levels. But at the same time, can I rule out another 20% move down in NFLX?

To soften the blow if NFLX does sells down another 20%, I may use a CALL expiring next June selling right now for 6 bucks. I received 600 dollars in credit for my services which is basically owning 6500 dollars worth of NFLX as example. If NFLX by then collapses below $59, my max loss is reduced by $600 on this trade.

Now you can decide if a stock like NFLX can blow past $85 in next year. If it does, you still make $2600. Almost a 40% trade.

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Fate of these type of stocks in near term will come down to the general market which has broken a key level last week.

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Yet, there is a lot of carnage and violence going on in one section of the market, whereas other stocks be it SCHD, Apple, even an ACN today, continue to do well and either approach or make all time highs.

So, this is a very localized pressure confined at this moment to a smaller segment of this market, which I believe has been due to leverage and margin lending. I do not think this is a technical sell off but rather a positioning sell off. Crowded trade getting demolished.

3% of Korean working age populace is facing a margin call at the moment. All thanks to tremendous amount of margin buying of stocks near or at highs. This tells you the retail folks voraciously dipped their toes into these momentum type names, and toes were dipped at 1200-1250, rather than when our folks first had this at 80 bucks (last year)!

So, this fluff will need to work itself out. A few funds will blow up, this margin pressure will eventually get drained out of the market.

Until then we have to rely on orderflow levels and related markets.

Now, from my post yesterday I warned against chasing this at 7640, and lo and behold we sold down into 7547 which is a key weekly level, unable to take it out.

Now if you have been a long time reader, you know I am simply sharing my view of correlated markets and tape reading — the thing again with prices action and orderflow is that they are dynamic and evolving 24X7. Now take instance of this tertiary level from Sunday— it would have been nice for the bears if we closed below this level.

Since we did not, I would think we can leverage this as support for the session tomorrow .

I think this tug or war or ping pong may continue until we resolve it by a break above 7640.

If you are super bearish here, I will think that a close below 7450 is much warranted (now 7569).

I think as long as we hold 7450, there is risk for a breakout higher into 7700.

Even to get to 7450 we need to take out this weekly tertiary level, so there is that.

Lemme know what you think.

~ tic

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Disclaimer: This newsletter is not intended to provide trading or investment advice but solely for general informational & educational purposes. It represents the personal opinions of the author, shared publicly with you as a personal blog. Engaging in futures, stocks, or bonds trading involves significant risk, and there is no guarantee of profit. In fact, there is a possibility of losing one’s entire investment. Utmost caution is advised. Your account can go to zero. The author does not guarantee any profit whatsoever, and the reader assumes the entire cost and risk of any trading or investing activities undertaken. The reader is solely responsible for making informed investment decisions. The owners/authors of this newsletter, its representatives, principals, moderators, and members are not registered as securities broker-dealers or investment advisors with the U.S. Securities and Exchange Commission, CFTC, or any other securities/regulatory authority. Consultation with a registered investment advisor, broker-dealer, and/or financial advisor is recommended. By accessing and utilizing this newsletter or any of its publications, the reader agrees to the terms set forth herein. Any screenshots used are courtesy of Ninja Trader, FinViz, Think or Swim, and/or Jigsaw, with whom the author has no affiliations. The information and quotes shared in this blog may contain inaccuracies, as markets are inherently risky and subject to unpredictable fluctuations. Additionally, the content of this blog is the intellectual property of the author, and its sharing or copying is strictly prohibited. By reading this blog, the reader accepts these terms and conditions and acknowledges that it is intended solely as a personal trading journal and nothing more.

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