Last week the crowd got bearish, after SPX closed red on the first two days of July and tech and semis got clobbered. We remained resolutely bullish and urged to give the benefit of the doubt to the bulls.

We closed out some SPY calls for a 51% gain. We also took an ES trade and closed it out for -2 pts.

Overall not too much action last week as it was a choppy/consolidation focused week. We ended the week on the highs, but also still below the old all time highs set in June.

Over the weekend more Iran news, CPI on Tuesday, and we have Warsh testifying on Tue/Wed. Should see volatility return here. And I lean towards buying the dip. The fundamentals and earnings growth is simply too strong to be bearish at this point.

Next move for markets

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In the last couple of weeks, we called out the pension fund rebalancing in late June as a reason to be cautious on stocks, then last week we said buy the dip. Both calls worked out very well.

As usual, we waited patiently for the perfect setup, this time it was a dip buy the morning Warsh spoke, at 7513. We booked a 50 pt gain and some runners that were stopped out but was good for up to 80 points.

The calls we are still swinging, for now.

Last week, despite SPX finishing up just shy of 2% on the week, quite a strong week, it was notable SPX and NDX both closed red on July 1 and July 2. Historically, the odds for both these days to be green are over 70%. As in the first day of July and the last day before Independence Day. So it was unusual. Anytime the unexpected happens in markets you have to wonder if something has changed in the trend.

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Last week we called out the significance of quarter end rebalancing and how that might foreshadow weakness for stocks in the coming week.

I also said I believe we are headed to new highs. I still do. Last week we saw the flows dominate the tape (quarter end rebalancing) and this next week we will see the same thing except with the flow now favoring the bulls. The data is pretty clear.

Next move for markets

Up. Everyone knows that July is a very bullish month for stocks. This is true. Not everyone knows the true extent of it. The next two weeks are the most bullish two weeks for stocks out of the entire year. And its by a landslide. Every year when this time comes around, the question isnt if you go long. The question is why should you not go long. There’s probably a 80%+ chance you make money here going long, on the off chance you lose you have no regrets because the trade was obvious and not really debatable.

Not only the most bullish month of the year, but its by quite a significant margin. The next best month after July’s hefty 1.67% return is December at only 1.28%. Some people can fall into sort of a seasonality trap, as they think it override everything else. There are many factors at play in determining short term market direction. However, this is an extreme outlier in seasonal returns, it takes on more significant than usual. Not only is it the most bullish month, its the most skewed month (bullish or bearish) of the entire year.

But wait theres more. On top of being the most bullish month of the year, in July that excess return is actually even more concentrated in the first two weeks. As you can see, just the first two weeks alone account for a roughly 2.43% average return. For some perspective, the SPX returns about 9% a year on average going back 100 years, so this is quite significant. Whats even more bullish than that, is its a straight line up. There are, in a typical July, no significant dips either in those first two weeks. Of course this is an average over a very large sample size, so you cant read too much into it. But the trend is as clear as can be.

A natural question one might have about this data is what causes such outsized performance, I mean a 98 year sample size is not random. It is two things, one, the start of the 2H of the year and all the associated new inflows and capital deployment. Second, its the start of earnings season. Earnings growth are the biggest driver of stocks, period. We just happen to be in the most robust earnings environment right now, since 2021 when the economy opened back up after the COVID shutdowns. Its common knowledge how strong earnings have been driven by AI investment, with the upcomings earnings growth estimated to come in at around 22%. Here this chart shows multiple years, and you can see what was “normal” earnings growth for a long time, and seeing that juxtaposed with the current years is really quite shocking. These are the largest companies in the entire world. Look how fast they are growing. Furthermore, you look at what SPX did in 2023, 2024, 2025, those were extremely strong years for stocks! And now what we have is an earnings environment where YoY growth has practically DOUBLED.

Id argue 2026 is actually an even better year than it looks, the YoY comps we had in 2021 were quite depressed, both because of COVID and because post COVID we saw a huge inflection upwards of earnings. 2025 was a great year, for 2026 to show such explosive growth using that as a benchmark is really remarkable. There’s been a ton of FUD lately, whether its Iran, or SPCX, or the AI bubble popping 10x a week. In the end explosive earnings growth will keep pressuring the market higher and higher. Dips are mostly buying opportunties until this changes.

There are uneducated people out there who keep screaming about a stock market bubble. A bubble with forward earnings at 20x is laughably stupid. 99% of people just repeat what other people say, they lack the capability to think for themselves. For reference, the 5 year forward PE average is 19.9. The entire rally the last 12 months is 100% explained by earnings growth, there has been zero multiple expansion. You look at MU, or Korea, these are companies/sectors that trade in the neighborhood of 7x forward PE right now. Yes they are cyclical companies, but its hard to argue thats at all euphoric. I dont see euphoria right now, I see fear and apprehension.

As you can see earnings and SPX price always end up converging over long periods of time, and they follow the same general trend. Right now we are undershooting, and quite a large gap is growing. The FUD machine has been working in overtime lately. But price always catches up to earnings, as smart money realizes its a buying opportunity. When price starts to overshoot earnings growth, thats when you should be leaning more cautious.

Why has price failed to make new highs? I think there a couple of factors to blame. Firstly, was Warsh’s first FOMC. He was widely expected to be hawkish, and he was. What really was tough for the market to digest was how opaque and vague he was. He refused to answer the most basic questions and kept on stonewalling with “we have a task force for that” over and over gain. That was not appreciated by the market. But now that more than a week has passed, we have seen market pricing reverse all the post FOMC hawkish moves, with the 2yr being ground zero. Yields are falling rapidly, oil is falling rapidly, I dont believe there will be hikes this year. Warsh’s whole MO is no forward guidance. That’s his defining character. Yet the market consensus last week was that he was guiding to hikes. The fact that the committee couldnt bring itself to hike with CPI at 4.2%, now with inflation falling rapidly, how do they justify a hike from much lower levels? I believe FOMC was a hawkish overreaction, and we are seeing markets walk back some of that hawkish pricing the week past.

Besides obviously bonds and oil, for a further clue on the Fed’s next move you can use Biotech as a clue. Biotech is infamously the most long duration asset. Companies borrow huge amounts of money, to develop drugs for years and decades that may one day pay off in the future. We are seeing a huge rally in biotech post FOMC, the last thing you would see before a hiking cycle. Biotech led the turn (down) in late 2021 before the market itself as it sniffed out a hawkish Fed.

I prefer to let the market do the talking, but my genuine view of FOMC was that he was quite dovish. He was extremely firm on inflation going back to 2%, but then who wouldnt be? His first goal was to establish credibility, and he did that. How many times did Powell reaffirm the 2% target, yet we spent 5 years above it? I think the dovish tilt was that, he was going to be the one to ultimately decide how that 2% target is measured. They will get to 2%, it will just be a handpicked Kevin Warsh basket of inflation measures.

The other reason for the market wobble, was the huge pension rebalancing flows we called out last week. We knew about those ahead of time, so hopefully that helps you avoid too much of a bearish bias. These are multi billion dollar behemoths rebalancing out of necessity, not of choice. Many of these mega funds target something like a 7% CAGR, to fulfill their pension obligations. So if equities are up 15% in a quarter, it would be downright irresponsbile to not deglide and sell equities to buy bonds. This is a flow that has a beginning, middle, and an end. Historically the flow is pretty much done at T-1 or T-2, which would be Monday or Tuesday.

The last factor for the market wobble was a good old fashioned positioning reset. Things got a little overheated in April/May as SPX rallied almost 20% off the lows, as massive move by any standard. We got a healthy correction in both price and time, but none of the underlying bull factors have changed I believe.

I was surprised to find out the GS hyperscaler basket (basically Mag 7 ex tsla/appl) had its worst month in over 14 years. This was the weak hands selling mega caps as they are afraid they will go bankrupt on Capex. Whether they are right or not is TBD, but I think after such a massive move to the downside, going into July and earnings season, we will likely see some mean reversion and dip buying.

This is hedge fund exposure to Mag 7. Quite the precipitous drop this year on CAPEX spending fears. If you omit Liberation day (event driven) we have rarely been this low in exposure to Mag 7 the past 5 years or so. These are still the highest quality businesses in the world. Last quarter we saw pockets of acceleration in growth due to AI, Google being the primary winner. Will we see more of that this quarter? That could set off this cohort in a big way. There is also speculation that the market will reward handsomely any hyperscalers who take on a more restrained view to CAPEX and given some horrid performances of their respective stocks this year we could be seeing that too. MSFT and META are the main “losers” so far of this CAPEX binge so they are primary candidates. I think ultimately, theres not much meat left on the bone of the sell Mag 7 trade.

As for hedge fund positioning writ large, I would say its in depressed territory. Overall gross and nets on a 1yr lookback are 0% and 24%. Its rare to see them this low or any lower. NDX was just down 4% last week, SOX actually had its worst week since Liberation Day. Going into earnings season and the most bullish month of the year I imagine we see hedge funds as an aggregate net buyers. With momentum especially weak in July seasonally, that could be a rotation from out of Semis into Mag 7 and other.

To sum up, we enter the most bullish month of the year, and the most bullish 2 week period of the entire year. The SPX over a 98 year period delivers on average a 2.43% return from July 1 to July 15. The positioning backdrop is quite favorable going into this period also, as the market corrected pretty nicely in June, and it seems the general market participant is quite fearful due to Iran, IPO worries, AI bubble worries, and run of the mill pension rebalancing. This market remains a fundamental story of outstanding earnings growth, and I believe it will prove that again in July. I think market overdid some hawkish market pricing, which has already been walked back in many assets. I think all time highs are on deck by mid July.

Trade Ideas

Will alert in the chat

We had an extraordinary week last week.

We caught a major swing low in the first week of June. When all the chips were down, we were right in a big way. Now we are watching the money pile up. Be right and sit tight as they say. Sure you can make 10-20 trades a week, eke out small gains. Or you can size up with conviction at major turning points, make alot more money and work alot less hard. I prefer the latter.

QQQ is up 4.4% from our entry. EWY is up a whopping 23.8% from our entry. And we hit it with major size. SPX is up 9.4% YTD. Look what we made in 2 weeks with the right timing and conviction.

The green arrow is where we bought, and with 30% weighting in the portfolio. Enough said.

We also are still swinging some calls from a couple weeks ago and those are up about 20%.

We had no losing trades.

Its officially the end of the quarter in the next week or so. How to navigate the indiscriminate rebalancing flows.

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Last week we bought the dip and are up quite substantially.

QQQ is now trading at 722, and EWY at 197.

We also bought SPY calls mid week, which are up about 20%.

The only trade we took that was a loser was an ES long that got stopped out when Trump said the war was back on. Otherwise a fantastic week.

At this point all signs from both sides point to a deal being imminent. The exact date who knows but time to start planning for a post-deal world, is it priced in by now?

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Last week we took two long trades in the ES. Both winners.

We went long post AVGO earnings at around 7560s. We sold the next day over 7600, and the rest we got stopped out at breakeven. We didnt make much money to be honest. But what really matters, is we were not long at all, in any way shape or form going into Friday. When many were wiped out.

As Buffett famously says cash is a call option. The market experienced a volaitlity shock, and that means opportunity is abound.

As we enter the Summer months, experienced traders know, it can be a slog. So we got a bit of a gift from the market here, you get a last chance to position for the Summer here.

Next move for markets

Up. I have been crystal clear about my thoughts and views of the market for months now. I will reiterate. Consensus is too bearish on the AI trade. Thats institutions, retail, households everyone. The contrarian trade right here right now is long the AI factor and that defacto means long the equity indices. We are early to this trade. The rally we have seen thus far this year, has been all fundamentals. All of it. There is no euphoria in the market writ large - only in select pockets. Meme stocks and the reddit crowd. That is due to simply the rise of retail trading, no commission brokers and such and I think that is idiosyncratic to certain single names. On the index level, the megacap level, there is no euphoria. There is instead a guarded caution and apprehensiveness. I think price needs to catch up to earnings, number one. Number two, I think the 21x forward PE multiple is too low for this environment. Considering economic growth, easy monetary policy, an executive branch that is both literally and figuratively invested in the stock market. Lastly, most importantly equities need to price in the uncertainty premium here. For the first time in a while its not left tail uncertainty but right tail uncertainty. A short term price target I have for the SPX is 8000 and I think back half of July into August is a reasonable time frame for that.

The market right now is driven by a pure fundamental story. The most important determinant for stock prices in the medium and long term is earnings. When people point out bad breadth as a reason to be cautious or bearish on stocks I laugh. Its supposed to be that way. When AI infra stocks are ripping its because their earnings are exploding. If we had good breadth, that would be bearish paradoxically. It would signify euphoria and excessive risk taking. AI stocks are going up because their earnings are. Why should SPXEW go up, if its earnings are flaccid. The broad market ex-AI doesnt deserve to go up because earnings growth is not inflecting higher. So the bottom line here is bad breadth is not bearish. Its an indicator of the market being in pristine health. The stocks that are earnings the most are going up the most. Its purely meritocratic.

What been the engine driving all this economic and earnings growth? Its been hyperscaler capex into AI infrastructure. The latest estimates continue to be quite robust and show an elevated level for both 2Q and 3Q of calendar year 2026. Things are expected to taper off next year. But, the most common trend with capex estimates, has been they have been drastically underestimated at every turn. Recall what I said in the beginning of this post. Consensus is way too bearish on AI and they keep underestimating growth, investment at every single turn.

I have some general advice in terms of helping center yourself and views on the AI trade. First acknowledge, that you dont know that much and youre not that smart. Check your ego at the door. Good advice for everything in life. I would be deferring to the tech CEOs here, listen to what theyre saying. They arent making it a secret, they arent talking in code or riddles. They keep doubling down on AI at every single turn, with extremely high conviction. The people who seem to be most bearish on AI, and the most skeptical are people with no background in technology. I am not an AI expert, period. I will defer to the people who are. The crowd looks at AI capex and thinks how stupid of the CEOs to invest so much money without promised return. I look at the same situation and think, these hyperscaler CEOs, who are much smarter than you or I, who have the most intelligent people and unimaginable resources at their disposal, are going All-In on this techonology. I wouldnt be fading that to listen to some doomer pundit.

A key market event this week was the GOOG ATM offering and equity raise. This was pivotal moment not just for themselves but Mag 7 broadly. META lately floated a test balloon on Friday. GOOG, META, and most of the other Mag 7 companies have been resolutely buying back shares and shrinking their share count for years now on a consistent basis. This is a cleary move away from that a signal of a regime shift. Everyone’s focused on the equity supply and how the market will digest it and overall see it as a bearish occurrence. I am the exact opposite. These CEOs are not idiots, they know what an equity raise means and implies for shareholders - yet they decided to proceeed despite that. Reading between the lines, the opportunity set for AI is so large and transformative, no sacrifice is too big. I look at the GOOG equity raise and think for the medium and long term nothing could be more bullish than that. What you do not want to see under any circumstances is a hyperscaler cutting back on capex. That means they think the juice aint worth the squeeze anymore. Both Sundar and Zuckerberg both this week just doubled down on the AI trade. They are both billionaire CEOs for a reason, its not because they are idiots. Earnings growth, institutional flows, executive actions by the leaders of corporate America - they are all aligned on the long AI trade and keep doubling down.

From a technical standpoint, many are worried about how the market will digest the supply from SPCX, and later anthropic and openai, along now with GOOG/META. You must remember, fear and doom gets all the engagement and rational thinking takes a back seat. The latest estimates from GS on equity supply should calm you down. We are well within the range of previous years. 2026 is not an outlier in any way. As a matter of fact total issuance has been dramatically higher for most of the past few decades. The couple of years post COVID saw very subdued issuance, which is a good thing as market is coming from a very restrained place in terms of equity issuance. On the other side of that coin is buybacks. Companies are still buying back their own shares to the tune of around 875bn in 2026, which is greater than total estiamted equity issuance. If you just look at the number, and take gross buybacks minus equity issuance you can clearly see the math shatters any perception of an equity market inundated with supply. Lastly, the companies to IPO and that have issued, are SPCX, openai, anthropic, goog meta. These are the greatest companies in the entire world. No hyperbole. This isnt like the SPAC era of 2021 when all these companies were trash. There is alot of wealth in the world, to posit that this equity supply from the highest quality assets in the entire world wont be easily absorbed is laughable to me. Again, these are the highest quality assets in the world, this is like real estate on billionaires row in Manhattan. There will be demand, lots of it.

A picture is worth a thousand words. Equity issuance has been on a steady downtrend for decades now. This is probably one of the biggest reasons why US stocks go up and to the right. Because the supply is on a steady downtrend over many years and decades. 2026 is a tiny bit elevated, but still not an outlier.

The buyback bid that dwarfs the equity supply. This continues to rise despite rising Capex. At the end of the day GOOG/META have been fcf machines for many years. They are not, at this moment in time. But I believe and the market believes they will eventually return to that as AI starts to expand growth and revenues. The theory that equity supply will break the stock market just makes no sense from a simple math perspective. Both aboslute numbers and relative to past years. Buybacks - issuance. Issuance as a % of total market cap. Its all benign.

Now lets circle back to what happened last week. A 477bps down day in the NDX. You dont see those everyday. What gives. To me there is nothing to see really. Equities went up alot in a very short period of time. Positioning got stretched in a way we haven’t seen in 5-6 years. Everyone was in calls, everyone was long, and it took a single Jenga block being pulled (rates repriced due to NFP) for a huge positioning washout. Momentum is historically crowded, all the pods are in the same trade. Its pretty banal. Positioning was too stretched and we saw a liquidation of traders in bad locations. Nothing has changed about the fundamental bull case here. As you can see above the price of calls were stratospheric no one had puts. This was a pure liquidation break, some fear and FUD about SPCX and hyperscaler issuance sprinkled in, and alot of weak hands.

One thing I am asked alot, is after these big down days is “Do you think it will go down more”. I dont know. Its besides the point. I have made my bull case really crystal clear here and a big red day doesnt change a single thing. The AI train is not stopping because stocks had a down day. This is a buying opportunity. I would also pose you a rhetoical question at this point. If you aren’t buying stocks on a -5% down day in the Nasdaq, when will you buy? Yes stocks could potentially go down more, I am ready for that and ready to buy more. You cant expect big returns wihtout stomaching some volatility its part of the game.

I have given my short term price target for 8000 SPX by Summer. So the current spot price of 7380 in the SPX was a screaming buy for me, and buy we did. When the market gets loose and sloppy and people are getting liquidated like what happened on Friday. They can certainly continue lower. I am hoping for lower to load calls. I think a realistic max downside scenario would be 7200 SPX. That would be a buy everything, deploy every single last dollar you have to buy the dip. Like look through your old couch cushions for spare nickels to buy the dip. At a certain point (already reached on Friday) you have to pinch your nose and buy, if it continues lower you buy more. This is not the time to take out the scalpel and look for an entry with 2 points MAE. There is a time and place for that. This is a time to get your hands dirty and blast longs here and the next 100-200 points lower. If we get there.

The latest HF positioning, post Friday close is out. Hedge funds and often all caught up in the same trades, esepcially this year as AI is the factor that is working the best by far. Obviously alot of them got stopped out or the tap on the shoulder from risk. This brings Gross and Nets on a 3 yr look back to 65% and 54% respectively. Quite healthy levels. The trend so far from this cohort over the past month or so is they are buying the highs. From a performance perspective they are having a great year as well. This is all systems go. Smart money is buying the highs which is confirmation and they are performing well and incentived to keep deploying capital on the upside.

My view is people are too bearish on AI and I wanted to add more exposure in my portfolio. I did that with EWY which is very highly correlated to AI infrastructure. A more simple mind may look at EWY and say it gone up so much already, it must be a bubble and hell no im not buying. But the earnings speak for themselves. They are making so much money, and like the US markets earnings keep on being revised higher and higher.

Despite having doubled YTD, forward P/E is in the basement levels at 7x. That is too low. Again consensus is too bearish here and think AI is something you try on for a couple months then get rid of. The market, capex, tech ceos all say the exact opposite. The opportunity here is obvious to me. People dont want to buy because its already gone up alot (bad reason). The fundamentals are just too strong here to ignore. What people also dont know is that ex samsung and sk hynix earnings growth is still a blistering 42%. This is more than a 2 stock etf. This is major economic boom for Korea and that will not disappear overnight. Goldmans target for kospi is 12,000 currently, about a 50% gain from here. They have revised this target up I think 5 times in the last year. They just keep blowing by it. The bears have two things to say about Korea generally. One, its already gone up alot. As long as earnings outpace price appreciation I believe its well justified. Second, is that memory and semis are cyclical, and capex in general is cyclical. They are right about that. To that I would say, you can make a hell of a lot of money in just one cycle.

To sum up, this market is a stone cold fundamentals story. Earnings growth is so extremely strong and that keeps driving the market higher. This is the highest earnings growth for the S&P since 2021, when the market emerged from the COVID lockdowns. Price is too cheap relative to earnings. I also strongly believe after price catches up to earnings, it will go higher again because the 21x forward P/E multiple is too cheap. The year started with SPX at 6950, and actually SPX was more expensive than then it is now. At 6950 in January before earnings season SPX was sporting a 22x P/E. I think a 22x to 23x is a fair a reasonable target for this year and that would be SPX well above 8000 by year end for a longer term view. In the short term, I believe Fridays selloff was purely positioning based. People who sold were primarily forced sellers. Whether it was raising cash for SpaceX, or liquidation based. Nothing changes about the fundamental bull case. Buy the dip with conviction here.

Trade Ideas

1. Will alert in the chat

Last week we bought the low of the entire week. Again. For the fourth week in a row. We took 1.25 points of MAE, and the trade went for 100 points.

No need to spend 8 hours a week watching orderflow, no need to count invidividual barrels crossing the strait of hormuz, no need to follow 10 different Iranian newspapers for headlines.

The consensus now in markets is we’re in a bubble. I disagree. I think we are early in the rally and will continue to buy dips in ES like we do every week. In fact actively looking for more long exposure via calls.

Next move for markets

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Last week we expected a brief pullback/retracement but called it out as a dip to buy.

7354 ended up being the low of the week. Thats the low of the week we called out in advance, and bought, 3 weeks in a row. We have a system that puts us in position to consistently make money on very low risk day after day. Week after week. Real traders know whats thats worth. Theres no Scenario 1, Scenario 2, Scenario 3… Scenario 67. There’s no need to hide behind amibguity here.

On a bigger picture time frame, I have repeatedly, as bluntly as I can, warned everyone I could, do not get bearish stocks because of the Iran war. It was and is priced in x 1000. Alot of people are learning the hard way.

Now as we look forward to next week and likely a big gap up. What inning are we in of the rally, how much of the deal was priced in already?

Next move for markets

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We kept it simple took 1 trade last week, bid the low of the week with 4 pts MAE, and it ran for about 170+ points in the end. We sold everything on Thursday while the late buyers got dumped on.

On Friday of course ES finally buckled and we had a pretty big down day considering the recent melt up. It may be time for a pullback, but just a technical retracement or something larger?

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A couple of weeks ago, in my weekly post I warned everyone that the crowd is extremely offsides - underweight, short, too bearish writ large regarding AI.

This is from my April 27 post, not an observation made in hindsight but before the move happened.

We had the right view before most did. On the execution side, we sniped the low of the week. ES closed at 7419.

We had the right view now, for weeks. That people were too bearish on AI. Yes, you read that right. Too bearish.

Myself included, have been taking profit too early. Although its easy to say in hindsight. You cant exactly enter in to a long trade and say “My exit will be when QQQ reaches the most extreme OB stage in 25 years”. You cant develop a systematic trading strategy with take profit targets at extreme outlier points. You develop a strategy for making money on normal outcomes and normal distributions. If you enter a trade on ES, you might say Ill take profit at +15, +30, +50 for example. You cant say, for example, my take profit is set at +500 points. Thats not realistic.

So if you missed this extreme vertical rally, dont be too hard on yourself. It was a true outlier in every sense. But now, the question is. After the fact, are we now in a bubble? Was that the blow off top, or a significant repricing? If this is another bubble, a la Dotcom, what inning are we? Is it too late to buy in a make alot of money if so?

Next move for markets

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Last week, we had of course FOMC and the Superbowl of Mag 7 earnings. I said, to expect new all time highs in the SPX on the back of earnings as the crowd writ large was underestimating the acceleration of the AI trade.

That was 100% the right call, while the crowd was declaring 7200 as a local top and for earnings to be a sell the news event. They were wrong as usual.

On a bigger picture time frame, SPX finished April up +10.4%, for its best month since November 2020. We were bullish the entire way up, while the majority missed the entire move.

As we enter the official beginning of May, with the index quite technically overbought and the Sell in May and Go away adage looming in the background, do we finally see some retracement?

Next move for markets

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A bit of a quiet week last week, we predicted a consoldation week to back and fill some gaps and thats exactly what happened.

We idenitifed early on in the week the 7180 area as a point of resistance. Market sold off about 50-100 points from that level 3x+ last week.

A couple of nice base hits, nothing crazy last week as market digested the big move. Looking forward to next week, with FOMC and Mag 7 earnings I expect that to change.

Right now, it really looks to me like the crowd is hugely offsides and unprepared for the next big move.

Next move for markets

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We called this entire move stone cold. Last weeks weekly post is entirely free to read and posted when ES was indicated to open at 6750, last traded price was 7164.

Our risk reversals which we put on April 8, we closed out for 18x. They actually ended up becoming 25x if you held later in the week. This options structure was actually a roll from last month where they settled for 2.5x. So we have been consistently relentlessly selling puts to fund upside this entire war move. While the crowd freaks out over meaningless news we have been raking in the cash.

The markets relentless rally over the past couple of weeks has been driven in very large part by indiscriminate flows and alot of chasing and “stop in”. Its time for an update on where we are in the rally.

Next move for markets

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Last week we had a monster gain on our short puts and long calls. We are not Trump insiders, but knew the situation was untenable and that a TACO would come, just not exactly when. We have been holding a risk reversal position since Mid March that shorted both puts and calls to fund a closer ATM call for this exact situation. A TACO, at some point, but not too soon after the original start of the conflict in late February.

Realistically speaking, we played it perfectly. Its an open secret that this administration is manipulating the markets and is rampant with insider trading. We are not privy to that information, but we did know the end to the war would be coming, and we capitalized on it with our options structure. We were not foolishly caught net short like many were. We did not get ourselves lost in the bearish cacophony. The risk reversal was closed for a +150% gain in total, then rolled again, and that position is green also. We had zero equity shorts. Zero oil longs. We are directionally agnostic as always and will go long when the market wants to go up and short it when it wants to go down.

Obvious elephant in the room. Do we sell this rip or buy into it. I believe we remain in a sell the rip market. But I think it is too early.

Next move for markets

Up. Its all about the flows. Nothing else. Here’s where the crowd is getting it so wrong. They are analyzing the Strait of Hormuz, commodity flows, they are translating tweets from MB Ghalidaf - is that how you spell his name? To be honest i dont even know. And I dont care. Because its not helping me make money so its meaningless to me. They are frantically copy pasting Iranian tweets into google translate trying to figure out secret meanings. That is all a waste of time, even worse, its a distraction leading you down the wrong path. This market is going higher, because there are simply going to be more buyers than sellers. Its not about whats happening in the war. Its about buyers and sellers right now. The imbalance is simply too great in favour of buyers at this point. Iran, oil, CL1, mb ghalidaf, arragchi - I dont care. Watch the flows.

First things first, the genesis of the market rally. The infamous TACO. People again are missing the point here. Its not about is the ceasefire going to be successful or not. I am going to be honest with you, I dont know what the 10 point plan is and I am not even going to read it. I dont care. Here is what matters. Its that Trump is signaling that he doesn’t want to continue the war. In essence, the Trump put has been activated. Because the polls forced him too. Its not about, did he succeed in the ceasefire. Its about the fact that is actively trying to dis engage and save the market. If this doesn’t work he will keep trying. And he will eventually succeed because hes the leader of the Free World whether we like it or not. Dont fight the Fed, and in 2026 you dont fight the White House either.

I think naive and uneducated traders often lament the woes of being a retail trader. Its actually pretty amazing, in the present day 2026. This aint 2006. I remember as a kid everyday I would get the mail for my parents and my dad would have 3 or 4 letters from ETrade like every single day. Today, you can go sit on the toilet and on a whim flip your entire book in 30 seconds. Institutions cannot do that. The TACO came out of nowhere, and we had a wild Wednesday and mosnter short covering. Now the data has hit the insititutional desks on the week end and we need a magnifying glass to see the short covering that actually took place. The war is effectively over in the markets eyes, as in the rate of change and escalation has collapsed. Hedge funds covered a gigantic amount on Wed/Thurs, but not enough. They will need more time to their nets back to where they should be. Just because you can close out all your shorts in 10 seconds doesnt mean the big boys can. Have to remember that. This is a big reason why “moves go on much longer than you expect”. Because even if a move is obvious. Institutions need time and liquidity to properly transact.

As a matter of routine, we religiously track systematic flows in the market because they are just so important. It is extremely rare to see this green wave. Last I recall was last April 2025, you know the rest. These are really big flows, and indiscriminate. I will not fade these flows 99% of the time. And let me tell you one thing, CTAs are not translating Iranian tweets or dissecting all the 10 points of the ceasefire. They are just buying futures, and lots of them.

How big is this flow relative to recent history. See above.

If you have been reading my weekly posts for a while now, a feature of the early 2026 market has been extremely long dealer gamma near the local highs at around 7000. This was in large part due to option overwriting structures both from independent investors and now major funds like JEPI JEPQ etc. This created a very strong resistance level aided by dealer gamma positioning. In laymans terms dealers were selling into rallies above 7000 actively surpressing upside moves. This has now all changed dramatically. Dealers are extremely short gamma on a 5% upside move. They go from surpressing a rally to now accelerating it.

Latest read on the GS vol panic index which is essentially an aggregate view of how much is the market hedged right now. After the massive squeeze and short unwind of the latter half of last week, we remain quite elevated. The ceasefire will fail view is not unique. Not at all. The market can and will continue higher just based on pure mechanical flows. As puts decay, and ehavy macro shorts remain embedded in the market, these will have to unwind sooner or later. This is continued fuel for a continued squeeze.

A look at what the crowd is expecting. This is not sentiment, this is not a survey. This is what the options market is pricing, or what people are actually betting their hard earned dollars on. Everyone is betting for a crash or continued downside. Almost no one, is betting for a rally. Whats the pain trade? What move here hurts most investors in the worst possible way. Higher stocks.

Last but not least, this is a feature very common in markets, strength begets more strength. GS ran a quant backtest on the SPX when its up 6 days higher in a row. The results were overwhelmingly bullish and hint to with high probability that the bottom is in and if we do get another dip its a dip to buy.

Ill end with something not so bullish. I have outlined why I expect higher prices in the near term clearly. Flows. Flows have a beginning middle and end. They will not last forever. The bearish forces at play on the market since last year remain. IGV just closed at a new YTD low. This was in large part due to the latest development in the AI space from Anthropic, Claude Mythos. The details of what the latest model can do arent important. What matters is software which is one of the most crucial sectors of the market remains in a strong downtrend and this is a major player in the Private Credit space which continues to collapse behind the scenes. Software remains in a bear market, therefore so does Private assets and financials writ large will continue to be weak which considerably caps the upside in the SPX. Financials are the second largest weighting in the S&P 500.

To sum up, the details of the war are irrelevant. The market will continue higher because the flow of funds are overwhelmingly bullish at the point in time. There are just too many buyers at this price and at this time, and none of them care about whats happening in the Middle East. Its purely mechanical. Positioning has been wiped, sentiment has reset aggressively, this is a classic bullish setup that you want to lean into. Bigger picture, software continues to collapse and we remain in a historically weak Midterm year. Therefore I continue to prefer trading this squeeze via options rather than outright long stock. But until the flows picture dramatically changes I believe buying dips is the preferred strategy.

Trade Ideas

1. Continued long risk reversals,

2. ES will alert in the chat

We called for a very large squeeze last Saturday to the 6550-6600 area.

This was on the weekend when ES last traded 6400, we called for the JPM short put strike to be squeezed OTM which would result in a huge rally.

Thats exactly what happened.

Thats the move given, the direction given, the exact time given.

And thats the trade given.

We called for this monster move 3 days before it actually happened too.

To top it all off, on Thursday we shorted the HOD.

So we got a huge bounce last week, SPX gained about 3% open to close. Is this just a technical bounce in the downtrend or something more.

Next move for markets

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We had a fantastic week last week. Not because we hit some multibagger on some 0dte yolos. A major positioning decision we made end of last year paid off in a huge way.

We didn’t trim equity allocation from like 80% long to 70%, or some finer details like that. We sold 100%, every single stock we owned. And now the SPX is down 10% on the year, technology stocks which everyone were OW, are down even more. Now we are officially KILLING it this year, all because we completely dodged the biggest market drawdown in 4 years. This is the worst year for the SPX since the 2022 bear market. We completely dodged the entire thing.

On a shorter term timeframe, we said keep selling rips and expect the downtrend to continue, as CTAs to sell 20B e minis last week. The post was sent Monday with ES at around 6700 and last traded price was around 6400, about 5% lower.

Anyways, SPX is trading about 10% down from its ATH, what things am I looking at to look for a potential bottom here. Lets start by acknowledging the EXTREME uncertainty of the current situation. We dont know anything about the war really, just what is reported through the media, and often fake. We dont truly know what the US’s objectives are, nor Iran. We dont know the extent of the damage in the energy supply. We dont know, x 1000. So lets focus on what we do know. We look at, in detail, aggregate institutional positioning across the market and we are getting to a point where a full on capitulation is near. If positioning is bombed out, truly, then you can buy stocks and be comfortable not knowing because the worst has been discounted.

Next move for markets

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Brutal continuation of the selloff last week, as SPX closed down about 7% from its ATH.

We are really in the perfect position here. On December 30, when everyone was bullish and screaming “Run it hot” and other things you hear at major tops, we made the disciplined decision to sell EVERYTHING, about 1% from the highs.

You’ll see alot of people bearish right now, calling for a bear market, or a 2022 redux, or test of 6000, what have you. That’s all worthless basically when SPX was already trading with a 64XX handle last week. We were bearish from 6900/7000 which was the real contrarian call and complete game changer. Looks like that will make our entire year to be honest. We are flush with cash and probably be buyers at/near the bottom like we always are.

Question of course when do you buy.

Next move for markets

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Volatility finally arrived last week and we made the most of it.

We went short ES last Friday, right before the -2.5% gap down on the huge oil spike.

Covered our short within 13 minutes of the open, for 111 pts.

Then we flipped long at 6588, right before the market went on to rally 270 points in less than 24 hours. Not a typo. The high of the week was 6853, and the low of the week was 6584. On a week where the range in ES was almost 270 points we got within 4 points of the low, after shorting it right before. It doesn’t get much better than that.

Can the market finally bounce now? Is this a dip buy opportunity or something more sinister?

Next move for markets

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So after one of the quietest starts to a year we have seen in many decades, things are starting to heat up majorly. VIX is at 30. The 6 month range of 6750-7000 that we have been trading in the SPX looks like it’s on the cusp of breaking. I think this next week or two is one of those rare times where you can make or break your year.

The end of December, we sold all of our stocks, predicting a weak start to 2026 and perhaps longer. Until very recently we had literally 0 equity exposure which was absolutely the right call. A few weeks ago we sold some puts to fund some risk reversals we remain long. But outside of that remain long no other equity exposure.

I am always a buyer at stocks, at the right price. As of last Friday’s close of 6740, I am not a buyer. The risk reward does not favour buyers at that level.

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Last week we continued to expect downside pressure. We got that.

We are coming up on now 3 months in this roughly 6800-7000 range. What signs do we look for in terms of a potential breakdown or breakout? Here’s what I am watching currently.

Next move for markets

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