Good Afternoon REBELS! The Canadian smoke is finally clearing here on the east coast to give us some sunlight for the first time in a few days.  I think the stock market is just like the smoke from Canada.  The selling may last for a few days but eventually the buyers(sun) will appear.  It was a volatile week filled with opportunities.  If you have a bull only bias, then it was a very difficult week.  As options traders we have several advantages over stock traders.  Clearly the first is leverage, but a close second is the ability to trade in both directions.  Image A is a stock that is poised to take out a key level, where image B has already broken the key level and retesting the breakout.  Both charts look poised for further movement.  Bulls love this type of a pattern.  Unfortunately, if you are a bull, this is an inverse of the QQQ(A) and the SMH (B).  If you like the charts below, then turn them back to around and if you don’t look at it the same then there is a bias.  This bias prohibits a lot of trader from reaching their full potential.  If your charting system allows you to put a negative sign in front of the symbol and you can see the inverse it may help your trading!  There is incredible opportunities in the market on the downside.  On the upside we are always fighting Implied Volatility as the market goes up.  On the downside, by owning options, the IV works in our favor as the market drops, the IV increases on the puts that we own.

Let’s dive into the sectors for the movement on the week.  Clearly the market felt heavy as the semiconductors fell and pulled down tech.  Tuesday and Wednesday they gapped the SMH higher only to be sold into aggressively.  The Hyperscalers did their best to counter act the negative movement, but even they had a bearish reversal pattern on Thursday and gapped down on Friday and couldn’t fully recover.  The concern is the patterns above…bears are overwhelming the bulls.

On a monthly chart we can see the SMH giving up almost 11%, being joined by the metals(XME) and tech(XLK).  The best performing sector was Pharma(XPH), but has been somewhat stuck in a range.

 

Note: Click on Charts to see a larger view!

 

PHARMA (XPH)

MBX is still leading the ETF, but LQDA, VTRS, ELVN, AMRX were close behind.  HRMY and former leader DFTX fell off for the week.

SEMIs

It was an ugly week for Semi stocks as several factors played into investors heads.  The first major reason for selling is the carnage in South Korea.  Margin calls were historic!  As the country has embraced leveraged ETFs, investors believed that the party was going to continue.  Bears hit the memory names and the bullish 3x leveraged ETFs were destroyed.  KORU the Direxion South Korea Bull 3X ETF has fallen 75.8% since June 1st high. The EWY, the South Korean ETF( large weights in Samsung and SK Hyinx) is down 30.2% since the June 18th high.  SK HYNIX (SKHY) has fallen 25.3% from the highest point(7/14) after the IPO. Memory names were sold into from the GOOGL report that they could reduce the RAMM required for their models, but this was only for a very small subset type of RAMM.

Another piece of information that hit the sector was a release of Kimi K3 AI LLM from Moonshot. This is another Chinese AI that is supposedly rivaling Anthropic’s Fable5 that the US government briefly held from the public.  Reports suggest the Chinese model runs roughly 15 to 20 times cheaper to run for coding tasks compared to Fable 5, while delivering roughly 85-90% of the premium model’s output quality.  This puts continued pressure on the US AI LLMs which puts even greater pressure on hyperscalers debt structure and ability to pay it back in the future.  With earnings coming up, the off-balance sheet funding totals and margins at the hyperscalers will be heavily scrutinized.

Memory names will be key this week for the bulls to see some type of support step in to show they are willing to buy at these levels.  Unfortunately, any reports of more margins calls(South Korea) will keep the pressure on to the downside!

 

SOFTWARE

Big divergences forming in the software ETF, with several names up and several down.  Probably worth watching the extreme names if a bid comes into the market. APP, ORCL and NOW were the worst performers.

SPACE

Most of the speculative, not profitable sectors have been hit.  Any bid that comes back into market could scare some of the shorts in these names.  Quantum names have also been hit hard.

QQQ TOP 10 

AAPL dominated the week while the chips pulled down the QQQ.  At the bottom we have AMD, MU and AVGO, while hyperscalers had that bid mid week, some of them faded for a negative weekly performance.

MIDTERM SEASONALITY 

Still leaving this in here for obvious reasons!

INSIDERS

Just something to keep an eye on as the SPY was near the all time high on Wednesday of this past week and we are going into the heavy part of earnings season!

VIX 

VIX  popped to 19.55 on Friday with all of the selling, but sellers pushed it down by the end of the day to 18.77.

EARNINGS CALENDAR

Wednesday afternoon looks to be critical with GOOGL, TSLA, TXN, IBM and NOW all reporting earnings!

Before Market(B- Orange), Aftermarket (A-White Background)

ECONOMIC CALENDAR

All sourced from TradetheNews.com

Monday:
10:00EDT/15:00BST US Jun Leading Index
11:30EDT/16:30BST US Treasury’s 3 and 6 Month Bill Auction

Tuesday:
08:00EDT/13:00BST Mexico May Retail Sales
08:15EDT/13:15BST US Weekly ADP Employment Change
08:30EDT/13:30BST US Jul Philly Fed Non-Manufacturing Activity
08:55EDT/13:55BST US Redbook Retail Sales
11:00EDT/16:00BST US Treasury’s 4 and 8 Week Bill Announcement
16:30EDT/21:30BST API Crude Oil/Gasoline/Distillate Inventories
18:00EDT/23:00BST SEMI Billings Report (Monthly)

Wednesday:
07:00EDT/12:00BST US MBA Mortgage Applications
10:30EDT/15:30BST DoE Crude Oil/Gasoline/Distillate Inventories
13:00EDT/18:00BST US Treasury’s 20 Year Bond Auction

Thursday:
08:30EDT/13:30BST US Continuing/Initial Jobless Claims
08:30EDT/13:30BST US Jun Chicago Fed National Activity Index
10:30EDT/15:30BST DoE Natural Gas Inventories
11:00EDT/16:00BST US Jul Kansas City Fed Manufacturing Activity
11:00EDT/16:00BST US Treasury’s 3 and 6 Month Bill Announcement
11:00EDT/16:00BST US Treasury’s Note Announcement
11:30EDT/16:30BST US Treasury’s 4 and 8 Week Bill Auction
13:00EDT/18:00BST US Treasury’s 10 Year TIPS Auction

Friday:
09:45EDT/14:45BST US Jul Preliminary S&P Global Manufacturing PMI; S&P Global Services PMI; S&P Global Composite PMI
10:00EDT/15:00BST US Jun New Home Sales
11:00EDT/16:00BST US Jul Kansas City Fed Services Activity

MACRO MEASURE from WAYNE RAZZI

Click image below to watch video!

 

LEVELS – LARGE ETFS from @RYANMASTRO5

The week ahead:

We have 80 S&P 500 names reporting this week.  Some highlights are GOOGL, TSLA, INTC and TXN.  These are all important to the market bulls.  Any falter here could give the bears another reason to sell!  GOOGL is the first large AI infrastructure to report so the market wants to see strong results from big spending.  TSLA’s margins will be watched closely and the INTC, TXN will help with guidance in the semiconductors.  Three financial names to watch that could provide some insight into the financial market: SCHW, COF and AXP.

The Straight of Hormuz is back in the restricted flow news cycle due to escalated bombing by both sides. Oil jumped to over $80 a barrel as tensions are still high. With no clear signs of the US stopping there will most likely have a continued bid underneath the oil price.

No Fed speakers this week as we are in the black out period before the Fed meeting next week. Key levels to watch are the lows from Friday as the market tried to move higher on Friday.  We also want to see a rally out of both the Semis and the hyperscalers to get the markets in sync and moving higher.  If one is going up and the other down, then expect sideways action.  We will also be focused on the memory names in semi space as these have been leading the semis!

Good Luck this Week!