Hello traders,

Hope everyone had a great long weekend and enjoyed your 4th of July celebrations.

We had an excellent week last week where we caught the market drop midweek.

Other than that our AI next inning stock picks are off to a great start with a couple picks going up 1500-3000bps on the week.

Realtime Discord access with equity positions tracker(new website rolling out to select subscribers), intraday orderflow & option dealer summaries included with the paid newsletter membership . Click here to subscribe.

Last week’s market

E-mini S&P 500 futures ended the week near 7,557. They gained about 210 basis points.

The Dow gained nearly 200 basis points and closed at 52,900.07 on July 2. The Nasdaq 100 ended near 29,900 after falling about 182 basis points in the final session. The Russell 2000 lost roughly 75 basis points for the week.

Semiconductors accounted for much of the Nasdaq’s weakness. The PHLX Semiconductor Index had risen more than 80% during the first half of 2026. The VanEck Semiconductor ETF then fell about 11% to 12% over two days in early July.

Reports said SK Hynix may slow its expansion of high-bandwidth memory production. That added to concerns that companies may be spending too much on AI infrastructure.

The semiconductor selloff did not spread across the whole market. The advance-decline line reached a new high. About 63% of stocks were above their 20-day moving averages, and 60% were above their 50-day moving averages.

These figures do not suggest broad weakness. They show that money has moved out of some technology shares and into other parts of the market.

CNN’s Fear and Greed Index remains in “Fear” territory. It recently moved up from “Extreme Fear.” This is a cautious reading for a market trading near record highs.

Institutional exposure to cyclical stocks is in the eighth percentile. If those stocks continue to rise, some managers may have to increase their holdings. Private equity was the best-performing factor last week. Momentum was the worst.

The Magnificent Seven are down about 130 basis points this year. Investors have sold these shares to fund purchases elsewhere. They have also questioned whether the companies will earn enough from their large capital-spending programs.

The companies say they are spending because they do not have enough capacity to meet demand. Their stocks have recently formed a higher low and remain above the trend that began after the Liberation Day lows in 2025.

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June employment report

The economy added 57,000 nonfarm jobs in June. This was well below the consensus estimate.

The previous two months were revised lower. April was cut from 179,000 jobs to 148,000. May was cut from 172,000 to 129,000. The two revisions removed 74,000 jobs from the earlier estimates.

The unemployment rate fell from 4.3% to 4.2%. This was not the result of stronger hiring. Labor-force participation fell by 0.3 percentage points to 61.5%, its lowest level since March 2021.

Hospitality employment fell by 61,000. That was surprising because the World Cup should be increasing demand for travel, hotels, and restaurants in the United States.

The report points to a slower labor market. It does not yet point to a recession.

Higher-income households are still spending. Housing remains weak, and lower-to-middle-income households are under more pressure. The Fed will have to consider that weakness before raising rates again.

Federal Reserve

Warsh’s first meeting as Fed chair took place on June 16 and 17. The committee voted 12-0 to keep the federal funds rate between 3.50% and 3.75%.

The new economic projections were more hawkish than expected. The median forecast for core PCE inflation in 2026 rose from 2.7% to 3.3%. The median year-end interest-rate forecast increased to 3.8%. That forecast includes at least one rate increase before December.

Warsh shortened the FOMC statement and removed much of its forward guidance. At his press conference, he said, “This Committee will deliver price stability.” He also said inflation required “immediate triage.”

His comments since the meeting have been less hawkish. He acknowledged that inflation conditions have improved as oil prices have fallen. This appears to rule out a July increase.

At the ECB Forum in Sintra, Warsh said inflation was still too high. He did not give a timetable for future rate changes.

Markets put the probability of at least one increase this year at about 65%. Current pricing is close to an 80% chance of an increase and a 20% chance of no change.

My estimate is closer to a 40% chance of an increase and a 60% chance of no change.

Conditions are different from those in 2022. Fiscal policy is less expansionary. Supply chains are working better. Housing is weak, and some consumers are under pressure. Oil has also fallen from its recent high.

Net immigration has turned negative, which may limit the supply of workers. AI could improve productivity and reduce some costs over time. It is too early to know how large that effect will be.

Warsh has said AI should reduce inflation over the long term. He has also said that strong economic growth and employment do not always cause higher inflation. Those views give him a reason to leave rates unchanged if the data remain mixed.

Crude oil is back near its pre-war price in the mid-$60s. The 10-year Treasury yield remains above its pre-war level. Lower energy prices may eventually pull yields down as well.

The June FOMC minutes will be released Wednesday at 2:00 p.m. ET. The minutes may show whether committee members agree with Warsh’s public position. They may also show how officials view inflation, employment, and the effect of AI on productivity.

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Treasury market

The 10-year Treasury yield ended the week in the mid-4.40% range. It recently found support near 4.35%.

Bond prices have remained weak even though crude oil has fallen. The Fed’s June projections are one reason. The upcoming Treasury supply may be another.

Warsh’s focus on inflation may help long-term bonds. Investors are less likely to demand a large inflation premium if they believe the Fed will keep inflation under control.

Three auctions are scheduled this week 3y, 10y, 30y

The June 10 auction of 10-year notes cleared at 4.538%. The secondary-market yield was 4.49% on July 2.

The bid-to-cover ratio will show how much demand each auction receives. Indirect bidding will give some indication of demand from foreign institutions and central banks.

Weak demand would probably push yields higher. Strong demand would support bond prices.

I think Treasury prices have more room to rise than fall at current levels. If oil stays down and economic growth continues to slow, the 10-year yield could move toward 4.20%.

A range between 4.35% and 4.50% is still possible until inflation data improve. A move above 4.60% would weaken the bullish case for bonds.

U.S. dollar

The Dollar Index lost some of its post-FOMC gains last week. It has returned to its 20-day moving average.

The dollar has been in a longer-term decline since Trump’s inauguration in 2025. The recent rally has not yet changed that trend.

The level at 97.9 is important. A break below it could lead to a move toward the 200-month moving average near 93.

If 97.9 holds, the index may continue trading between that level and 103. The upper end of that range is close to where the dollar traded before Liberation Day.

The dollar’s recent strength came from expectations of higher U.S. rates. If those expectations fall, the dollar should lose support.

Crude oil

West Texas Intermediate crude ended the week near $68.78. It is down more than 40% from its 2026 high.

The June 17 Islamabad Memorandum of Understanding between the United States and Iran opened a 60-day period for negotiations. Oil tanker traffic through the Strait of Hormuz also resumed. These developments reduced fears of a major supply interruption.

OPEC+ is adding supply. On July 5, seven members announced that they would increase production by 188,000 barrels per day starting in August.

The group could pause or reverse the increase later. For now, the change adds more oil to the market.

The ISM Manufacturing Prices component fell from 82.1 to 73.0 in June. The 9.1-point decline was the largest since July 2022. The index is still high, but input-price pressure has eased.

WTI may trade between the mid-$60s and low-$70s if the situation in the Middle East does not get worse.

A break below the mid-$60s would probably require weaker demand from China or a larger increase in OPEC+ production.

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Iran and Israel

Iranian naval activity has increased again. The threat rating for the Strait of Hormuz is now “substantial.”

Iran and Israel have continued to exchange strikes despite the ceasefire arrangements. Israel is also still carrying out operations in southern Lebanon. Those operations continued after the June 19 ceasefire between Israel and Hezbollah.

Hardline groups in Iran oppose the talks with the United States. They are also demanding that the United States reduce its presence in the region.

The United States has criticized some Israeli operations in Lebanon. U.S. officials are concerned that the fighting could hurt negotiations with Iran.

The talks have a 60-day window. If they continue, some of the remaining war premium should come out of oil. If they fail, oil prices could rise quickly.

Higher oil prices would add to inflation and make the Fed more likely to raise rates.

Trade policy

Relations between the United States and China are quiet for now.

Both countries are discussing lower tariffs on agricultural products. China has also agreed to buy large amounts of U.S. soybeans through 2028.

The United States declined to renew USMCA on July 1. The agreement will now go through annual reviews that may continue until 2036.

A new trade agreement with the European Union took effect on July 1. It applies a 15% tariff to most European products.

The 10% global surcharge under Section 122 is scheduled to expire on July 24. The United States has proposed Section 301 tariffs for several countries as a possible replacement.

The USMCA decision creates some uncertainty for North American businesses. The agreement is not about to expire, so the immediate effect should be limited.

ECONOMIC CALENDAR

Wednesday has the most event risk. The 10-year auction starts at 1:00 p.m. The FOMC minutes follow one hour later.

Weak auction demand and hawkish minutes would probably push yields higher. Strong demand and less hawkish minutes would probably lower them.

The ISM Services report is due Monday. Its price components will show whether inflation in the service sector is easing.

June CPI will be released July 14. PPI follows July 15. Those reports will be more important than this week’s data for the inflation outlook.

Market Biases

ES Emini

Bias:

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Last three or so years in the markets have been a blur. We have had an AI revolution like no other and Frontier General Intelligence is now cheaper per month than four cups of coffee(espresso based drinks, not drip) at Starbucks.

A couple weeks ago we initiated a position in Intel at $106 or so and it has since hit new all time highs of $140 and pared some of those gains while trading at $128 or so at the time of writing.

Our initial bets on the AI complex were in hindsight pretty simple.
, , and

Now comes the tricky part as we are trading a more mature market and multiples are now going to be scrutinized heavily and everyone and their analyst uncle is going to ask “what about P/E, FCF, P/S and head and shoulder shampoos on the chart”.

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We are casting a wider net this time with about 20 equity ideas and categorizing them in the following tiers.

1. Design and IP layer

2. High Volume Silicon layer

3. Specialized Endpoint Silicon

4. Component Enablement layer

We will go through each one and you will either get bored or learn something new today about semiconductors (or both).

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Hope you all had a great weekend.

Happy Father’s day to all the amazing fathers around the world and wish you all enjoy your day to the fullest.




We had an excellent week this past week with us catching an excellent FOMC short.

Realtime Discord access with equity positions tracker(new website rolling out to select subscribers), intraday orderflow & option dealer summaries included with the paid newsletter membership . Click here to subscribe.

Our Intel position as discussed in the June 9th newsletter is now up 2500bps and has smashed new all time highs.

The local compute/inference basket will be out shortly.

We had touched upon how China’s path looks towards AI dominance in last week’s outlook

And just this past week Z.ai launched their new flagship model ZLM 5.2 which is already talk of the town (by town I mean the autistic part of x dot com the everything website)

Benchmarks don’t mean much but this is an eyebrow raising performance for an open-source model.

Personally, using ZLM 5.2 has been a breeze and it is very very close to using Opus as your daily driver at tenth of the cost, so this is going to put Anthropic/OpenAI in a tough spot unless they pull more rabbits out of their hats.

In the coming weeks, we should see Anthropic and OpenAI launch newer models in order to stay competitive and have a viable path to IPO.

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MICRON, RATE HIKES AND PCE

The two main events this week are Micron earnings and the PCE report which is the Fed’s measured gauge of inflation.

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Hello traders,

Hope you all had a great weekend and some time off screens.


Last week, we posted our latest stock pick to all subscribers, free and paid, because I’m a sweetheart like that.

With virtually zero MAE, the stock is up 22% or so in a couple days.

Realtime Discord access with equity positions tracker(new website rolling out to select subscribers), intraday orderflow & option dealer summaries included with the paid newsletter membership . Click here to subscribe.

ANTHROPIC, MISANTHROPIC and MISS-ANTHROPIC

Late on Friday, Anthropic had to disable access to the Claude Fable worldwide due to US government’s orders.

We had covered how Anthropic’s profitability hinges on the spaceX compute deal for the following two months.

With this new quagmire of USG interference in its model release schedule and subsequently Claude users pardon my french collectively losing their shit and moving to ChatGPT en-masse, has put a moderate sized question mark on where the next $10B ARR would come from for Dario & co.

Where does this take us next?

1) Local inference becomes an important commodity.

If you are on the fence to own local compute and run your own models, the news events of this week should push you over the ledge and spend money (if you have the discretionary income) building out your own personal compute.
We were sitting pretty with our booked gains of the first cycle of semis and optics, now we are deploying our capital on local compute (Intel was just the beginning)
Running local models is something everyone should do as machine-intelligence should not be available to a select few. USG is treating machine intelligence like it is WMD and I have an opposite viewpoint where having local models will increase your productivity tenfold and measurably improve your quality of life.

that’s all fine Algo, but what is the stock?

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THE BACKGROUND

Intel has been the talk of the town ever since last year.

The price flirted to 130s and traded in the double digits today at one point closing at 107 dollars.

This newsletter thinks Intel is an important component of the next few years of the race.

Context: The newsletter was long AMD as I believed AMD had more structural tailwinds compared to Intel back in March 2025.

Both Intel and AMD have outperformed Nvidia in the last year or so which had a stellar run up to then (there is such a thing as base effect etc I know)

But why change from team AMD to Intel right now Algo?
I thought you would never ask

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PANTHER LAKE: A TOUR DE FORCE

Intel claims Panther Lake is the first SoC built on the 18A platform. Performance is about 15% better than its predecessor at the same power efficiency. Density is about 30% better density over Intel 3.

In layman terms, if the 18A yield and volume keeps ramping up, Intel can be considered a serious contender to TSMC.

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DATA CENTERS: DO NOT WRITE ME OFF

Intel Q1 report was interesting because data center revenues went up to USD 5.1B, roughly 22% up over the past year.
This is important because most analysts had written off Intel’s data center revenues as they were considered far behind in servers.

As long as the Servers keep chugging on and generate profits for Intel that would provide Intel with cashflow as the foundry production ramps up.

INTEL INSIDE: MENTAL OUTSIDE?

Intel is now considered as protected infrastructure ever since Trump decided to invest in it at 20 dollar price. On the flip side, the stake of government is passive and if Dems win the next election, they can divest from it in no time.
However, this gives a slight edge to Intel in my opinion.

Best case, Intel becomes a Western Foundry alternative to TSMC, worst case the subsequent government washes off their hands calling it a dirty investment for insert reason here

I can go on and on about 14A and wafer volume and go all Anandtech on you guys, but the sun is out, so I have to head out.

I recommend to swap the AMD exposure for Intel. Timeline for this investment is north of two years but south of five years in our current understanding.
As always, subscribers will get updates on the positioning in the discord.

That’s about it from me.

-Fin

Hello all,

Hope you all had a great weekend and got some much needed green light therapy after the last Friday.

Realtime Discord access with equity positions tracker(new website rolling out to select subscribers), intraday orderflow & option dealer summaries included with the paid newsletter membership . Click here to subscribe.

Friday we had a fruitful day where we were able to capture about half the downside.

After that, we tried to catch the bottom and after a couple stop outs were able to get a counter rotation off the lows.

FROM GREED TO FEAR?

One of the most beautiful thing about the markets is that it pretends to be irrational to a certain subset of participants all the time and perfectly rational to another subset.

Friday was the first “real” red day on Nasdaq and suddenly the entire tone of the market shifted.

The main cause for the large sell was a blockbuster NFP report, which would then cause the Fed to hike rates.

This was reflected in the long-end of the US treasuries as well. The long-end pricing reflects the sentiment that the Fed’s path and equilibrium rates are higher down the road.

Why is Nasdaq panicking?

Hyperscalers are taking on more debt in order to build out as many data centers as they can and if the FFR starts inching higher, their payback time period for the said assets increases due to the debt servicing costs going higher (Algo, please please stop just tell me long or short I’m already snoozing here)

Just this week, Alphabet issued fresh debt to the tune of $84 billion and Meta planned to do the same.

In a filing dated June 2, Alphabet said it ​now aimed to raise $18 billion through the sale of ​Class A and C shares and $16.75 billion from depositary shares. It had earlier planned to raise $30 billion through concurrent public offerings backed ​by investment banks, split evenly between the two.

The company’s ​plans to raise $10 billion through a private placement of shares to Berkshire ‌Hathaway ⁠and another $40 billion at-the-market offering program in the third quarter remain unchanged.

The stock offerings are set to finalize on June 4 with the depositary shares closing a day ​later, the company ​said.

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A couple weeks ago, we touched upon how Anthropic may not be profitable unless you slice it into a very small snapshot in time. It is not related to this but just a small reminder that private markets do not have the same scrutiny as public ones and you can get a rosy story more traction in private markets than public ones.

MIDTERM MADNESS

U.S. President Donald Trump told reporters on Friday that his team is looking into the idea of AI companies giving the American public a ​stake in their firms, adding that he planned to host a ‌meeting with AI executives as soon as next week.

“There’s something very interesting about it, where it almost becomes a partnership with the American public,” he told reporters aboard Air Force One. “We’ll ​look into that.”

If this train of thought of Trump results into something or not is still debatable but American government nationalizing AI labs is not a good precedent in my opinion.

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DO WE EVEN NEED FRONTIER MODELS

SWE-Bench of models show a really interesting trend.

You can get 90% of the top tier model intelligence for 30% of the cost.
I asked Deepseek which models are worth the price

AI output below
The standout value models are:

1. DeepSeek-V4-Flash-Max: 0.790, $0.14 / $0.28
   Best cheap option. It is only 1.6 percentage points behind GPT-5.2 and 1.6 points behind Gemini 3.1 Pro, while being radically cheaper.

2. MiniMax M2.5: 0.802, $0.30 / $1.20
   Probably the best overall value. It scores basically the same as GPT-5.2, Kimi K2.6, Qwen3.7 Max, MiniMax M3, and DeepSeek Pro-Max, but costs far less than most of them.

3. MiniMax M3: 0.805, $0.60 / $2.40
   Excellent value. Slightly better than MiniMax M2.5, still cheap.

4. DeepSeek-V4-Pro-Max: 0.806, $1.74 / $3.48
   Best if you want near-top open model performance and still reasonable output pricing.

5. Qwen3.7 Max: 0.804, $1.25 / $3.75
   Good, but not clearly better value than MiniMax M3 or DeepSeek-V4-Pro-Max.

Models that look poor on value

GPT-5.2: 0.800, $1.75 / $14
Good score, bad value in this table. MiniMax M2.5, MiniMax M3, DeepSeek-V4-Pro-Max, Qwen3.7 Max, and Gemini 3.1 Pro all beat or match it on score. Several are far cheaper.

Claude Sonnet 4.6: 0.796, $3 / $15
Not compelling on this metric. It is below the 0.80 cluster and expensive.

Gemini 3.1 Pro: 0.806, $2.50 / $15
Strong score, but weak value versus DeepSeek-V4-Pro-Max or MiniMax M3.

Claude Opus 4.8 / 4.7
Worth it only if you need the best performance below Mythos. Not value buys.”
AI output ends

Since everyone always thinks they need flagship models, corporations end up forking a huge amount of dollars for likely similar code output.

The biggest risk to top AI labs is people moving to cheaper models en-masse and causing a cascading drop in paid daily users for them.

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Hello traders,

Hope you had a great weekend and enjoyed the warmer weather.


We had a fruitful week in the markets last week.

Realtime Discord access with equity positions tracker(new website rolling out to select subscribers), intraday orderflow & option dealer summaries included with the paid newsletter membership . Click here to subscribe.

US-IRAN. DEAL OR NO DEAL

This past week we had conflicting news reports of the US peace deal being signed with Iran and the one sticking point for both parties has been Uranium enrichment. Interestingly, this was a sticking point in negotations checks notes 14 years ago. But unlike his predecessor, President Trump has managed to make the markets make a new all time high after new all time high during this war.

Trump administration is pushing for “JCPOA-style” deal even though no one in the administration is willing to call it that, end result that US would want is stop enrichment and then in-lieu remove sanctions step-by-step.

The Iranian stock market is pricing in a deal sooner rather than later, so that is one data point to look forward to.

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Hope you had a great long weekend and got some time to rest and recharge.

S&P reached yet another record high in Sunday globex session on the “news” that US-Iran are close to peace deal and it would be signed by end of this week.

Nasdaq futures also was flirting with the psychological 30,000 mark and at this point there is a career risk looming for fund managers who will have to chase this rally.

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Anthropic is profitable, sort of?

“Anthropic’s revenue is set to more than double to $10.9 billion in Q2 2026, an “explosive rate of growth” that will make the company profitable for the first time ever, per WSJ.

The company is set to turn an operating profit of $559 million in Q2 2026.

Why would Anthropic be profitable for only Q2 of this year?

Because SpaceX is subsidizing Anthropic’s GPU costs for this quarter.

Post Q2, SpaceX will start charging Anthropic the prevailing rate and they will likely dip back into being unprofitable. This is great timing for Anthropic because they can raise fresh capital when they are “profitable”.

They pushed down their costs with a sweetheart deal during a tiny window. Anthropic also made sure to leak this right when Nvidia reported earnings, just to keep the whole AI super(hype)cycle going. If you take away that discount, their actual business model goes right back to previous numbers. Their costs go up exactly as fast as their revenue does(linearly). I also find it hard to believe they magically fixed their inference margins in just six months. Remember in January when they missed their gross margin targets because compute costs were 23 percent higher than they expected?

I won’t call it fraud but the timing is beneficial for Dario & co.

All in all, we do live in interesting times.

The AI trade has been doing great for the last year but the SAAS trade is the casualty of the AI trade. The contrarian trade here is to buy beaten down SAAS names and look for reversals in them. Stocks like (servicenow) and (Salesforce) come to mind as the obvious beneficiares if vibecoding does not replace every large software contract.

What are the bonds saying though?

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Hello traders,

I hope you all had a great weekend and took some time off screens to rest and recharge for the upcoming week.

The main event this week is Nvidia earnings

But before we jump the gun to Jensen and Co, let us recap last week.

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Wishing a very happy Mother’s day to all the amazing moms around the world and hope you all have a joyous weekend(yes, you can sleep in today and no, the world won’t end if you take some time off :) ).

The S&P logded a new all time high this past week and so did Nasdaq.
Markets have been chugging along nicely since the Middle East conflict is fading into background and bumper tech earnings are driving the market higher.

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CPU, MEMORY AND STORAGE

Last week was one for the ages for CPU, Memory and Storage stocks

SANDISK closed the week 47% higher than where it started, with its YTD gain now at 539% or so.

INTEL went up 34% this week and is up 234% YTD.

This sneak preview might boost Intel even more in the short term.

We closed our AI and Optical stocks a couple weeks ago and now

are slightly regretting the decision. Just slightly as the newsletter is no longer bullish on Semiconductors in the short term. I will be looking for a pullback of about 20-25% on AMD to re-enter the position. I would leave SNDK, INTC and the rest alone and not play the game to time the so called top on them however I do not find the reward profile attractive in going long these names at this moment.

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Hello traders,

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Hello traders,

Markets chugged along nicely this week and made new all time highs on both Spooz and Qs as President Trump extended the ceasefire unilaterally by three weeks.

Realtime Discord access with equity positions tracker(new website rolling out to select subscribers), intraday orderflow & option dealer summaries included with the paid newsletter membership . Click here to subscribe.

But(there is always a but) as soon as the market closed, there were murmurs that US delegation to Pakistan may not happen and right on cue a “TRUTH” was shared by the President on Saturday afternoon.

So we are back to square one (yet 600 points higher on SPX, finance is wonderful)

EQUITY SPOTLIGHT

We closed our AMD, COHR and LUNR positions in the model portfolio on Friday, the X thread linked below explains the thesis on the trades so I would not repeat it here.

That brings us to closing out most of our high beta convex trades in the tech and semis space since early last year.

We are not in the business of calling tops or bottoms, but if I see a company run up 400% in just over a year, I will take chips off the table to wait for the market to cool down a bit and reallocate capital towards a less “hot” sector so to speak.

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EUPHORIA SEASON 3

I meant the market euphoria and not the Sydney Sweeney one, but if it helps keeping you on this post instead of scrolling away, so be it.

Due to the unbelievable rally off the lows, the market is now solidly in the greed stage. Trump might play the war card a couple more times but ground invasion in the face of midterms is something even John Bolton would stay away from. We have tech earnings this and the next week with the bulk of megacaps reporting this week.

The MAG7 stocks have a lot to prove especially with them going all in on capex spend/hyperscalers and laying off workforce (not so much by Apple but by the rest).

This past week Google announced it is going to invest upto $40 billion into Anthropic.

So the gameplan here by Sundar & co is to hedge their bets with Gemini and Anthropic. This is quite similar to Elon Musk’s SpaceX licensing Cursor and getting an option to acquire them for $60 Billion.

MAG7 companies sans Nvidia are now in a race to AGI and if AGI/ASI is all that is cracked up to be, the capex would seem like a negligible expense in order to advance humanity. However, if AGI/ASI is unable to provide the ROI on the hyperscaler investments, this can cause a sharp correction in the stock price.

Nvidia is the shovel selling business and will likely just laugh its way to the bank.

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It has been a historic two weeks for the markets. S&P erased a 10% drawdown to reach fresh highs quickly followed quickly by Nasdaq futures which are now within kissing distance of 27,000.

Seizing this turn of events, we lightened our stock portfolio and closed our CLS and ESLT positions completely.

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Hormuz Standoff continued over the weekend with the US blockade continuing as peace talks continue for another week in Pakistan.

So, how did we get here and what does it mean for the markets?

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Hello all,

On Sunday, April 12, President Trump posted on Truth Social that the U.S. Navy would “immediately” begin blockading “any and all Ships trying to enter, or leave” the Strait of Hormuz, labeling Iran’s toll collections as “illegal” and “world extortion.” He ordered the Navy to interdict any vessel in international waters that had paid a toll to Iran and instructed U.S. Central Command to begin de-mining the waterway. CENTCOM subsequently announced that enforcement of the blockade against all maritime traffic entering and exiting Iranian ports would begin Monday. Crucially, CENTCOM clarified that vessels transiting the Strait between non-Iranian ports would not be impeded; this is a blockade of Iranian commerce, not a closure of the Strait itself.

The announcement came hours after the collapse of 21-hour marathon negotiations in Islamabad, Pakistan, between Vice President J.D. Vance’s delegation and Iranian officials. The talks broke down over Iran’s refusal to commit to abandoning its nuclear weapons program. Iran’s Islamic Revolutionary Guard Corps rejected the blockade outright, warning that any enemy attempting to challenge their control over the waterway would be trapped in a “deadly vortex.”

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Hello traders,

Happy Easter. Hope your day is peaceful, bright, and full of good food, good company, and a little bit of joy.

We caught a decent chunk to close out last week and did not have any positions going into the weekend.

Realtime Discord access with equity positions tracker(new website rolling out to select subscribers), intraday orderflow & option dealer summaries included with the paid newsletter membership . Click here to subscribe.

Moving on,

Over the weekend US was able to exfiltrate the two pilots downed in Iran in a covert operation as mentioned by the President on truthsocial.

Additionally, President Trump also posted this not so cryptic message asking Iran to open up the Strait of Hormuz.

Geopolitical Architecture: The Hormuz Crisis

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Last week we had quite a week in the markets where after a brief relief rally, the broader market kept going down at a rather orderly pace and crude traded triple digits once again.

We closed our shorts and QQQ puts in the PM session on Friday.

This is not to say the market has bottomed or we will go to new all time highs in X weeks. However as prudent traders we have decided to close our short exposure as of now and not hold anything through the weekend due to the nature of this news-based market.

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TRADING IN TACO-TIMES

Intra-day trading in this market with your typical momentum/mean-revert strategies is not going to be a fun time unless you got the infrastructure and/or you are working in an HFT like setup.

But Algo I’m a crackhead daytrader and I need to trade everyday.

This sounds like a you problem, so I let you work on it.

Jokes apart, this is what I think.

Intraday action on indices has been news-driven and hence if you use stop losses, it quickly starts turning negative EV(assuming suboptimal path dependency). Most of you reading this would be aghast and be like "Is the paragon of risk Algo telling us to abandon stoplosses entirely?”

Well, yes and no.

If you run a selective timeframe ADR on say NQ, you can study historical adverse excursion over the timeframe you trade and cluster the data by volatility regime. If your stop sits outside normal noise, the trade can survive routine shakeouts.

However, if you are margin challenged, this can mean risking $3000-6000 per contract. Add in variance and out of sample behavior, you are looking at a possibility where you are out of 30-40K even if you are “right” directionally but get screwed over by breaking news or Trump tweets and so on.

In this situation, I would love to

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This past week, the fed held the rates steady and the geopolitical unrest caused the global markets to sell off into Friday.

We were well positioned with our NQ shorts, QQQ put spreads and CL longs.

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The Fed has its task cut out, inflation is not at post-pandemic crushing levels but it is sticky enough (even without the current geopolitical turmoil).

Target rate probabilities are hovering at 350-375bps base case by end of the year. Even though Warsh will be dovish, however the the chair does not individually decide the rate decision(even though President Trump thinks so)

Shelter and services pressure has not rolled over enough to give the Fed confidence to cut, and wage pressure in parts of the service economy remains another thorn.

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WHAT IS UP(or down) WITH GOLD?

1. Who is selling gold?
   The answer is not that direct but we can estimate that the Gulf Council Countries are selling the accumulated Gold (roughly $3 Trillion worth) because of checks notes being bombed every day.
   Once the U.S. began hostilities on March 2, every side likely switched to preplanned contingency playbooks. GCC actors, coordinated or not, started raising cash by selling gold, equities, and Treasuries. As the conflict dragged on, collateral values fell, and lenders exposed to GCC debt likely began issuing margin calls. Credit conditions would have tightened quickly. Critical infra was being hit, hundreds of ships were stranded behind the strait and the less we talk about oil wells the better it is. So asset prices were under pressure from two directions at once: normal risk-off selling and forced selling tied to GCC liquidity needs.
   

2. When will the sell stop?
   A lasting peace deal will cause Gold to stabilize and increase its value.

3. But I was told Gold is a hedge in times of uncertainty.
   Yeah, welcome to the real world bud.
   

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Asset outlook and posture

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Hope you all had a great weekend.

Index futures attempt a feeble bounce after three weeks of losses. Oil hovers near $100. Bitcoin defies gravity. And the Federal Reserve faces its most consequential meeting in over a year.

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Hello traders,

What a week it has been in the markets so far. Our swing ideas largely worked well and hence we are calling it a week here.

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I hope you all had a great weekend.

The Iran-USA war has intensified over the weekend and the developing story is that USA has started to bomb refineries in Iran. What does this mean for the region and the world.

The first scenario is that Tel Aviv may have received indications that the U.S.-backed military campaign could reach a conclusion within approximately one week. Should this be the case, Israel may be acting with urgency to neutralize assets critical to Iran’s primary revenue streams before that window closes.

The second scenario involves a deliberate effort to provoke an Iranian response by directing strikes at oil infrastructure within the Gulf states, thereby extending the duration of the conflict. Such an escalation could significantly heighten tensions, potentially prompting the Islamic Revolutionary Guard Corps to abandon restraint and adopt a substantially more aggressive posture.

At present, the region appears to be entering an increasingly volatile phase. Wishing safety and well-being to the innocent across the Gulf.

We were short equities and long crude oil and closed our USO 80/95 spreads as they entered max gain last week.

We are still holding our /ES short and would like to hold it until 6844 or so (stops in +40 pt profit)

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Moving on,

Labor Market Weakness Versus Persistent Wholesale Inflation

The economic data released in early 2026 paints a difficult and unusual picture. On one hand, the labor market appears to be weakening fast. The preliminary February employment report showed nonfarm payrolls falling by 92,000, with the unemployment rate rising to 4.4 percent. That is a sharp reversal from the stronger job growth seen in January and suggests that tight credit conditions, along with higher input costs tied to global supply chain strain, are starting to force companies to cut staff more broadly. The weakness was not limited to one corner of the economy. Financial services posted their worst hiring month since April 2025, while overall job growth leaned heavily on steadier sectors such as healthcare and education.

At the same time, inflation has not eased in the way higher interest rates were supposed to encourage. Headline CPI for January cooled modestly to 2.4 percent year over year, but wholesale inflation remained stubbornly strong. The final demand Producer Price Index rose 0.5 percent month over month, above expectations for 0.3 percent. Core PPI, which excludes food and energy, jumped 0.8 percent in a single month. With core PPI running at 3.6 percent year over year, price pressures are still building in the production pipeline, raising the risk that those costs will eventually flow through to consumers.

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The Federal Reserve’s Dual Mandate Problem

That mix of softer employment and persistent inflation has thrown markets into confusion over what the Federal Reserve will do next. Before the February jobs report, the CME FedWatch Tool showed a 94.1 percent chance that the Fed would leave rates unchanged at its March meeting, largely because earlier labor data had looked solid. The payroll decline changed that view quickly. Traders in fed funds futures and interest rate swaps sharply repriced expectations, and the FedWatch Tool now points to a 97 percent chance that the Fed will cut rates to a range of 3.50 percent to 3.75 percent at the March 18 meeting.

At the same time, there are signs of a deeper split inside the Fed itself. More dovish policymakers, focused on the labor market’s sustained softness over the past six months, are said to support as many as four additional 25 basis point cuts this year to avoid a hard landing. More hawkish officials remain focused on the fact that core inflation is still well above the Fed’s 2.0 percent target. Their concern is that cutting rates too quickly, especially during a large oil price shock driven by geopolitical tensions, could push long-term inflation expectations higher and revive mistakes associated with the 1970s. Because Fed officials are now in the blackout period before the next FOMC meeting, investors will not hear any public guidance from Chair Jerome Powell, Governor Christopher Waller, or Vice Chair Michelle Bowman during the week of March 8 to 14. For now, markets are left to react almost entirely to incoming data.

So Algo, how does this impact the markets?

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