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

Read more

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.

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.

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

Read more

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.

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.

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.

Share

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.
   

   ---

Asset outlook and posture

Read more

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.

Read more

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.

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.

For remainder of the week and through the weekend the only thing we will be focusing on is how the crude oil market reacts to the closure of the Strait of Hormuz and if this administration blinks.

The bottom line is that President Trump cares about the markets more than I care about my sharpe ratio. We should ideally see de-escalation in the middle east sooner rather than later.

In this regard, I’m warming up to the idea of buying software here.

Atlassian Corp

Thesis pillars

1. Revenue

Even with the AI hoopla, TEAM revenues are climbing steadily and I don’t see that changing anytime soon. Vibe-coding JIRA is not something I would bet any significant amount on.

2. Margins
TEAM reported a non-GAAP operating margin of 27%. That is A-OK in my book. A large company with mature R&D and stable clients, this is something I wouldn’t call a red flag at all.

3. RSU reset
The stock has taken a beating and the RSU grants from 2020-21 era are now fully vested and/or reset. This is an excellent sign as the SWE market has now reset.

4. Engineer market reset
The hiring market has changed a lot. Signing bonuses have gone away, competing offers are rare, and the wave of layoffs across big tech in the last couple years have made talent easy to find and with a much lower ego(FAANG OR GTFO DOES NOT FLY ANYMORE). That gives $TEAM a chance to hire excellent people at compensation levels the same people would laugh at two years ago. Bonus, you can get them in-office and crank up the productivity that way.

Overall, this makes TEAM an excellent play to buy and hold for 3+ years.

Tail risks to monitor

• A slowdown in enterprise spending would delay the revenue ramp and push out the re-rating.

• Competitive pricing pressure from hyperscalers could squeeze gross margins before operating leverage shows up.

• A broader macro selloff could compress software multiples across the board, meaning 25x falls to 15x even if company fundamentals stay intact.

Subscribe now

I have been off X this week and hence you all probably missed the intra-day commentary, however the discord is plenty active, sharing a snippet below.

I really wanted to share the Friendship over meme on X but I stopped myself from doing so.

That is about it from me.

-Fin

P.S. Next week’s market outlook would come out on Monday instead of a Sunday.

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)

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,

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.

Subscribe now

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?

Read more

Hello traders,

I hope you all have had a good weekend.

First of all wishing peace and safety to my Middle-East/West Asia subscribers.

Yesterday US and Israeli forces attacked Iran and in the process eliminated top brass of IRGC and Ayatollah Khamenei. This has caused oil to spike in the early markets to about 8-10%. If the Strait of Hormuz stays impacted, crude can easily go to 90-100 per barrel.

Our idea to long oil through USO spreads into the week would likely work out well. However, since the options do not open until 9:30 am Monday, today’s globex session is key.

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.

Recapping last week’s trades

Subscribe now

THE TIMELINE SO FAR AND WHAT IS NEXT

Feb 27, 2026: US-Iran talks in Geneva ended without any deal. Right after the talks, US authorized departures of non-essential Federal workers from Israel.

Feb 28th, 2026: US and Israel struck Iran with missiles and then Iran instantly retaliated by attacking US assets in neighboring countries like UAE, Qatar, Saudi Arabia, Bahrain and Oman. US also announced that Ali Khamenei was targeted and killed in a missile attack on his compound.

March 1, 2026: US strikes continue with attacks on Iranian Naval bases and ships with President Trump sharing it on his social media platform TruthSocial.

Readers, I’m gonna be honest here. I’m not a geopolitics expert. I can code and trade but I definitely do not know how this conflict is going to end . Past US attempts at installing Democracies failing in the region do not necessarily mean this one will also end up the same way.

However, these are three second-order effects that I believe are possible if this conflict extends beyond a few weeks.

1. Inflation expectations will start perking up based on Hormuz escalation. Crude spiking to 90 will first hit PPI and then passhtrough to CPI in a month or two, especially in the transport sector. Another concern is that the inflation might become “sticky” and even if crude prices go down, the CPI might stay higher for a while (primarily as companies would want to make as much profit as possible due to tariff uncertainity)

Read more

I hope you all had a great weekend.

We had an excellent short week last week and ended up on the right side of the tape more often than not.
Brief summary here.

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.

THE FOUR TRILLION QUESTION : NVIDIA EARNINGS

Nvidia reports fiscal Q4 2026 earnings on February 25, 2026, carrying consensus expectations of approximately $65.56 billion to $65.68 billion in revenue and EPS near $1.46 to $1.52. Data center sales dominate the forecast at roughly $58.72 billion to $59.9 billion. Short term equities market volatility is guaranteed yet directionally unpredictable. Historical data confirms that pure earnings beats no longer drive immediate valuation appreciation. Pricing dynamics now rely entirely on Q1 fiscal 2027 forward guidance, specifically concerning Blackwell architecture production scaling, TSMC packaging capacity bottlenecks, and the preservation of gross margins in the mid 70 percent range. Guidance deviating downward from aggressive growth metrics will initiate severe liquidation.

Long term market impact is contingent upon the structural permanence of artificial intelligence infrastructure spending. Nvidia projects a $500 billion revenue path for its Blackwell and Rubin chip lines through 2026. This aligns with anticipated global data center expenditures escalating to between $3 trillion and $4 trillion annually by 2030. However forecast reliability remains suspect due to epistemological uncertainty surrounding circular artificial intelligence deals, inventory overbuilds, and unquantifiable geopolitical regulatory obfuscation. Sustained equity growth demands flawless execution of the architectural roadmap and empirical evidence of expanding enterprise workload diversification beyond concentrated cloud provider capital expenditure cycles.

What to Watch

Beyond the headline revenue and EPS numbers, focus on these specifics:

Blackwell ramp timeline: When do shipments meaningfully accelerate? Any delays matter because the product cycle is the growth engine.

Gross margin trajectory: Can they hold 74% as mix shifts to new products, or do yields and ramp costs pressure profitability?

China exposure: How much revenue is still coming from a region facing escalating restrictions? Any surprises here could be problematic.

Customer concentration: Are Meta, Microsoft, Amazon, and Google still buying at the same pace, or is there any sign of digestion?

Inference versus training: The bull case long-term depends on AI moving from model training (where Nvidia dominates) to inference (where competition is fiercer). Any data points on inference revenue mix help answer whether the moat persists.

The Economic Picture: Can Goldilocks Last?

Markets are walking a tightrope right now. Growth is holding up better than anyone expected, but we’re also dealing with genuine powder kegs overseas and corporate earnings that could make or break the quarter. As February winds down, traders are trying to figure out whether this “Goldilocks” scenario (decent growth without runaway inflation) can actually survive the real world.

The Supreme Court just threw a wrench in the works by striking down broad presidential tariff powers, which has everyone scrambling to recalculate what this means for bond yields, deficits, and the dollar. Meanwhile, tensions are flaring in the Middle East and we’re hitting the four-year mark of the Russia-Ukraine war, both of which are keeping energy markets on edge.

Share

The story of early 2026 has been the economy refusing to roll over. Despite some messy data from the late 2025 government shutdown, the underlying picture looks solid.

Manufacturing is finally waking up. The ISM index hit 52.6 in January, the best since early last year, and the Philly Fed jumped to 16.3. New orders are growing and price pressures are actually easing a bit, which is exactly what you want to see. Historically, this kind of manufacturing rebound favors value stocks, small caps, and industrials over the growth names that dominated for years.

Labor markets look weird but stable. Jobless claims are hanging around 200,000, which suggests employers aren’t hiring aggressively but also aren’t laying off. That’s good for consumer spending without triggering the wage-price spiral that would force the Fed’s hand.

But inflation isn’t going quietly. Headline CPI looked tame at 0.2% month-over-month in January, but dig deeper and it’s messier. Used car prices dragged the core goods number down artificially. Strip that out and core goods inflation actually accelerated to 0.36%.

So, what can exactly go wrong in this situation?

Read more

Hello,

Please find the weekly levels for this week below.

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.

Read more

Hello traders,

Hope you had a lovely Valentine’s day and are enjoying your long weekend.

A quick recap of the 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.

COLD CPI, A CONCERN?

The week that just ended on February 14, 2026, seriously challenged the popular belief that everything is going smoothly in the markets. For the past few months, low volatility had investors feeling comfortable, but that comfort zone is cracking. Right now, we’re dealing with three major problems all at once: inflation that’s cooling down but still stubborn in key areas, big tech stocks showing weakness, and geopolitical tensions that have gone from diplomatic talk to actual military action.

When the January 2026 Consumer Price Index came out, it highlighted a key disconnect. The headline numbers suggest inflation is still coming down, but if you look under the hood at core services and shelter costs, they’re staying stubbornly high. Making this worse, we now have a new tariff system that the Federal Reserve Bank of New York says is passing almost 90% of costs directly to American consumers. This creates a kind of stagflation tax that the Fed can’t really fix with their normal tools.

At the same time, something weird is happening with geopolitical risk. Usually when tensions rise, oil prices spike. But West Texas Intermediate crude ended the week around $62.89, dropping over 2.7% on Friday alone. This happened even though Israel and Iran are on the brink of a nuclear confrontation and the United States has set a hard June deadline for ending the Russia-Ukraine conflict. The market seems more worried about demand falling (because of tariffs hurting the economy) than about supply disruptions from wars. This mismatch in pricing is one of the biggest risk opportunities heading into next week.

Looking at stocks, the Nasdaq 100 is showing classic signs that big investors are selling. The index failed to get back above its 100-day moving average, and major names like Apple and AppLovin got hammered on earnings. This suggests we might be shifting from a “buy the dip” mentality to “sell the rally.”

With Kevin Warsh being nominated as the next Federal Reserve Chair and the Fed minutes coming out on February 18, we’re set up for volatility to spike. The easy money trades of 2024-2025, where you just bought index funds and AI stocks, are giving way to a market where you need to actually pick good stocks and worry about borrowing costs and geopolitical risks.

Subscribe now

Understanding the Economy: The Inflation-Tariff Trap

The Inflation Problem: Breaking Down January 2026 CPI

When the Bureau of Labor Statistics released the January 2026 inflation data on February 13, the market had trouble figuring out what it meant. Headline CPI rose 0.2% from the previous month and 2.4% from a year ago. That 2.4% is the lowest annual reading since May. On the surface, this looks good and supports the idea that inflation is cooling. But when you dig into the Core CPI (which excludes food and energy), you see structural problems that justify why some Fed officials are worried.

The good headline number was mostly created by falling energy prices, which dropped 1.5% in January. Gasoline prices crashed 7.5%, and that’s a volatile component that hid the persistent inflation pressure in services. When you strip out energy, the picture looks much worse. Shelter costs, which make up the biggest chunk of the CPI basket, rose 0.2%. While that’s better than the 0.4-0.5% monthly increases we saw before, it’s still mathematically hard to get back to a 2% overall inflation target without shelter costs falling faster.

The “supercore” inflation metric, which is services excluding energy and housing and is the Fed’s preferred way to track wage-driven inflation, keeps getting pushed up by rising costs in medical care, recreation, and airline fares.

This data backs up what Fed officials like Christopher Waller and Lisa Cook have been saying. They argue that risks are tilted toward higher inflation, which means we need to keep rates “higher for longer” even though the market is pricing in rate cuts. The split between the goods sector (where prices are falling because supply chains are fixed) and the services sector (where prices are rising because of wages and insurance costs) creates an economy that’s hard to manage with just one interest rate.

The Tariff Problem: Measuring the Real Impact

A big variable that the market isn’t pricing in properly for 2026 is the return of aggressive trade protectionism. A major study from the Federal Reserve Bank of New York in February 2026 measured the impact of the 2025 tariff regime and proved that the political talking points are wrong. Foreign exporters aren’t absorbing the tariff costs. American companies and consumers are paying nearly 90% of it.

The average tariff rate on U.S. imports shot up from a low 2.6% at the start of 2025 to 13% by year-end. That’s a five-times increase in the tax on imports, comparable to the trade wars of the 1930s in terms of percentage, though it’s happening in a much more globalized economy now. The New York Fed’s data shows that about 86% of tariff costs get passed through to import prices. So for every 10% tariff, import prices rise by 8.6%.

This structural shift has serious implications for the current market:

Profit Margin Squeeze & Earnings Risk: American companies, especially in industrial and retail sectors, face a tough choice. Either absorb these costs (which means lower earnings per share) or pass them to consumers (which means people buy less). Walmart reports earnings next week and will be a key test of this dynamic. If they signal they can’t pass costs on, the entire retail sector could get repriced lower.

Monetary Policy Conflict: The Federal Reserve can’t easily cut rates to boost growth if inflation is being artificially propped up by tariff-driven price increases. This “stagflation” impulse (lower growth because of higher costs) makes it harder for the incoming Fed Chair to navigate. It effectively raises the “floor” for inflation, making the 2% target impossible to reach without causing a severe recession.

Federal Reserve Policy Outlook: The Warsh Era Begins

Kevin Warsh being nominated to replace Jerome Powell adds a new layer of uncertainty to policy. The market sees Warsh as pragmatic but historically hawkish when it comes to fiscal irresponsibility and government overspending. His appointment signals we might shift away from the “flexible average inflation targeting” approach toward a more rigid defense of the currency and long-term fiscal stability.

At the January FOMC meeting, the Fed held rates steady at 3.50% to 3.75%, which is significantly lower than the 2023-2024 peak, showing that the Fed had done substantial easing throughout 2025. But the January pause wasn’t unanimous, revealing a divided committee. Dissenters like Stephen Miran argued for aggressive cuts (up to 100 basis points), saying tariffs haven’t had much impact. This view directly contradicts what the New York Fed found. Meanwhile, hawks like Alberto Musalem from the St. Louis Fed said further easing would be “unadvisable” given that the labor market refuses to weaken.

Key Event Ahead: FOMC Minutes (Feb 18): The minutes from the January meeting come out Wednesday, February 18, and people will be looking closely at how deep this division runs. If the minutes show growing agreement that the “neutral rate” has shifted higher because of fiscal deficits and tariffs, the bond market might have to reprice where rates will end up in 2026, which could trigger a sell-off in shorter-term bonds.

Stock Market Structure & Sector Analysis

The stock markets are showing classic late-cycle behavior: narrowing breadth, defensive rotation, and high sensitivity to liquidity withdrawal. The gap between the S&P 500 and the Nasdaq 100 is the defining feature of current market structure.

Index Performance: ES and NQ

Read more

Hello traders,

Last week we had one of the most volatile weeks in the recent history outside of the Liberation day week in the markets. We were on the right side of the volatility most of the times and reaped great rewards for it. Some snippets here.

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 equity ideas were a glimmer of green in the sea of red.

Are We all Fucked?

That is exactly what you would feel if you opened the finance news-cycle over the last few weeks.

But is it really true?

Equal weight S&P just made new all time highs and the S&P is off only a couple hundred bps from its own all time highs.
Then why is it that everyone is screaming from the top of their lungs as if a crash is coming?

The answer is leverage, it is always fucking leverage. People are levering themselves to the tits on Crypto-AI-Datacenter complex without looking at how the individual companies are performing, looking at you and .

Last few weeks have shown you what you own is garbage and what is not.

There is no shame in riding garbage to the top but as the music stops, you should exit it. Full stop.

The other question is the AI capex spend. More on that below.

Subscribe now

The $670 Billion Question

There’s an old saying in tech: “We tend to overestimate what we can accomplish in one year and underestimate what we can accomplish in ten.”

This week, one of the main stories was the wild Capex numbers by big tech.

Read more

Hello traders,

Here are the weekly levels for this week.

Subscribe now

Read more

Hope you all had a great weekend.

A lot happened over the last week and we were on the right side of the markets for the most part.

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.

Fed Hits Pause Button, but Dissent Signals Debate Within

he Federal Open Market Committee voted 10-2 Wednesday to hold the benchmark federal-funds rate in a range of 3.50% to 3.75%, marking the first pause after three consecutive quarter-point cuts late last year that brought rates down from 4.50%.

The decision was widely expected, but the details provided fodder for both bulls and bears. The committee acknowledged that the labor market remained “low” in terms of job gains and that the unemployment rate had stabilized. On the other hand, the committee noted that inflation remained “somewhat elevated,” signaling that the fight against rising prices was not yet complete.

Governors Christopher Waller and Stephen Miran dissented, arguing for an immediate 25-basis-point reduction. Their opposition underscored a growing rift within the central bank over whether inflation has cooled sufficiently to warrant further easing. Waller, in particular, has been vocal in arguing that the risks of over-tightening now outweigh the risks of doing too little on inflation.

The dissents were the story. Waller is not a dove by nature. When he starts pushing for cuts, it deserves attention.

In its post-meeting statement, the Fed emphasized its commitment to assessing incoming data when considering future adjustments. This language was interpreted as leaving the door open to a cut as early as March, though market pricing suggests June or September is more likely.

The market reaction was muted but modestly positive. Equities rallied into the close, bond yields ticked lower, and the dollar weakened slightly. Fed funds futures shifted to price in slightly higher odds of a cut by mid-year, with the probability rising from around 40% before the meeting to roughly 50% afterward.

For now, the Fed’s message is one of patience. The committee is in no hurry to move in either direction, preferring to let the data guide its decisions.

Take advantage of APEX’s 90% promo code and pass account in one day. Also $40 resets on your accounts. Use code ALGO or alternatively just click the button below

APEX SALE

Commodities: A Month for the History Books

If January 2026 will be remembered for anything in financial markets, it may well be the historic surge in precious metals and the resurgence of crude oil. Safe-haven demand, a plummeting dollar, and geopolitical anxiety combined to produce some of the most dramatic moves in commodity markets in decades.

Gold Rallies to Record Highs Before Pullback

Gold delivered a historic monthly performance, surging to an all-time high of $5,626.3 before profit-taking drove a steep correction.

The yellow metal opened January around $4,330 and spent the month in a parabolic ascent, breaking above $5,000, then $5,200, then $5,400, before peaking at $5,608.35, a gain of nearly 30% at its peak. The move represented one of the largest monthly rallies in gold’s modern history.

Gold Futures closed January 30 at $4,763.10, a stunning correction from the highs but still up roughly 10% for the month.

The rally was fueled by converging forces:

• Central bank buying: World Gold Council data shows official sector purchases exceeded 1,000 tonnes for the third consecutive year, with China, India, Turkey, and Poland leading

• Dollar weakness: The DXY fell sharply as Fed cut expectations rose

• Iran tensions: The escalating nuclear standoff drove safe-haven demand to extreme levels

• Inflation hedge: With tariffs threatening renewed price pressures, gold attracted fresh positioning

The correction came on January 30 as traders booked profits and uncertainty emerged around potential Fed personnel changes. The move was exacerbated by margin calls on leveraged positions.

J.P. Morgan projects gold will average $5,055 per ounce by Q4 2026. Goldman Sachs raised its 2026 target to $5,400. The most bullish forecasters see $6,000+ if geopolitical tensions escalate to open conflict.

Gold Trade Idea

The pullback from $5,608 to $4,763 (down 15%) creates a buying opportunity for those who missed the initial surge. Fundamentals remain intact.

Setup: GC Long on Support Test

• Entry: $4,700 to $4,800 zone

• Stop Loss: $4,550 (below the 50-day MA)

• Target 1: $5,200 (prior resistance becomes support)

• Target 2: $5,600 (retest of all-time high)

• Target 3: $6,000 (extension)

• Risk-Reward: 1:3

Conservative Entry:

• Wait for daily close above $5,000

• Entry: $5,020

• Stop Loss: $4,800

• Target: $5,600+

• Rationale: Confirms buyers have absorbed the correction

Options Play: GLD Call Spread

• Buy GLD March $435call

• Sell GLD March $460 call

• Defined risk, leveraged exposure to gold rally

NB: These are setups and not trades. For more details, please check the discord.

Subscribe now

Silver Suffers Violent Correction After Parabolic Run

ilver’s January was extraordinary, one of the most volatile months in the metal’s trading history.

Silver exploded higher through mid-January, driven by industrial demand from AI infrastructure, solar panels, and electric vehicles, combined with safe-haven buying spillover from gold. The white metal surged from roughly $32 at the start of January to an all-time high of $121.67, a gain of nearly 280% at its peak.

Citigroup dubbed it “gold on steroids” and forecast $150 within three months. Chinese buying was relentless as industrial users scrambled to secure physical metal. Major miners like Fresnillo and Hecla revised production guidance lower, and the structural supply deficit asserted itself violently.

But the rally ended in catastrophe. On January 29, the CME Group implemented a new percentage-based margin system that hiked maintenance margins to 16.5% of contract value. The move forced leveraged speculators to liquidate en masse.

The result was a cascade crash. Silver plummeted from above $100 to as low as $75 in a matter of hours. Silver closed Friday, January 31 at $78.53, down 35% from the all-time high in just two days.

The crash wiped out billions in speculative profits and reminded traders why silver is called “the devil’s trade.”

Silver Trade Idea

Silver’s close at $78.53 after the crash from $121.67 creates both danger and opportunity. Only traders comfortable with extreme volatility should participate. Position sizing must be significantly reduced.

Setup: SI Long at Crash Support

• Entry: $70 to $72 zone (current area)

• Stop Loss: $64 (below the crash low with buffer)

• Target 1: $95 (50% retracement)

• Target 2: $110 (61.8% retracement)

• Target 3: $120+ (retest of highs)

• Risk-Reward: 1:3

• Position Size: 25% of normal due to volatility

Aggressive Breakout Setup:

• Entry: $88 on daily close above $85 with volume

• Stop Loss: $78

• Target: $110+

• Rationale: Reclaim of $85 signals liquidation is over

Conservative Play: Silver Miners (SIL)

• Entry: Current levels

• Stop Loss: 15% below entry

• Target: 40% to 60% upside if silver recovers

• Rationale: Leveraged silver exposure without margin risk

NB: These are setups and not trades. For more details, please check the discord.

Crude Oil Posts Best Month Since 2023

West Texas Intermediate futures surged 13.57% in January, their strongest monthly performance since July 2023, as tensions between Washington and Tehran ratcheted higher.

The rally came as the Trump administration warned of potential military action if Iran’s nuclear program advances further. Intelligence reports indicating Iran has enriched uranium to 90% purity, the threshold for weapons-grade material, sent traders scrambling for protection.

“The Strait of Hormuz risk premium is back in a big way,” said an energy analyst at a major commodities desk. “Add in supply disruptions from Kazakhstan, winter freeze-offs in the Permian, and tighter sanctions on Russian crude, and you’ve got a perfect storm for bulls.”

Production outages proved particularly supportive. Kazakhstan experienced unexpected shutdowns, winter storms triggered freeze-offs across the Permian Basin, and tighter restrictions on Russian oil purchases finally began to bite.

The International Energy Agency raised its global demand forecast for 2026 to 930,000 barrels a day, citing improving economic conditions. But not everyone is convinced the rally has legs. The U.S. Energy Information Administration still projects WTI averaging just $52 this year as global supply outpaces consumption.

OPEC ministers gather Monday, their first meeting since the January surge, and any signals on production quotas could set the tone for February.

Key levels to watch:

Read more

Hello Traders,

Wall Street enters the final week of January perched at a familiar yet precarious position: near record highs but beset by crosscurrents that demand the attention of even the most seasoned traders. The Federal Reserve convenes this week for its first policy meeting of 2026, a gathering that will test the market’s conviction that interest rates have peaked and that cuts remain in the offing, if not imminently, then at least by summer.

Beyond the Eccles Building, the forces impacting markets this week extend to oil fields in the Persian Gulf, battlefields in Ukraine, and the corridors of trade policy in Washington. Index futures have consolidated beneath psychological barriers, bitcoin has stalled below the vaunted $90,000 level, and crude oil oscillates between supply gluts and geopolitical risk premiums. For traders and investors alike, the week of January 26 through 30 promises to deliver the kind of high-stakes drama that defines modern financial markets.

Snow day Giveaway: Restack and like this post for your chance to win a free year of paid subscription. Three lucky subscribers will be selected. If you are already a paid subscriber, you get a year comped on your account.

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.

The Federal Reserve’s January Meeting

A Pause That Speaks Volumes

When the Federal Open Market Committee concludes its two-day meeting on Wednesday, January 28, at 2:00 p.m. Eastern Time, virtually no one on Wall Street expects a change to the federal funds rate. The benchmark overnight lending rate will almost certainly remain anchored in the 3.50% to 3.75% range, where it has resided since the concluding rate cuts of 2025.

Yet the absence of action should not be mistaken for a lack of significance. In the peculiar theater of central bank communications, what Jerome Powell says, and equally important, what he declines to say, during his 2:30 p.m. press conference could prove more consequential than any rate adjustment.

“The market has largely priced out any chance of a January move,” said one senior strategist at a major Wall Street bank on signal chat who requested anonymity to speak candidly about Fed expectations. “But the forward guidance game is where the real money gets made or lost. Powell has to thread a needle between acknowledging that inflation remains sticky and not spooking a market that’s counting on cuts by the back half of the year.”

The December Consumer Price Index, released on January 13, showed headline inflation running at 2.7% year-over-year, stubbornly above the Fed’s 2% target but well below the peaks above 9% that haunted policymakers in 2022. The Producer Price Index for November came in at 3.0%, with fresh December data due on Friday, January 30, which could reshape expectations heading into the February meeting.

The Arithmetic of Rate Cut Timing

Traders in interest-rate futures markets have been steadily pushing out their expectations for the first rate cut of 2026. Where some had hoped for action as early as March or April, the consensus has now shifted to June at the earliest, with many market participants penciling in July or later.

This shift reflects a sobering reality: the “last mile” of the inflation fight has proved more arduous than central bankers anticipated. The goods inflation that drove the initial surge has largely receded, courtesy of healed supply chains and normalized inventory levels. But services inflation, driven by wages, shelter costs, and healthcare expenses, has demonstrated remarkable staying power.

The Fed is in a difficult spot.They’ve made tremendous progress on inflation, but they can’t declare victory prematurely. And with the labor market still reasonably tight, they have the luxury of patience. I’d expect Powell to emphasize that patience in his remarks.

The challenge for equity markets is that “higher for longer” interest rates impose a cost. Growth stocks, whose valuations are particularly sensitive to the discount rate applied to future earnings, face headwinds when bond yields rise. The technology-heavy Nasdaq-100, which has been the market’s locomotive since the artificial intelligence enthusiasm took hold in 2023, could be especially vulnerable to any hawkish surprise.

What to Watch in Powell’s Remarks

Market participants will parse every syllable of Powell’s press conference for clues about the Fed’s reaction function. Several key themes warrant particular attention:

Inflation characterization: Does Powell describe inflation as “persistent,” “sticky,” or “gradually moderating”? Each adjective carries different implications for policy timing.

Labor market assessment: Will the Fed chairman emphasize continued strength, suggesting less urgency to cut rates, or emerging softness that might accelerate the timeline?

Financial conditions: The Fed has grown increasingly attentive to broader financial conditions, including equity valuations, credit spreads, and the dollar’s exchange rate. Any commentary on asset prices could move markets.

Forward guidance language: The December meeting’s statement and dot plot implied a gradual normalization of rates throughout 2026. Will Powell affirm that path or suggest it may be reassessed based on incoming data?

The stakes are considerable. A more hawkish-than-expected tone could send the 10-year Treasury yield, currently around 4.25%, climbing toward 4.5% or beyond, pressuring equity valuations across the board. A more dovish message, by contrast, could provide the catalyst for index futures to break through their recent consolidation ranges and establish new record highs.

Take advantage of APEX’s 50% promo code and pass account in one day. Also $40 resets on your accounts. Use code ALGO or alternatively just click the button below

APEX SALE

Index Futures Analysis

E-mini S&P 500: Consolidation Below a Psychological Barrier (Algorithmic levels at the end of the post)

The E-mini S&P 500 futures contract, the benchmark vehicle for institutional traders seeking exposure to America’s largest companies, has spent recent weeks consolidating beneath the psychologically significant 7,000 level. This sideways trading action comes after an impressive rally that began in April 2025 and carried the index to successive record highs through the autumn.

Such consolidation is neither unusual nor inherently concerning. Extended rallies require periods of digestion, allowing valuations to normalize and new buyers to enter at what they perceive as sustainable levels. The 50-day simple moving average, currently situated around 6,850, has served as a reliable support level on each of the market’s recent pullbacks.

What we’re seeing is textbook behavior after a strong impulse move. The market rallied hard, investors grew cautious at round-number resistance, and now we’re watching to see whether buyers or sellers gain the upper hand. The good news for bulls is that every test of support has been met with buying. That’s constructive.

The key technical levels for ES futures are relatively well-defined(more levels at the end of the post). Overhead resistance awaits at 7,000, a level that represents both a psychological barrier and, more practically, an area where many traders have placed profit-taking orders. A decisive break above 7,000, defined as multiple daily closes accompanied by expanding volume, would likely trigger a wave of momentum buying that could carry prices to 7,200 or higher in short order.

On the downside, the 6,850-to-6,880 zone represents what technical analysts(also known as male-astrologers) call the “line in the sand.” This area has been tested multiple times and has held on each occasion. A failure to hold this support would mark a significant technical deterioration, opening the door for a deeper correction toward the 6,600-to-6,650 weekly support zone, a decline of roughly 4% from current levels.

The fundamental backdrop remains broadly supportive. Corporate earnings, while growing at a more modest pace than in prior quarters, continue to exceed expectations for the majority of S&P 500 components. The artificial intelligence investment cycle shows no signs of abating, with major technology companies announcing expanded capital expenditure plans for data centers and computing infrastructure. And despite the Fed’s cautious messaging, the prospect of rate cuts later in 2026 provides a psychological floor for equity valuations.

E-mini Nasdaq-100: Growth Stocks Face a Technical Test

If the S&P 500’s chart appears constructive, the Nasdaq-100’s presents a more nuanced picture. The technology-heavy index recently broke below an upward-sloping trendline that had contained its advance since December, signaling a potential shift in short-term momentum.

The Nasdaq-100 has been the market’s star performer for much of the post-pandemic era, propelled by investors’ enthusiasm for artificial intelligence, cloud computing, and the digital transformation of commerce. Companies like Nvidia, Microsoft, Apple, Amazon, and Meta Platforms, collectively commanding trillions of dollars in market capitalization, have delivered earnings growth that has justified, at least partially, their elevated valuations.

But the index’s sensitivity to interest rates makes it particularly vulnerable to any reassessment of Fed policy expectations. Growth stocks, by their nature, derive a larger portion of their valuation from earnings expected far into the future. When interest rates rise, the present value of those distant earnings diminishes, pressuring stock prices.

The technical picture shows the Nasdaq-100 futures trading around 25,700, having pulled back from a recent test of the 26,000-to-26,400 all-time high zone. The weekly relative strength index remains above its 50 level, suggesting that the broader uptrend remains intact.

Key support levels for NQ futures lie at 25,250-to-25,300 in the near term, with more significant support at the 24,800-to-25,000 confluence zone(more levels at the end of the post). This deeper support level represents the intersection of daily and weekly demand areas and has significance for longer-term position traders. A sustained break below 24,800 would signal a more substantial correction, potentially targeting the 24,000 area, a decline of roughly 6% from current levels.

The Nasdaq has been remarkably resilient, with pullbacks consistently shallow and short-lived, The question now is whether that pattern holds or whether we’re finally seeing the beginning of a more meaningful correction. I’d watch the 24,800 level closely. If that gives way, you could see a pretty rapid move lower.

Bulls point to the artificial intelligence narrative as a reason for continued optimism. The major cloud computing providers continue to invest aggressively in AI infrastructure, driving demand for advanced semiconductors and related technologies. Third-quarter earnings from Nvidia and other AI beneficiaries exceeded expectations, and fourth-quarter results, due in the coming weeks, are anticipated to show continued strength.

Yet skeptics note that the AI boom has been largely priced into current valuations. For the rally to continue, companies must not merely meet expectations but exceed them by widening margins. In the current environment of cautious capital spending and uncertain end-demand for AI applications, that bar may prove difficult to clear.

Share

Bitcoin’s Sharp Retreat

The Cryptocurrency Stumbles Below $88,000

For much of 2024 and 2025, bitcoin appeared destined to breach the $100,000 level that had assumed almost mythological significance among cryptocurrency enthusiasts. The April 2024 halving, the quadrennial event that reduces the rate at which new bitcoins enter circulation, created supply constraints that, combined with institutional demand through spot exchange-traded funds, drove prices from the $30,000 range in late 2023 to nearly $98,000 by mid-January 2026.

But in late January 2026, the world’s largest cryptocurrency has suffered a sharp retreat that has rattled even seasoned crypto traders. As of January 25, bitcoin trades around $86,700 to $89,000, well below its January 14 high of $97,900 and distressingly far from the psychological $100,000 barrier. The cryptocurrency has lost approximately 7% over the past week alone, triggering over $130 million in leveraged position liquidations as prices dipped below $88,000.

The decline has unfolded with unsettling speed. During the week of January 18, bitcoin pushed past $95,000, reaching its highest level since mid-November 2025 and raising hopes that the long-awaited breach of six figures was finally at hand. But those hopes proved premature. By January 20, prices had slid below $89,000, and the downward pressure has persisted through the weekend.

The psychological significance of $100,000 cannot be overstated. Round numbers exert a powerful influence on market psychology, serving as focal points for both buyers and sellers. Buyers who have been waiting for the right moment to enter may be holding back until prices clear the barrier, viewing $100,000 as validation of bitcoin’s ascent to mainstream acceptance. Sellers, meanwhile, have clustered their orders just below the level, recognizing its significance and seeking to take profits before any potential reversal.

The technical picture has deteriorated notably over the past week. Bitcoin currently trades below a succession of key moving averages, including the 20-day, 50-day, 100-day, and 200-day exponential moving averages, that now serve as overhead resistance levels. The price is struggling at the 50-Week Exponential Moving Average, a level that often determines medium-term trend direction. When prices trade below this indicator, it suggests a weakening of the underlying bull case.

The $88,000-to-$90,000 region has emerged as a stabilization zone, though its durability remains uncertain. A Bollinger Bands squeeze indicates low volatility, typically a precursor to a significant price movement in one direction or the other. The bands have contracted sharply over recent weeks, reflecting the narrow trading range. History suggests that such squeezes resolve with explosive moves, though the direction cannot be predicted from the squeeze alone.

And some technical indicators(not a fan of these but an interesting point), including a bearish “Kumo twist” on the Ichimoku cloud chart, suggest the path of least resistance may be lower. The Ichimoku cloud, a Japanese charting technique that combines multiple indicators into a single visual display, has generated what its practitioners consider a warning signal

Bitcoin is under significant pressure right now. The weekly losses are concerning, and we’re seeing liquidation cascades that suggest overleveraged longs are getting flushed out. The key question is whether the $85,000-$87,000 zone holds as support. If that breaks, we could see a move toward $80,000 or lower.

Institutional Flows and Regulatory Clarity

Two factors loom large in the assessment of bitcoin’s near-term prospects: institutional engagement and regulatory development.

The spot bitcoin ETFs approved in early 2024 transformed the cryptocurrency’s investor base. What was once the exclusive province of retail traders, crypto-native funds, and adventurous family offices became accessible to a far broader array of institutional investors. Pension funds, endowments, and registered investment advisors gained a means to access bitcoin within familiar brokerage accounts, bypassing the complexities of cryptocurrency exchanges and digital wallets.

This democratization of access has been a pillar of bitcoin’s advance. Data on ETF flows suggest consistent net inflows throughout late 2025 and into early 2026, indicative of persistent appetite among professional investors. The leading spot bitcoin ETFs have accumulated billions of dollars in assets, establishing bitcoin as a recognized, if not universally embraced, component of institutional portfolios.

Yet the pace of inflows has moderated from the frenzied levels seen immediately following the ETFs’ launch, suggesting that the initial wave of pent-up institutional demand has been largely satisfied. The “easy money” from institutions that were simply waiting for a regulated vehicle has been made. Further gains will require attracting new buyers, either institutions that remain on the sidelines or incremental allocations from those already invested.

On the regulatory front, proposed U.S. legislation aimed at clarifying the oversight structure for cryptocurrencies has generated cautious optimism. For years, the industry has operated in a regulatory gray zone, with the Securities and Exchange Commission and Commodity Futures Trading Commission staking competing claims to jurisdiction. A legislative framework that resolves these ambiguities could unlock additional institutional capital and reduce the regulatory risk premium embedded in cryptocurrency prices.

“Regulatory clarity would be a game-changer,” said a securities lawyer specializing in digital assets. “Right now, firms are hesitant to allocate meaningfully to crypto because they don’t know what rules they’ll face in two years. If Congress can provide that certainty, you could see a wave of new money flow into the space.”

The Macro Headwinds

Yet bitcoin’s fortunes are not determined solely by crypto-specific factors. As an asset class that thrives on risk appetite and liquidity, bitcoin is acutely sensitive to broader financial conditions, and those conditions have grown more challenging in recent months.

The 10-year Treasury yield, which stood at around 4.00% in early January, has risen to approximately 4.25% as investors have repriced expectations for Fed rate cuts. Higher yields on risk-free government securities increase the opportunity cost of holding non-yielding assets like bitcoin and gold, reducing their relative attractiveness.

This competition for capital is not merely theoretical. Portfolio managers constructing multi-asset portfolios must weigh the expected returns of various asset classes against their risks and correlations. When Treasury yields rise, the hurdle rate for alternative assets like bitcoin increases correspondingly. Why accept the volatility of cryptocurrency when you can earn 4%+ on government bonds?

Meanwhile, the dollar has firmed against major currencies, another headwind for bitcoin and other assets denominated in dollars. A stronger greenback raises the effective cost of bitcoin for international buyers, potentially limiting demand from Europe, Asia, and other regions.

Geopolitical risks present a more complex picture. In theory, bitcoin’s narrative as a stateless, censorship-resistant store of value should benefit from increased global uncertainty. Some analysts have speculated that the cryptocurrency could serve as “digital gold” during periods of crisis, attracting safe-haven flows.

In practice, however, bitcoin has often traded as a risk asset during periods of acute stress. When investors flee risk, bitcoin frequently declines alongside equities, at least in the initial phases of a sell-off. Only later, once the initial panic subsides, has bitcoin sometimes rallied on safe-haven flows.

Price Targets and Probability

Despite the near-term uncertainty, analysts remain broadly bullish on bitcoin’s longer-term trajectory. Major financial institutions have published price targets that cluster in the $150,000-to-$200,000 range for 2026:

Standard Chartered has set a target of $150,000, revised lower from earlier, more aggressive projections but still implying substantial upside from current levels.

Bernstein maintains a $150,000 target, anticipating an elongated bull cycle in which institutional buying offsets retail selling.

JPMorgan estimates a fair value of $170,000 within six to twelve months, based on its model of bitcoin’s evolving role as a portfolio diversifier.

Tom Lee of Fundstrat, a perennial bitcoin bull, has suggested prices could reach $200,000 if macroeconomic conditions align favorably.

Yet prediction markets tell a more cautious story. The odds of bitcoin reclaiming $100,000 in the first half of 2026 are assessed at relatively low levels, reflecting fading short-term momentum following a volatile period in late 2025 and the recent sharp decline in January.

For the week ahead, key levels to monitor include support at $83,000-$85,600 and resistance at the $92,000-$95,000 zone. A decisive break below $85,000 would signal a deepening correction, while a recovery above $92,000 would suggest the recent decline was merely a shakeout of weak hands before another attempt at $100,000.

Crude Oil’s Crosscurrents

Geopolitical Risks Versus Structural Surplus

The crude oil market embodies the tensions that define the current macro environment: geopolitical risks that threaten supply disruptions set against a structural surplus that weighs on prices. For traders in West Texas Intermediate futures, navigating these crosscurrents requires constant vigilance.

WTI crude opened 2026 near $57.40 per barrel, reflecting its worst annual performance in five years during 2025. The new year brought volatility, with prices touching a low of $55.76 on January 7 before rallying to $62.36 by January 14. As of January 25, WTI trades around $61 per barrel, supported by seasonal winter demand and geopolitical concerns but capped by an impending supply glut.

OPEC+ and the Production Dilemma

The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, met virtually on January 4 to assess market conditions. The outcome was a reaffirmation of the group’s November 2, 2025, decision to pause production increases through February and March 2026.

This decision reflects OPEC+’s recognition that the market cannot currently absorb additional barrels. The coalition’s strategy throughout 2024 and 2025 has been to restrict supply in an effort to support prices, a tactic that has met with only partial success. While production discipline has prevented a more severe price decline, it has also ceded market share to non-OPEC producers, particularly in the United States.

The next OPEC+ meeting is scheduled for February 1, 2026, when ministers will assess whether to extend the production pause or begin a gradual return of barrels to the market. The outcome will hinge on demand conditions, inventory levels, and, crucially, the trajectory of oil prices in the intervening weeks.

“OPEC+ is in a difficult position. If they bring back production too quickly, prices crash. If they maintain cuts indefinitely, they lose market share and revenue. There’s no easy answer.

The Oversupply Outlook

The U.S. Energy Information Administration’s forecasts paint a challenging picture for oil bulls. The EIA projects that global oil production will exceed demand throughout 2026, leading to inventory builds that could weigh on prices.

The agency’s annual average forecast for WTI in 2026 is $52 per barrel, substantially below current levels and nearly $13 lower than the $65 average in 2025. Global liquid fuels production is anticipated to rise by 1.4 million barrels per day in 2026, with OPEC+ driving a substantial portion of this growth once production increases resume.

Other forecasters have reached similar conclusions. The International Energy Agency has pointed to a potential oversupply of 3.5 million barrels per day in 2026, as current OPEC production levels exceed anticipated demand. A structural surplus of 3 to 4 million barrels per day for the full year would represent a significant shift in market dynamics, pressuring prices toward the lower end of their recent range, or below.

The Geopolitical Risk Premium

Yet crude oil’s price incorporates more than supply-and-demand fundamentals. Geopolitical risk, the premium investors pay for the possibility that conflict could disrupt supply, has proven a persistent feature of the oil market in 2026.

The Middle East remains the primary source of this risk. Tensions between Iran and Israel have escalated throughout January, with reports of widespread protests within Iran, Israeli covert operations aimed at undermining the Iranian regime, and speculation about military strikes against Iranian nuclear facilities. Some analysts have assessed a high probability of a second Israeli-Iranian military conflict in the first quarter of 2026.

President Trump’s administration has added to the uncertainty with its announcement of a 25% tariff on any country that continues trading with Iran, a measure that took effect on January 12. While designed to pressure Iran economically, this policy also creates the potential for supply disruptions if importing nations are forced to seek alternative sources.

The geopolitical risk premium in oil is real, At any moment, a headline could cross that sends prices $5 or $10 higher. The market has to price in that possibility, which puts a floor under prices even when the fundamental outlook is bearish.

For now, these competing forces, geopolitical risk versus structural oversupply, have produced a trading range between $58 and $63 per barrel. A breakout in either direction would require a decisive shift in one of these factors: either a significant escalation of Middle East tensions or a breakthrough in talks that defuses risk, or alternatively a collapse in OPEC+ cohesion or a surprise surge in demand.

Bond Yields and Treasury Market Dynamics

The 10-Year Yield: Anchor of the Financial System

No single financial instrument exerts as much influence on the broader markets as the 10-year U.S. Treasury yield. This benchmark rate serves as the reference point for mortgage rates, corporate borrowing costs, and equity valuation models. Its movements ripple through every asset class, every portfolio, every trading desk on Wall Street.

The 10-year yield has risen from approximately 4.17% two weeks ago to 4.25% as of January 23, a move that, while modest in absolute terms, reflects meaningful repricing of interest rate expectations. The January 12 Treasury auction saw the 10-year note clear at 4.173%, a sign that demand remains solid but that investors are demanding incrementally higher yields to absorb new supply.

The Deficit and Supply Concerns

One factor weighing on Treasury prices, and thus lifting yields, is the sheer volume of debt the U.S. government must issue. Federal budget deficits exceeding $1.5 trillion annually require the Treasury to bring a steady stream of new securities to market. This supply must be absorbed by domestic and foreign buyers, each of whom has alternatives for their capital.

Foreign central banks, once the largest buyers of U.S. Treasuries, have reduced their holdings in recent years. China and Japan, historically the two largest foreign holders, have diversified into other assets, including gold and euro-denominated securities. This shift has placed greater burden on domestic buyers, including insurance companies, pension funds, and mutual funds, to absorb Treasury issuance.

“The supply-demand dynamic in Treasuries has shifted,” explained a fixed-income portfolio manager at a major asset manager. “Ten years ago, you had multiple marginal buyers competing for each bond. Today, the buyer base is narrower, and the deficit is wider. That’s structurally supportive of higher yields.”

Implications for Risk Assets

For equity investors, the 10-year yield’s trajectory matters enormously. Higher yields increase the discount rate applied to future corporate earnings, reducing the present value of stocks, particularly growth stocks with earnings weighted toward future years. At the same time, higher yields make bonds more competitive with equities as an asset class, potentially drawing capital from stock portfolios to bond portfolios.

The relationship between yields and stock prices is not mechanical, however. Equities can advance even as yields rise if the cause of rising yields is strong economic growth rather than inflationary pressure or supply concerns. Context matters.

“The question is why yields are rising,” noted an equity strategist at a global investment bank. “If yields are rising because inflation expectations are becoming unanchored, that’s bad for stocks. If yields are rising because growth is stronger than expected, stocks can handle that. Right now, the answer is ambiguous, which is why markets are uncertain.”

For the week ahead, any movement in the 10-year yield in response to the FOMC announcement or the PPI data will be closely monitored by equity traders seeking to gauge the interest rate environment.

Geopolitical Flashpoints

United States and Iran: Maximum Pressure and Military Posturing

The intensifying confrontation between the United States and Iran represents the most significant geopolitical risk facing markets in early 2026. What began as renewed sanctions has escalated into a full-spectrum pressure campaign that now includes substantial military assets positioned in the Persian Gulf, raising the specter of direct armed conflict between the two nations.

President Trump’s administration has dramatically escalated its “maximum pressure” campaign against Tehran. In January 2026, the Treasury Department’s Office of Foreign Assets Control targeted nine shadow fleet vessels and their owners accused of transporting Iranian oil and petroleum products, with proceeds allegedly funding regional proxies and weapons programs. These actions, implemented under Executive Order 13902, represent the most aggressive sanctions enforcement in years.

Treasury Secretary Scott Bessent has attributed the widespread protests erupting across Iran to the effectiveness of these economic sanctions, claiming they have led to an economic collapse within the country. The collapse of the Iranian rial, shortages of basic goods, and frustration with the ruling establishment have produced the largest demonstrations since the 2022 uprising triggered by the death of Mahsa Amini.

The military dimension of the confrontation has grown equally alarming. President Trump announced the deployment of a major naval flotilla to the region, stating, “We have a big force going toward Iran... Just in case, we have a big flotilla going in that direction.” The USS Abraham Lincoln aircraft carrier, along with destroyers equipped with Tomahawk cruise missiles, has redirected its course toward the Middle East. The U.S. has also dispatched F-15E Strike Eagles to the region to reinforce airpower.

The deployment follows Operation Midnight Hammer in June 2025, when the United States struck Iranian nuclear facilities using B-2 Spirit stealth bombers and Tomahawk missiles. That operation, ordered by President Trump, marked the first direct U.S. military strike on Iranian soil. The January 2026 military buildup suggests Washington is preparing for potential follow-up action or deterrent posturing.

Iran’s response has been defiant and threatening. Supreme Leader Ali Khamenei has reportedly relocated to a fortified underground shelter due to fears of a potential U.S. attack. Iran’s Revolutionary Guard commander has warned that any U.S. military strike would designate all U.S. bases in the region as “legitimate targets.” A mural unveiled in Tehran depicted damaged planes on an aircraft carrier with the message, “If you sow the wind, you will reap the whirlwind.”

Iran has also accelerated its nuclear program in response to international pressure. Reports indicate that uranium enrichment has reached 90%, the level required for weapons-grade material, raising the specter of a nuclear-armed Iran that would fundamentally alter the regional security calculus.

For markets, the implications are severe. Any military exchange between the United States and Iran, particularly one that threatens oil supply from the Persian Gulf or disrupts shipping through the Strait of Hormuz, would send crude prices sharply higher, potentially spiking $10 to $20 per barrel in short order. Safe-haven assets, including gold, the Swiss franc, and potentially the U.S. dollar, would likely appreciate. Equity markets would face significant selling pressure, with defense and energy stocks potentially outperforming the broader indices. The situation remains the most dangerous flashpoint for global markets.

Ukraine and Russia: The War Grinds Forward

The conflict between Ukraine and Russia, now approaching its fourth year, continues to exact a devastating toll on the combatants, on European economies, and on the global supply of food and energy.

Trilateral talks involving the United States, Ukraine, and Russia occurred in Abu Dhabi on January 23-24, with Ukrainian President Volodymyr Zelenskyy describing the discussions as “constructive.” A second round of direct negotiations is anticipated for February 1, raising tentative hopes for a diplomatic resolution.

Yet the military situation suggests that a negotiated settlement remains distant. Russian forces gained 63 square miles of Ukrainian territory between December 23 and January 20, a slower pace than the preceding month but still indicative of continued Russian offensive operations. Moscow’s campaign of long-range missile and drone strikes against Ukraine’s energy infrastructure has severely degraded the power grid; nearly 60% of Kyiv was without electricity by January 21.

Russia has deployed advanced weapons, including the Oreshnik hypersonic missile, which struck Lviv on January 8 and killed four civilians. The use of such weapons signals Moscow’s determination to prosecute the war aggressively regardless of the humanitarian consequences.

For markets, the Ukraine conflict primarily affects European equities and energy markets. Any peace breakthrough would likely trigger a rally in European assets, particularly those most exposed to the war’s disruption of energy supply and trade. Defense stocks globally could face selling pressure if a ceasefire appears imminent.

Conversely, an escalation of the conflict, particularly one that draws NATO forces more directly into hostilities, would have profound implications for risk assets worldwide. While such a scenario remains relatively unlikely, traders routinely monitor headlines from the region for any indication of widening hostilities.

Tariffs and Trade Wars: The Greenland Gambit

President Trump’s trade policy continues to roil markets and strain relationships with traditional allies. The most dramatic development of January has been the threatened imposition of tariffs on European nations unless the United States is permitted to acquire Greenland.

The tariff threat targets Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the United Kingdom, nations with economic ties to Greenland or objections to the American proposal. A 10% tariff was slated to begin on February 1, 2026, escalating to 25% by June 1 if negotiations do not produce an agreement.

European leaders have responded with a mix of incredulity and defiance. The European Union has threatened to activate its Anti-Coercion Instrument, sometimes referred to as the “trade bazooka,” which would allow for broad retaliatory sanctions against U.S. exports. Brussels is also contemplating the reactivation of previously suspended levies on 93 billion euros worth of American goods.

“This is uncharted territory,” observed a trade policy expert at a Washington think tank. “We’ve had trade disputes before, but threatening tariffs over territorial acquisition is something else entirely. It tests the legal and political limits of trade law.”

The broader tariff landscape adds to the uncertainty. The weighted average applied tariff rate on all U.S. imports has reached 14.0%, the highest level since 1946, with an effective tariff rate of 10.1%. These measures represent the largest U.S. tax increase as a percentage of GDP since 1993. A Section 232 investigation into semiconductors resulted in 25% tariffs on specific covered products as of January 15.

For investors, the tariff environment creates headwinds for companies dependent on global supply chains and export markets. Import-dependent retailers and manufacturers face higher input costs, some of which will be passed to consumers in the form of higher prices. Exporters to tariffed regions face retaliatory measures that diminish their competitiveness.

The U.S. Supreme Court’s expected ruling on the president’s authority to impose tariffs under the International Emergency Economic Powers Act could reshape the landscape. If the court constrains that authority, markets would need to reassess the probability of tariff escalation or rollback.

Trade Ideas for the Week Ahead and Weekly Levels

For professional traders seeking to position for the week’s key events, the following trade ideas balance risk and reward across multiple asset classes and scenarios.

Trade Idea 1:

Long

Read more

We are at a juncture in the markets where a lot of people would ask you to buy a certain tech names because they are “beaten-down” or at “good value”. This newsletter is not adding any major US tech names other than the ones we own. We are still building position in China-tech but for now, we will not add any US large cap tech outside of our core holdings.

(more on the market posture later in the newsletter)

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.

The financial landscape for the week of January 19, 2026, is characterized by a violent convergence of high-velocity macro factors that signal a profound regime shift in global asset allocation. While U.S. markets observe the Martin Luther King, Jr. holiday on Monday, the electronic futures complex and international bourses are actively repricing risk assets against a backdrop of escalating geopolitical friction, a pivotal battle for the stewardship of the Federal Reserve, and a decisive "Great Rotation" within the equity market structure.

The Macro-Strategic Landscape: Four Pillars of Volatility

1. Geopolitical Fragmentation: The weaponization of trade policy involving Greenland and the potential deployment of the EU’s “Anti-Coercion Instrument” is ruffling a lot of feathers in the backdrop of Davos summit.

   

2. Monetary Policy Uncertainty: The race between Kevin Warsh and Kevin Hassett for the Fed Chairmanship.This staffing move doubles as a referendum on monetary doctrine, forcing a choice between the “Productivity Dove” and the “Administrative Loyalist” that will set the terminal rate for the rest of the decade.

3. The Capital Rotation: The “Great Rotation” is driven by a recognition that the valuation spread between mega-cap technology and the rest of the market has reached unsustainable extremes, precisely as the U.S. economy shows signs of a mid-cycle re-acceleration (GDP forecasted at 4.3%).

   

4. Commodity Supercycle: Supply constraints in energy and metals, exacerbated by geopolitical risk premiums, are colliding with renewed demand, creating a setup described as the “Rubber Band Theory” in crude oil markets.

   

   ---

   Share

   ---

The Greenland Tariff Shock: Escalation and Mechanism

President Trump’s declaration of a 10% tariff on goods from eight European nations;including Denmark, the United Kingdom, France, Germany, Sweden, and the Netherlands, effective February 1, 2026, represents a stark escalation in the use of economic statecraft. The administration has explicitly linked these tariffs to the refusal of European allies to facilitate the U.S. acquisition of Greenland, citing “national security” and the strategic importance of the Arctic in a multipolar world.

The Escalation Ladder: Escalation and Mechanism

The ultimatum is structured with a punitive escalator designed to force capitulation. The initial 10% levy is set to rise to 25% by June 1, 2026, if a “deal for the complete and total purchase of Greenland” is not reached. This mechanism creates a ticking clock for European exporters. A 25% tariff would be prohibitive for low-margin European exports like German automobiles or French industrial machinery, potentially pushing the Eurozone, already grappling with stagnation, into a deep recession.

Market Implications

Currency Markets: The Euro (EUR) is under pressure as traders price in the economic drag of tariffs. Conversely, the U.S. Dollar (USD) sees safe-haven flows despite the potential inflationary impact of the tariffs on the U.S. consumer.

Equity Volatility: European indices (DAX, CAC 40) have sold off sharply, dragging U.S. futures lower in pre-market trading as the risk of a retaliatory trade war rises.

The European Response: The “Big Bazooka” (Anti-Coercion Instrument)

The European Union’s reaction has been swift, unified, and potentially historic. Brussels is reportedly preparing to deploy its “Anti-Coercion Instrument” (ACI) for the first time. Often referred to by trade policy experts as the EU’s “big bazooka,” the ACI was legislated in late 2023 specifically to deter economic bullying by third countries.

Mechanism of the ACI

Unlike standard retaliatory tariffs, which are often slow to implement and sector-specific, the ACI allows for a comprehensive and rapid asymmetric response. It empowers the EU Commission, following a determination of “economic coercion,” to take sweeping countermeasures. The definition of economic coercion under the ACI, a third country applying measures to interfere with the sovereign choices of the EU or its member states, fits the Greenland ultimatum precisely.

Potential Countermeasures under ACI

The ACI provides the EU with a vast arsenal of economic weapons that go far beyond simple tariffs:

Market Access Restrictions: The EU can limit U.S. companies’ access to the single market of 450 million consumers, potentially blocking the sale of U.S. software or digital services.

Public Procurement Bans: American firms could be barred from bidding on lucrative public procurement contracts within the EU, affecting defense contractors and infrastructure firms.

Intellectual Property Suspension: In a “nuclear option,” the EU could suspend the protection of U.S. intellectual property rights within the bloc. This would strike at the heart of America’s knowledge economy, threatening the royalty streams of pharmaceutical and technology giants.

Financial Services Restrictions: The EU could target the U.S. services surplus by restricting banking activities or digital service provision, a direct threat to U.S. financial institutions operating in London, Frankfurt, and Paris.

The activation of the ACI would signal a shift from a “trade skirmish” to a full-blown economic conflict, potentially fragmenting the Western alliance structure just as unity is required to address challenges in Eastern Europe and the Middle East.

Subscribe now

The Battle for the Federal Reserve: Defining the Reaction Function

As the term of Chair Jerome Powell nears its expiration in May 2026, the race to succeed him has become a proxy war for the future direction of U.S. monetary policy. The contest has narrowed primarily to two candidates: Kevin Warsh and Kevin Hassett, with the political dynamics shifting rapidly in Warsh’s favor following recent comments by President Trump.

The Candidates and the Odds

Read more

The Trump DOJ has served grand jury subpoenas to Federal Reserve Chair Jerome Powell. While the official scope of the investigation concerns a June 2025 congressional testimony regarding cost overruns in the $2.5 billion renovation of Federal Reserve office buildings, the timing and aggressive nature of this legal maneuver are viewed by market participants as a pretextual escalation of the Trump administration’s campaign to force aggressive interest rate cuts.

The market is now grappling with two distinct tail risks. The first is Paralysis Risk, where the Fed, in an attempt to prove its independence, refuses to cut rates despite softening data or improved inflation metrics, keeping financial conditions tighter for longer to avoid the appearance of capitulation. The second is Capitulation Risk, where Powell is forced out or coerced, leading to a premature easing cycle that unanchors inflation expectations and reignites price instability in late 2026. The immediate reaction has been a flight to hard assets, with gold extending gains to record highs and the U.S. dollar weakening against major peers as confidence in U.S. institutional stability wavers.

Read more

Hi,

Weekly levels for the week attached below. Plan will follow tomorrow

Read more

Hello traders,

Wishing you all a Happy New Year. Thanking you all for your support and reading my thoughts on the markets over the past year. Wishing everyone another excellent year of outsized returns.

Now, let’s get to business.

1. THE CONVERGENCE OF REGIME CHANGE AND MONETARY FRAGILITY

The global financial architecture enters the first full trading week of 2026 confronting a geopolitical shock of a magnitude not seen since the late 20th century, coinciding precariously with a pivotal inflection point in United States monetary policy. As markets reopen on Monday, January 5, institutional allocators are forced to recalibrate risk models that were largely predicated on a “status quo” continuation of late-2025 trends. Instead, the sudden and dramatic United States military intervention in Venezuela: codenamed “Operation Absolute Resolve”. has shattered the geopolitical calm, injecting a profound volatility variable into energy markets, sovereign debt spreads, and the broader risk premium for emerging markets.

This kinetic event, resulting in the extraction of Venezuelan President Nicolás Maduro to the Southern District of New York, serves as a violent bookend to a holiday period that had already displayed signs of exhaustion in the equity complex. The much-anticipated “Santa Claus Rally” failed to materialize in the final week of 2025, leaving major indices like the S&P 500 (ES) and Nasdaq 100 (NQ) consolidating near all-time highs but showing distinct technical divergences. While the first trading day of 2026 (Friday, January 2) saw a tentative recovery with the S&P 500 advancing 0.60% and the Nasdaq 100 gaining 1.05%, the underlying breadth remains suspect, driven primarily by idiosyncratic headlines in the AI sector rather than broad-based accumulation.

Realtime Discord access with equity positions tracker, intraday orderflow & option dealer summaries included with the paid newsletter membership . Click here to subscribe.

Simultaneously, the “Kyiv Peace Pivot” is unfolding in Eastern Europe. A high-stakes summit of National Security Advisors from the “Coalition of the Willing” convened in Kyiv on January 3 to formalize a 28-point peace plan, creating a complex juxtaposition: potential de-escalation in Europe against rapid escalation in South America. This dichotomy creates a “barbell” risk environment where defense primes, energy volatility, and sovereign-grade collateral become the primary vehicles for hedging, while high-beta technology and consumer discretionary sectors face headwinds from a resurgence in the 10-year Treasury yield, which has reclaimed the psychologically significant 4.20% level.

The macroeconomic backdrop for these geopolitical fireworks is a Federal Reserve that has shifted its narrative from aggressive easing to a cautious “pause.” The upcoming December Employment Situation Report (NFP), scheduled for release on Friday, January 9, serves as the final arbiter for the January 27-28 FOMC decision. With the consensus forecast for job growth narrowing to a tepid +55,000 and average hourly earnings projected to rise 0.3% month-over-month, the specter of “stagflation-lite”; slowing growth with sticky wage inflation:threatens to trap the Fed in a “higher for longer” stance despite the geopolitical turbulence.

2. GEOPOLITICAL DEEP DIVE: THE NEW ERA OF INTERVENTIONISM

2.1 Operation Absolute Resolve: Structural Shift in Global Energy Security

On the morning of January 3, 2026, the geopolitical risk calculus for the Western Hemisphere changed fundamentally. U.S. forces, including elements of the 160th Special Operations Aviation Regiment and Delta Force, executed a direct military extraction of Venezuelan President Nicolás Maduro and First Lady Cilia Flores from the Miraflores Palace in Caracas. This operation, termed “Operation Absolute Resolve,” was framed by President Donald Trump as a necessary action to dismantle a “narco-terrorist” regime and secure critical energy resources for the Western world.

The “Trump Premium” and Energy Market Mechanics The immediate reaction in energy markets is likely to be characterized by extreme confusion, creating a “bull trap” for those operating on superficial narratives. President Trump’s declaration that the U.S. will temporarily “run” Venezuela to facilitate a transition and “get the oil flowing” aims to project a bearish supply shock: suggesting that Venezuela’s massive reserves (over 300 billion barrels, the largest in the world) will flood the market and depress prices.

However, a granular analysis of the Venezuelan infrastructure reality suggests the opposite in the short-to-medium term:

• Infrastructure Decay vs. Potential: Venezuela’s current production hovers around 1 million barrels per day (bpd), a fraction of its early-2000s peak of over 3 million bpd. The degradation of PDVSA (the state oil company) infrastructure is profound. Industry experts estimate that restoring production to 4 million bpd would require capital expenditures exceeding $100 billion and a timeline spanning roughly a decade. There is no “switch” to flip; the recovery will be a grinding, capital-intensive process.

• Immediate Supply Shock Risk: The transition period presents acute risks of asymmetrical warfare. Pro-regime remnants, potentially aided by embedded Cuban or Russian operatives, possess the capability to sabotage pipelines, refineries, and export terminals. Furthermore, the legal vacuum created by the removal of the head of state freezes current export contracts, particularly those involving “grey market” shipments to China and India.

• The China Disconnect: Venezuela currently exports approximately 600,000 bpd to China, largely as repayment for billions in loans. A U.S.-controlled transitional government is highly likely to nullify these “oil-for-loans” agreements, declaring them odious debt incurred by an illegitimate regime. This forces Beijing into the spot market to replace this heavy crude supply, ironically tightening the global sour crude market even as the U.S. promises abundance.

Sovereign Risk and Emerging Markets The audacity of the operation: the first direct removal of a Latin American head of state since the invasion of Panama in 1989 which forces a repricing of sovereign risk across the region. Leaders in Colombia, Mexico, and Brazil have expressed “deep concern” regarding the violation of international law. Investors must now factor in a “sovereignty risk premium” for assets in countries politically aligned against Washington, potentially widening spreads on EM hard currency debt and putting pressure on currencies like the Colombian Peso and Brazilian Real.

2.2 The Kyiv Peace Summit: A Fracture in the Alliance?

While Washington turned its gaze south, a critical diplomatic summit occurred in Kyiv on January 3. National Security Advisors from the “Coalition of the Willing” a subset of NATO and EU partners: met with Ukrainian officials to discuss a controversial peace plan.

The “Land for Peace” Dilemma The peace plan under discussion reportedly involves significant concessions. The U.S. proposal suggests Ukraine may need to cede territory currently occupied by Russia: approximately 20% of the country, including the 5,600 sq km captured by Russian forces in 2025 alone. in exchange for peace. This proposition is politically toxic for President Zelenskyy, who continues to maintain that borders must not be changed by force.

• European Divergence: A rift is emerging between the U.S. administration, which seeks a rapid conclusion to the conflict to focus on domestic and hemispheric issues, and European capitals (London, Warsaw, Baltic states) that view territorial concessions as an existential threat to the European security order.

• The “Backstop” Security Architecture: To mitigate the risk of future Russian aggression, the plan proposes a multilateral framework where European-led troops would deploy in Ukraine as a “tripwire” force, backed by a U.S. strategic deterrent. This shift from a unified NATO posture to a “Coalition of the Willing” implies a fragmentation of the alliance, potentially weakening the Euro (EUR) in the medium term as defense burdens shift decisively to European budgets.

2.3 The Middle East: The Preemptive Strike Calculus

The geopolitical risk matrix is further complicated by developments in the Levant. Intelligence reports circulating on January 1 indicate that Israel is mobilizing special rapid intervention units along the Lebanese border, signaling readiness for a “preemptive” operation against Hezbollah.

• Hezbollah’s Reconstitution: Israeli defense assessments suggest Hezbollah has used the recent ceasefire to reconstitute its Radwan Force and rebuild missile stockpiles in southern Lebanon. The IDF conducted 17 airstrikes on January 2, the most extensive wave in months, targeting training facilities and weapons depots.

• The “Second Strike” Scenario: Reports indicate that Prime Minister Netanyahu and President Trump have discussed a “second strike” on Iran, focusing on nuclear facilities. While the Venezuela operation dominates the current news cycle, the trigger for a massive spike in oil prices (WTI > $80) remains in the Persian Gulf. Any Israeli ground incursion into Lebanon would likely catalyze this risk, counteracting any bearish sentiment from the Venezuela “supply glut” narrative.

Share

3. MACROECONOMIC FRAMEWORK: THE FEDERAL RESERVE & DATA GAUNTLET

3.1 The Federal Reserve: Pause, Not Pivot

The Federal Reserve enters 2026 with a target rate range of 3.50%-3.75%, having executed three consecutive 25 basis point cuts in late 2025. However, the narrative of a seamless “soft landing” is fraying. The minutes from the December 9-10 FOMC meeting reveal a committee deeply divided on the path forward.

The Hawk/Dove Split The minutes highlight a significant schism. “Hawkish” participants argued for holding rates steady to ensure inflation returns durably to the 2% target. Surprisingly, usually dovish members like Chicago Fed President Austan Goolsbee, along with Jeffrey Schmid, preferred no change to the target range at the December meeting, suggesting a growing consensus for a pause to assess the impact of prior easing. This hawkish dissent from key members complicates the pivot narrative.

The “Pause” Consensus Current pricing in the Fed Funds Futures market suggests the Fed will hold rates steady at the January 27-28 meeting. This “pause” is predicated on the need to assess the cumulative impact of the 2025 cuts and the inflationary implications of the new administration’s tariff policies. The Fed is effectively in “data dependency” mode, making every data release a binary volatility event for markets.

3.2 The Treasury Market: The 4.20% Danger Zone

The 10-year U.S. Treasury yield closed the week at 4.20%, rising 3 basis points on Friday and up 13 basis points over the past month. This resurgence in yields is a critical headwind for equity valuations.

• Valuation Compression: A sustained move above 4.25% begins to severely compress the Equity Risk Premium (ERP). With the S&P 500 trading at elevated multiples, the yield support for such valuations erodes rapidly as the risk-free rate rises.

• Supply Indigestion: The Treasury is scheduled to auction a massive slate of debt this week, including 3-month and 6-month bills, and 3-year notes. The sheer volume of issuance required to fund the fiscal deficit: exacerbated by potential costs associated with the Venezuelan reconstruction effort; puts structural upward pressure on the entire yield curve.

• The Inflation Expectation: With average hourly earnings forecast to rise 3.6% year-over-year , wage inflation remains uncomfortably high for a Fed targeting 2%. If the Venezuela operation leads to a short-term spike in gasoline prices due to uncertainty, headline CPI (due Jan 13) could surprise to the upside, forcing the Fed to abandon its dovish bias.

  3.3 Economic Calendar Analysis: The Week Ahead

  The economic calendar for the week of January 5 is back-loaded, culminating in the critical Employment Situation Report. However, early-week data will set the tone for GDP expectations.

  

  ---

  Thanks for reading Algoflows Capital! This post is public so feel free to share it.

  Share

  ---

  
  4. MARKET ANALYSIS: ASSET CLASS TECHNICALS & FLOWS

  4.1 Index Futures: S&P 500 (ES) & Nasdaq 100 (NQ)

  Market Context: The “Santa Claus” Failure The S&P 500 and Nasdaq posted double-digit gains in 2025, marking the third consecutive year of green finishes: a run likened to the 2019-2021 period. However, the “Santa Claus Rally”typically the last five days of December and first two of January failed to materialize in late 2025, with indices logging declines in the final four sessions. While January 2 saw a bounce (ES +0.60%, NQ +1.05%), this price action occurred on low holiday volume and faces immediate validation tests.

Read more

{NOTE: THIS POST WAS WRITTEN ON THURSDAY AND IS A SCHEDULED POST}

The financial markets are in a “bridge” week, the interlude between the Christmas holiday and the commencement of the new trading year in January 2026. This period, historically characterized by thinning liquidity and window-dressing operations, has assumed heightened significance due to a confluence of structural macroeconomic shifts and acute geopolitical developments. We stand at the precipice of a new investment regime, defined by the Federal Reserve’s decisive pivot toward monetary easing, a potential diplomatic resolution to the protracted conflict in Eastern Europe, and the persistent, latent volatility within the Middle Eastern theater.

1. The Macroeconomic & Monetary Framework

1.1 Federal Reserve Policy: The Dissenting Pivot

Read more

Hope you all had a great weekend and spent some time with your loved ones and got some time to relax and unwind.

The comforting narrative of a seamless economic deceleration known commomas the “soft landing” died this week.

It was not dismantled by a Trump Truthsocial post or a black swan event from abroad. It was dismantled by a moment of startling candor from the Federal Reserve itself.

In a revelation that will likely define the trading landscape for the entirety of 2026, Chair Jerome Powell conceded on Wednesday that the United States economy is no longer adding jobs. This admission serves as a gravitational singularity for global asset pricing. It suggests that the world’s largest economy is not merely cooling but may already be contracting in labor terms.

This reality has been masked only by the lagging nature of statistical modeling. Consequently, the risk paradigm has shifted violently from “inflation optimization” to “recession defense.” This shift was immediately visible in the bifurcation of asset classes. While the Dow Jones Industrial Average ground out record highs driven by defensive industrial positioning, the Nasdaq 100 succumbed to a sharp correction. The technology sector lost nearly 2% as the “AI Capex” narrative faced its first true crisis of confidence following disappointing guidance from Oracle and Broadcom.

The trading week concluding on December 12, 2025, will be recorded in financial history as a pivotal moment of regime change. As investors look toward the week of December 15, they face a “clearing event” of extraordinary magnitude. A backlog of critical data is scheduled for release in a condensed window due to prior government funding lapses. This includes the November Nonfarm Payrolls, Consumer Price Index, and Retail Sales. This “Data Super-Cycle” will force a reconciliation between the Fed’s grim internal labor estimates and the hard print of government statistics.

Algoflows Capital is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Subscribe now

Realtime Discord access with equity positions tracker, intraday orderflow & option dealer summaries included with the paid newsletter membership . Click here to subscribe.

The Monetary Pivot and the Labor Market Mirage

The decisions and communications emanating from the Federal Reserve during the week of December 8 to 12 have fundamentally altered the forward curve for interest rates. The central bank has effectively transitioned from a reactive stance against inflation to a proactive stance against labor market disintegration.

The December 10 Decision: Anatomy of a Fracture
The Federal Open Market Committee voted to lower the federal funds target rate by 25 basis points to a range of 3.50% to 3.75%. While the headline action aligned with consensus expectations, the internal dynamics of the committee reveal deep fractures regarding the path forward. The decision was not unanimous. It featured rare dissents from both sides of the ideological spectrum. This highlights the extreme uncertainty governing the current economic moment.

President Schmid of the Kansas City Fed dissented in favor of holding rates steady. He argued that inflation remains sticky above the 2% target. He believes the “last mile” of disinflation is being complicated by loose fiscal policy and looming tariffs. His concern focuses on the 3.0% to 3.1% headline CPI forecasts. He suggests that cutting rates into above-target inflation risks a resurgence reminiscent of the 1970s.

On the opposing flank, Chicago Fed President Goolsbee argued against “front-loading” cuts but expressed deep concern that real rates remain too restrictive given the deteriorating labor data. His commentary in subsequent interviews highlighted the risk of being “behind the curve” as the unemployment rate ticks higher. This divergence suggests the “Fed Put” is no longer a unified force. It is a contested policy tool that depends on data the Fed itself admits is flawed.

The ‘Negative Payroll’ Bombshell
The defining moment of the week occurred during Chair Powell’s press conference. In response to a question regarding the discrepancy between robust headline payroll numbers and the palpable weakness in the real economy, Powell stated a statistic that silenced the room.

“Payroll jobs are averaging 40,000 per month since April,” Powell said. “We think there’s an overstatement in these numbers by about 60,000. So that would be negative 20,000 per month.”

This admission confirms what bearish macro strategists have suspected for months. The Bureau of Labor Statistics’ “Birth-Death” model has broken down. This model imputes job creation from estimated business formations. In a high-rate environment with rising bankruptcies, the model likely continues to add phantom jobs from businesses that do not exist.

The implications for valuation models are profound. If the economy is shedding 20,000 jobs a month, aggregate demand must be contracting. This implies that current S&P 500 earnings-per-share estimates for 2026 are overstated. A contraction in the labor force correlates historically with a 10% to 15% decline in corporate earnings. A shrinking labor force implies a lower natural rate of interest, or r*. The Fed’s current policy rate of 3.50% to 3.75% is likely severely restrictive if the neutral rate has fallen to 2.5% or lower. This necessitates a more aggressive cutting cycle than the “gradual” pace currently priced by SOFR futures.

The Fog of War in Economic Data
The Fed is operating in what Powell described as a “foggy situation.” The lapse in government funding earlier in the year caused delays in critical data collection. This forced the Fed to rely on “plausible estimates” rather than hard data. This creates a dangerous feedback loop. The market relies on the Fed for guidance, but the Fed is flying blind. It relies on anecdotal evidence from the Beige Book and private sector data which often diverge from official statistics. This uncertainty premium must be priced into risk assets. It justifies the volatility seen in the VIX curve this week.

Share

Part II: The Great Equity Rotation and the AI Reality Check

The equity market is no longer moving in unison. We are witnessing a violent rotation out of the “AI Hype” and into “Real Economy” value. This is driven by the realization that AI monetization may be further away than priced.

The Breakdown of the AI Trade
For twenty-four months, the market operated on the assumption that hyperscalers like Microsoft, Amazon, and Google would spend infinite capital on Nvidia chips regardless of immediate return on investment. The week of December 8 to 12 shattered this assumption.

Oracle shares plunged nearly 11% after missing revenue estimates. The company signaled that its massive AI capital expenditures would have a longer payback period. More alarmingly, reports surfaced that data center projects for OpenAI were being delayed to 2028. This news sent shockwaves through the semiconductor supply chain. Investors are moving from “Reward the Spenders” to “Punish the Spenders.” This “Capex Digestion” phase is typical of all technological revolutions. It suggests the Nasdaq 100 faces a structural headwind as multiples compress.

Broadcom, a bellwether for AI networking, beat earnings but issued guidance that failed to meet the “whisper numbers.” The stock dropped approximately 8%. The market’s reaction indicates that perfection is priced in. Any deviation from exponential growth is punished severely.

Divergence: Dow Jones vs. Nasdaq
The divergence between the indices tells the story of the rotation. The Dow Jones Industrial Average reached record highs, rising 1.2% for the week. The index is populated by companies that benefit from “Old Economy” dynamics. Financials benefit from a steepening yield curve. Industrials benefit from onshoring and tariff protectionism. Healthcare acts as a defensive rotation during economic slowing.

In contrast, the Nasdaq 100 fell 1.9% and signaled a bearish divergence. The rotation is capital flowing out of technology and into value. This is not a panic selloff but a reallocation of risk. Smart money is moving to sectors that can survive a recession (Utilities, Consumer Staples) or benefit from the new administration’s policies (Energy, Industrials).

Share Algoflows Capital

The Oil Collapse and the Supply Glut

Crude Oil has decoupled from geopolitical risk. It is trading purely on a bearish supply and demand thesis. WTI settled at $57.44, down 2.13% for the week.

The Supply Glut Thesis
The primary driver is the International Energy Agency report forecasting a “record surplus” in 2026. Production from the US, Brazil, Guyana, and Canada is overwhelming global demand growth. The US is pumping at record efficiency. This renders OPEC+ cuts less effective. Global oil inventories have swollen to four-year highs.

OPEC+ discipline is fragile. With prices below fiscal breakevens for Saudi Arabia and Russia, the incentive to “cheat” on quotas is rising. A breakdown in OPEC+ discipline could trigger a price war similar to 2014. The “Negative Payrolls” narrative in the US combined with weak manufacturing PMIs in China and Europe paints a bleak demand picture. The market is pricing in a global manufacturing recession.

WTI is in a defined downtrend channel. Support at $56.80 is critical. A break below this level opens the path to $50. Resistance stands at $60.00. Gasoline prices have dropped to four-year lows providing a small stimulus to the US consumer but hurting refiner margins.

Geopolitics and the Energy Paradox

While monetary policy dominates the domestic narrative, the global geopolitical architecture is undergoing a stress test of significant magnitude. The interplay between kinetic conflict and economic warfare is creating distinct winners and losers in the commodities and currency markets.

The Middle East: Escalation and Apathy
The conflict between Israel and Iran has entered a new and more dangerous phase following the “June 2025 War” and subsequent skirmishes. Israel is reportedly preparing potential strikes on Iranian nuclear facilities if uranium enrichment crosses critical thresholds.

Despite the existential threat to the Strait of Hormuz, a chokepoint for 20% of the world’s oil supply, crude prices have collapsed. This reflects a profound “Recession Bias” among traders. The market is more afraid of demand destruction in China and the US than it is of supply disruption in the Gulf. This apathy creates a massive mispricing of volatility. A single successful strike on Iranian export terminals or the mining of the Strait would force a repricing of oil from $57 to over $80 overnight. The “Geopolitical Risk Premium” in oil is currently negative. This is an anomaly that historically resolves with a violent snapback.

Eastern Europe: The Fall of Pokrovsk
The war in Ukraine is shifting from a stalemate to a dynamic negotiation phase. Russian forces have captured the strategic city of Pokrovsk. Military analysts describe this as a “Pyrrhic victory” due to the loss of five divisions’ worth of armor and 25,000 troops. However, it has shifted the optical momentum in Moscow’s favor. This “inevitability” narrative is being leveraged by the Kremlin to force concessions.

President Zelensky’s meeting with leaders from the UK, France, and Germany in London to present a “revised peace plan” signals that Kyiv is preparing for a post-conflict reality. The prospect of peace is paradoxically bearish for oil. A ceasefire could lead to the reintegration of Russian crude into the formal market. This would remove the friction of the “shadow fleet” and increase transparent supply. Conversely, it is bullish for European equities like the DAX and CAC. These indices would benefit from lower energy volatility and reconstruction stimulus.

The Trade War and Tariffs
The second Trump administration has aggressively utilized executive power to reshape global trade flows. On February 1, 2025, Executive Orders were signed imposing tariffs on China, Mexico, and Canada. While the North American tariffs have been paused until March pending negotiations, the tariffs on China are set to bite.

The administration has invoked the International Emergency Economic Powers Act to impose “reciprocal tariffs” on countries not subject to other sanctions. This effectively creates a universal baseline tariff. The suspension of the “de minimis” exemption is a direct blow to platforms like Shein and Temu. It also impacts US consumers facing higher prices for low-cost goods. This is inflationary for the “goods” component of CPI. However, the exemption of Canadian energy from the full tariff rate has prevented a spike in US gasoline prices. This aids the disinflation narrative.

Treasury Markets and the Yield Curve

Despite the fiscal chaos and deficit concerns, the US Treasury market has shown remarkable resilience. The auction on December 9 was a resounding success. The high yield cleared at 4.175% with a bid-to-cover ratio of 2.55. This was stronger than the 6-month average of 2.51. The “tail” was 0.0 basis points. This indicates perfect pricing precision.

The 30-year bond auction also cleared well with a bid-to-cover of 2.43. Why is demand strong? First, at over 4.1%, the US 10-year offers a significant yield pickup over German Bunds or Japanese JGBs. Second, in a world of geopolitical instability and negative payrolls, the US Treasury remains the ultimate collateral. Third, the easing cycle lowers the financing cost for leveraged holders of Treasuries.

The yield curve is steepening. As the Fed cuts the front end to save the labor market, the long end remains sticky due to inflation and tariff fears. This “bull steepening” is a classic late-cycle recession signal. The 2-year yield is anchored by rate cuts, but the 10-year yield reflects the long-term fiscal reality.

Share Algoflows Capital

Digital Assets and the $100k Ceiling

Bitcoin has failed to capitalize on the “Fed Pivot” liquidity injection. It is behaving more like a high-beta tech stock than digital gold. BTC closed the week around $90,218, down 1.74%.

Bitcoin is currently highly correlated with the Nasdaq. As the “AI Trade” unwinds, liquidity is also being pulled from crypto. The “risk-off” sentiment in equities is overpowering the “monetary debasement” thesis that usually supports crypto. The 2x Bitcoin Strategy ETF (BITX) declared a dividend, signaling the maturation of the asset class’s financial infrastructure. However, spot volumes have cooled.

Technically, the $98,000 to $102,000 zone remains a formidable “psychological wall.” The 52-week moving average at $102,200 is the key level to watch for a breakout. Immediate support lies at $85,929. A breakdown below the $83,712 pivot would invalidate the bullish trend and likely trigger a liquidation cascade to $78,000. Bitcoin needs a specific catalyst to break $100k. This would likely be a resurgence of banking sector stress or a clearer liquidity injection signal from the Fed.

The Week Ahead and Trading ideas

S&P 500 Analysis

Read more