I hope you all had a great weekend and got some much needed rest and recreation.

This past week was an excellent one for the “nothing ever happens” gang as the jobs report came in much softer than anticipated thereby reducing the odds of another rate hike in the upcoming FOMC meeting. We had a good week as well

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GOOGLE DARK HORSE (YET AGAIN)

Google was our largest position since 2022 and we exited it in February this year due to concerns our losing in the AI race,

Google Gemini has lagged behind other AI models for quite some time now, sparking a tonne of jokes online and so forth.

However, looks like Google has hit back and how,

There is a chance that AI will cannibalize search (Google’s core product), however there is an outsized opportunity in the AI race for someone who owns the complete stack to push ahead due to efficiently servicing their debt through positive FCF from allied businesses.

Since our exit the stock is at similar levels but definitely interested in it at about

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Hello traders,

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

Last week was an interesting one where Nasdaq closed highe trailed by ES and Russell finished red on the week.

The gains in the Nasdaq occured due to Meta launching its AI assistant Muse and simultenously we getting “peace deal” headlines out of the Middle east which also helped tame the 10Y yields.

This puts QQQ at a hair’s breadth from all time highs at close on Friday.

This week we have core PCE and GDP as the main headline news that can move the markets.

PCE is the Fed’s preferred gauge of inflation. As we know by now, that majority of the FOMC is leaning towards another hike of 25bps at the least.

ALL TIME HIGH PRICES ALL TIME LOW CONFIDENCE

This past month has been interesting when it comes to breadth of the market.

The S&P is trading only 100-150bps below the all time high, but the breadth has fallen to historic lows.

Median S&P500 stock is down 16% below the 52 week highs. This is not a situation where “rising tides lifts all boats” situation.

Additionally, news off Hormuz has not been all rosy as the administration would like us to tell.

The US administration isn’t really keen on prolonged conflict with midterms nearing and the 10Y responding to Crude oil movements.

Fence-sitting voters overwhelmingly are against the Iran war with 70% of them saying the war was a bad decision. Single issue voters(Gas price voters) are also against the war due to increased inflation.

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BONDISTAN BLUES

With the backdrop of 10Y yields spiking, we think Trump admin probably cuts a sweetheart deal with Iran either before the midterms or right after.

Therefore the bearishness thoughts of the market maybe shortlived.

So, what is the bad case and the kinda less bad case for the markets here?

Bad case for equities: 10Y/30Y yields keep rising because growth and inflation expectations keep going up along with Strait of Hormuz choking crude oil.

Less bad case: yields rise because traders suddenly jam more hikes into the front end.

The 10s30s bear flattening is our evidence that policy repricing is dominating the growth repricing in recent days.

The ES drop if it happens due to a discount rate shock, would be bought back up quickly, however if it is earnings shock(multiple compression) then we can see a prolonged drawdown on the ES.

In simple terms:

expected policy rate ↓ → SOFR futures ↑ → Treasury yields stabilize/fall → bond vol ↓→ crude oil ↓ → Equities ↑

CL plays a critical role here
CL ↓ → inflation pricing ↓ → terminal-rate expectations ↓ → rates ↓/stable → MOVE/bond vol ↓ → VIX ↓ → ES ↑

Again if you did not understand this, it is totally fine and it is not needed for anything if you are just directionally punting Nasdaq on a daily basis.

No Algo, I want to learn and understand. Wow I thought you’d never ask.
Let me show you the illustrated charts

Slides 2-4 continue after the paywall.

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Hope you had a great week and some time away from screens this weekend.

We had an excellent week last week and we captured most of the FOMC downside and then subscribers also managed to capture the upside.

THE HIKE THAT SURPRISED NO ONE EXCEPT ONE GUY

Main story this past week was the Fed hiked rates by 25bps for the first time in three years and winked at another one to come by end of this year.
The decision was a unanimous one and hence there was likely no “family fight” this time over the rate decision.

This brings the overnight funds rate to 375bps-400bps.

During the presser, Chairman Kevin Warsh said inflation has been “too high ... for too long.”

“We must be confident that underlying inflation is moving to our objective clearly and at sufficient speed,” he said. “Today, the FOMC decided that this standard has not been satisfied.”

Well this must have caused the market to tank, right?

Nasdaq closed about 1% higher week over week and the S&P largely closed unch on the week. The most rate sensitive index RTY closed about 70bps lower to end the week.

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NOT OUT OF THE WOODS YET

The complacent tone in the markets right now is that the rate hikes are priced in and the Hormuz crisis is going to end soon.

The contraian tone is that Crude is popping above 100, the 10 year yield is doing its thing as Scott Bessent invited Jake Paul to the Treasury where he did a checks notes a money spread outside the treasury building.

It feels like somewhere along the way I entered a portal and entered this bizarro world; but I digress. The contrarians are thinking we have a large drawdown on the S&P and the AI/Semi Complex by the end of the year and they are also betting that Republicans losing the midterms may cause and even faster acceleration in the downfall.

SO WHO WOULD BE RIGHT AND WHO WOULD TURN OUT TO BE WRONG IN THE PREDICTION?

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Hello traders,

Hope you had a great weekend and some time away from screens.

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.

AI LEADERS ARE TELLING EVERYONE TO SLOW DOWN RIGHT BEFORE THE IPO

The biggest news over the weekend was that the holy trinity of AI Dario, Sam and Elon urged everyone to take a step back on AI development.

This has caused a small selloff in AI and tech stocks in the weekend market

I have shared my thoughts on stopping AI research three and a half years ago here.

AI development genie is out of the bottle now and I would rather have the west reach ASI than China doing so. However, employment impacts of large scale cheap intelligence is not something we can take lightly.

THE FED AND THE FAMILY FIGHT

Moving on,

We have an important Fed meeting coming up this Wednesday.

We are now looking at a near certain 25bps hike and there has been some chatter about a surprise 50bps hike as well. I’m in the 25bps camp barring some crazy economic data dropping between now and Wednesday.

TALE OF TWO ECONOMIES

The economy is currently bifurcated into two drastically different outcomes for men and women. One that is doing exceedingly well and other that is staring at the bottom of the barrel. Trump administration is turning out to be the most feminist administration of all time. This is probably a tough pill to swallow for most but the data show an insane skew which has left the data guys(me) aghast. The divergence cannot be dismissed anymore.Have a glance at the report below

I do not want to take a societal/moralistic stance here but we are looking at this from a lens of understanding where the puck is going to be in 24-36 months from now. Infographic to follow

cue suspenseful music

Now let us look at the stocks which directly are in play due to the macroeconomic landscape.

Disclaimer: Stocks mentioned here are for informational purposes only and should not be construed as investment advice. My lawyer has told me to write more such things, so there are more at the end of this newsletter.

Small giveaway before the paywall:
Like + restack this post and I’ll randomly pick 2 people to get 6 months of AlgoFlows Capital comped.

If you’re already a paid subscriber and win, I’ll add six months to your existing subscription.

Winners picked Friday.

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Hello traders,

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

Last week we had a bumper jobs report to which the President had some words to say:

Oh wait, not that, but this banger did needed to be shared as well. No notes.

Employers added 162,000 jobs in August, and the unemployment rate held steady at 4.1 percent. But wage growth is not keeping up with rising inflation.

This has made everyone look towards the Fed if they will or will not increase rates, current projections are saying 60/40 towards a 25bps rate hike.

The biggest risk in this financial system is the 10Y treasury yield.

US Treasury will do everything it takes to lower the yields below the “Peace Deal Sounds Amazing Actually” line through buybacks and other related measures.

Thesis for bears here would be Iran escalation causing Crude oil spike which pushes inflation higher and then it causes 10Y to spike and puts downward pressure on equities.

Key takeaway if you have ADHD or cannot read due to learning disability caused by excessive social media and phone use.

”We are bullish risk at the moment; but eventually the long term yields problem will spill onto equities with crude oil being the wildcard which can ignite the fire(ha! got both oil spill and fire in the line)

Slightly longer term outlook below

Our outlook towards technology ex-semis is not as bullish as we would want to be. However the Shovel and on-device-inference basket

is something I would be inclined to be doubling and tripling down on as and when the market affords us a discount on the intrinsic value and would like to layer in tranches in the primary on device inference companies. As Warren Buffett once said “Real G’s move in silence like lasagna” or maybe it was Lil Wayne it was one of those two.

Gold

Gold at 4400-4300 is an extremely attractive asymmetrical bet targeting new all time highs. Personally would want to wait until FOMC presser to initiate a position.

A slightly more convex bet on Gold would be being long Barrick Mining Corp, world’s largest Gold mining company. Entry near 50-52 CDN would be ideal targeting 80-90 CDN.

Crypto

Our Zcash trade idea from last year has paid off massively for those who held onto the position ($166—>$1200). I would love to reenter Monero at 410-440 area and Zcash at 750-800 area. These are super volatile cryptocurrencies so anything above 100-200bps is not something anyone who is optimizing their resting heart rate should go for.

WEEKLY LEVELS

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Hello all,

Hope everyone had a great weekend and took some time off screens.

Last week we had Nvidia earnings which caused the stock to go up 900bps and eventually pushed rest of the semi complex higher only to be stopped in its tracks by Jackson Hole Symposium speech by Kevin Warsh.

The rate decision now is much closer to a cointoss than before.

SPX: S&P500 has shown some support near 7600 and that is the line in sand for bulls as of now. Any dips that are near 7600 and are shallow maybe bought up and then we can continue the march to all time highs. However, below 7600 a sustained weekly close can send the S&P to the next target of 7300/7260.

Nasdaq: As far as Nasdaq goes, the story is of the AI capex cycle and free cashflow decline/growth. We are in a position where hyperscalers eventually have to show profits on all the billions invested in AI to real profits.

Key risk monitors for me are understanding if the semiconductor complex keeps outpeforming SaaS ecosystem. If both advance at a similar pace that ensures a broad market rally suggesting risk is back on the table.

Problems start if one starts to lag versus the other. If Semis lag with respect to software, we might be hitting a ceiling on compute requirement on AI and if it is vice-versa we will see a decimation of Saas companies in the hands of Claude.

Russell: RTY is the most rate sensitive index, once labor releases cool down and lower yields can cause IWM to test 290-270 area. 270 is an extreme target.

Value: Value and industrials stocks seem to be a safe-haven for stocks if growth data holds up as broader tech keeps consolidating.

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Dollars and Commodities

Dollar is hovering around 99 area and we expect a slide to 97-95 in the coming months due to the actions of the treasury. Bessent has shown willingness to kill the dollar to save the bond market and eventually it would be reflected in the strength of the dollar. We are not a rates newsletter so I will not go too much into depth of it here.

Gold is at an interesting crossroads with 4300-4400 seemingly good entry points for adding or establishing a long position. I’m a huge fan of metals here or anything that I can touch and feel(sorry Dario I cannot touch Claude yet)

Oil keeps staying elevated due to geopolitical risk in the Strait of Hormuz. Any escalation in the region can see oil hitting 90-95 and maybe having a call fly to hedge your shorts is a decent risk-reward trade around here. Eventually if the conflict winds down Oil can slide down to 66-68 (ouch Saudi they still gotta pay Ronaldo his entire contract)

THE WEEK AHEAD

This week we will have the August jobs report numbers on Friday which will sway the rate decision either way either cementing the “no-hike” rationale or deepen the “Family Fight” towards a 25bps hike.

Other than that we have crude oil inventories and a couple PMIs alongwith JOLTS data this week. As the summer ends the markets will start picking up steam into the fall with respect to volume and volatility.

The rate hike or not will boil down to the NFP numbers this Friday and the Fed would want to see UER stay in 4.2-4.4% so as to stick to no hike.

Anything under 4.1% and Fed would definitely pencil in a couple hikes into the year end. Conversely something like a 4.3% and payrolls below 75K would mean there would not be likely hike in the coming meetings.

The Fed also reiterated their desire to get PCE to 2% and will do everything that they need to do to reach it even if it means hiking to the displeasure of POTUS.

Another marked tonality shift has happened in the words of President Trump.

From incessantly Truthing(its like tweeting but on truth social, yeah I don’t even know what timeline this is) to cut rates, he has now taken a more somber stance of no hikes.

All in all, Warsh is walking a fine line here and probably would be relieved once the jobs report is out either way as it will give him more clarity towards the hike.

WEEKLY LEVELS

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I hope you had a great weekend and some time off screens.

Our trade idea from last week’s weekly outlook worked well as Nasdaq shed 2.7% and S&P lost 1.71%.

We are essentially in low volatility summer regime and most of the decisionmakers are enjoying their time off.

20% TO THE BIG GUY

The biggest news of last week was that the Treasury was going to increase the buybacks on the long-end of the bond market.

This is outside the QRA process, so it means that Bessent & co. are not sitting pretty with where the yields are at the moment.

The buyback isn’t really about the size but about the intent. Essentially what the admin is signalling is that if yields get uncomfortably high, they would use any means necessary to put a backstop on their rise.

What this essentially does is

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Hello traders,

We had a pretty muted week last week despite having CPI, PPI being released.

This is exactly how low volatility summer action pans out when there aren’t new tariffs being launched every other day (anyone miss 2025 just yet?)

Volatility has been subdued over the past week and we are levels not seen since Christmas.

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GOLDILOCKS DATA AND FAMILY FIGHTS

This past week we got CPI and PPI which were broadly in-line with expectations. The numbers were almost too good.

This has made drastic revisions to the rate hike for the next meeting with the odds dropping from 80% to 32.5%

“There’s an old saying in Tennessee — I know it’s in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can’t get fooled again.” -- George W. Bush

Cost of hedging has gone down considerably and maybe now is the time to buy

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Hello traders,

Hope you all had a great weekend and enjoyed the sunny weather on offer stateside.

After all the volatility on offer through July, the S&P ended up smashing all time highs last week. This is something that would make Trump administration elated on the cusp of midterm elections.

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Nasdaq on the other hand, is a completely different story.

After having a 3500pt pullback from all time highs right after the fed minutes, Nasdaq came roaring back and is now about 1000pt off the all time highs.

This comes in the aftermath of Leopold Aschenbrenner’s fund almost blowing up, Citadel buying the said book causing the bottom on the AI trade and then coming back again with a fresh $400m equities bet.

TECH IS BACK? KINDA

Speaking of equities, earlier this year we had posited the idea of being long (Atlassian)

The core pillar of our thesis has worked exceptionally well and is now up about a 11000bps from our post.

It is wise to offload some of the stock in this area to “give thanks” to the market by taking some chips off the table.

Again, there are multiple ways to trade the market and one of them is to keep doubling and tripling down on your winning positions and either become a Billionaire or be someone who gets margin called on the day of their wedding. Neither approach is wrong, I just prefer one where my resting heart rate does not collect social security cheques.

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ART OF THE DEAL

Last week the US again relented and decided to not attack Iran as the 10Y crept up into the “Peace Deal Sounds Amazing Actually” zone and that posturing will continue until we get back into the “We Will Attack Iran” zone.

The administration is giving Warsh a lifeline with this strategy and now the only thing that can ruin this party is a hotter than anticipated CPI print this week.

Zooming out a little here, as AI keeps advancing we will see some sort of a disinflationary impact on the world around us (oh no Warsh has taken over this post), eventually pushing us to new highs on Nasdaq.

However, there are people who do not believe in the disinflationary nature of AI and they will keep pushing their chips into precious metals like Gold and Silver.

If I had to construct a lazy portfolio for my aunt who doesn’t follow the markets it would be a split between local inference, precious metals (overweight Gold) , emerging markets, drones & robotics and then check back in after a decade or so.

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THE WEEK AHEAD

This week we have the CPI, PPI and retail sales, the importance of these cannot be understated lets look at each of these in context of the broader market.

CPI expectations are at 3.4% YoY and for core it is 2.5%. For MoM core you would want it under 0.2% if you are bullish equities(especially tech). A surprise core print above 0.4% will push the Fed into an uncomfortable corner with regards to rates and cause a landslide in high beta tech.

We got a decently soft Jobs report on Friday, if it is combined with a cooler CPI and PPI we would be in goldilocks territory.

However, if the script is flipped we would be at

soft jobs Friday → hot CPI Wednesday → hot PPI Thursday.

This looks fairly like the S-word (Stagflation).

Retail sales seem to be doing fine for the most part. However as equity bulls you want it to be normalized against inflation as retail sales are nominal and not inflation adjusted. So a 0.2% print with a cooler inflation is likely a better sign of booming economy+consumption than a 0.4% print with a hotter CPI print.

TOO CHEAP TO METER

Some interesting ARC-AGI results from this past week on both ends of the spectrum

Prime Agent, A self-improving RLM harness for coding and long-running autonomous tasks. Designed to be both token-efficient and expressive through programmatic tool calling, context as a variable, multi-agent messaging, and a self-modifiable harness state.

Prime Agent is a general-purpose coding harness

On ARC-AGI-3, it scores 95.5%, surpassing the human-expert baseline, but the gain is not benchmark-specific.

We see major improvements across models when compared to their proprietary harnesses:

Back of the napkin math says about $250-290 in output token cost, with total cost not above $400 or so.

That is impressive but still expensive.

Okay, here is DeepSeek V4 Flash.

“DeepSeek V4 Flash from

on ARC-AGI (Verified):

- ARC-AGI-2: 61.4%, $0.04/task
- ARC-AGI-1: 89.0%, $0.02/task

DeepSeek V4 Flash sets the new standard on the cost-to-performance Pareto frontier.”

I don’t want to get all too technical here but a layman explanation is that you can get near-frontier level intelligence for roughly 96 to 98 percent cheaper than Opus.

This makes us all question, is AGI here? and is it really that cheap?

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Hello traders,

Wishing Lionel Messi and his Argentinian team all the VARy best for the World Cup Final.

Hope you all had an excellent weekend. We had an outlier week last week and caught majority of the downside on the indices.

We do not dwell on the past, here is the look ahead the current week.

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Hello traders,

I hope you all had a great weekend.

Over the weekend we got the usual news of Hormuz being closed for the weekend.

Per clockwork, it is expected the strait to open by Monday RTH open.

These are the things to look forward to this week.

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Hello traders,

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

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

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

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Last week’s market

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

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

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

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

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

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

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

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

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

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

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June employment report

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

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

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

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

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

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

Federal Reserve

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

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

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

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

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

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

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

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

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

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

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

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

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Treasury market

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

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

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

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

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

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

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

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

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

U.S. dollar

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

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

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

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

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

Crude oil

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

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

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

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

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

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

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

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Iran and Israel

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

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

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

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

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

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

Trade policy

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

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

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

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

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

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

ECONOMIC CALENDAR

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

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

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

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

Market Biases

ES Emini

Bias:

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

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

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

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

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

1. Design and IP layer

2. High Volume Silicon layer

3. Specialized Endpoint Silicon

4. Component Enablement layer

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

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Hope you all had a great weekend.

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




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

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

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

The local compute/inference basket will be out shortly.

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

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

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

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

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

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MICRON, RATE HIKES AND PCE

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

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Hello traders,

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


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

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

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

ANTHROPIC, MISANTHROPIC and MISS-ANTHROPIC

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

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

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

Where does this take us next?

1) Local inference becomes an important commodity.

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

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

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THE BACKGROUND

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

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Hello all,

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

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

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

FROM GREED TO FEAR?

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

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

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

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

Why is Nasdaq panicking?

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

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

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

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

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

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

MIDTERM MADNESS

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

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

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

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DO WE EVEN NEED FRONTIER MODELS

SWE-Bench of models show a really interesting trend.

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

AI output below
The standout value models are:

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

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

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

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

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

Models that look poor on value

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

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

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

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

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

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

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Hello traders,

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


We had a fruitful week in the markets last week.

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

US-IRAN. DEAL OR NO DEAL

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

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

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

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