The Morning Call
7/21/26
The
Market
Technical
Monday in the
charts.
Summary:
Amid a quiet macro week, investors are bracing for the micro (mega-cap
earnings) and after OpEx unclenched Gamma, markets were freer to
move today (Nasdaq higher, rest lower). Bitcoin bounced alongside
big-tech and bond yields jumped despite oil prices well off their highs
chopping around unch, (fuel products higher). The dollar and
gold went nowhere. The loss of positive dealer gamma after July options
expiration leaves the S&P 500 less pinned, according to Bloomberg
macro strategist, Michael Ball, giving any momentum rally greater scope to
pull the broader market higher.Weakness in semiconductors and other crowded
AI-infrastructure winners has pushed high-beta momentum into one of its fastest
and deepest drawdowns on record. But the size of the recent drawdown in past
AI-winners and more negative positioning does indicate there is a risk
of a squeeze higher, which was the case on Friday. Broader market
positioning matters more now.
Monday in the
technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/market-performance
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
Margin debt jumps
(again) in June.
https://www.advisorperspectives.com/dshort/updates/2026/07/20/margin-debt-finra-june-2026
The dollar signals
a continuation of its bearish chart pattern.
The VIX isn’t
telling the whole story.
https://www.zerohedge.com/the-market-ear/calm-storm-vix-isnt-telling-whole-story
Summary:
The VIX still looks remarkably calm. Beneath the surface, however, the picture
is very different. Single-stock volatility has exploded, semiconductors are
swinging wildly, dealer gamma has deteriorated and investors are increasingly
paying for downside protection. Goldman's volatility
panic index has surged in recent sessions. Unlike the VIX, it captures a
broader set of volatility signals, offering a deeper read on market stress.
What happens after
a 20% drawdown in the semis?
https://www.zerohedge.com/the-market-ear/what-normally-happens-after-20-drawdown-semis
Summary:
15 episodes of >20% drawdowns in SOX over the past 15 years. 5 turned into
>30%. Worst 44%. What happens after a 20% drawdown? 20 days later = 8%
positive return. On average.
Tuesday morning
setup: US stock futures are higher led by Tech after a strong bounce in chip
stocks in Japan (memory stock Kioxia traded limit up after trading limit down
on Friday and Monday was a holiday) and Korea, as evidence mounts that Momentum
/ Semis pullback have bottomed, with supportive price action elsewhere in Asia
and Europe, though the JPM EU Trading Desk is not yet seeing follow-through
buying in Semis. As of 7:20am ET, S&P futures are 0.5% higher,
lagging the 1.4% bounce in Nasdaq futures helped by a report that TSMC
is planning price hikes, although it is unclear if the early ramp will
persist amid the re-escalating war with Iran which overnight saw Houthis impose
a blockade on Saudi Arabia. In premarket trading, most Mag 7 names are higher
with semis leading (SOXX +4%). Cyclicals ex-Energy are leading Defensives with
both Staples and HC net lower and AI boosting Industrials and Utils. WTI crude
is trading near its highs, boosting Energy as all 3 commodity complexes move
higher with silver the standout which has traded in tandem with the AI theme.
The yield curve is twisting steeper with yields ranging from -1bp to +1bp with
USD flat. Today’s macro focus is on the weekly ADP number and regional Fed
activity. US economic data calendar includes ADP weekly employment
change (8:15am) and July Philadelphia Fed non-manufacturing index (8:30 am).
Fed speaker slate is blank during July 18-30 external communications blackout
period around the July 28-29 FOMC meeting.
Fundamental
Headlines
The
Economy
US
International
The May UK
unemployment rate was 4.9% versus consensus of 5.0%; May average earnings were
up 4.3% versus +4.5%.
The
July EU economic sentiment index came in at 23.4 versus predictions of 11.2;
the July German economic sentiment index was 26.3 versus 18.0; the July German
current conditions index was -77.1 versus -77.8.
Other
Crude oil versus refined product prices.
https://econbrowser.com/archives/2026/07/eyes-on-refined-product-prices
This analyst believes
oil prices will remain elevated through the end of 2027.
https://talkmarkets.com/article/interview-with-christiane-baumeister-oil-price-shocks-1784561347
The manufacturing sector of the economy
continues to improve.
https://bonddad.blogspot.com/2026/07/the-manufacturing-sector-of-economy.html
Overnight
News
President Trump is
nearing a decisive fork in the Iran war, with U.S. and Israeli officials
envisioning only two viable endgames: Option 1: Pursue a new 10-day ceasefire
aimed at reopening the Strait of Hormuz. Option 2: Launch a massive joint
military campaign with Israel to force Tehran's capitulation.
OpenAI and
Anthropic executives are sounding the alarm about the rise of cheap AI,
particularly powerful new models produced in China, suggesting they will lead
to a “dystopian” AI future and present unacceptable security risks without
regulation.
The cost of
protecting Oracle Corp.’s debt against default reached a fresh multi-year high
on Monday while its existing bonds sold off, as doubts grew over whether the
company’s massive investments in artificial intelligence will pay off.
Iran
Overnight news.
Inflation
Gold is the constant. What it signals is in substantial decline.
Confusion over how
the Fed/Warsh is measuring inflation. Lost in this somewhat esoteric struggle
to define inflation is the fact that however the Fed has defined inflation,
they have never met the goal anyway. I
am a whole lot less concerned about defining inflation than I am about the Fed
having the balls to manage monetary policy to meet the whatever its definition
is.
https://stayathomemacro.substack.com/p/2-of-what
What
the yield curve is telling us about inflation.
Inflation
conundrums.
https://www.advisorperspectives.com/commentaries/2026/07/20/conundrums-inflation
A statistical revamp is about to lower
inflation.
Tariffs
Trump slams Canada with 50% tariff on selected
goods.
The
Financial System
They are doing it again.
(4)
Oh My Fucking God, They're Doing It Again
Investing
Why retail traders consistently
underperform.
https://www.advisorperspectives.com/commentaries/2026/07/20/why-retail-traders-underperform
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