The Morning Call---What if big tech was right all along?

 

The Morning Call

 

8/4/26

 

The Market

         

    Technical

 

            Monday in the charts.

https://www.zerohedge.com/markets/bond-yields-black-gold-dump-big-tech-bitcoin-jump-another-trump-deal-looms-yentervention?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTIwMjQyIiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4NTc4ODgxMiwiZXhwIjoxNzg4MzgwODEyLCJhdWQiOiJ6aC1naWZ0In0.3BhEbkn7KCYcwjcC1f6FSXzC8APNA97mreUXszkhKGY

 

Note: the S&P closed above the previous high and fractionally below its all-time high, suggesting another leg up.  Weighing against that is (1) high valuations and (2) seasonality.  Still it appears the momentum has shifted to the upside.  I am now considering nibbling on some laggards.

 

            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

 

Tuesday morning setup: S&P futures are trading at all time high with the latest push higher triggered by comments from Scott Bessent on CNBC who echoed Trump in saying that "we may have Iran deal tomorrow to open Hormuz" (or we may not). The Nasdaq also looks set to extend Monday’s gains: As of 8:00am ET, S&P futures are up 0.4% to an all-time high of 7655 and Nasdaq futures rise 1.1%, as Palantir soared 16% pre-market after upping its forecasts, while Caterpillar rose 9% on an earnings beat. Semis are leading the Tech tape with Mag7 (DRAM, EWY, SMH, SOXX all higher by at least 1.6%) while Mag 7 are mixed: Amazon (AMZN) falls 2% after founder Jeff Bezos filed to sell $4.07 billion of stock (Nvidia +1.3%, Tesla +0.6%, Apple -0.2%, Meta -1.7%, Alphabet -1.5%, Microsoft -2%). Cyclicals are leading Defensives with healthcare/staples lower pre-market. Bond yields are slide 2-3 bps on the drop in oil prices, and the USD is stronger as is USDJPY following a catastrophic 10Y JGB auction while intervention is not expected to have a lasting impact and the market is likely signaling the need for BOJ to hike. In commodities, WTI tumbles on Bessent's comments that we may have a deal to reopen Hormuz tomorrow (we won't) with WTI sliding as low as $76. Base metals are higher with Precious metals spiking and Ags bid. It’s a busy day, with earnings this morning from McDonald’s and Caterpillar, and the AI trade front and center this afternoon as AMD and SpaceX report. Today’s macro data focus is on JOLTS and trade balance. 

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

The June trade balance was -$73.3 billion versus expectations of -$73.0 billion.

 

                          June construction spending fell 0.1% versus forecasts of +0.2%.

           

The July manufacturing PMI was reported at 53.9 versus predictions of 53.8.

 

The July ISM manufacturing index was 55.6 versus 54.0. 

                           https://bonddad.blogspot.com/2026/08/august-starts-with-great-ism.html

 

                        International

 

 

                        Other

 

                          Taxing the rich.

                          https://www.powerlineblog.com/archives/2026/08/tax-the-rich-2.php

 

                          The yield curve steepens but spreads are still too narrow.

 https://wolfstreet.com/2026/08/01/six-years-into-bond-bear-market-30-year-treasury-yield-hits-5-28-yield-curve-steepens-but-spreads-are-still-too-narrow/

 

            The War

 

              Huge uptick in Israeli attacks in spite of Trump’s ‘historic deal’.

              https://www.zerohedge.com/geopolitical/huge-uptick-israeli-airstrikes-gaza-trump-hailed-historic-hamas-deal

 

            Monetary Policy

 

              The death of forward guidance.

              https://www.realclearmarkets.com/blog/2026/08/01/the_death_of_forward_guidance_1197889.html

 

              The Fed needs to start listening to normal people.

           

 Summary: The Federal Reserve has various ways to gather public input, including the Beige Book, which collects information from businesses and community organizations, and Community development staff, who run in-depth studies of low- and moderate-income families. The most recent Beige Book shows consumers are adjusting to increased prices by taking on more debt, buying less but shopping more frequently, and trading down to cheaper alternatives, which is wearing on them and helping explain how resilience coexists with frustration. The Fed's Worker Perspectives report shows workers describing their work lives as "survival" rather than "stable", with rising prices being more common than rising wages, and workers relying on coping strategies such as shopping around for deals, taking on debt, and relying on assistance programs. The Fed decided last week that its response to this sentiment was not to raise rates, and offered almost no explanation. But it needs to show that it has heard: Inflation is a thing, and controlling it is the Fed’s responsibility. The very best minds on inflation include the people paying the higher prices.

 

              A 3% inflation world.

              https://allisonschrager.substack.com/p/forward-guidance-wont-make-you-happier

 

            Fiscal Policy

 

              What is behind the US support of the yen?

  https://www.bloomberg.com/news/newsletters/2026-08-03/us-and-japan-and-yen-intervention?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTc4NTc4MDE5MCwiZXhwIjoxNzg2Mzg0OTkwLCJhcnRpY2xlSWQiOiJUSjZYQkhSMjRVOE8wMCIsImJjb25uZWN0SWQiOiJCMzFCNTRDQTI3MTE0NjAxOUQxMURCN0IxRUM4NTE2MyJ9.-qn_cjgwHb2y3Fz9NuA6rgn6q4LaWqhDrmDkdhYfcBI

 

           

            Inflation

 

              One month of falling prices does not restore price stability.

              (4) One Month of Falling Prices Won’t Restore Price Stability

           

            AI

 

              AI lowers wages but doesn’t cut jobs.

              https://www.apollo.com/wealth/insights-news/insights/daily-spark/ai-lowers-wages-but-doesnt-cut-jobs

 

             Can semiconductor makers navigate rising water risks?

              https://www.advisorperspectives.com/commentaries/2026/08/03/semiconductor-makers-navigate-water-risks

 

              The Chinese threat to US AI models.

              https://www.zerohedge.com/ai/chinas-ai-knife-fight-deepseeks-new-model-runs-100x-cheaper-anthropics-flagship

 

              What if big tech was right all along?

  https://www.zerohedge.com/the-market-ear/what-if-big-tech-was-right-all-along?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTIwMzA5Iiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4NTg0ODA4OSwiZXhwIjoxNzg4NDQwMDg5LCJhdWQiOiJ6aC1naWZ0In0.mVKE9FWwD71hYcS8KC8S9blJStSvT6MfR-gNiyiGKlI

 

 

     Investing

 

            The challenges to valuing companies.

            https://www.tker.co/p/aswath-damodaran-quotes-about-valuation

 

            Why selling bonds is the wrong move.

            https://talkmarkets.com/article/bonds-in-your-portfolio-why-ditching-them-is-the-wrong-move-1785753896

 

            A second act for high yield bonds.

            https://giftarticle.ft.com/giftarticle/actions/redeem/f894a754-8bfb-47ba-ab64-b527f97b03c7

 

            The case for owning gold (but not till it breaks out of its current downtrend).

            https://talkmarkets.com/article/bullion-caught-between-war-and-the-fed-1785777091

 

            VC money floods into US nuclear startups.

            https://www.zerohedge.com/energy/vc-money-floods-us-nuclear-startups-ai-power-demand-explodes

 

            The latest from Goldman’s commodities guru.

            https://www.zerohedge.com/commodities/heres-what-keeps-goldmans-samantha-dart-night-global-diesel-squeeze

           

The Yen just became everyone’s problem.

https://www.zerohedge.com/the-market-ear/yen-just-became-everyones-problem?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTIwMjA5Iiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4NTc4Njg3MywiZXhwIjoxNzg4Mzc4ODczLCJhdWQiOiJ6aC1naWZ0In0.5wbryVq3B5BRZQGi0t8XP-7Ydh9DFCs9AHkUf4TkyEc

 

                        Global bond market on edge.

            https://www.zerohedge.com/markets/global-bond-market-edge-japanese-yields-soar-after-horrible-10y-jgb-auction

 

            Dip buyers need to heed the Market’s warnings.

https://www.zerohedge.com/markets/dip-buyers-stocks-need-heed-markets-warning-signs?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTIwMjAzIiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4NTc4NzMxOSwiZXhwIjoxNzg4Mzc5MzE5LCJhdWQiOiJ6aC1naWZ0In0.JCsYIf2DWIfrH6lr_PirV7faPvgFLFNAZVMnhTsU3hM

 

            It is the earnings stupid.

https://www.zerohedge.com/markets/goldman-partner-why-sp-will-make-more-all-time-highs-year?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTIwMjIyIiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4NTc4NzY5NCwiZXhwIjoxNzg4Mzc5Njk0LCJhdWQiOiJ6aC1naWZ0In0.FSprxK2doPFGQJBPxbgAmUVn5kOSZPsZmPykNrwx-Os

 

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

           

 

 

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Monday Morning Chartology

 

The Morning Call

 

8/3/26

 

 

The Market

         

    Technical

 

A real roller coaster of a week saw the S&P push above its 50 DMA (if it remains there through the close today it will revert to support) and the upper boundary of that very short term downtrend. Is the worst over? Perhaps. As always, follow through is the key. Certainly, Friday’s pin action raises the prospect that the worst is over. And don’t forget that the index is now above all three DMAs and in uptrends across all timeframes. That said, August through mid-November has historically been the worst time period for stock performance. Plus the disgruntlement in the bond market is not likely to help. I remain cautious.

 

            Risk appetite wavers.

            https://www.capitalspectator.com/risk-appetite-wavers-while-the-fed-plays-it-calm/

 

 

 

 

The long bond continued its dismal performance---not surprising given oil prices (the war), the prospect for a new round of tariffs, the ruling class drunk on deficit spending and Warsh’s performance at his virgin FOMC presser. There is nothing occurring that changes my opinion that TLT is going nowhere---except further down. What we know technically is that TLT is below all three DMAs and in downtrends across all timeframes; so for the long bond to rise enough to even challenge the upper boundary of its very short term uptrend, I think that it is going to take a series of positive developments.

 

 

 

 

 

 

GLD remains in a well-defined downtrend. It is below all three DMAs and continues to play with the lower boundary of its short term uptrend. If the challenge proves successful, the next visible support level is the lower boundary of its intermediate term uptrend---which is quite away aways.

 

Despite UUP’s dismal performance on the week, it still held that very short term uptrend---although it is now challenging its 50 DMA. Of course, on a longer term basis, the dollar remains in no man’s land and at this point I see like prospect of its breaking out of even its short term trading range. Technicals aside, a spendthrift ruling class, higher oil prices and a weak kneed Fed is all the explanation one needs to understand where it is trading.

 

 

Friday in the charts.

https://www.zerohedge.com/markets/blood-streets-tech-wrecks-bonds-battered-crude-catapults-july-jolt?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTE5OTgzIiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4NTUyOTg1OSwiZXhwIjoxNzg4MTIxODU5LCJhdWQiOiJ6aC1naWZ0In0.-MBAQQzDCshJOtwaFv6oeHV_F7_TvnM-VsLBg9c_cWw

 

Friday 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

 

What is the VIX missing?

https://www.zerohedge.com/the-market-ear/what-vix-missing?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTIwMTY3Iiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4NTc2MjAwOSwiZXhwIjoxNzg4MzU0MDA5LCJhdWQiOiJ6aC1naWZ0In0.-1NN4d83ILaajk7kxFTYUy2YHVbJJtgbEXJecxSye7A

 

Monday morning setup: Futures are higher with both tech and small caps outperforming as Trump points to a deal/advanced discussions with Iran (which Iran is naturally denying), which is helping push energy prices and bond yields lower as the USD depreciates. As of 8:00am ET, S&P futures are up 0.5% while Nasdaq futures rise 0.4% led by Mag 7 stocks higher with Semis lagging. Energy is lower with the remaining sectors seeing a bid pre-mkt as the lower oil / bond yields are creating what JPM hopes will be an ‘Everything Rally’. Though the Kospi against tumbled overnight, EWY is +1% pre-market. Samsung Electronics and SK Hynix plunged nearly 9% each, while TSMC fell more than 2%, following their record surge on Friday. The yen rallied sharply before paring most of the gain amid speculation that authorities may have intervened to prop up the currency again after coordinated action between the US and Japan last week. Bloomberg’s gauge of the dollar fell 0.1%. WTI is under $80/bbl dragging the Energy complex lower as we see this move boosting both Base and Precious Metals with Ags lower. Today’s macro data focus is opn the final July reading of S&P Global manufacturing PMI due at 9:45 a.m. ET, followed by ISM manufacturing for July and construction spending for June at 10 a.m. Omdia total vehicle sales are due through the day. In premarket trading, Mag 7 stocks are mostly higher:  Amazon (AMZN) rises 1.6% as the e-commerce and cloud-computing company is set to extend gains after reporting cloud revenue acceleration for a fifth straight quarter (Alphabet +1.7%, Microsoft +1.8%, Meta +1.6%, Tesla +0.6%, Apple +0.6%, Nvidia -0.3%)

 

 

    Fundamental

 

       Headlines

 

              The Economy

 

The US stats were disappointing last week. They included one neutral and three negative primary indicators and one plus, one neutral and one minus inflation measure. Overseas, the data was balanced with two neutral and one negative inflation datapoints.

 

While the US data did not make for an optimistic read, one week’s numbers do not a trend make. Plus the poor GDP read (a primary indicator) was chiefly due to the trade and inventory data. So at this point, I am not concerned.

 

Inflation, of course, has been and remains my big worry. Last week’s better reading was principally due to lower oil prices---which has since changed. Plus, there is now higher tariffs to factor into future inflation readings. Most important, the bond market is clearly warning us that inflation remains a concern. So, my outlook there hasn’t changed either.

https://wolfstreet.com/2026/07/30/inflation-in-the-overall-economy-hitting-consumers-businesses-and-governments-was-really-bad-in-q2-even-without-energy/

 

Speaking of inflation, last week’s FOMC meeting and more importantly, Warsh’s subsequent presser was clearly a disappointment to the bond investors---at least those that believe inflation is a problem and a more hawkish Fed needed. I noted last week that Warsh appearance was unfortunately reminiscent of the three past generations of Fed heads---talking tough and doing nothing. Many experts believe that he will correct that mistake in short order. Let’s hope. But let’s also not forget who appointed him and what his expectations are.

https://www.carsongroup.com/insights/blog/the-feds-going-to-let-it-run-hot-until-they-dont/

 

There are three other issues that remain front and center in their impact on the economy (and Market):

 

(1) the economics of oil whether or not there is peace tomorrow. Global reserves are near operational depletion and more of the oil refining infrastructure has been destroyed. It seems wildly optimistic to me to believe that this won’t continue to produce inflationary pressures on global economy,

https://talkmarkets.com/article/strategic-oil-reserves-down-to-a-record-low-two-week-supply-1785517600

 

(2) the economics of fiscal policy---which is an abomination. The irresponsibility and lack of concern by our ruling class, spending trillions with no plan [anyone telling you that tariffs are the answer is smoking dope] to address the issue is stunning. I can see the merit in John Tamny argument that the gluttonous spending keeps them from spending more. But given the current level of spending, I am not sure that if the absence of spending more means that interest rates and inflation will somehow be lower.

 

(3) the economics of AI. Here I have a whole less confidence in my views. As much as I have read, I still don’t understand with any degree of certainty the economics of the current AI spending. That doesn’t mean that all the hopes and dreams of the participants won’t come to fruition. It just means that I don’t have a lot of confidence in the outcome. Suffice it to say that the enormous current and forecasts spend had better pay off or the economy and the Market are in for some serious indigestion.

https://www.advisorperspectives.com/commentaries/2026/07/31/hyperscalers-earn-ai-ambitions

 

                   What skeptics get right and wrong about AI.

              https://talkmarkets.com/article/ai-bear-case-what-skeptics-get-right-and-wrong-1785501494

 

The optimistic view, though it says nothing about the economics.

https://www.realclearmarkets.com/articles/2026/07/31/mark_zuckerberg_articulates_the_brilliant_ai_future_ahead_1197561.html

 

The economics of inflation.

https://mrzepczynski.blogspot.com/2026/07/the-failure-of-forward-guidance-or-what.html

 

Bottom line: the economy continues to grow despite the ruling class’s best effort to sabotage it while inflation remains well above the Fed’s target. There are plenty of storm clouds, so caution is needed.

 

                        US

                       

                        International

 

                          June German retail sales fell 1.1% versus consensus of down 0.5%.

 

The July Japanese manufacturing PMI came in at 54.5 versus projections of 54.7; the July German manufacturing PMI was 52.2, in line; the July EU manufacturing PMI was 51.9 versus 52.0; the July UK manufacturing PMI was 51.9 versus 52.8.

 

                        Other

 

                          July business cycle indicators.

                          https://econbrowser.com/archives/2026/07/business-cycle-indicators-at-end-july

 

            Iran

 

              Overnight news.

              https://www.zerohedge.com/markets/trump-says-perimeters-deal-reached-iran-reopen-hormuz-after-call-saudi-crown-prince

 

              Another TACO headline?

              https://www.zerohedge.com/geopolitical/iran-denies-negotiations-us-after-trump-announces-talks-monday-afternoon

 

            Fiscal Policy

 

              Government ownership of companies is becoming routine.

              https://www.cato.org/blog/government-ownership-stakes-companies-becoming-routine-under-trump

 

     Investing

 

                        Second quarter earnings hitting on a cylinders.

https://www.zerohedge.com/the-market-ear/world-wonderful-first-time-1955?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTIwMTU3Iiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4NTc2MDIwNywiZXhwIjoxNzg4MzUyMjA3LCJhdWQiOiJ6aC1naWZ0In0.1b8Hrseby8otekQ-5uYAw0JXQRiK95MmIFlpcyMzPt8

 

           

                        The short seller fairy tale.

            (4) Leopold Aschenbrenner’s Short Seller Fairy Tale

 

 

                        Investors should brace portfolios from tech volatility.

            https://giftarticle.ft.com/giftarticle/actions/redeem/1a818e58-b63f-454d-99bf-376ba431d380

               

                The new ‘crash puts’.

https://www.zerohedge.com/markets/banks-unload-leveraged-etf-risk-crash-puts?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTIwMTQyIiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4NTc2MTEwMCwiZXhwIjoxNzg4MzUzMTAwLCJhdWQiOiJ6aC1naWZ0In0._qYMaZvsqd2EZRfnQKG5O949ZkScgYGJyoi5Izh-o30

 

           

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What I am reading today

 

           

 

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