friday speedrun

It all sounds familiar

Here we go again.

July 24, 2026

Hello. It’s Friday. Thanks for signing up. I’m Brent Donnelly.

The About Page for Friday Speedrun is here.

Here’s what you need to know about markets and macro this week

Before we talk about the macro setup… My new book is out:

TRADE OUTSIDE THE BOX: Advanced Thinking for Professional Traders You can buy it on Amazon right here. Here’s the one-pager.

The book is written for experienced traders. If you are new to the game, I would suggest you start with Alpha Trader. If you have been trading or investing for more than five years, this book is for you (and you don’t need to have read Alpha Trader to enjoy it).

Let’s get started.

Global Macro

A parade of familiar but scary factors marched through markets this week as the bond vigilantes, tariff headlines, and escalation of military aggression in the Middle East all combined to take markets down late in the week. This is a continuation of last week’s selloff, and we are now a decent bit off the highs across the board. Correlation within the indices is at multi-decade lows as semis, MAG7, software, and consumer staples all trade like they are on different planets. The theory that the market is just a huge index being pushed up by passive flows has taken a severe hit this year as the entire story is about active rotation and alpha and single name and single sector performance. Movements at the index level have lost much meaning.

Everything from here to the next heading “STOCKS” is excerpted from am/FX…

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We are experiencing a bit of a toxic cocktail here as U.S. military policy once again pushes down on the macro vibes with the war raging again and tariff jitters resurfacing. This has taken yields up and introduces the risk of restrictive real rates and tightening financial conditions. The market is hesitating and does not want to react too quickly as the experience from April 2025 and March 2026 both reinforced the “nothing ever happens” meme. When all was said and done, selling stocks on both of those occasions was a bit of a disaster, but that’s not to say stocks did not sell off. They did. They simply bounced in a v shape afterwards. We are coming off a max overbought setup in stocks and fear is picking up.

671/682 is where the 100-day moving averages come in for QQQ (EMA and SMA) and if we are at the start of a major turn, those are the levels to watch. You can see in the chart that the break in 2022 was a good signal for a year-long bear market, but in 2023 it was just routine AUG/SEP seasonal weakness. The break was clean again in 2025 on Liberation Day and then another false break in 2026 on the war. There is the potential for tough slogging here for stocks as we have:

Fed itching to hike.
Yields close to breaking out.
War getting worse. Tariff news starting up again.
Gold, silver, and bitcoin unable to hold a bid.

Still, none of this feels particularly super scary because:

We already did the tariffs trade and the economy was fine.
We already did the war trade and the economy was fine.
US 10-year yields are trading at the same level as where they were in October 2023.

Sure, liquidity barometers like gold, silver, and bitcoin are trading poorly, but maybe that’s just because retail has taken their ball and gone home and so the bubble assets deflated and will not reinflate. Money rarely comes back to chase the same space twice within a few years. Markets need time to forget past pain—and the pain in crypto, silver, and gold is still fairly fresh.

So while I can see that there are scary things going on in the market, I don’t think anything has quite hit the threshold yet where we get a panic selloff like 2025 or bear market like 2022. My base case would be something more boring like the July to October period in 2023 that I marked on the chart above. Several people in my chats are already saying they are praying for a huge selloff so they can get long for the year-end rally. That seems premature! In the short run, things should continue to wobble but to get a scary move in stocks you need some or all of these three situations:

One: US 10s through 5.0%. 5% 10-year yield is the most important level in macro right now. We have been consolidating for three years after the runup on the COVID inflation shock and eventual Fed hikes. Note the 2022 high has ended up as the average in the four following years (4.33%). This thing looks like a massive bull flag, and perhaps the slow burn of global fiscal insanity can open up another stair step higher for global yields at some point. But at 4.70%, it’s hard to be super scared. In trading, there is always the question of levels vs. changes—markets react to both. The rate of change is becoming a concern, but a combination of fast move and new highs will be much scarier than the current move within well-worn territory.

Two: Oil through $105 and or $125. The market thought the whole war thing was over and now the ceasefire has ceased and while oil is skyrocketing again, related products like EU natgas, crack spreads, etc. were already going nuts before oil even started to reverse. Now, the tight energy situation and the rates vs. energy prices doom loop flywheel have been reactivated. The panic and complacency cycle perfectly captured by the two ungodlily-timed contrarian Economist covers is heading back towards panic.

Check out the ceasefire gap. We are right back into it.

Three: Economic weakness. With deficits completely out of control while Initial Claims print sub-200k and the UR is at 4.2%, the recession that would truly club stocks is not on anyone’s bingo card right now. Things can shift quickly, so that’s something to monitor as energy squeezes, real wages go negative, and rates move higher. A recession is the real thing to be afraid of, but it doesn’t look possible right now. If high interest rates and raging energy prices have no transmission to the economy because of various factors including deficit spending, stocks have a hard time staying fearful for long. So ultimately, we can get all the energy and political and policy and supply shocks we like. But if the economy remains indestructible, so are stocks. The economy is certainly antifragile, but it can’t be indestructible?

To summarize my view right now: I comprehend the softness in stocks and the strength in the USD, and I am here for it. I still believe the run-up into the Fed should see a hawkish trade: Buy USD, sell stocks, sell bonds. This view was outlined here: https://www.spectramarkets.com/amfx/the-runup-into-fed/.

Bigger picture, tariffs, a Middle East war, and rising yields are all familiar stories—and familiarity breeds contempt. To get a sustained bear move in risky assets, you need new levels, not just zippy changes in familiar ranges. 5.0% in the U.S. 10-year yield is the line in the sand. And while it’s impossible to imagine right now, serious economic weakness would be kryptonite given the fiscal policy starting point.

Stocks

Bloomberg charts 1-year SPX correlation back to 2011 and it looks like this:

Realized 1-year SPX correlation just printed 0.086, the lowest in the history of this series. Stocks are barely moving together anymore. The 2011 euro panic had this thing at 0.75, COVID pushed it to 0.68, the 2022 inflation shock got it to 0.49. Those were regimes where one macro variable drove the bus and every name was just a beta expression. We are the opposite of that right now. Nothing is in charge. The duck is barely moving even as its legs paddle furiously underwater.

And here’s a one-year chart of drawdown from high water for: S&P 500, NASDAQ, MAG7, semis, bitcoin, and space stocks.

Here is this week’s 14-word stock market summary:

All the scary things are familiar. Reruns are far less exciting than first showings.

https://www.spectramarkets.com/subscribe/

Interest Rates

Weak CPI, soft jobs, but… More war. And so, interest rates are moving back towards the top of the range. The Fed is on a bit of a warpath to reestablish its lost inflation fighting credibility and next week’s FOMC meeting should reinforce that vibe. There is a strong game theoretic argument for hiking in July if the main objective is credibility. It is generally believed in orthodox monetary policy circles that early hikes allow for fewer hikes because you clamp down on the inflationary pressure early and things never get out of hand. By waiting so SOOOO long to hike after COVID (and continuing to buy MBS long after it was obviously an insane policy choice) the Fed made their life harder (and the life of all Americans harder). Warsh might want to do the opposite here and hike to send a message that the old way (pretend to care about the inflation target and keep promising to hit in two years—and roll the two-year forecast every three months so it’s always two years away) is not the way anymore.

With inflation falling and the war on and off again, it would take a lot of courage to hike, and central banks usually do the easy thing, not the hard thing. That is why July is only priced at 18%. The market believes, as I do, that the Fed only hikes when absolutely forced. Maybe this time is different, though. Many of the troubles in current society can be traced back to government and quasi-government always taking the easy route (spend and print). It would be interesting to see a regime at the Fed where they don’t take the easy way.

Fed rate hike probabilities here:

https://polymarket.com/dashboards/fed-rates

Fiat Currencies

I flipped long USD this week because I felt that the run up into FOMC would see USD buying and higher yields. Also, USD positioning, which was max long USD a few weeks ago, is pretty clean now. Sure, the CFTC data shows big USD longs still, but that data and those actors lag. Options markets and Spectra flows show that positioning is much more in balance.

I try not to cut and paste am/FX too much in here because it’s boring for am/FX readers, but sometimes my main views have already been written up and it’s a waste of time to rewrite the same thing with different words. So here’s what I had to say about yen this morning.

In July 2024, USDJPY was making new highs above 160.00 and the world was freaking out about a potential JPY crisis. The MOF intervened on July 11 and July 12 and then the BOJ hiked rates on July 31. That sequence of events took USDJPY from 161.85 to 142.00 in less than a month as it was followed by a surprisingly weak jobs report (4.3% vs. 4.1% expected Unemployment Rate). USDJPY spent the rest of 2024 recovering back to 158.00 before it swooned back down to 140.00 on Liberation Day.

The hike in July 2024 is the only real surprise hike from the Bank of Japan in recent memory, though there have been other policy tweaks that came as a surprise. The biggest one was when the BOJ widened the YCC band on December 20, 2022, again shortly after three MOF interventions in September and October 2022.

Now, you have a 40-year low in the yen, a recent intervention (late April and early May), Katayama talking about bold action, Takaichi asking GPIF to turn the boat a bit, falling government approval ratings, nothing priced in for BOJ, and a market mega long USDJPY on a fairly simple (but logical) thesis: Loose fiscal/loose monetary.

The key thing to note here is that BOJ surprises tend to follow interventions.

There are some differences from the 2023 and 2024 experience. First of all, 5 out of 56 economists were calling for a rate hike at that July 2024 meeting whereas exactly zero are calling for a hike next week. Another difference is that the July 2024 hike did not go particularly well—the Nikkei sold off 9% or so afterwards.

So, this is new information that might scare the BOJ if they were considering a hike next week. Finally, USDJPY hasn’t rallied that much. The level is high, yes, but the rate of change is fairly slow. Here is the same chart as above except I replaced the USDJPY price with 3-month runup and drawdown in USDJPY.

So maybe things are not as urgent? It’s hard to say. If things were not urgent, why would Katayama keep using the bold action language?

As Simon Flint has pointed out that Tobias Harris has pointed out, the Takaichi government is becoming less popular. If they feel any of this has anything to do with inflation and the weak yen, they might be motivated to take some actual bold action. There is little doubt that part of the popularity problem comes from cost-of-living concerns.

To summarize all this: Takaichi is in a tough spot, Katayama is chirping, GPIF is being asked to turn the ship a tad. Positioning, price action, and sentiment are one way. Nothing is priced in. The past two MOF interventions were followed by surprise tightening from the BOJ. I am generally anti-lottery ticket because of favorite/longshot bias and because lotto tickets are usually exciting but negative EV. But sometimes lottery tickets are positive EV! To be perfectly honest: I did not think any of these things before I started typing this morning. I write to find out what I think. The idea just kind of came together here so I want to let it percolate over the weekend before putting on any trades. Let me know if you think it’s a bad idea or a good idea—sometimes reader feedback can help me determine whether I am barking up the correct or incorrect tree.

Regardless, it’s an interesting setup.

And here’s next week’s calendar. I put “Powell” instead of “Warsh” but it’s a bit funny to me so I left it. You know who’s chair.

Crypto

Hmmm. I refuse to get excited about more CLARITY Act headlines.

Commodities

Last week’s chart of USO looked like this and now we’re at 136. Truly amazing stuff.

There have been some zippy moves in ags and elsewhere, too. Look at DBA (the Deutsche ags ETF). Note how wars raise volumes and prices.

Precious metals are like bitcoin: They keep looking like they want to rally off major sentiment lows—and then they don’t. Once a bubble bursts, it’s very difficult for animal spirits to return to the same asset class until the painful memory of the bubble burst is gone from the collective memory. If you are looking for bubbly topside, you need to find something new and get ahead of it before the market does. Silver, gold, bitcoin, space stocks, and anything that was a bubble in the last few years is unlikely to go parabolic again until at least a few years from now.

That’s it for this week.

Get rich or have fun trying.

The fun stuff

TRADE OUTSIDE THE BOX: Advanced Thinking for Professional Traders is out! You can buy it on Amazon right here.

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https://shows.acast.com/blindboy/episodes/the-history-of-smoking-banana-peels-and-the-anarchists-cookb

another amazing episode:

https://shows.acast.com/blindboy/episodes/greek-mythology-and-simulation-theory

If you hate it—don’t tell me I didn’t warn you.

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