Something is wrong

Oof

We are witnessing an old-fashioned buyer’s strike here as retail has completely thrown in the towel after a series of rolling bubbles drains confidence and spending power and retail specifically has taken its ball and gone home. The Pavlovian buy the dip mentality that dominated for ages is no longer in force. Perhaps the SpaceX IPO was the last straw for a market that has finally tired of chasing narrative momentum. Quantum stocks, rare earths, space stocks, gold, and silver: All huge money losers now. Semis are still up a grillion percent off the lows, but stocks like MU are still in pain. Micron made an epic double top at $1255 and tickled $807 premarket today.

Retail could be forgiven for giving up at some point as you can see below that there have been so many pump and dumps in retail spec favorites that it’s becoming a bit expensive and ridiculous. Everything is an altcoin now.

Anyway, my view has been that the data would not cooperate with a hawkish Fed and while that view has been correct, I am losing money because this view led me to the conclusion that stocks would rally and the USD would sell off and that is not happening. Something is wrong.

From June 10 to July 13, we made a steady move higher in yields despite middling economic data as both Warsh and Waller sounded more hawkish than expected. This delivered a 14bp rise in 2-year yields. Now, after CPI, we have reversed those 14bps (plus one more)—————–but look at the asymmetry in the moves.

CPI was 14JUL

Not only is there an asymmetry in things like DXY, EURUSD, and USDJPY, there is no symmetry at all in gold and silver. They went down in both regimes. This is telling, I suppose. Another way to tell the same story:

The USD has remained stubbornly strong and risky assets have remained stubbornly weak despite a turn in the data which should put us in Bridgewater’s disinflationary boom quadrant. But no. There are inconsistencies galore as USDCAD, for example, which is normally sensitive to equity prices and is seen as a good release valve trade for Fed policy, has been going down and then down again as yields went up and down. Lots of weird stuff going on.

Behind the scenes, there is plenty of worry about AI, but in a world massively overweight U.S. assets and U.S. tech, is a falling QQQ really bullish USD? Maybe for a few days, but certainly not in the bigger picture. From 30,000 feet, falling confidence in AI payback will be bearish USD, not bullish. If markets start asking why China can do it for billions while the U.S. does it for trillions, that’s not a USD-bullish thing.

Mostly, I am just spelling out the lay of the land here as I admit I am confused. I don’t really know why things are doing what they are doing. I was confident the multi-SD weak CPI was going to be the launchpad for a move towards the ATH in SPX and instead everything is going Pete Tong.

One could excuse retail for giving up. The charts of all the most favored retail plays look like altcoin charts.

While it’s boring and repetitive and hard to believe we are still talking about forever wars and WMDs in 2026, maybe these charts are worth worrying about again?

Via Chuck Retzky

That crack spread chart is the 1-month, but the 3-month is breaking to new ATH as well. I am not sure if the oil and Hormuz and crack spread stuff is impacting markets right now, but I suppose it is best to have it on the radar at least given the complacency around the whole thing.

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Calendar

A dud of a calendar next week.

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Final thoughts

1. I enjoyed this article about Tim Draper. There are always too many pessimists out there—it’s nice to read some rational optimism. Link only works if you are signed into Bloomberg, sorry. Could not find a public link.
2. The GBPUSD trade is just about back to flat and extremely disappointing. As detailed throughout this piece, something is not working properly as there is almost no transmission from lower yields to global macro.

Have a top bins weekend.

There were signs.

HT Sensei Ramiro

good luck ⇅ be nimble