7/28/26 Recap

The SPY continues to build under the 50 day as the Korean market imploded overnight again sinking 11% which led to another round of margin calls and a violent reaction here. The RSP is actually up 1% today, outside of semis, the market is completely fine but there is a vicious unwind happening in the ai trade at this moment as that is where all the momentum traders are heavily using leverage and the snowball lower unfolds. Tomorrow we have FOMC and rumors of a potential rate hike occurring just a day after Trump spoke telling us how rates need to be lowered. Lots of uncertainty in the market right now between the Iran war, the semi implosion, and the fed. When uncertainty exists, markets throw tantrums.

The SMH is taking it on the chin, it is down from 671 to 522 in in a month and half. Do I think we’re actually in a bubble? No, not even close, we might be in a couple years, but for right now we’re in the middle of the biggest buildout in human history and we won’t know whether all this investment has a payoff or not until a few years pass. Right now we’re in the middle of one massive levered long unwind as the korean traders are getting margin called left and right in one of the biggest margin calls a society has ever seen. Their KOSPI is down 30% in a month and it is really pressuring us here. The SMH is on the 100 day right now, it really needs to hold here, so many of these names are down 30-50% in a month while business is actually going very well. It just shows you how little fundamentals truly matter and how sentiment and technicals really drive everything.

The reality of this market is just simply the fact that leverage works both ways. We were very overdone to the upside and now we’re getting really overdone to the downside but because of how much leverage is in the system you’re getting faster and more violent moves than we’ve ever seen historically. The same happened last year with the tariff tantrum and how quickly the market crumbled. This is a dynamic we’re going to be dealing with for a very long time. I do think we’re closer to the end of the pain than a full blown crash. Korea has been imploding for over a month now and I think alot of these names that are down in the panic are actually not bad buys if you have a long term horizon. The ai trade still has a long runway.

Scanner

Here are the large caps the scanner in the database pulled as showing strength. You’re finally seeing some tech name like SHOP and SPOT. HPQ was one I highlighted yesterday in the recap as well.

If you click on the backtest tab there you will see a histogram with some data. Obviously from the time I rolled this out the market has been pretty hideous but this will keep track of how well these names are doing. You will see over time, in better times, the win rate will materially improve but this is just more about transparency and showing the results of the scans.

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