The Market You Want
vs. The Market You're In

U.S. Futures & World Markets

Stocks are trying to bounce this morning after recent weakness in tech and momentum names. Nvidia, which reports after the bell tomorrow, has been down seven straight sessions — off -7.35% over the last five trading days. Expectations are pretty low heading into the print.

Consumer stocks are weaker after disappointing earnings from Dick's Sporting Goods. Unsurprisingly, Nike is down 2% premarket.

The big news this morning is Stanley Druckenmiller's op-ed in the Wall Street Journal on Bessent's strategy in the bond market — best line: "Every basis point of artificial yield suppression is a subsidy to procrastination." Worth noting: Druckenmiller later acknowledged the op-ed was written with AI.

It reminds me of the old trading axiom: trade the market you're in, not the one you want.

CORE Headlines

• Iran threatens to retaliate against new U.S. sanctions. — Reuters
• Stanley Druckenmiller says Bessent's bond repurchase program is a mistake. — Bloomberg
• Oura Health wants to raise $3B for IPO. — Bloomberg
• Meta aiming to introduce the "Hatch" AI agent platform in a few weeks. — The Information
• A Nvidia employee was accused of smuggling chips into China. — FT
• SoftBank plans to issue a record volume of retail bonds to fund AI investments. — WSJ
• SEC sent subpoenas to banks that handled trading at Situational Awareness. — NYT
• The FTC reached a settlement with Zillow and Redfin over market competition claims. — WSJ
• The U.K. and France are sending classified technology to Kyiv to allow production of an Anglo-French cruise missile. — WSJ

Charts & Data

Hedge funds posted their largest weekly sale of US equities since Liberation Day in April 2025. Nine of 11 sectors were sold. Hedge funds are rapidly unwinding bullish bets on US equities. The Kobeissi Letter via Goldman: a significant institutional positioning shift.

Short interest in the median S&P 500 stock stands at 3.2% — elevated but consistent with hedging flows rather than bearish conviction, not yet signaling a market inflection. Goldman via Daily Chartbook.

Software sentiment has bottomed — more companies in the top-right quadrant of the JPM sentiment matrix than at any point since the analyst joined the firm. JPMorgan via Daily Chartbook: software stocks benefiting from AI are finally getting recognized.

The S&P follows a clear earnings-season pattern: rises through the first four weeks, pauses as reporting fades, then picks back up. The market is currently in the lull phase. Deutsche Bank via Daily Chartbook.

Companies that have specified AI use cases are garnering a greater share of earnings growth, positive revisions, and margin expansion than those that haven't. NewEdge Wealth via Daily Chartbook: AI adoption is showing up in the fundamentals.

Mag 7 forward PE down to 23.7 — the narrowest premium to the S&P 500's 19.7 since April 2025. Mid caps at 16.5, small caps at 15.7, and they continue to outperform. Yardeni Research via Daily Chartbook.

Interesting Reads

• LIV Long and Prosper: Dispatches from the End of an Era — Skratch
• Everyone loves streaming but it's not making people happy or fulfilled — Slow Boring

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