Disclaimer: I am not a licensed financial adviser or fund manager, and I am not licensed by the Securities Commission to provide investment advice. Everything in this post is my personal opinion, shared for educational and entertainment purposes only. When I mention stocks, sectors, or my own positions, I am documenting my own thinking and actions — not recommending that you buy, sell, or hold anything. Markets involve risk, including loss of capital. Past performance is not indicative of future results. I may hold positions in securities mentioned, and my views can change without notice. Please do your own research or consult a licensed adviser before making any investment decision. 

After such a long delay, I am going to post more consistently my macro update. Sorry, there were a lot of things going on and especially my day job. I posted some stuff on Twitter (@densedisk) about my thoughts and usually they would be the fastest. Generally, I post what I am thinking at that current moment and can switch my mind depending on price action and what market is doing.

For Macro Update, you can expect a more structured format (Overall to Conclusion). I will be sharing key indicators and signs about the market and what made me worry and what I am looking for and what could be happening and potentially how I am positioning myself. I believe no one can predict prices of the markets and the most we can do is react to what it is telling us and adjust accordingly. 

I will be using probably the same indicators and things I am watching out for every week. Yes, I know there are a lot more and I am constantly learning more as well, but I believe that would make the Macro Update too long to read and bore the viewers. Anyways, these few things I look for would generally cover 80% of what is important already about the big picture and would give you a clear understanding of my thoughts.

I will start things out by saying I was worried about Semiconductor (memory/photonics/cpu/their entire supply chain) stocks since late June and got more wary of it since July 2nd and got out of all my semiconductor names since then. Recently, I traded SK Hynix and as of writing this, got out of it as well for a slight profit. How did I foresee this? Read this article to understand my thought process.

SP500 Futures:

Nasdaq Futures:

Russell 2000 Futures:

Dow Jones Futures:

Equal-Weighted SP500:

Equal-Weighted Nasdaq:

SP500 and Nasdaq have been consolidating since May until July, and Rusell 2000 and Dow Jones have pushed higher during the same period. During May to June, it was fine in my opinion as it was showing signs of a healthy rotation as the equal-weighted SP500 and Nasdaq were pushing higher while the main indices were consolidating. I took this as the market was rotating into other sectors to charge upwards soon.

However, late June to early July, the leaders were showing unhealthy signs and got me spooked. More on that down below (Internals, Credit Market, Leaders, Narrative, all were shaking and not doing good things).

Last Friday, the reason I got out of all my tech positions was because the equal-weighted Nasdaq broke down the 50day ema. More on why, despite me believing the AI capex demand is strong, yet I decided to cut first and would rather chase higher when the market became healthier.

Proof that I got out, but only profited a little. sad.

VIX and VVIX:

Late June to mid-July, VIX was coming down, while VVIX was not going lower, which made the VVIX/VIX climbing higher. This means hedge funds were likely buying VIX options as a hedge and were showing signs of being wary.

VIX, VIXEQ, COR1M:

VIXEQ/VIX is topping over, which is usually a good sign, but the reason why this is happening is due to VIX going up and not because VIXEQ is coming down. This is bad, as the pressure is not lifting yet. We are going into earnings at elevated VIXEQ and VIX being around the low end, which could mean a potential spike in VIX (no one knows, but pressure is building). COR1M, the correlation between stocks, got pushed on a very low end, it almost went as low as 2024 Yen Carry Trade early July. COR1M pushing lower is usually good as it means healthy rotation in the market while market grinds higher, but we are at the 2nd lowest point since the bull run and this means less likely to go lower (it could, but no one knows) and the risk is to the upside, which means less juice to squeeze for the market to grind higher healthily.

All in all, internal volatility was good, but positioning from hedge funds became wary and buying protection. VIXEQ is grinding higher, which means VIX could be underpricing as VVIX is telling the same story. COR1M at the lows means not much juice left to squeeze to the downside and likely rebound upwards. This tells me a catalyst is all it needs to make things pop for VIX and COR1M.

US10-Year Rate and MOVE:

The 10-year rate seems to be moving higher while the MOVE index remains muted. Correlation is going down slightly, but not alarming yet. You can look at the correlation in February to March, that would be concerning and I would flag it hard. Though it could mean we are moving in that direction. Both 10Y-rate and MOVE going up is bad, and if rates crash while MOVE going up is also bad (correlation low), vice versa for both of the scenarios in general.

LQD/IEF:

LQD is an investment grade corporate bond ETF and IEF is a 7 to 10 year Treasury ETF. As the ratio of LQD/IEF declines, the bond market is having a flight to safety, moving away from riskier bonds to safer ones (corporate bonds are perceived as riskier than government bonds). This was one of my warning signs that I took from the treasury markets in those 2 red circles, which made me cut my positions in high beta assets. 

Micron:

Earnings on 24th June was very good, triple beat, Revenue/Earnings/Guidance. The next day it popped up, but around 1-2 July, it started breaking down and that was why I tweeted to be careful, my first tweet to 0 followers at that time. I got more cautious last week as it lost the 50 day ema and decided to get out of all my semi holdings and tech.

Usually when good news or results and yet stock goes down, is generally a warning sign.

TSMC:

Earnings on 16th July was decent and yet got sold down as well for TSMC, which confirmed my bias.

Lumentum:

Lumentum and other CPO (co-packaged optics) and photonics stocks were losing steam around late May to June.

Overall, when leaders like your semicap names are losing steam, it likely means a correction is incoming as they already ran up so much. For a healthy bull market, ideally they consolidate, rebase and push higher, but no one knows.

Positioning:

Another reason why I was scared was because a lot of my friends started talking about semiconductors. Even influencers started talking about it, which makes me think about positioning and I stumbled upon how crowded the trade was. The AUM went up so much since April to June, which spooked me, if you see the speed of it. Furthermore, there is a also the Korean leverage ETF problem, where a correction will make more correction as people gets margin called.

OpenAI IPO delayed. Bad for sentiment. This means underwriters in the market might not pay up to 1 trillion in valuation and if they do not IPO, investors will question their ability to fund the capex.

Oracle bonds got downgraded. Creditors think their debt is lower quality and has higher risk. This means more pain for future bond issuance for capex and could mean lesser demand for capex.

Kimi K3. I think this is a nothing burger and could spin both good or bad depending on what you focus on and I am not an expert in this area. Feels like a deep seek moment to be again.

US-Iran War. This is very interesting. I legit caught the bottom for oil prices as I posted my Iran War article on 2th July, which will have another long post as to roughly how I spotted it. However, I was already positioned in oil stocks way before and slowly averaged down. Yes, as of now, I am in the green. I reiterated my point again on 8th July as the fundamentals look like a decent set up for oil, especially refiners. Nonetheless, it will be very long and I didn’t write much about it because no one follows me and my focus now is to gain followers and subscribers first. It is literally free.

Going to track oil prices as well as it is a good leading indicator on inflation and if oil goes higher, rates expectations could revise and valuation for stocks could come down.

The dollar index is showing strong signs, but it could go up or down. However, bias seems bullish to me as it formed a Cup and Handle on the weekly chart. If it goes higher, bad for other assets that are priced against the dollar (technically everything). Hope we don’t see oil and dollar up together.

The AI narrative is weakening. New leaders are emerging like cyber security and biotech (more related to use cases of AI, etc.). Software names look interesting as well. MAG7 earnings are coming soon and they need to show that revenue growth is strong and capex is worth spending on.

If they clear it, semicap names could come back. MAG7 could also go up as people reposition in them as valuation has lowered and expectations of earnings could increase.

If I am convinced by the semiconductor stories and technicals that confirm what I like, I might re-enter even at a higher price than what I sold. I prefer to have momentum on my stocks and always wait for confirmation.

A lot of uncertainty to navigate, yet many opportunities as well.

However, I do not think we are out of the woods yet. Pressure is building and I am raising cash from tech and left with some oil stocks mostly. I do not mind chasing tech at higher price as the risk I perceive is lower. Waiting for a better environment.

Anyways, hope you have learnt a thing or two. There are a couple more things in my mind, but this article is already too long. I don’t even know if people even like this stuff.

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