Something Doesn't Feel Right.

FLOWS & POSITIONING

Introducing a big upgrade to our toolkit… Stay tuned for much more — coming soon!

COT POSITIONING SUMMARY

Positioning is extreme across a number of KEY markets:

• Short candidates (net-long extreme): SPX · Copper
• Long candidates (net-short extreme): VIX · SOFR · CAD · TY · FF · FV · TU · WTI

How to read the table: The LEFT-HAND column ranks the current positioning relative to history — for example, S&P positioning is in the TOP 95 percentile of all-time (extremely crowded). The HISTOGRAM panel shows the actual positioning — S&P positioning is currently 47.54% net Long. A quick glance in the above table reveals (1) S&P at extreme crowded long, and (2) VIX at extreme crowded short. This is very concerning.

Think the stage is being set for a lot of Volatility into later Q3. Visualizing the extremes in positioning across markets:

Looking through the above table:

• S&P positioning is at 95th percentile.
• VIX positioning is at 1st percentile — at risk of a major short-squeeze (spike in Volatility).
• Rates positioning is noisy due to basis trades, however it’s notable that SOFR and FF positioning remain at extreme lows across all categories.
• Copper positioning is at 93rd percentile.
• FX positioning in Euro, Yen, and Canadian Dollar is at historic lows — traders are extremely Long USD / Short these currencies.

If I had to pick one chart right now, this is THE most concerning:

Something doesn’t feel right: These are extremely unstable conditions. Volatility seems likely to rise — perhaps significantly.

CRITICAL CHARTS, LEVELS & SCENARIOS

NEAR-TERM: chop is likely to get worse, and don’t rule out sharp bounces. MEDIUM-TERM: risk is elevated, and the probability of a bigger market correction is growing. Core Risk is declining from a secondary Sell signal:

As discussed last week, this should ideally lead to a bigger correction into later Q3. Our ideal scenario is a move down to target Buy range. Near-term: monitoring for bounces to build Shorts/Hedges. Staying patient for now — no forced trades. SPY is rolling down — this was heavy action all week:

Near-term, SPY left open gaps in the $750 range, and could test them on a bounce. Lean to Short/Hedge if seen, or slightly below at $745-747. More concerning, weakness is appearing right as the market continues to track the 1999-2000 trajectory (as discussed recently). This is where volatility spiked in BOTH directions — including snapback rallies. This week has FOMC and BOJ meetings — be prepared for wide intraday swings. Tracking closely for a window to build Short positions. I think we’ll see an opportunity very soon. VIX remains tightly coiled. If it begins to push >20, it would be a big problem. Watching closely if it breaks out of this base:

VIX sentiment is turning UP — similar to how the S&P topped in Q1:

As discussed earlier in this report: VIX positioning is near the most extreme in history — which adds fuel for a volatility spike, as shorts would be forced to cover. Priors: July 2024 (VIX spiked to 65 as carry trades blew up), January 2026 (VIX chopped to 35 as stocks corrected):

Equity positioning remains extended — consistent with either a topping condition, or an extended consolidation: The last time in this range was the January top:

QQQ: Near-term, there could be significant chop in this range, before a bigger decline takes hold: As I wrote this week:

If it were to break, it could test 3% lower (100d), but then a bounce could bring it right back into range and chop even further. Overall, not worth getting chopped up while stocks decide the next move.

Note how closely QQQ is following the scenario suggested last week:

Key takeaways:

For now, while QQQ trades at $665-690 it’s a low signal-to-noise. Wait for a clear asymmetric setup first. SOX may be working on a test of ~10,800:

Testing this level is not required, but would be far more interesting for a bounce setup. Remember that if this is a major top, there will be plenty of extremely sharp bounces along the way (study 1995/1997/2000). Overall — expect more chop between support/resistance as this plays out.

MONITORING CATALYSTS

1. South Korea Moves Up Leveraged ETF Deposit Rule to Tame Volatility (BBG, July 23)

South Korea is moving up the date it had planned to lift the minimum cash deposit requirement for investors in leveraged exchange-traded funds to July 31, a measure to curb demand for the products that are blamed for amplifying stock volatility.

Once the requirement kicks in next Friday, Korean traders placing new orders in single-stock leveraged ETFs listed at home — or ones abroad, while using domestic brokerage accounts — will have to place a minimum cash deposit or have an account balance of at least 30 million won ($20,332), the Financial Services Commission said in a statement. Earlier this month, the authorities said the requirement would be implemented starting Aug. 5.

The July 16 announcement was one of South Korea’s measures regarding the leveraged ETFs tied to Samsung Electronics Co. and SK Hynix Inc. that have rapidly grown in size and fueled a surge in market volatility. The regulators then also said new listings of single-stock leveraged ETFs would be temporarily halted until market conditions stabilize.

The ETF products, along with the two chipmakers they track, have become so popular among retail investors that they account for more than 70% of trading value in the Korean stock market.

As I wrote this week:

If history is a guide, there may be even more margin increases after that, and perhaps even tighter new regulations. The tide is going out...

The combination of liquidity receding in the Korean market, and poor global equity seasonality, could create a very negative backdrop for high-beta stocks into later Q3.

METALS

Price action in Metals continues to improve — little by little, a bullish picture seems to be emerging.

Note the above charts: how little it would take, to turn these trends around (higher).

Metals continue to surprise with their resilience: If they make new lows, it could be on short-term noise, within a bigger bottoming structure. If geopolitics improve even slightly, Gold/Silver would likely lead markets sharply higher, and not look back. Medium-term, we think the skew for PMs remains strongly positive.

RATES

On the edge of multi-year extremes… can they react? The 2YR Yield remains the most important rates chart to watch: Now approaching major resistance… Watch for chop around this range, ideally as part of a bigger topping structure:

Everything hinges on Oil — if Oil stalls/reverses, Yields will follow:

Core Models are moving into potential topping range — and may complete the pattern this week (we’ll update as this develops):

Sentiment is almost at panic levels:

The last time Bond sentiment was this low was near the major bottom in January 2025. Near-term, a brief break of price support could trigger widespread capitulation (social media inundated with mindless posts repeating “Breaking: Bonds at the lowest since [date]”). Sentiment is 90% there — the final push may be near — and with it, we’re on the lookout for a major turn in Bonds. Stay tuned.

THE DOLLAR

Dollar positioning remains near the most crowded in history. Dollar positioning made a new high this week — now in the Top 98.33 percentile of all time: This is the highest positioning in more than a decade (2015):

DXY remains at a critical juncture:

Near-term, the Dollar could extend higher, but if anything turns Oil/2YR Yields down... the Dollar would be vulnerable to a big drop. This week’s FOMC/BOJ meetings could also have a major impact. Let’s see what happens.

OIL

Testing ideal targets: Oil reached our target range for a potential top — and MAY be reacting: (As of Sunday morning, WTI is down 4.5% to $85.40 on Hyperliquid. Brent is down 5% to $87.50. These are big declines.)

Oil’s RSI hit topping range for a typical failed bounce, and may have turned DOWN:

This is where we want to start paying attention for a tactical turn / secondary failure: Watching for a reversal in this range, perhaps a test of the downtrend line, while monitoring de-escalation news. If Oil fails in this area and rolls over in the next few days (pending), it would be a big opportunity / regime change, sparking new market leadership (especially in Equities). If Oil follows the ideal sequence, it would set up a solid asymmetric Short (will update).

BITCOIN

Building the foundation for a big rally? BTC is trading in a tight coil, even as stocks trade poorly:

BTC remains at long-term support and holding:

Is BTC forming a medium-term bottom?

PORTFOLIO HOLDINGS & NOTES

This week: Looking to raise cash from weak stocks/groups, in addition to building Short/Hedge positions. As things stand, Cash allocation is approaching 20%. Goal is to increase cash by 10-20%, while adding 20-30% Short/Hedges (or more). Overall, looking to shift to a pure defensive position. Want to remain diversified in the Long book, avoiding exposure or any correlation to AI trades. Admin note: we’re in the process of migrating the portfolio page to simplify access — coming soon.

MACRO POSITION: LONG GOLD

GOLD & SILVER MINERS (Monitoring for entry)

ETFs: GLD GDX GDXJ GDMN SLV SIL SILJ / Focus list: AEM AG AGI AU B BVN CDE EGO EXK GFI HL HMY IAG KGC ORLA PAAS RGLD SSRM WPM

Updated commentary: GDX made a higher low and retested the June support range. Gold Miners BVN/SSRM remain clear leaders in their group (and among our preferred names). Monitoring for a clean setup to re-build exposure in the Focus list (will update).

MACRO POSITION: LONG YEN (Monitoring for entry)

Updated commentary: Yen remains our top focus in FX, and may be drawing a major turn. It could also provide a cheap hedge to a broader Equity portfolio. Extreme positioning adds fuel for a Dollar decline / Yen rally — driven by FX intervention and/or capital repatriation. The R/R setup remains extremely asymmetric. On watch for a major turning point in this range, looking to build significant Long Yen exposure (will update).

EQUITY HEDGE: VIX CALL SPREAD, QQQ PUT SPREAD, SHORT SMH

(Monitoring for entry)

Updated commentary: These are some of the options we’re monitoring to add potential hedges. Will update as we initiate positions in the next few days.

CYCLICALS & COMMODITIES (25%)

Holdings: ADM ASIX CBT CF DD DOW EMN ERO FCX FM.CN HUN IPI LXU LYB NTR NUE RS SCCO SQM STLD TECK TROX TX WS (new names in bold will be bought as part of position changes planned for this week, using tight initial stops)

ETFs: IJR IWC IWM DBA MOO COPX SLX XME URNM / Focus list: ADM ALB ALM ANTO.LN ASH ASIX ATI BG BHP CAT CBT CC CCJ CE CF CLF CMC CMP CRML CRS CTVA DD DE DOW EMN ERO FCX FM.CN GGB HUN ICL IE IPI LAC LXU LYB MOS MP MTRN MTX NB NTR NXE NUE OLN RIO RS SCCO SOLS SQM STLD TECK TROX TX UAMY UEC USAR UUUU VALE WLK WS

Updated commentary: The list of potential bottoming setups remains significant. Steel stocks had a strong week and may be leading Industrial Miners higher. Last week’s Five Star Setups made immediate progress with solid moves this week (bullish confirmation). Chemical stocks continue to demonstrate significant potential as a group. Altogether, constructive action developing across key names and groups.

Steel leading (in a weak tape, no less — very important):

Cyclicals & Commodities remain among the key areas we want to prioritize for new Buys. We continue to watch all the big global names with strong interest, as part of our bigger structural focus.

TECH (23%, lean to reduce tactically if support fails to hold)

Holdings: IGV AMZN APP IBM MSFT NET NOW TEAM ZS

ETFs: AIQ GRID IGV MAGS QQQ SMH WCLD XLK XSD XSW XTL / Focus list: AAOI AAPL ADSK AKAM AMAT AMD AMPX AMZN ANET APH APP ARM ASML AVGO AXTI BWXT CDNS CEG CIEN CIFR CLS COHR CRDO CRWD CSCO DDOG DELL FN FTNT GEV GLW GOOGL HUT IBM INTC IPGP IREN JBL KEYS KLAC LITE LRCX LWLG META MPWR MRVL MSFT MU NBIS NET NOW NVDA ON ORCL PANW PEGA PLTR PWR Q QCOM RBRK RIOT SNDK SNPS STM STRL STX SYM TDC TEAM TLN TRMB TSLA TSM TTWO TWLO U VECO VRT VST WDC WULF WYFI

Updated commentary: More evidence of Sell-the-news in widely-followed names: GOOG reported great results and plunged this week. INTC reported the fastest revenue growth for any quarter since 2011, beat top-line and bottom-line expectations, and upped guidance. The CEO even said “AI is driving unprecedented demand for compute”. The stock popped 10% after-hours on Thursday after results were announced. All over social media, posts celebrated “INTC saved the market”. Then INTC opened flat on Friday’s cash session (erasing the earnings pop as if nothing happened), and sold off from the open to the close — ultimately plunging 8% on Friday. Absolutely terrible price action, regardless of how good the story is. This could be one of the most turbulent earnings seasons in years.

Charts of interest:

A big opportunity setting up on IBM’s weekly chart?

BRAZIL (20%)

ETF: EWZ

Updated commentary: Some nice progress this week, after forming a higher low. Top weights NU, ITUB, PBR, BBD remain in constructive patterns, while VALE may finally be turning from a major low. Following the trend for now.

SOLAR (5%)

Holdings: TAN CSIQ ENPH NXT SEDG

ETFs: ICLN TAN / Focus list: ARRY CSIQ ENPH FSLR NXT RUN SEDG SHLS TE

Updated commentary: ICLN and TAN were in ideal range to stabilize/roll up, but are breaking key support. Individual names are breaking down from their coils. We reduced exposure tactically, and will cut the rest this week unless there’s an immediate reversal.

HEALTH CARE (5-10% Target)

Holdings: GILD IDXX MDT

ETFs: IBB IHI XBI XLV ARKG / Focus list: AMGN GILD IDXX MDT NVST OMCL REGN TEM TFX VEEV VRTX

Updated commentary: Health Care is gradually becoming a core focus area for us. Near-term, looking to Buy AMGN on a pullback (pending). Stops remain tight on all positions. Will update on new setups with high priority as they develop.

CHINA (5%)

Holdings: BABA BIDU TCEHY

ETFs: CQQQ EEM FXI KSTR MCHI / Focus list: BABA BIDU BILI EDU NIO TCEHY VIPS VNET WB

Updated commentary: Monitoring closely for a bigger play if they can form higher lows in this range and roll up/confirm the rally (a critical decision point here). If U.S. markets keep deteriorating, China Tech may not hold either — but let’s see what happens this week:

FINAL THOUGHTS

Something doesn’t feel right:

1. Positioning has reached unstable levels.
2. Volatility seems likely to rise — perhaps significantly.
3. Shifting to a pure defensive position, and raising cash at the margin, feels like the optimal move. We continue to avoid concentrated, crowded exposure — portfolio diversification has never been more important.

These are massive themes that could dominate the rest of 2026. One day at a time, let’s see what this week brings.

We’ll communicate on key changes and views as always, adjusting to market conditions, and navigating with a clear focus on new opportunities. Good luck this week!

Thanks for reading.

Onwards and upwards, -MC