Institutions hold firm as markets stay anxious, not broken

Can we talk? Because I want to talk about what a $5 swing in crude—from $80.43 to $85.50—only to finish the day almost unchanged at $83.25 actually tells us.

It tells you nobody knows what’s happening next….5 months of conflict then an apparent ceasefire deal and then no deal and now nine straight days of U.S. strikes – taking out more military installations, road and bridges. Three American service members dead in the last few days, and Trump vowing to make Iran pay for it. Tehran is telling reporters the ceasefire framework is effectively dead while still leaving the door cracked open for mediators to keep talking. That contradiction - tough talk publicly, quiet channels privately - is exactly why oil swung $5 on the day.

Add in the fact that the Houthis (an Iran proxy) are threatening to block the Saudi shipping lanes in the Red Sea, and you can see why energy traders can’t get comfortable in either direction. The situation remains volatile.

All of this reminds us that while June’s inflation reports looked encouraging, they were helped enormously by a nearly $30 collapse in crude oil. Lower energy prices reduced transportation costs, eased manufacturing expenses and relieved pressure across the broader economy. But markets don’t price yesterday’s inflation. They price tomorrows. If oil stays in the low $80s—or moves higher—that tailwind disappears. Future inflation reports may not look nearly as good.

The TLT (20 yr bond etf) and TLH (10 yr bond etf) both lost ground – falling 0.75% and 0.6% respectively and that pushed bond yields up which didn’t help the tone and only added pressure to the situation…. The 2 yr is yielding 4.19% after hitting 4.21%, the 10 yr is now yielding 4.58% after kissing 4.6%...while the 30 yr is at 5.11% after trading as high as 5.12% - leaving the bond market in the ‘danger zone’. And that is the problem that Kevy has to deal with….he can talk about cutting the front end of the treasury market all he wants, but he can’t control what happens on the back end if oil keeps doing what it did, the bond market will make THAT decision for him.

Then Goldman tells us that the Hedge fund community (the Momo guys) are bailing on tech – saying ‘the exit’ has been the fastest on record…Not elevated, - the fastest…..and at the first glance – you’d say – ‘oh boy, that’s NOT good’ – but let’s put it in context – because I did hint at this yesterday.

Don’t confuse hedge fund action with institutional conviction.

Hedge funds (the Momo guys) trade quarter to quarter, not year to year. They’re tactical. They use leverage, they trade around earnings, and they have no problem taking profits after an extraordinary run. If they think valuations are stretched - even temporarily, they will reduce exposure without hesitation AND they all do it at the same time. They get paid to trade! And the algo’s? Don’t even go there – they are incentivized to create chaos!

That’s very different from firms like Fidelity, Capital Group, Wellington, BlackRock, Vanguard, Berkshire Hathaway (think Uncle Warren) and the large pension and endowment managers.

Those firms invest for years - not weeks. They aren’t trying to outperform this quarter; they’re trying to build wealth over decades. They own huge core positions and trim around the edges when stocks get stretched but they don’t ‘bail’ – UNLESS of course the investment thesis has changed (or the fundamental story has shifted) - very much like a good wealth manager does. If anything, they are buying what the Momo guys are selling - they are doing what they are mandated to do, invest for the long term, manage risk and buy good stocks that go on sale – and there is a sale going on right now!

And that’s an important distinction.

Now the VIX spent the day in negative territory – falling as much as 7% before ending the day down only 0.6%. – which suggests that ‘fear’ is NOT building, that panic is NOT setting in, that investors (not the Momo guys) are NOT running for the door. This morning the VIX is down another 6% at 17.50 – leaving it below 2 trendlines and sitting atop another. That is not what PANIC looks like.

And by the end of the day – stocks ended lower – and here is the tell that matters most to me: the S&P and the Nasdaq were both GREEN most of the session yesterday. Chips were bouncing. The broader market and tech were advancing – then 4pm hit, CENTCOM confirmed another round of strikes, and just like that - the tape rolled over into the close. That’s not a broken market. That’s an anxious market, looking for a resolution.

At the end of the day - The Dow gave up 307 pts, the S&P lost 14 pts, the Nasdaq lost 12 pts, the Russell lost 19, the Transports lost 266 pts or 1.1% the Equal Weight S&P lost 43 pts while the Mag 7 gave back 25 pts.

Twenty-three of thirty (75%) of the Dow stocks closed lower. CAT took 95 pts off the Dow, GS took 60 pts, AAPL took 42 pts, BA, UNH, JNJ, AXP all took more than 80 pts off the Dow – on the flip side – MSFT itself added 50 pts (it was up 2.2% now trading at $402 up 14% since the end of June), GOOG added 31, while CRM, AMZN, CVX and V all added more than 50 pts – there’s that rotation-not-liquidation theme again.

Energy was the winner on the day – up 0.5% which makes sense when crude is the whole ballgame. Communications, Tech, Semi’s, Software and Memory names rounded out the winners.

Healthcare, Basic Materials, Industrials and Consumer Discretionary all lagged – suggesting more rotation.

If this were true institutional liquidation, the place would be a mess…. everything would have been sold…. without regard……and that is not happening.

Gold did nothing yesterday – ending the day just about where it started…. but this morning it is up $55 or 1.4% at $4,062 as the dip buyers wake up and the tension in the middle east continues to heat up.

Even with today’s move, however, gold remains trapped in the $4,000–$4,200 trading range that has defined the market for weeks. For gold to really make a statement, it needs to break out of that range. If geopolitical tensions continue to build, it could be the catalyst that finally pushes prices through resistance.

There is no real eco data today to drive the action….so look to oil, bonds and earnings…

And today’s earnings are set to give us a broad read on the economy –

Consumer - DHI, GM, GPC, HAS (housing, autos, discretionary spending), Financials - SCHW, SYF, MSCI (investing activity, consumer credit, capital markets), Industrial/Defense - MMM, NOC (manufacturing and government spending), Energy - HAL (oil & gas and capital spending), Healthcare/Life Sciences - DHR (biotech).

GOOG, TSLA & NOW kick off earnings for the mega-cap technology names tomorrow. MSFT, META, AAPL & AMZN Follow next week.

But today is not about tech and that’s why today’s reports have the potential to move the broader market, not just the individual stocks.

And for now, investors appear to like what they see - futures are UP this morning…. ahead of these reports…. Dow futures are up 181 pts, S&P’s up 41, Nasdaq up 400 pts while the Russel is up 25 pts.

Overnight Asian markets ended higher and European markets are all higher as well.

The geo-political rumor this morning is that mediators are proposing a 10-day ceasefire to allow the temperature to cool down. Whether that gains any traction remains to be seen, but for the moment it’s helping improve sentiment.

The S&P closed at 7443 down 14 pts – breaking below trendline support at 7454. This morning the tone is more positive, Investors appear to be focused on coming earnings and eco data. If the tone stays strong – we will take back the 7454 trendline and turn yesterday’s break into nothing more than a head fake.

Remember... don’t let the headlines force you into emotional decisions. Focus on your plan, your timeline and your long-term objectives—not the noise of the day.

Dover sole meunière

Classic, simple.

Ingredients: The dover sole fillets, s&p, all-purpose flour, butter, olive oil, Juice of 1 lemon, chopped Italian parsley, capers (optional—but I love them), lemon slices for serving.

Pat the fillets completely dry. Season with s&p. Lightly dredge in flour. Shake off the excess.

Heat a large sauté pan. Add the olive oil and butter. When the butter stops foaming, add the fish. Cook about 2–3 minutes then carefully flip. Cook for another 2 minutes. The fish should just begin to flake.

Remove and set aside on a warm platter.

Make the Meunière Sauce - Reduce heat slightly. Add butter. Let it foam until it turns a beautiful hazelnut brown. It will smell a bit ‘nutty’.

Add the lemon juice, parsley and capers.

Pour the brown butter sauce over the fish. Place the fresh lemon slices on the plate.

Serve immediately.