We’re coming off the first real down week since spring, but the market isn’t dead—it’s just moving through one of those liquidity-driven resets. The SPY and NASDAQ are hanging above their 20- and 8-day EMAs, but the leverage story is the real risk. When it unwinds, it unwinds fast. For now, money’s still flowing, so the dance continues—just don’t lose sight of the exit.
Key Takeaways
Bank reserves are the canary in the coal mine
- Regional banks (KRE) remain under pressure after reserves hit $3 trillion, exposing cracks in the system.
- If those reserves keep slipping, it won’t just be banks—it’ll ripple across the S&P 500.
Gold breaking higher as the dollar slides
- Gold miners are in their best margin run in decades, with GDX setups ripe for spreads.
- The UDN (bearish dollar index) keeps gaining, showing ongoing debasement of paper money.
Emerging markets bleeding capital
- China, India, and Taiwan saw their biggest equity outflows in five months.
- Capital is rotating back into the U.S.—watch FXI, EEM, and INDA as pressure builds.
Trade setups on the radar
- Occidental (OXY): Spinoff buzz makes it a spread candidate around 42–43 with high probability.
- Leonardo (DRS): Defense stock momentum—$42/$47 spreads line up with clean risk-reward.
- Riot (RIOT): Momentum fueled by Nvidia and AI upgrades—prime credit spread candidate.
What I’m Watching
SPY and QQQ are still leaning bullish, but momentum in defensives and cyclicals is fading fast. Insiders continue loading gold and miners, while energy’s resilience looks stretched at overbought levels. The real tell? Whether leveraged momentum in FANG and semis cracks under the 50-day. If it does, the unwind will be fast and ugly.
This tape is about liquidity, not fundamentals. As long as the flows keep coming, assets levitate. But when the leverage breaks, history tells us the move won’t be gentle. Stay nimble, stay disciplined.
Until next time,
Garrett Baldwin
TheoTRADE
