The Prints Disappointed. The Flip Held. Barely.
The event the whole week was built around landed, and it landed soft. Alphabet and Tesla both cleared the revenue bar after Wednesday's close and both sold off anyway — Google on a capex guide raised toward $205 billion, Tesla on an operating margin that caved under record deliveries. Futures are red into the cash open, NQ −0.9%, and oil is doing the tightening the Fed won't. Yet the index itself is composed: cash never lost the 7,500 shelf and closed a hair above the real gamma flip. The disappointment we flagged as the tail arrived — and the structure absorbed it, for now, on the thinnest of cushions.
- The flip held, but the walls closed inCash closed 7,498.96 — above the settled 7,487.58 flip and pinned at the 7,500 put wall, so dealers sit marginally long gamma and hedging leans stabilizing. The catch is compression: the near walls collapsed to 7,600 and 7,500, right onto spot, versus the wide 7,000/8,000 outer walls a day ago. The cushion is real but razor-thin — lose 7,487 on a close and amplified downside reopens with little beneath it.
- Beats that traded like missesAlphabet beat — revenue $119.8B, Cloud +82% — and fell ~5% after hours on a capex guide raised to $205B, paring to −1.5% pre-market. Tesla beat on revenue but missed EPS ~39% as auto margin slid to 16.8%. The market punished the spend and the margin, not the top line.
- Semis went the other wayThe capex "shock" sold software — Meta, Microsoft, Palantir all lower — but bid the hardware that gets paid: Super Micro +20%, Dell +9%, Nvidia +2%. The tape split down the middle of the AI trade: sell the payers, buy the paid.
- Oil keeps pricing out the cutCrude is ripping — WTI to $91 on Houthi strikes against Saudi tankers in the Red Sea — and the long end is leading, 30Y at 5.18%. Cut odds are gone and a September hike is the market's live tail. Every barrel higher tightens conditions the Fed isn't touching into blackout.
- The crowd finally blinkedThe tell overnight wasn't price — it was sentiment. AAII bulls collapsed from 44.9% to 29.6% in one week, bears jumped to 42.3%. Retail flipped from optimism to fear into a tape that held support — a contrarian crack in the positioning air-pocket the letter has been flagging.
Prices, Gauges, Flow & Yesterday's Calls
| Instrument | Last | Chg | Read |
|---|---|---|---|
| S&P 500 (cash, Wed close) | 7,498.96 | −0.14% | Held the 7,500 shelf; closed just above the flip |
| E-mini S&P (ES Sep) | 7,494.25 | −0.61% | Back at the flip pre-market on the earnings fade |
| Nasdaq-100 (NQ Sep) | 28,922.75 | −0.89% | Software leads the drag; semis cushion it |
| Dow (YM Sep) | 52,075.00 | −0.71% | Broad give-back; no defensive haven bid |
| Russell 2000 (RTY Sep) | 2,953.80 | −0.54% | Small caps ease with beta and rates |
| VIX | 18.24 | +9.6% | Popped into the prints; curve still contango |
| 10Y / 2Y Treasury | 4.70% / 4.34% | +4bp / +3bp | 2s10s +36bp; 30Y 5.18% — bear-steepening on oil |
| WTI / Brent | 90.97 / ~98 | +4.8% | Red Sea tanker strikes; Brent read varies by wire |
| Gold / Silver | 4,085 / 58.70 | −1.6% | Slipped Wed as real yields rose; steadier this AM |
| DXY | 101.27 | +0.1% | Firm; USD/JPY 163.5, EUR 1.139 |
| Bitcoin | 65,427 | −0.9% | Slips with risk; holding the $65k area |
| Movers · SMCI / DELL / GOOGL | +19.8% / +9.3% / −1.5% | mix | Backlog · AI-server pull · capex-guide fade (pre-mkt) |
Sentiment & Flow Gauges
| Gauge | Level | Signal |
|---|---|---|
| CNN Fear & Greed | 43 | FEAR Still parked in Fear; up from ~37 a week ago |
| AAII bulls / bears | 29.6 / 42.3 | −13 SPREAD Bulls cratered 15 pts w/w (wk 7/22) — sharp reversal |
| VVIX / CBOE SKEW | ~96 / ~152 | TAIL BID Vol-of-vol normal, skew rich — downside hedges stayed on |
| Equity put/call | ~1.6 | HEDGED Elevated; a potential contrarian tell above 1.0 |
| FedWatch (Jul 29) | ~73% hold | BLACKOUT Cut odds ~0; ~27% priced to a hike |
| Dealer gamma (net GEX) | ≈ Flat / on flip | ON THE LINE Cash closed ~11 pts above the 7,487.58 flip → marginally long; level map in §04 |
The Flow Read
The gauges have stopped arguing and started agreeing — nervously. A week ago the crowd was near-max long with AAII optimism spiking; now bulls and bears have swapped places (gauge grid above), the VIX has popped to 18, and skew stayed rich into the prints. The fast money left long ago on Goldman's record tech de-gross; what changed overnight is that the slow money finally flinched, even as price did not break — the tape held the flip while the last believers started to sell it. Structurally the compression is the story: the near gamma walls have squeezed onto spot, so dealer hedging dampens inside a tightening band but has little to catch a break of 7,487. Into a blackout-thinned summer book with Intel still to report tonight, the market is coiled right on its regime line.
Yesterday's Calls, Graded
A Thin Data Day, a Loud Earnings Tape
| When (ET) | Event | Consensus | Prior |
|---|---|---|---|
| Thu 8:30 | Initial Jobless Claims (wk Jul 18) | 214K | 208K |
| Thu 11:00 | Kansas City Fed Manufacturing | 13 | 11 |
| Thu BMO | T-Mobile · Honeywell · Union Pacific · AXP wk | — | — |
| Thu AMC | Intel · United Rentals — the next swing name | $0.22 | — |
| Fri 9:45 | Flash S&P PMIs (Mfg 53.9 / Svc 51.2) | — | — |
| Next Wk | FOMC Jul 28–29 · mega-cap tech cluster | Hold | 3.75% |
Pivot Points & Gamma Map
Dealer Gamma Map
| Gamma level | SPX | ES Sep · +41 | Role in today's tape |
|---|---|---|---|
| Call wall · ceiling | 7,600 | 7,641 | Heaviest call gamma just overhead — the first magnet if the flip holds and the band works higher |
| Gamma flip | 7,487.58 | 7,529 | Regime line — cash closed ~11 pts above → dealers marginally long, dampened; a close below reopens amplified downside |
| Put wall · floor | 7,500 | 7,541 | Dominant near put gamma, right at spot — the pin the whole tape is coiled around |
Structure & Breadth
The VIX curve is still in contango — spot popped to 18.2 into the prints against a higher second month (~19.5) — so there is event nervousness but no panic bid, and the one-day expected move sits near ±$61. Skew stayed rich (~152) against normal vol-of-vol (~96): the market is insuring tails, not fleeing them. Beneath the index, breadth is the soft spot — Wednesday's split had semis up hard and software down hard, a narrow advance. Fundstrat's Mark Newton is the named read to carry: he flagged the equal-weight S&P breaking its first uptrend since mid-May as yields pushed higher, an internal warning even with the cap-weight index parked near the shelf. Support: the 7,487.58 flip and 7,500 pin, then the low-7,400s; resistance: the 7,600 call wall.
The Capex Argument Splits the Desks
The cleanest bull rebuttal to the selloff, from the seat the Street watches. Kwon's team just raised its 2027 hyperscaler capex estimate to roughly $1.1 trillion — about 25% above the ~$800 billion 2026 consensus — and reads the chip and software wobble as a buying opportunity, not a warning. His thesis is the mirror image of the tape's reaction to Alphabet: if the spending is real, it is demand landing on the semiconductor and hardware names, not waste to be punished. The market sold Google's capex guide; Kwon says that guide is the reason to own what the capex buys — the most direct challenge on the board to the "AI spend is a cost" reflex.
The number under the whole debate. Goldman flagged this week that roughly $489 billion of AI-related debt has been issued year-to-date, with the hyperscalers — Microsoft, Amazon, Meta — about 40% of it. That is the subtext beneath Alphabet's guide and Tesla's ballooning capex: the AI build is increasingly debt-funded, and a market that cheers the spend on the way up has to reckon with who carries it if returns lag. Not a crash call — a reminder that the capex story has a balance-sheet cost the multiple has not been asked to price. Read alongside Kwon, the two frame the fault line: demand that pays for itself versus leverage that has to be serviced.
O'Rourke gives the rotation a name: investors are starting to "look beyond AI as trade risks cloud markets," fading the crowded leadership as oil, tariffs and the September-hike tail stack up. His caution is less a bearish earnings thesis than a read on concentration — a market this dependent on a handful of mega-caps is fragile precisely when those names stop being the easy trade, which is what Wednesday's after-hours reaction demonstrated. He is the voice for the leadership baton being dropped before anyone picks up the next.
Held/moved voices live in the tracker below. HSBC's Max Kettner (carded this week on his shift to "reduce risk") and Goldman's John Flood ("buy the AI drawdown, but it's still short-covering") are name-referenced here, not retold.
Buy/Sell-Side Roster — Sorted by Influence
| Voice · Firm | Stance | Dir |
|---|---|---|
| Tony Pasquariello · Goldman | Dark into earnings week; respect the trend, expect sharper reversals near peak gross | CAUTION |
| Michael Hartnett · BofA | Bull & Bear Indicator at a record 9.6 "sell"; rotate to bonds, defensives, USD — next Flow Show Friday | BEAR |
| John Flood · Goldman | Buyer of the AI drawdown — GOOGL > AMZN > META plus semis; but "short-covering, not conviction" | BUY DIP |
| Ohsung Kwon · Wells Fargo | Raised 2027 capex to ~$1.1T; buy the chip dip — the spend is demand, not waste | BULL |
| Max Kettner · HSBC | Reduce risk into peak earnings; prefers Mag-7 over semis — this week's reversal | MOVED |
| Venu Krishna · Barclays | Constructive, earnings-dependent; 7,800 target intact — light positioning is fuel | BULL |
| David Lefkowitz · UBS | 7,900 year-end; expects broad-based gains as the rally widens | BULL |
| Binky Chadha · Deutsche Bank | Street-high 8,000; underweight positioning is the upside fuel — needs breadth | BULL |
| Scott Chronert · Citi | ~8,100; broaden past the "Mag 7" tag to a wider AI basket | BULL |
| Mike O'Rourke · JonesTrading | Look beyond AI; crowded leadership fragile as trade/oil risk builds | CAUTION |
| Ed Yardeni | 8,250; "AI is the real deal, not a bubble" — but carries a summer-stall warning | BULL* |
| Tom Lee · Fundstrat | Buy the dip toward ~7,700; warns of an abrupt H2 drawdown "that might feel like a bear market" | BULL* |
| Peter Berezin · BCA | Sell strength over buy dips in H2; AI may erode Big-Tech margins | BEAR |
| Jim Bianco · Bianco Research | Markets "want higher rates"; the Fed-easing path is overpriced — hike-or-hold, not cut | BEAR |
| Jonathan Krinsky · BTIG | Cautious on semis — "premature to look for a bottom"; leadership wobbling | BEAR |
| Savita Subramanian · BofA | Street-low ~7,100; majority of her bear-market signposts triggered | BEAR |
Oil Rips, and the Cut Trade Stays Dead
Bianco keeps hammering the point the equity tape still resists: the market "wants higher rates," and the easing path priced into the front of the curve is overpriced. The debate at the July 28–29 meeting, he argues, is hike-or-hold — not when the cuts come — and the bond market is the only real check on inflation running above target for 63 straight months. Wednesday's tape agreed: the 2-year at 4.34% sits well above the 3.63% funds rate, the long end led the curve steeper with the 30-year at 5.18%, and the oil breakout keeps feeding the impulse.
The through-line runs straight from the pump to the multiple: the same crude move that lifts energy names pins the Fed and bear-steepens the long end, and it lands in the week the AI-capex debate hit the tape. Oil is up on hard news, not rumor — Houthi strikes on two Saudi tankers in the Red Sea, roughly nine ships reportedly halting passage, a U.S.–Iran exchange past a twelfth night — with Goldman's desk holding a $120 Brent risk case if it persists. Gold slipped Wednesday as real yields rose, the opposite of a fear bid, which says the driver is rates and inflation, not a flight to safety. For a Fed already boxed, an energy-led inflation impulse with cut odds at zero is the least convenient backdrop possible — a barrel of oil, not a dot plot, is doing the tightening while the committee sits dark.
Single Names: The Prints, and the Split They Made
Alphabet beat and got sold on the spend. Revenue was $119.8 billion (+24%), Google Cloud surged 82% to $24.8 billion, and operating margin widened to 34% — a clean beat on the metrics that were supposed to matter. What the market punished was the guide: full-year 2026 capex raised to $195–$205 billion, with management signaling another "significant" increase in 2027. The stock fell nearly 5% after hours before paring to ~−1.5% pre-market. The answer the tape took to its own question: the AI build is now a cash-flow drag first and a revenue story second.
Tesla beat on revenue and hollowed out underneath it. Sales rose 26% to $28.2 billion on record deliveries of 480,126, but adjusted EPS missed by ~39%, automotive gross margin slipped to 16.8%, and operating income collapsed 57% to $398 million (a 1.4% margin) as regulatory credits dried up and capex more than doubled to $5.8 billion, tipping free cash flow negative. The stock fell ~4.7% after hours, ~−1.3% pre-market. Deliveries were known; the print turned on the margins the market has stopped trusting.
The offsets, and the split. ServiceNow was the bull rebuttal — an EPS beat ($4.09 vs $3.57), revenue +22%, and a raised subscription guide sent it up ~6.5% after hours. IBM softened on a revenue miss as customers shifted spend toward AI infrastructure; T-Mobile raised its free-cash-flow guide. But the sharper signal was in the chips: the capex fear that sank software bid the hardware that gets funded — Super Micro +20% on a record backlog, Dell +9%, Nvidia +2% — while GE Vernova (−9%) and software names (Palantir, Reddit) fell. Intel reports after tonight's close against a ~$0.22 bar and is the next swing factor for the semis tape.
Dark, and the Hawk Has the Last Word
The Fed is in blackout since July 18 and stays silent into the July 28–29 FOMC, where a hold is all but locked with funds at 3.50–3.75%. The move under the surface is the one that matters: cut odds are gone, CME futures put roughly a 27% chance the committee actually hikes at this meeting, and prediction markets sit near 35% for a September hike — a repricing driven by oil's fresh leg and a bear-steepening curve. The governing signal is Chair Kevin Warsh, whose recent testimony pushed back on the idea that June's cooler CPI settled anything: some might say "mission accomplished," he noted — "That is not my view." With no speakers this week, the rates tape takes its cue from crude and tonight's earnings, not Washington, and the rescue the bulls quietly pencil in keeps receding. Treat the hike probability as a futures-implied read, not an exchange-direct print; the direction is unambiguous.
What the Consensus Is Missing
The flip held, but the cushion shrank to nothing
The comfortable read is that the tape absorbed two disappointing mega-cap prints and closed above its gamma flip — resilience. The structure says something sharper. The near dealer walls have compressed onto spot: put wall 7,500, call wall 7,600, flip 7,487.58, all within a hundred points, versus the wide 7,000/8,000 outer strikes a day earlier. That is not stability; it is a coil. Inside the band hedging dampens, but the band is thin and the next real support sits far below the flip. A market that closes eleven points above the line that flips it into amplified downside has not defused the risk — it has concentrated it into a single level, and pre-market ES is already sitting on it.
The tape sold the payer and bought the paid — backwards, if the build is real
Wednesday's reaction was internally contradictory and nobody is calling it out. Alphabet was punished for guiding capex higher; Super Micro and Dell were bought on the read-through of that exact spending. You cannot have it both ways. Either the hyperscaler build is real demand — so selling Google's guide while bidding the hardware it funds is a rotation, not a verdict — or it is overspending, in which case the semis rally is borrowed time. Wells Fargo's move to a $1.1 trillion 2027 capex estimate says it is demand. If that is right, the market just sold the company writing the checks and bought the ones cashing them — the wrong side of its own thesis.
Retail capitulated into support, not out of it
The one-week collapse in AAII bulls from 44.9% to 29.6% — bears vaulting to 42.3% — reads on the surface as confirmation the mood has turned dark. Look at when it happened: the crowd flipped bearish into a tape that held its shelf and its flip, not one that broke them. Sentiment reversals that come at support while price refuses to confirm are the contrarian's favorite tell — the slow money blinked without the level giving way. It does not guarantee a bounce, but it inverts the usual setup: the last believers sold near the line the structure is defending, which is precisely where a squeeze, not a cascade, tends to start.
eli@cannontrading.com · cannontrading.com
Legal Disclosure & Risk Warning — Cannon Trading Company
This publication is provided by Cannon Trading Company for informational and educational purposes only. Content may include market commentary, technical observations, analyst opinions, and aggregated material derived from publicly available sources. While such information is believed to be reliable, Cannon Trading Company does not author, independently verify, endorse, or guarantee the accuracy, completeness, or timeliness of any third-party information referenced or summarized herein.
The information, opinions, market data, and commentary contained in this publication are subject to change at any time without notice and do not constitute investment advice, a solicitation, or a recommendation to buy or sell any security, futures contract, option on futures, foreign currency transaction, or any other financial instrument.
Past performance is not indicative of future results.
Trading Futures, Options on Futures, retail off-exchange foreign currency transactions, and other derivatives involves substantial risk of loss and is not suitable for all investors. You may lose all or more than your initial investment. Carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources, and other relevant circumstances.
Cannon Trading Company does not guarantee any profits and makes no representation that the strategies, ideas, analyses, or information presented will result in profitable trades or avoid losses. Any market views, analyst calls, forecasts, or third-party commentary referenced reflect the opinions of their respective authors and may or may not align with the views of Cannon Trading Company.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NO INVOLVE FINACIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETLEY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
Cannon Trading Company is registered solely as a commodities broker. Nothing contained herein constitutes the provision of investment advisory services.
© 2026 Cannon Trading Company, Inc. All rights reserved.
cannontrading.com • 1-800-454-9572 • (310) 859-9572