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Good morning partner,
Few things to cover this morning:
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Yesterday’s Session
Another day where the hyperscalers rose to the detriment of the semis/memory trade. Most of the chipmakers were down big, like 7-12% big in most cases while the defensive side of the sector pushed higher.
Seems like this morning the setup offers quite the opposite mark, as semis/memory are pushing higher to likely pull capital out of the hyperscalers, software, and other areas of our HALO thesis.
As I went over in Sunday’s weekly plan, most of the participation around this space is coming from retail leverage, especially now that South Korean regulations have driven international traders to bet on things like SMH, DRAM, SOXX.
On the other hand, hedge funds de-grossed their AI positions at the fastest pace since before Liberation Day happened, making me wonder if there’s a catalyst nearby that we haven’t really thought of…
Maybe NVIDIA earnings, maybe the fact that 15% price hikes ended up being rejected by the market yesterday, if I told you I had an idea I’d be lying to you.
For now, the tug-of-war continues with AI concentration set to win the day.
Let’s take a look at yesterday’s leaders and laggers:
Technology, Industrials, Utilities.
Once again, the day continues to spread across the AI concentration side of things, where the three leaders this morning are all betting on the same outcome.
Recall I had thought the Situational Awareness blow up would have been enough to wash out the leverage in the system, or at least the leniency to concentrate further around AI.
Was I wrong to think that…
Leverage and concentration are stronger than ever before now, as over 75% of all green sectors on the day are all the same bet around AI capex continuing to grow.
What I am becoming interested in is the other 25%.
Consumer cyclicals, financials, real estate are going up in harmony with AI, even though they really pose the opposite bet really.
This is exactly where the latest update from Goldman’s prime brokerage book comes in handy as I dig into the sector for an Offside Premium idea this week.
Rotations
Prime Brokerage Net Trading Flows, Goldman Sachs
Everything you see retail traders buying on margin is what the “smart money” is now dumping.
Classic.
Materials, Utilities, Information Technology are now having the largest de-risking of the decade as more participants rush to get these names off their books.
What are they buying?
Consumer Discretionary, Financials, and some macro products (my guess is a combination of gold and bonds.)
I get the discretionary side of things, after all it is the coiled spring of the economy right now according to the latest GDP data.
Only AI investment and exports are driving the economy, as ~50% of GDP growth in the first half of 2026 came from those areas, while the consumer just fell deeper into a recession.
Now that we’ve got Walmart (WMT), Home Depot (HD), and Lowe’s (LOW) earnings this month, along with a fresh retail sales print…
The image has become clear as to where the consumer is starting to spend again despite tight budgets and uncertain inflation.
Hint: It has four wheels, sometimes 18.
Markets are already paying a premium forward P/E multiple for these companies, and my job is to explain to you why a high P/E name is still cheap, that’s where the big money is made.
Offside Premium members will have that watchlist this week, with my top picks and trade structure coming next.
News
Stanley Druckenmiller critiqued Bessent’s choice to influence bond yields, saying the Treasury should instead focus on the deficit that caused the higher yields in the first place and ignore the short-term invoice (Druck was Bessent’s mentor.)
Apple Clears Approval to start using CXMT and YMTC memory chips from China as the company dumps Micron as its memory supplier. Timely release after the conclusion was reached in my analysis of NVIDIA’s 15% price hike.
Amazon Raised Prices on hardware products citing memory shortages as a margin headwind. Why not follow Apple and switch memory providers? Because that would directly affect Anthropic’s income, and therefore Amazon’s stake in it, see how it all works?
Goldman Warns of AI usage for its bankers, one of the bank’s partners mentioned risk to judgment and analytical skills that represent the Goldman prestige. Interesting timing going bearish after prime clients dumped their AI names.
Movers & ES Levels
Expedia 📈 Jumped 5.5% after Evercore raised its price target, another name joining the wave of software driving second thoughts for previously bearish investors.
Expion Energy 📈 Gained over 80% after announcing a $9 million raise to expand its lithium mining operations, the latest piece of evidence pushing the AI narrative toward robotics and away from other infrastructure areas.
Hims & Hers 📉 Lost over 10% after Visa reported a sudden spike in disputes as customers are having trouble canceling their weight loss product subscription.
AAOI 📉 Fell more than 13% along with other semis/memory names as it announced a fresh $600 million raise by selling stock in order to buy equity stakes in other expensive AI players. This is an extension proving my capital cycle peak thesis is running.
Now let’s get into some ES levels for today.
** Due to low volatility, yesterday’s take on the index remains the same for today
Note that $7,655 was hit to validate our lower-level of the current range, with no aggressive reaction yet, meaning we could hit it again and lose it most likely. **
$7,650 - $7,800 remains the base to trade for now, until we see the potential September effect on volatility (which so far is right on schedule.)
We continue to see a “sell the rally” behavior currently, with the latest evidence shown at $7,740 and $7,720.
Should be see more aggressive selling activity at or below $7,700 and I suspect we may as well reach the lower end of the current base at $7,650.
What happens after that will be up to the momentum factor (AI) and how the components around memory and neoclouds continue to behave.
For now I wouldn’t have too strong of a view on the index unless these levels break on renewed aggressive offering from the sellers.
More importantly, we should continue to see passive bidding from the buyers in order to keep prices below that $7,800 turn distribution I mentioned on Monday.
Know that we are at an extremely important cutoff here at $7,700.
Below that we find a 150-point distribution running from $7,400 to $7,550 which I believe could trade and consolidate should we see that aggressive offer from sellers come in.
Portfolio
Yesterday’s auction made it clear that the AI narrative is continuing to shift around.
My long/short equity trade on AI infrastructure names has gone south, so I will take advantage of selling the rallies as they come about to clear up some liquidity and cut the losers early.
Software continues to drive higher, though it was now become a bit over extended, where some risk is also likely going to get cut soon.
The consumer sleeve of the portfolio is also doing a great job of holding its ground and slowly pushing higher, where new additions are expected to get our portfolio to a new all-time high run by next quarter.
We have outperformed the S&P 500 since inception by roughly 5%, while holding less than 30% of the index’s volatility and having 40-50% cash on balance throughout.
This is where alpha generation comes to support your compounding journey.
Most members have 15x their membership costs to Offside Premium over the past quarter.
Financial growth starts at finding these compounding deals and letting the system run.
Here’s the positioning update for today’s premium members:
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