July 18, 2026 | Trading Desk Notes for July 18, 2026

“People will believe the most preposterous stories, as long as the price keeps going up!” Bob Hoye

Bobby has been a friend for ~50 years. I once introduced him at a conference as a great market historian who was actually “there” when the Tulip Bulb mania hit Holland in the 1630s. What I love about his “preposterous” quote is that it is timeless; it applies equally to Tulipmania, 1929, the DotCom bubble, and to the runaway markets we’re seeing these days.

S&P 500

Nasdaq 100

SOXX – Semiconductor Index

South Korea ETF

Silver

Bitcoin

SpaceX

BTW: According to Brent Donnelly, over a billion “locked up” SpaceX shares will be cleared to hit the market in August. That’s compared to the current float of ~939 million. (That doesn’t mean they will hit the market, just that pre-IPO investors will be able to sell some of their shares.) It looks like the SpaceX IPO may have “top-ticked” the AI/Semiconductor bubble.

Different analysts have been expressing “doubts” about the AI bubble for months, and as time passed, analysts have noted the dramatic “rotation” within the equity markets, the explosion of single stock and sector VOL, relative to the subdued VOL in the indices, but the over-levered BTD/FOMO hot money crowd didn’t listen – because prices kept going up!

I’ve posted charts of CAT a few times this year (I see CAT as one of the “picks and shovels” companies around the Hyperscaler/data center build-out), and it traded at nearly 3-month lows on Friday, down ~22% from the all-time highs set at the end of June.

However, despite the “risk-off” tone in equity markets this week, especially in AI/Memory stocks, remember that CAT rallied by ~$800 (~4X) from the April 2025 lows to the June 2026 highs.

Quote from Stephen Innes:

“In the early stages of a boom, investors buy the rumour. In the middle, they buy the earnings. Near the mature end, the companies deliver exactly what was promised, and the stocks fall anyway. It does not mean the business is broken. It means the price had already travelled further than the news.”

So what now?

The SOXX Semiconductor ETF rallied over 100% from late March to late June and has given back ~1/3 of those gains.

The S&P rallied about 20% from late March to late June, but has given back very little of those gains, which may “prove the point” that some money has left the high-flying tech stocks – but has not left the market – it has “rotated” to other stocks within the broad S&P index.

To further illustrate this “rotation”, note that while the SOXX ETF dropped ~20% from its highs four weeks ago, AAPL has rallied ~21% to a new record high. As I wrote in last week’s Notes, “Alpha has come from being right on rotation, not from trend following.“

To be fair, the S&P was clearly “buffeted” by weakness in AI/Tech shares on Thursday/Friday, and Friday’s close was the lowest since June 29, a sharp reversal from Wednesday’s highs, when it looked like the index could make a run at new record highs.

So, what next? Well, we’re getting into the heart of Q2 reporting season (leading banks reported strong earnings this week), and the market’s reaction to earnings reports and forecasts could be a “tell” on sentiment. (Note that ASML and TSM reported well this week, but their share prices fell.) We’re also in the heart of “summer vacation” time, and that may dampen participation (for years, I’ve noticed how markets “get real” after the Labour Day holiday). I think the “bloom is off the rose” for the high-flying AI/Tech stocks, and more questions about “viability” will arise (NIMBY protests, debt financing concerns, Chinese competition, a tsunami of new issues), but, like Doomberg explained in a recent interview with Maggie Lake, “AI is happening. Nothing can stop it. Lots of AI companies will likely fail, and lots of money will be lost, but AI is coming at warp speed – the world as we know it is changing radically.”

The next phase of the war with Iran

About three months ago, I compared the IRGC to the Hells Angels on steroids. Trump’s not at war with Iran; he’s at war with the IRGC, so “finish the job” means regime change, which means “boots on the ground,” and markets aren’t pricing that, and I don’t think the American public wants that. The IRGC is ramping up their attacks on other Gulf countries and hit KSA last night. Israel seems to be “sidelined,” but that could change in a heartbeat. I think markets are expecting a limited but continuing conflict, meaning that the SOH will remain effectively closed to commercial traffic.

The effective closure of the SOH didn’t bother the stock market in April and May, as the S&P rallied ~20% and the NAZ rose ~35%. Still, I think a continuing conflict with Iran, especially if the war widens. Soaring fuel prices will hurt share prices because the sharp break we’ve seen in the market-leading AI/Tech sector has left the market psychologically vulnerable to more negative news.

Energy

Front-month Brent crude oil futures had returned to pre-war levels (~$70) at the beginning of July, but closed Friday at ~$88.25, up ~25%.

Front-month RBOB gasoline futures had only dropped ~50% from April’s highs before surging higher this week.

Front-month Heating Oil futures (think of HOE as untaxed diesel) exhibit a chart pattern similar to that of gasoline.

In last week’s Notes, I wrote, “There’s no shortage of crude oil, but there is a shortage of (global) refinery capacity, which has created a shortage of products like gasoline, diesel and jet fuel.” I also noted that American exports of gasoline, diesel, and jet fuel were at record highs. I expect those shortages to become more acute, and crude oil to be in short supply as well, if this phase of the war with Iran continues or expands. We won’t have the reserve buffers this time around. I think there is more than a 50/50 chance that the war continues and expands.

Natural gas

Dutch TTF Natural gas futures have rallied during this phase of the war with Iran, approaching the highs set last March, as supplies from Qatar are blocked and as European reserves need replenishing before winter.

NYMEX Natural Gas front-month futures have dipped while European prices have rallied as robust American production has led to a dramatic expansion in storage inventories and as Freeport LNG has gone offline for unplanned maintenance, reducing exports. (That spike in January was a reaction to a wave of very cold weather.)

Gold

COMEX front-month futures had their lowest weekly close ($4,023) this week since early November. The market has dropped below $4,000 on nine trading days since June 24 (and closed below $4,000 on Thursday for the first time since November), but there seems to be support below that level. Central bank buying has increased recently, and speculative stop-loss selling seems to have run its course (in futures, if not in ETFs).

My friend, John Johnston (Market Vibes on Substack), is a veteran metals and energy futures trader. I subscribe to his Substack and have huge respect for his knowledge and experience. He mentioned this week that people who are bullish on precious metals might consider buying mining shares (miners earn money) rather than bullion (which has negative carry). I understand his point, but the real buyers in the gold market are the central banks, and they buy bullion, not mining shares.

Currencies

COT reports show that speculators’ US Dollar positioning in currency futures is the most bullish in years.

The Canadian Dollar dropped to 15-month lows in June as short-term interest rate spreads between Canada and the USA widened to 140-150 bps (historically very wide), and speculators were heavily short CAD. Softening US short rates over the past two weeks appear to have spurred some of those shorts to cover.

Despite recent strong comments by Japanese government officials, the Yen continues to weaken. Retail investors in Japan are heavily long the Yen, apparently believing that the government will take measures to boost the currency. On Friday, the Finance Minister warned that the government would take “decisive action” if the Yen continued to weaken. Monday is “Marine Day” and a national holiday in Japan – a great opportunity for intervention.

My short-term trading

I started the week with a double position long Yen. I was stopped on half the position in the Sunday overnight session and held the remaining position into this weekend.

I bought WTI on Sunday and covered it for a decent gain on Thursday when the rally seemed to run out of steam.

I shorted the S&P on Monday when the market weakened following a very strong Friday close, but was stopped for a slight loss when it rebounded on Tuesday.

I got short again on Tuesday, but was stopped for another slight loss. I shorted the market again on Thursday and caught the breakdown on Thursday/Friday. I stayed short into the weekend with a nice unrealized gain. My P&L for the week was nicely positive.

Thoughts on Trading

I wrapped up last week’s “Thoughts” by saying, ” There’s nothing wrong with being wrong, except staying wrong.”

So, how do I define “wrong” in terms of my trading?

Before I put on a trade, I have to know why and where I would exit the trade at a loss, where I would get out and admit that I was “wrong” on the trade/idea.

For instance, when I bought Dec WTI on Sunday at ~$73 (blue ellipse), I decided to exit the trade if it fell to around Friday’s lows (~$70), and I placed a sell stop at 7025 (red ellipse). Given the “increased hostilities,” if the market fell back to Friday’s lows, I would be “wrong” to be long.

The market rallied sharply on Monday, and more on Tuesday and Wednesday, so I raised my (protective) stop to Monday’s lows at $7210 (Black ellipse). If the market turned around and fell below Monday’s lows, after the gains it made Monday through Wednesday, I would be “wrong” to be long.

The market rallied more on Thursday, but it appeared to be “running out of steam,” so I decided to take ~$2.50 in profits (pink ellipse) and cancelled my stop. My thinking was that I would be “wrong” not to take profits when I had the chance, with the market looking “tired” after rallying to the best prices in a month.

When the market traded higher on Friday, I considered going long again, but decided it would be “wrong” to take “weekend risk” and buy the market after the sharp gains of the past two weeks.

The Barney report

Every three months, I have to give Barney a Bravecto pill to help protect him from ticks and fleas. He REALLY doesn’t like the taste of that pill, which is about half the size of a golf ball. I’ve tried coating parts of the pill in peanut butter and tricking him into swallowing it, but he’s “wise to my tricks” and refuses to “take the bait.” I guess with his wonderful nose, he can smell the Bravecto. Anyway, after two days of trying to trick him by disguising the pill in different kinds of food, he finally ate it. Thankfully! What a Good Boy!

Listen to Mike Campbell and me discuss markets

On this morning’s Moneytalks show, Mike and I discussed the wicked price action in global over-leveraged AI/Tech stocks and the rotation between stocks. You can listen to the show here. Don’t miss Mike’s interview with our long-time friend (and terrific analyst) Greg Weldon, starting at the 5-minute mark. My spot with Mike begins at the 43-minute mark.

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Victor Adair retired from the Canadian brokerage business in 2020 after 44 years and is no longer licensed to provide investment advice. Nothing on this website is investment advice for anyone about anything.

Victor Adair July 18th, 2026

Posted In: Victor Adair Blog

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