High-Stakes Fighting in Hormuz; Hostage to Hynix; Fading ‘Memory’ Basket?

Freewheel Burning

Fast and furious we ride the universe
To carve a road for us that slices every curve in sight
We accelerate, no time to hesitate
This load will detonate whoever would contend its right
Born to lead
At breakneck speed
With high octane
We’re spitting flames
Freewheel burning
Freewheel burning

– Tipton, Downing, Halford (Judas Priest), 1984

Zero to 120…

So much going on. Markets under pressure? That was so Monday. What Tuesday brings? Could be anything. What we do know is that from here on out, probably for weeks or even months, life for traders and investors is going to move quickly. On Monday, Pres. Donald Trump finally lost patience with an Iran that I believe wants nothing to do with a lasting peace process and will never negotiate in good faith.

The president acted as U.S. forces responded to Iranian aggression against civilian freighters by fully resuming offensive operations against the Iranian military and Iranian infrastructure supporting that military. The president announced that the U.S. would impose a fee of 20% on all cargo shipped through the Strait of Hormuz while re-implementing the U.S. Naval blockade of Iranian ports. These moves, especially the mention of a 20% “toll” on safe passage through that waterway, would be considered inflationary on both a domestic and global scale.

Markets did not like that. Crude oil futures prices soared, and bond traders sold debt securities (forcing yields / interest rates higher) as quickly as equity traders sold stocks. Then it got worse. Fed Gov. Christopher Waller spoke in New York and said that inflation is now expanding beyond what could be driven by things like energy fuel prices and tariffs. Waller sounded ready to consider higher short-term target interest rates.

Making matters worse for the markets in real-time, Waller, who is highly respected as a central banker, identified surging capital spending on artificial intelligence as an inflationary factor. There was a time when technological progress was seen as a deflationary force and such an impact had been expected to be visible as AI impacts everything. Maybe not this time?

Earnings, Fed

Where does Tuesday even begin. Earnings? Let the large U.S. banks kick off the season. This morning, we’ll hear from Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), Goldman Sachs (GS) and Wells Fargo (WFC). Macro? In a few hours, the Bureau of Labor Statistics will release the June data for consumer prices. The headline consumer price index will weaken significantly (my opinion), but core CPI will matter more.

This will impact markets as much as anything else, as our central bankers will be out in force on Tuesday. Fed Chair Kevin Warsh will testify before the House Financial Services Committee (cue the circus music for that financially illiterate crew) this morning.

Warsh will be followed this afternoon with public appearances to be made by Fed Govs. Michael Barr, Lisa Cook and Michelle Bowman, all of whom sit in positions holding permanent policy voting rights. In addition, Chicago Fed Pres. Austan Goolsbee will speak. Chicago does not hold 2026 voting rights, but the media loves Goolsbee, allowing his words to punch above their weight, which could force increased keyword-reading algorithmic trading activity.

Hostage to Hynix?

This morning, our old friend, Jim Cramer posted to his X account, “How did all of tech become hostage to SK Hynix!”

He’s not wrong. On Friday, what was the “when issued” offering had traded as high as $177 after being priced at $149. Keep in mind that these American Depository Receipts, which are listed at the Nasdaq in New York, represent 1/10th of an ordinary share. Those are listed in South Korea. So, $149 is reflective of a per share price of $1,490 and $177 is reflective of $17,700. These are huge moves.

On Monday, SKHY gave up 9.32% in New York, trading as low as $151.30 and closing at $152.35. At zero dark-thirty on Tuesday morning, I see these ADRs trading with a $162 handle (up 6.5%-ish). With the SKHY associated volatility has moved the entire memory / storage basket. In fact, all of the tech space, or at least the semiconductors do seem to be following SKHY around like my Jack Russell terrier when she thinks we’re about to go out for a walk. All she wants to do is get out and fight other animals — including snakes and alligators. Like the marketplace, she’s blind to danger.

So, have I added SKHY to that basket? No. In fact, I have written in recent days that I had reduced the impact of that basket on my overall portfolio. Out of necessity. I remain long SanDisk (SNDK), Micron (MU), Seagate (STX) and Western Digital (WDC), but to a far less impactful degree. Of those names, only SNDK (though readers will recall that I cut that one in half last week) remains a “top five” holding and I am looking to have that name swap places with Advanced Micro Devices (AMD), which is currently number six. I have reduced WDC to a day-trading vehicle and am actually looking to complete my exit from STX.

Will I trade SKHY? Of course. My beautiful basket, which has done so well for my book and for my followers? That basket is now in Darwin mode. Survival of the fittest. It’s not dead, but evolution was, I guess, inevitable.

Hitting Bump at Roundhill Memory…

The new Roundhill Memory ETF (DRAM), which was the easy way to trade our memory basket, and has only been trading publicly since early April, suffered a technical setback on Monday.

Readers will see support for this ETF at its 50-day simple moving average that lasted a few days. Unfortunately, that fund also hit resistance at its 21-day exponential moving average several times since the start of July. This reflects a disagreement between the swing crowd and the pros. Today, my guess is that we’ll find out if the prose broke for good on Monday.

The June consumer price index and Kevin Warsh’s testimony may have more to do with what happens here than anything particular to the space. How’s this for a sign of the times? Would any of us really be surprised if the market moved sharply in either way later today? No. None of us would be surprised.

Everyone hated NYSE trading floor specialists back in the day. Now, we all wish the powers that be had never hijacked the market model. Some stability, the kind of stability that had been provided by a centralized, ongoing two-sided auction that was refereed by those specialists, is now sorely missed. No commissions? Congratulations. Now you get ripped off on the way in and on the way out and most of you don’t even know it.

Chart Says: Stay Nimble

The Nasdaq Composite continues to develop a closing triangle pattern. Closing triangles, for those unaware, often foretell a sharp rise in volatility, but do not signal direction.

‘Day One’ Bearish Reversal

Yes… I know. The S&P 500 at least technically did post a “Day One” bearish reversal of trend on Monday. Negative price discovery. Increased trading volumes.

Awful breadth. It was all there. Now, we need a pause followed by confirmation to get on board. Any hope for the bulls? Sure. The daily moving average convergence divergence is postured bullishly. That’s right. The S&P 500 posted a bearish candlestick while my favorite indicator is signaling the bulls.

OK, Gang…

It’s time to button down our jerseys and tape on the foil. We’re going to have to play some “old time hockey.”

Economics (All Times Eastern)

06:00 – NFIB Small Biz Optimism Index (June): Expecting 95.6, Last 95.3.

08:15 – ADP Employment Change (Weekly): Last +21K.

08:30 – CPI (June): Expecting -0.1% m/m, Last 0.5% m/m.
08:30 – Core CPI (June): Expecting 0.2% m/m, Last 0.2% m/m.
08:30 – CPI (June): Expecting 3.8% y/y, Last 4.2% y/y.
08:30 – Core CPI (June): Expecting 2.8% y/y, Last 2.9% y/y.

08:55 – Redbook (Weekly): Last 11.5% y/y.

4:00 p.m. – Net Long-Term TIC Flows (May): Last 779.

4:30 – API Oil Inventories (Weekly): Last -399K.

The Fed (All Times Eastern)

10:00 – Speaker: Federal Reserve Chair Kevin Warsh.

12:40 p.m. – Speaker: Reserve Board Gov. Michael Barr.

1:00 – Speaker: Chicago Fed Pres. Austan Goolsbee.

1:30 – Speaker: Reserve Board Gov. Lisa Cook.

2:55 – Speaker: Reserve Board Gov. Michelle Bowman.

Today’s Earnings Highlights (Consensus EPS Expectations)

Before the Open: BAC (1.13), C (2.71), ERIC (1.50), GS (14.50), JPM (5.80), WFC (1.70)

At the time of publication, Guilfoyle was long SNDK, MU, STX, WDC, AMD equity.