Top Pick Performance
Several of our long picks did not work out yesterday as the space sector trade faded. However UMAC did hit our $21 target which was given on Monday (and consistently throughout the week) when the stock was just at $17. Also profitable, were hedges of short IWM, long OXY, and short SPCX.
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Macro Discussion
Google reported good news yesterday on the AI capex front raising 2026 capex by $15B and saying that capex will increase “significantly” in 2027. Adding to the bull thesis for AI infrastructure, OpenAI reportedly will increase cloud infrastructure spending by $150B.
This is resulting in a bid this morning in MU NBIS and other AI infrastructure stocks. However, we are more concerned about oil this morning than we are excited about AI capex.
Oil is surging yet again, another 4% this morning, as the Iran war continues to escalate and oil tankers continue to be targeted. IWM is only down 0.1% at the time of this writing and we believe with GOOGL ER now behind us, there is nothing left to hold up the major indices including QQQ. TLT continues to drop, often an early warning indicator before sharp market pullbacks especially in IWM.
Given the strength and rotation into the AI infrastructure trade, we contemplated staying at yellow alert, but we believe the oil story will end up leading the markets broadly lower today so we’ve downgraded to red alert. Our #1 pick of the day is a directional bet - not just a hedge, to short IWM. See top picks section below for details.
Today’s Signal: 🔴
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