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Good morning partner,
Few things to cover this morning:
Yesterday’s Session
After a massive gap higher in the S&P, markets have taken a breather with a slight pullback from all-time highs.
Eerily low volume, momentum stocks underperformed, and the value factor ruled on the day.
This is an early warning sign we should pay attention to, but nothing for the bulls to panic yet.
Let’s take a look at the day’s leaders:
Financials, Industrials, Materials.
These are defensive stocks taking over for the day, and as you saw from the map above, lots of names in the S&P ended the day higher.
But, that’s not enough now that over 50% of the market is made up by tech names.
A 2.5% drop in tech was enough to cancel out the efforts for breadth to catch up, and the reasons tech went down are twofold.
Microsoft pulled back a $3 billion deal with Oracle citing security concerns, then immediately announced a partnership with DeepSeek to lower AI usage costs.
OpenAI started a pricing war with Anthropic, citing potential 30-40% cuts.
This means the AI trade may start unwinding as revenue targets are missed, ROI schedules on capex get pushed way back, and the productivity question blurs.
We’ll cover this in depth later today inside Offside Premium by the way.
The Iran Front
Markets continue to discuss the MOU that’s being proposed with Iran, some citing concerns that the US has already dumped years of expensive ammunition and resources on this war.
Only to now pay $300 billion in additional relief to Iran.
No details on Hormuz, tolls, oil, and whether an actual ceasefire has been signed yet.
News
Yum! Brands is set to buy Pizza Hut in a $2.7 billion deal to private equity firm LongRange Capital.
This means great news for us as Domino’s Pizza (DPZ) shareholders, since the bottom of the valuation ranges may be in with private buyers finding the space attractive.Robinhood (HOOD) is cutting 10% of its workforce, and while they may cite AI as the reason, let’s remember we are in a shadow recession in the US.
Nonetheless, I still like this stock to $120 or so after buying in the low $70s before starting this newsletter.Solar energy generation just surpassed coal in the United States for the first time in history (12.8% vs 12.2%), opening the floodgates for new solar-related investment opportunities.
Housing starts tanked by 15.4% yesterday to signal the consumer, credit, and bank loan appetite is not looking that healthy.
FOMC day everyone, markets expect rates will be left unchanged. Any deviation from this 98% expectation could shake up markets big time today, so watch out.
Movers & ES Levels
Southwest Airlines 📈 rose by 2.9% after Jefferies boosted their price target, part of our transportation and agricultural recovery trade on a Hormuz opening.
Innodata 📈 spiked 7.8% after bullish analyst commentaries on their growing AI demand for solutions, supporting evidence for our software and cybersecurity long trade.
Micron 📉 declined by 6.2% as investors digest the implications of Microsoft’s deal with DeepSeek & its decline of the Oracle deal.
Dave & Buster’s 📉 pulled back 6.3% after lower profit and falling same-store sales during the quarterly earnings report, looks like the bottom K of the economy continues to struggle.
We’ll see, now let’s get into some ES levels for today.
Bulls successfully defended $7,575 on the ES yesterday as called for in the digest, resuming higher chances of a continued uptrend for now. Closing above $7,575 continuedly this week will be key to build up enough support to make new all-time highs.
Bears want to see prices hit $7,550 and consolidate there for an hour or so to reload, then ultimately close the week or the day below $7,500 if we are to see the bottom section of a “b” shaped volume profile (signaling a reversal potential).
Portfolio
I have initiated the Offside Portfolio for paid members, but you will receive daily updates on my positions after I decide to buy or sell.
Since this has just been incepted, there’s only Domino’s Pizza and Adobe, but I will likely add from names in the following watchlist:
Lululemon (LULU)
Uber (UBER)
Pagaya Technologies (PGY)
Cognizant (CTSH)
Nintendo (NTDOY)
Here’s my current pitch deck on Uber for starters, get familiar with my thesis before I drop the entire deep dive in Offside Premium. ⬇
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