The Stock Market Just Gave Us a Major Signal
In a Nutshell
Markets staged a sharp recovery after heavy selling, but the bounce looks leveraged and fragile with nothing new to resolve ongoing risks. Memory chip stocks led the move while South Korea’s margin-call crisis and a fresh Bank of Japan yen intervention loom as potential triggers for another leg down. The core takeaway: treat today as a possible lower high, avoid adding leverage, and wait for concrete reassurance before assuming a sustained rally.
These notes were generated by AI and may contain inaccuracies.
Markets experienced an amazing recovery, but the question remains whether they will hold at these elevated levels. The NASDAQ has been forming consistent lower highs and lower lows, reaching one of its lowest points yesterday as Microsoft and Meta reported earnings. Shortly after the FOMC rate decision, markets began selling off aggressively into the close, followed by buying pressure that formed higher lows and a gap up above previous day's trading levels.
Apple and Amazon are set to report earnings today after the bell. The key question is whether there is enough conviction in the market to hold at these levels and what the market might be celebrating.
Massive bounce occurred in memory chip stocks including SanDisk, SK Hynix, Micron, Intel, and Western Digital. Micron was up 15.5% on the day, reaching 17% at one point. SanDisk was up 22%. These stocks, which were some of the worst performing in the past two weeks, experienced significant bounce today.
The concern is where this buying pressure is coming from, as much of it happened into the market open, potentially from leveraged buyers.
South Korea has seen over 1.2 million accounts hit with margin calls. An estimated 320,000 to 360,000 accounts were fully liquidated per Goldman Sachs. Around 3.4% of the adult population in South Korea received margin calls. This situation highlights that things can get worse before they get better.
The approach emphasizes investing in good companies without using leverage, allowing tolerance for downturns and benefiting from green days. However, there is concern about people going in too aggressively at the first sight of a green day without knowing what will unfold over the weekend.
Things are not deescalating in the Middle East, and conditions don't look good in other countries that influence US markets.
The Bank of Japan yen intervention has started. If this continues to drop, markets could experience a similar crash to what was experienced in August 2024 - the carry trade all over again, potentially leading to significant downturn within a short period of time. Tomorrow, more information is expected about what the central bank of Japan is supposed to do if they raise rates, which could be a shock for US markets.
Two series of reports that markets were initially celebrating during the pre-market session:
- June's PCE report came in as expected at 3.7%
- Core inflation came in as expected
- US Q2 GDP came in at 1.5%, below the expectation of 2.1%, indicating the US economy growth is slowing down
Citadel potentially rug-pulled Leopold, who runs a fund called Situational Awareness. The fund was one of the best performing funds of 2026 due to the recent downturn. They reportedly sold everything to Citadel. Citadel Securities is the institution that shared news that the Federal Reserve could possibly be raising rates in yesterday's Fed meeting, but rates weren't raised, though markets still sold off due to concern.
The idea being thrown around is that Citadel planted the seed, forced Situational Awareness to get margin called as Fed left rates unchanged, then Citadel acquired the entire portfolio.
Significant moves in individual stocks include:
- NBIS up 29%
- BE up 25%
- SanDisk up 22%
- Irene up 24%
- Oaklo up 11%
- NBIS up 26%
- Bloom Energy up 25%
These moves represent approximately one-fourth of value being created in the past 12 hours, which appears irrational. Markets have been selling off for the past week or two, and at the first sight of a green day, everyone pretends like there's nothing to worry about, but all previous concerns remain present.
Currently setting up for a possible lower high with a nice rip up potentially getting rejected again. If rejected, this could create more selling pressure, especially from leveraged buyers. The trigger could be the South Korean market again or the Japanese market tomorrow.
Meta is still down 9.3% despite today's moves, highlighting that one green day does not mean the market must make a full recovery to previous all-time highs.
The market is celebrating today, but nothing was announced that injects certainty. Things can get worse before they get better. One green day does not guarantee a full recovery. The recommendation is not to overlever up at these levels and to recognize that stepping stones are needed to provide reassurance in areas of previous concern.
The question remains whether this is the beginning of a bull run or just another lower high before another leg down.
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