They HATE Leverage
Market Rewind: July 27-31, 2026
Hello everyone and welcome back to another episode of deleveraging. On a serious note, these past two weeks have made many I know question their entire thesis. While I agree this is necessary, I have to pushback on those saying this is the time to panic and sell everything. I will also question: what do you think of a biweekly report? Would this be of more use than these weekly Rewinds? Please, feel free to let me know as my job is to provide value.
It turns out the market is not a fan of leverage. We have seen what has been happening to the Kospi and semis. The overall Nasdaq has shown more weakness than the S&P and of course the DJIA. I hope that in the text following you can have a better understanding of everything that happened this week from my lens, as well as what I am watching, how I feel about everything, and more. So without me rambling on here, I will jump right in.
There will be no From The Filings section this week due to everything already being baked into Sections III and V.
Quick disclaimer: I am not a financial advisor and nothing in here should ever be considered as financial advice. I write this primarily to organize my thoughts to you all and everything here is my own thinking. I do have positions in many of the companies I will speak about in this week’s article and there is a possibility I may buy or sell positions at any time. Thank you all for being here; and as always, if anything I said or claimed is not backed up by proper evidence, please feel free to let me know, as accuracy is my primary goal.
Executive Summary
The indices lie about this week. Between the Nasdaq, S&P, DJIA, and Russell, it does not look too bad, but for SOX… there is a story.
The story of the week was Situational Awareness and Leopold Aschenbrenner. I am sure all of you reading this have read the news and have varying opinions on said news.
I pulled SALP’s 13F to really get a deeper look into everything that happened.
The drawdown was extremely mechanical. An equal-weight basket of names reported to be in his (Leo’s) book fell more than the SOX alone. Fundamentals do not move that way… rather forced sellers do.
The Fed held rates, as I predicted and I am sure many others predicted this. I am watching the long end and will go in depth in this article.
MSFT was the only one of four that still converts cash and therefore the only one that rallied (granted AMZN rallied too).
META’s operating income went down. AMZN had stellar earnings. AAPL had great earnings but guidance, in my opinion, is what killed the momentum.
CXMT shot up near 500% on Monday. (It was extremely cheap)
Korea had the worst week and the best day in its history.
Oil did two 8% days in opposite directions. The US suspended the air campaign against Iran over the July 25–26 weekend, then Trump announced the US would hit Iran hard after an attempted attack on American forces. Then over the weekend of August 1 he called off a strike entirely and put Hormuz on the table — so the war premium is now coming out, not going in. See the note at the top.
Contents
I. The Tape
II. The Headlines
III. The Unwind
IV. The Fed
V. Earnings
VI. The Software Squeeze
VII. Semis
VIII. Oil & The War
IX. What I Am Watching
Conclusion. Where I Land
Since Friday’s Close
Trump called off a planned strike on Iran over the weekend of August 1. Mohammed bin Salman pushed for the de-escalation, which is the likeliest answer to who actually did the asking. The terms are: “Immediate, Complete, and Total OPENING OF THE HORMUZ STRAIT,” plus an end to Iran’s nuclear program. Tehran denies it. Iranian officials say “Iran has reached no agreement regarding the reopening of the Strait of Hormuz,” rejected the overture, and renewed their threats. POTUS says a framework exists. The counterparty says it does not. Why is this important? Roughly 1/5 of seaborne crude moves through Hormuz, and the closure is what has been leading to the war premium. A reopening of the Strait does not just drop Brent, it also drops the September hike completely in my opinion. Everything below was written to Friday’s close, NOT to this weekend.
I. The Tape
What. A. Week. Am I right? I mean, the unwind and then the violent whipsaw towards the upside on Thursday. Pretty volatile week.
S&P: 7,489.72, +1.05%
Nasdaq: 25,373.85. +1.59%
DJIA: 52,485.03, +1.04%
SOX: 11,311.08, -4.30%
Russell: 2,931.34, +0.05%
VIX: 15.99, -13.94%
WTI: $86.80, -2.81%
Gold: $4,098.60, +0.76%
Yes, we can just look at the weekly closes here, or we can dive deeper and look at the actual path that we took to end up here, because in my opinion it was quite interesting.
Monday -2.23%, Tuesday -4.49%, Wednesday -5.33%, Thursday +8.19%, Friday +0.07%
If we do some math here, we can realize there was a 15.8% peak-to-trough drawdown and an 8.2% single session recovery inside the past five trading days. Nothing screams vol1 like that.
Let me now show you the week by name:
Reading from top to bottom, we can realize that pairing is indeed the entire point here. We see MSFT, WDAY, AMZN, ORCL, NOW, GOOGL, and ADBE all showing great strength this week. While software was strong, the hardware layer was indeed weak: VRT, SNDK, QCOM, MU, ARM, MRVL, COHR, SMCI, etc. Last week I wrote how I believed the market was “transferring value from the buyers of compute to the sellers of it,” and this statement reversed this week. The reason is not that everyone changed their mind about the AI buildout, I go more in depth on this in Section III.
Else, respectively:
I know that those are not all the names from my lovely dispersion chart, but I do not want to bore all of you with screenshots from Yahoo Finance. You get the point.
II. The Headlines
Monday, July 27 — the war switches off and China lists a memory company:
The United States abruptly suspends its air campaign against Iran over the July 25–26 weekend, with both sides pausing attacks to give what officials call “space” for diplomacy. Oil settled.
CXMT listed on the Shanghai STAR market and rose 466%. ~$480B market cap after the first day.
SK Hynix reported record Q2 revenue and missed on both lines, with management offering little detail on shareholder returns or LTA pricing. That is strange to write about a company in the middle of a memory shortage and the Street picked up on it immediately.
Tuesday, July 28 — Korea trips up again, and Citadel Securities’ surprise rate-hike call:
The Kospi fell and trading was halted. SK & Samsung both fell.
This selloff carried into US markets and we saw the semis complex falling. Where semis were lacking, software was thriving.
In my opinion, this is still a leverage flush-out.
Not to mention, Citadel Securities — the market maker, not the hedge fund — mentioned a surprise rate hike was likely heading into Wednesday’s Fed decision. This, alongside Korea’s vol, triggered the unwind even deeper across the semis (their debt would worsen if rates increased, you probably already knew this).
Wednesday, July 29 — the fed holds 9-3, Korea halts again
Citadel Securities was proven wrong. The Fed held rates 3.50-3.75% on a 9-3 vote. Beth Hammack, Neel Kashkari and Lorie Logan each dissented in favor of a 1/4 point increase. The statement was remarkably shorter than the recent norm.
The Kospi fell again and tripped yet another circuit breaker.
VRT missed on revenue and raised guidance, software continued to rise.
Trump said the US would hit Iran hard in retaliation. Oil jumped on this news, leading to the intraday unwind being hit from every angle. (Keep in mind something was going on behind the scenes…).
SALP’s prime brokers were working the book behind the scenes. The block itself did not print until Thursday’s open.
Thursday, July 30 — the violent reversal:
Before the open, Citadel bought SALP’s entire public equity book (L/S) in a single block at a discount. The fund’s assets had gone from ~$45B at the start of the month to ~$10B.
MSFT rose double digits off of a great earnings beat and software just having a great week.
The entire semis trade went FLYING. Across the board, every name with an AI sticker attached to it had run 10, 20, some 30%+ during that session, seemingly rapid.
Friday, July 31 — Korea’s best day ever, AMZN & AAPL opposite directions:
The Kospi rose 1,001.89 points, 17.91%. This was the largest single day gain in the index’s history. The overnight US rally forcing short covering and SK chairman buying shares.
AMZN ripped ~15% off of incredible earnings. Capex was raised for 2026 from $200B to $220B, attributed to higher memory costs. More in Section V.
AAPL fell ~7%. The quarter itself did not seem bad, but the guidance is what held it all back. Guiding 9-11% growth against consensus near 12%, with supply constraints and DRAM/NAND price inflation named as the cause. It was big Tim’s last earnings call as CEO.
Safe to say that it was widely considered as one of the most packed weeks of the year so far. Extremely volatile… keep that in mind as you continue reading, there was an underlying story playing out the entire time.
