Wk30 MacroTechnicals - Disruptive Forces

US–Iran escalation. AI competition.

Two major narratives in focus right now - 1) US-Iran tensions driving the rebound in Energy prices; and 2) AI competition driving the market to rethink expectations.

US-Iran Tensions

A key variable on this issue is one of timing. If there is no immediate resolution then Oil prices are likely to stay elevated for longer, which in turn poses longer term risks of more persistent inflation. But after much talk of a ceasefire and an agreed MoU, the ongoing tit-for-tat attacks exchanged between the US and Iran increasingly diminishes the prospects of a deal.

The change in strike targets from focusing on the Iranian coastline to infrastructure tragets further inland is drumming up speculation of a potential ground assault. Amir-Hossein Sabeti, a hardline lawmaker from Tehran said that the destruction of the south's transport links was most likely the prelude to a ground attack.

Meanwhile statements out of Iran have done anything but cool tensions. Iran's Supreme Leader said "The repeated breaches by the Great Satan of its commitments toward the memorandum of understanding have proven the utter worthlessness of a Trump signature". Mohsen Rezaei, an adviser to Iran's supreme leader and a former Revolutionary Guards commander, warned that "if US strikes continue for several more days, Iran will move into full-scale offensive operations".

AI Competition

There were two notable developments last week that exerted more selling pressure on semis: 1) China’s CXMT rapidly expanding production capacity that would equal Micron’s by the end of the current year; and 2) the Kimi K3 model proving that improvements in model efficiency can reduce memory capacity requirements (as well as earlier news of GLM 5.2 closing much of the gap with frontier Opus and GPT models).

The implied combination of both is significant enough for the market to rethink the durability of the AI‑driven memory supercycle as rising competition and more efficient models undermines the most bullish demand narratives of ever‑rising memory intensity per AI workload. This forces a reassessment of growth and profitability not only for the semiconductor complex, but also for AI providers like OpenAI and Anthropic that have tied their strategies closely to these manufacturers. In other words, a constant threat of new entrants and advancements represents a systemic level risk to the entire AI ecosystem.

Disruptive Narratives

A continued war of attrition with Iran keeps risks of energy supply disruptions elevated, while the AI complex is increasingly exposed to technological and competitive disruptions that could invalidate consensus earnings expectations in relatively short order. The stock market has had it quite easy for quite some time, and I'm not sure many (especially those I speak to) share my belief that the easy part of the cycle could now be done.

Preview of our Swing Trades

Before we get into our weekly process of MacroTechnical analysis, I want to offer non-paying subscribers a glimpse of the strong run of swing trades we've had.

Long Crude at 71.60 playing into war flare-up risks, Oil up over 15% since entry and trade is still open at +7R

Long NZDJPY from 91.77 on July 2nd, out at 94.24 for +6.25R

Short AUDNZD with 1.2193 avg after initial entry stopped out. Trade is still open currently around +230pips and +6.5R profit

Long CADJPY - original position from 113.60 still running with +210pip and +4.2R in profit. Profit was taken on added position from 114.05 at 114.81 f0r +11.4R