Equities Took the Growth. The Curve Took the Bill.
The July ISM manufacturing survey delivered the strongest reading since May 2022, and the S&P 500 responded by setting a record. Both halves are true and not obviously compatible. Equities traded the second leg of the oil unwind; rates traded the print. By the close, futures had moved September's hike odds to roughly two in three and December's into the high eighties, and the index had broken the range that has contained it since the middle of May.
- The factory economy is not the problem this cycle said it wasNew orders at 56.7, production the best since late 2021, and employment at 52.8 — the first expansion in thirty-three months. That is a manufacturing sector adding workers into a Fed with three voters already dissenting for a hike.
- Stocks priced the barrel, bonds priced the surveyCrude fell for a second session on the cancelled strike and equities read it as disinflation. The curve did not: the ten-year finished roughly where it started despite the oil move, because the growth print cancelled the energy relief.
- The range that held for eleven weeks is goneThe index spent 49 of the 53 sessions since 14 May inside 7,300–7,530. Monday it opened at 7,504.78 — effectively on the old call wall — and never traded back inside. Breaks that begin at the open and never retest are the kind that carry.
- Palantir gave the AI trade its cleanest beat of the seasonRevenue up 93% with US commercial up 149% and the full-year guide raised by half a billion dollars. And the chips still lagged: semiconductors underperformed a two-percent Nasdaq day while Korea's memory complex took its second leg down.
- The disinflation that paid for Monday is one headline wideCrude is bid again overnight. Iran's foreign ministry denies direct talks with Washington, the Strait of Hormuz remains largely closed to transponder traffic, and the strike was called off rather than settled. The energy channel has reversed three times in seven weeks.
The Board & Yesterday's Calls
| Instrument | Last | Chg | Read |
|---|---|---|---|
| S&P 500 cash, Mon 3 Aug close | 7,600.50 | +1.48% | Record close; high 7,610.04, low 7,504.78 |
| E-mini S&P ES Sep · settle 7,628.25 | 7,646.50 | +0.24% | Premium to cash +27.75 |
| Nasdaq Comp / NQ Sep | 25,913.90 / 29,044 | +2.13% / +0.53% | Nasdaq-100 +1.78% |
| Dow / Russell cash close | 53,178.41 / 2,981.91 | +1.32% / +1.73% | Dow a record too; small caps joined |
| VIX Mon close · Aug fut 17.95 | 15.86 | −0.81% | Steep contango; Sep 19.18 |
| 2Y / 10Y Treasury | 4.255% / 4.694% | +0.3 / +0.7bp | 2s10s near 44bp |
| 30Y Treasury the number that matters | 5.241% | +0.9bp | Gave back the oil-led relief inside a session |
| WTI / Brent | 81.34 / 85.16 | +1.24% / +1.66% | WTI settled 80.34 after a second down leg |
| Gold / Silver | 4,122.20 / 59.23 | +0.77% / +2.37% | Metals bid straight through a risk rally |
| Nat gas / DXY EUR-USD 1.1506 | 2.78 / 100.04 | unch / +0.14% | Lower-48 output back at a record |
| USD-JPY post-intervention | 157.70 | +0.34% | Drifting back up as the official bid steps away |
| Bitcoin / Ether | 63,758 / 1,863 | +0.51% / +0.35% | Still not joining |
| Palantir after hours | 144.42 | +14.94% | On a raise across every key metric |
Sentiment & Flow Gauges
| Gauge | Level | Signal |
|---|---|---|
| CNN Fear & Greed | 46 | NEUTRAL Prior close 42, week ago 38 — still under the midline at a record high |
| AAII bulls / bears week to Jul 29 | 31.0 / 42.1 | −11.1 SPREAD The survey's last read before the range broke |
| NAAIM managers week to Jul 29 | 79.70 | STILL LONG Trimmed from 84.02, nowhere near defensive |
| Put/call equity · index | 0.55 / 0.88 | COMPLACENT Call demand, not hedging; total 0.80 |
| VVIX / SKEW | 90.81 / 139.96 | TAILS BID Vol-of-vol down 17% in three sessions; crash pricing unmoved |
| Fed path · Sept 16 | 64.7% hike | LIVE December 86.3%; no cut priced at any meeting |
| Dealer gamma regime | POSITIVE | DAMPEN Cash far above the flip — levels in §04 |
| Breadth above 50d / 200d | 64.01% / 68.98% | BROAD Both jumped on Monday; the crack has closed |
The Flow Read
Three flows pointed the same way on Monday and they disagree about tomorrow. The tape was broad — 1,915 advancing issues to 847 on the NYSE, nine of eleven sectors green, consumer discretionary up 2.68% — but thin: NYSE primary volume fell to 1.269bn shares from 1.440bn on Friday. A record close on lighter volume than the day before is not the signature of new money arriving. Positioning is stretched at one end and empty at the other: Goldman's derivatives desk has trend-followers near the top of their historical length, while the futures data show leveraged funds covering 16,259 E-mini shorts in the week to 28 July and asset managers adding to a net long approaching 945,000 contracts. The fast money is out of the way; the slow money is already there.
The calendar is the third leg: 31% of the index sat in an open buyback window at the end of July, rising toward half by the end of August, and that programme is the only committed buyer this month. None of it is a discretionary decision to own equities up here. Money-market assets fell for a fourth consecutive week and the last full fund-flow print still showed $16.58bn leaving equity funds. Monday was a covering-and-programme tape that ran into an air pocket above the old ceiling — and those move fast without leaving much of a bid behind them.
Yesterday's Calls, Graded
The Last Labour Read With a Full Session Behind It
| Day · ET | Event | Consensus | Prior |
|---|---|---|---|
| Tue 08:30 | International trade balance (Jun) | −$73.0bn | −$77.6bn |
| Tue 10:00 | JOLTS job openings (Jun) | 7.35M | 7.594M |
| Tue 10:00 | Factory orders (Jun) | +0.4% | −1.3% |
| Tue BMO | Caterpillar, McDonald's, Pfizer, BP, Spotify | — | — |
| Tue AMC | AMD, SpaceX | — | — |
| Wed 08:15 | ADP employment (Jul) | — | — |
| Wed 08:30 | Quarterly Refunding Announcement | — | — |
| Wed 10:00 | ISM Services (Jul) | — | — |
| Thu 08:30 | Initial claims · Q2 productivity | — | — |
| Fri 08:30 | Nonfarm payrolls (Jul) | ~100K | 57K |
The Band Did Not Just Move Up. It Doubled.
| Gamma level | SPX | ES Sep · +27.75 | Role in today's tape |
|---|---|---|---|
| Call wall ceiling | 7,700.00 | 7,727.75 | Re-struck 200 points higher; nothing heavy between here and there |
| Gamma flip | 7,411.91 | 7,439.66 | Dampen above, amplify below; cash is far above it |
| Put wall floor | 7,500.00 | 7,527.75 | Friday's ceiling is this morning's floor — Monday's low sat on it |
The structural change is larger than the price change. Twenty-four hours ago the heaviest call gamma sat at 7,500 and the heaviest put gamma a hundred points beneath it — a corridor that had been squeezing this tape for weeks. The re-strike lifted the ceiling two hundred points and moved the floor onto what was the ceiling, doubling the corridor. Dealers are still long gamma and will still lean against extremes, but the extremes now sit nearly a hundred points away in either direction. That is a mechanically wider daily range than this market has been allowed since May.
The pivot work agrees on where the friction sits. Cannon's September E-mini pivot for today is 7,602.25, first resistance 7,661.75, first support 7,566.75 — and second support at 7,507.25 lands almost exactly on the futures translation of the put wall. Two methods, one shelf, from opposite directions. On the cash index, Mark Newton's 7,620.90 is the level Monday's 7,610.04 high stopped eleven points short of, and it sits between the pivot and the gamma ceiling. That is the first genuine test of the break, and it is close enough to matter inside the opening hour.
The Flow Desk That Went Quiet Came Back Bullish
Dark for a week, and back on the day the range broke. He tells clients the forces that carried US equities to records this year remain “firmly intact” after a reset in retail speculative trading. The framing is the part worth keeping: “Markets are transitioning from a flow-driven environment back to one increasingly dictated by earnings, corporate demand, and the macroeconomic backdrop.” Read plainly: the Street's most influential flow strategist is telling you to stop trading flow and start trading fundamentals — on a morning when the flow data are the most stretched all year.
Has turned cautious on the technicals of the artificial-intelligence trade, and unusually for a strategist of his seniority he names the analogue outright: 1999–2000. His tell is a relative-performance one — the semiconductor complex has outrun the hyperscalers that fund it by a wide margin over the past year, the equipment makers beating their own customers. The warning is about sequence: “the worrisome part of a boom cycle is when companies closest to final demand roll over, even as capital spending beneficiaries of the cycle keep on thriving.”
Draws a distinction most of the bubble commentary skips: “There does not appear to be a valuation bubble, but there may be an earnings bubble.” His mechanism is the one this letter has been tracking from the rates side — “more government debt, increased issuance, and persistent inflation have all contributed to a higher cost of capital, leaving earnings as the key driver of returns.” When multiples cannot expand because the discount rate will not fall, every point of index return has to come from the E; and if that E is inflated, the risk is not that stocks are expensive but that the denominator was never real. He reads the broadening of this rally as “a healthy normalization.”
Turned constructive without turning bullish. The push back toward all-time highs is “encouraging,” and clearing the late-July opening gap is a genuine short-term positive — but he says it “looks premature to take a victory lap.” He also notes the advance has not been confirmed by the parts of the market that led the last one, which is the technician's version of what the breadth data said on Monday. His resistance is the number to trade against this morning; it lives in §04.
On the first joint US–Japan currency operation in roughly three decades: “It seems likely that authorities would intervene further in coming days if the yen begins to unwind.” Tokyo is reported to have spent close to $53bn in a single day, potentially its largest ever, and the yen has already given back part of the move. Goldman's framing is that intervention buys time rather than changing fundamentals — a schedule rather than a level. For the carry complex, the risk is not the next intervention but the session after it.
Takes the opposite side of the same trade, and does not soften it. He calls the US Treasury's yen support “built to fail,” “largely theater,” and a “PR-motivated half-measure” — a striking line from the Street's most durable equity bull. His second point has not been priced anywhere: he argues Middle East energy costs are feeding eurozone inflation hard enough that the ECB is likely to raise rates in September. A synchronised hike from both major central banks in the same month is priced almost nowhere.
Where the Street Stands This Morning
| Voice | Stance | The shift |
|---|---|---|
| Scott Rubner Citadel Securities | INTACT | Out of the dark bullish; the regime turns back to earnings from flow |
| Michael Cembalest JPM Asset Management | CAUTIOUS | From constructive to naming the 1999 analogue outright |
| Peter Oppenheimer Goldman Sachs | EARNINGS RISK | Relocates the bubble from the multiple to the earnings line |
| Mark Newton Fundstrat | CONSTRUCTIVE | From cautious to encouraged, with the victory lap withheld |
| Kamakshya Trivedi Goldman Sachs FX | FLOW | Expects the authorities back in the yen within days |
| Ed Yardeni Yardeni Research | BULL, HAWKISH | Intervention called theater; adds a September ECB hike |
| Jamie Dimon J.P. Morgan | EXUBERANCE | “It's gung ho, folks” — deficits flattered corporate profits |
| Tom Lee Fundstrat | BULL | Out of the dark; told CNBC 2027 could be one of the best years for equities |
| Cullen Morgan Goldman Sachs, Delta One | FLOW | Held: trend followers at the 94th percentile, gross down not net up |
| Michael Feroli J.P. Morgan | HAWK | Held: December hike is the house call, September risk “real” |
| Lance Roberts RIA Advisors | DEFENSIVE | Held, with a bond defence: bitcoin carries ten times the equity risk |
| Max Kettner HSBC | TRIMMING | Held: bullish but rotating to equal-weight over the megacaps |
| Dirk Willer Citi | BULL | Held: the bull market is safe until the Fed actually hikes |
| Danielle DiMartino Booth QI Research | HAWK | Held: one cool month does little against a sixth straight three-handle |
| Michael Hartnett BofA | DARK | No Flow Show into the biggest single session of the quarter |
| Mike Wilson Morgan Stanley | DARK | Silent through a record close and an eleven-week range break |
| David Kostin Goldman Sachs | DARK | No published index mark since the Fed changed the question |
| Andrew Tyler JPMorgan Market Intelligence | DARK | No flow note on the session the range gave way |
A Survey That Hired, a Price Index That Didn't Cool Enough, and Three Officials Already Dissenting
The print is the pressure point. July ISM manufacturing came in at 55.6 against a 54.0 consensus and 53.3 in June, the highest since May 2022, and the internals were not one line carrying the index. Orders, production and employment all improved together, and the sub-index the Fed cares about most stayed hot: prices paid at 71.1, easing from 73.0 but a third consecutive month above seventy. A manufacturing sector hiring for the first time in nearly three years while paying up for inputs is the cleanest argument the three dissenting officials could have asked for.
Nothing else pushed back. The final S&P Global manufacturing reading was 53.9, unchanged from its flash. Construction spending fell 0.1% in June against expectations of a gain — the session's only soft print, and the one nobody traded. Abroad the picture is softer: China's private manufacturing gauge slipped to 50.9 from 51.7, a four-month low, though new orders there have risen for fourteen straight months.
The currency operation is the story that has not finished. Treasury Secretary Bessent confirmed the coordinated US–Japan intervention and said he would not hesitate to act again. The Bank of Japan is holding its policy rate at 1%, the highest since September 1995, and has flagged upside inflation risk running through Middle East energy costs. Korea — worth separating, because the tape treats the three as one story — is not a participant; the won receives spillover only, and foreign investors sold a net 2.83 trillion won of Korean equities on Monday even as the currency firmed. What began as an FX headline is now the most consequential change in global financial conditions that no policy committee has voted on.
The Application Layer Beat. The Shovel-Makers Didn't.
Palantir delivered the quarter the AI trade needed and then raised on top of it. Revenue reached $1.94bn with adjusted earnings of 41 cents against 35 expected, US commercial revenue hit $764m and US government $809m, and the company closed 220 deals worth more than a million dollars each. Management lifted the full-year revenue guide to $8.15–8.16bn from $7.65–7.66bn and full-year free cash flow to $4.5–4.7bn. Alex Karp's line — “demand for AI sovereignty has now been unleashed” — is the sales pitch, but the sovereignty framing is also the part hardest for competitors to price against.
Tonight carries two more. AMD reports with consensus at $1.62 a share on $11.31bn of revenue, options implying roughly a ten percent move, and the stock up 122% year to date — very little margin for a soft data-centre guide. SpaceX files its first public quarter against a consensus loss of 29 cents, trading below its June listing price and some 45% off its high, with a lockup releasing 911.5 million shares on Thursday. The lockup, not the print, is the position risk.
Monday's tape had a shape. First Solar, Coherent, Lumentum, Oracle and Axon each gained more than nine percent; Marriott, Fair Isaac, eBay, Monolithic Power and CF Industries each lost more than five. Energy was the only meaningfully red sector, and Amazon closed above a three-trillion-dollar market value for the first time. Diamondback crossed a million barrels of oil equivalent a day and doubled its repurchase authorisation to $16bn; Whirlpool missed and cut its full-year guide by roughly fifteen percent. Morgan Stanley cut Circle Internet to Underweight and took its target to $38 from $106 — the largest single reset of the session.
Two deals are live. AstraZeneca and Bristol Myers Squibb are reported to have held early-stage talks on a roughly $400bn combination that would create the world's fourth-largest drugmaker; AstraZeneca fell seven percent as analysts questioned the logic and sources cautioned a deal may never materialise. Atkore agreed to a $95-a-share cash sale to Prysmian and rose twenty-eight percent.
The Market Has Stopped Arguing About Direction
The target range is 3.50–3.75% after the 29 July hold, which passed nine to three with Hammack, Kashkari and Logan all dissenting in favour of an increase. Pricing for the 15–16 September meeting now carries a 64.7% chance of a hike against 35.3% for a hold, with the probability of an ease at zero. By the 9 December meeting the hike probability is 86.3%. The arc matters: this was a forty-percent proposition in late July, roughly a coin flip immediately after the meeting, and is the base case at both horizons now.
No Fed speakers today, which leaves the supply calendar as the near-term mechanism. The quarterly refunding lands Wednesday alongside Governor Cook, and the size and duration mix gets tested against a five-and-a-quarter percent long bond that just refused to hold a rally. The market is no longer debating direction. It has not begun to price the equity consequence.
Three Things Nobody Is Trading This Morning
The index repriced a hike and rallied, and it has never had to test what comes after.
Every rate repricing of this cycle has been a debate about whether the Fed moves. Monday's was about when — and equities treated both halves as good news: the survey as growth, the odds as confirmation of growth. That works exactly as long as the growth is real. But a central bank tightening into a manufacturing recovery with a three-handle on core inflation is not a scenario this market has traded, because it has not happened in this cycle. The consensus reads the December number as a forecast to be right or wrong about; it is better read as a deadline. No strategist on the Street currently publishes a scenario for what the multiple does the day the Fed actually hikes.
The dealer band doubled in width overnight, and that is a bigger change than the record.
Everyone will write about the record close. Almost nobody will write that the corridor dealers hedge inside went from roughly a hundred points wide to two hundred. The range-compression that has defined this tape since May — the reason every rally stalled and every dip got bought within days — is materially weaker this morning, not because the regime flipped but because the walls moved apart. The practical translation for anyone sizing a futures position is immediate: the stop distance that was sensible last week is a much smaller fraction of the day's plausible range now. The market did not get more dangerous. It got roomier, and that asks a different size.
Monday was an everything-except-AI-hardware tape, and it is being reported as an AI rally.
The Nasdaq gained 2.13% and the semiconductor complex underperformed it. New highs there barely exceeded new lows on a day the index added more than five hundred points. Meanwhile the share of constituents above their long-term averages jumped, the equal-weighted index participated, and small caps put in one of their better relative sessions of the summer. In Seoul the memory names took a second leg down and reversed a positive open in half an hour. Every one of those points the same way: the rally broadened away from the chips on the session Palantir repriced the application layer. The consensus reads a strong Nasdaq and a strong Palantir as one trade. Monday's internals say the market has started separating the companies that sell the shovels from the companies that sell the software — and it is the shovel-makers being left behind.
A Wider Room, and Two Markets That Disagree Inside It
The record is the least interesting fact on the page. The walls moved apart, the range that governed eleven weeks of trading is behind us, and two markets that read the same data set arrived at opposite conclusions — equities pricing the barrel, the curve pricing the survey. One of them is wrong, and JOLTS at ten o'clock is the first of three chances this week to find out which. Until then the geometry is simple: a floor where the ceiling used to be, a ceiling nobody has tested, and more room between them than this tape has been given since May.
eli@cannontrading.com · cannontrading.com
Legal Disclosure & Risk Warning
Cannon Trading Company
This publication is provided by Cannon Trading Company for informational and educational purposes only. Content may include market commentary, technical observations, analyst opinions, and aggregated material derived from publicly available sources. While such information is believed to be reliable, Cannon Trading Company does not author, independently verify, endorse, or guarantee the accuracy, completeness, or timeliness of any third-party information referenced or summarized herein.
The information, opinions, market data, and commentary contained in this publication are subject to change at any time without notice and do not constitute investment advice, a solicitation, or a recommendation to buy or sell any security, futures contract, option on futures, foreign currency transaction, or any other financial instrument.
Past performance is not indicative of future results.
Trading Futures, Options on Futures, retail off-exchange foreign currency transactions, and other derivatives involves substantial risk of loss and is not suitable for all investors. You may lose all or more than your initial investment. Carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources, and other relevant circumstances.
Cannon Trading Company does not guarantee any profits and makes no representation that the strategies, ideas, analyses, or information presented will result in profitable trades or avoid losses. Any market views, analyst calls, forecasts, or third-party commentary referenced reflect the opinions of their respective authors and may or may not align with the views of Cannon Trading Company.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NO INVOLVE FINACIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETLEY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
Cannon Trading Company is registered solely as a commodities broker. Nothing contained herein constitutes the provision of investment advisory services.
© 2026 Cannon Trading Company, Inc. All rights reserved.
cannontrading.com • 1-800-454-9572 • (310) 859-9572