Beginning of a larger bearish correction here?

Welcome to the Sachso market call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the host and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only. Hi, everyone. It is Wednesday, 19th of August, 2026. Sorry about the lack of warning, not having podcasts last three trading days, a huge project that is distracting me a bit. There will be probably a couple of missed days early next week as well, but we should be good for the rest of this week. And we have a pretty interesting times and markets pretty ugly drawdown yesterday in momentum stocks, AI hardware stocks, NASDAQ 100 itself, off minus 1.68% of the stocks was off almost 5% yesterday and some ugly action in the CUSB overnight down 6% last I looked. I don't think it was quite closed yet when I looked and the knee case been down 5 over 5% 5.5% in fact over the last couple of days of trading. Even Europe had an ugly day yesterday, broader average is not so much less than half a percent on the equal weight S and P 500. But I think it's getting kind of interesting here. I mean, we've seen this rough correction in the high momentum names, the high beta names. They have not even managed to really re-approach the highs of the cycle, not even those slightly broader NASDAQ 100 when I say broader, I mean relative to specific AI core stocks and semiconductors. And I think that lack of leadership is a divergence that demands our attention. So what next? And I'll talk about how the bearish case for stocks here in a little bit later. But what's looking for next in terms of the S&P 500 would be something like a high momentum breakdown through 76, 17 the old high. And we have kind of a divergent MACD indicator in asserting to getting that negative inflection point here as well. And yeah, I'll play any more to say on stocks right now. We have Ole Hansen head of commodity strategy here in the studio. Welcome. Ole is good to talk to you again. Thank you very much. And I think one of the key things that's spooking this market finally, I mean, it seems to weather almost anything. But we do have very high crude oil prices, the geopolitical situation. I think it feels to me like maybe it's a little bit of a lack of clarity here, not so much the fact that Brent crude is back above 90 bucks. But we're just like there's no prospect of this, it feels like of this getting resolved. So it's not maybe the level itself is just maybe the outlook. What's your read of the situation and crude oil prices? Well, first of all, that the global supply and demand system is somewhat managing to cope with the disruption, which remains obviously very elevated. And in the last week, we have seen the flow of ships grind almost to a halt. There's obviously a lot of some stuff going on behind the scenes, transponders being turned off. So oil is coming out. Oil is being offered outside the Strait of Hummus, Society of Arabia, the latest one to do that. Demand destruction, IEA looking for a slowdown in demand this year by 1.6 million barrels. That's obviously concentrating around this time. Chinese demand imports also down. SPI in the US continue to be reduced. And now some warning signs that potentially these cabins can come down to levels where the where potentially it could be difficult to maintain it. So we'll see. But overall, the market is managing. And that still just tells us that that's not where the stress is, the stress is in the refined products. And we got diesel now trading in the US $100 barrel above a double tie. We got diesel in Europe gas oil trading $77 above Brent. And this just highlights that the that it is the refinery space where we're even though they're producing it. They're running at max capacity or as fast as they can. They cannot keep up simply because there's a lot of barrels that are not coming out of the from refineries within the the the Persian Gulf and also from Russia following the recent attacks. So so the the stress is very much still being felt. It's just not in the crude barrel. And that's why the continue to raise the question was not trading a lot higher. It isn't for for for these reasons. But again, the longer this takes ultimately, there will be prices will be before it's higher. But as you also mentioned, John, the barrels are building up again inside the Gulf. And there's this market. The markets just were getting caught long from some sudden announcement that could unleash another flood, a flood of oil coming out of the Gulf. So that's why as well. It's it's not a malware. People are really desperate to get long. Yeah. And you mentioned the strategic reserve. And there's some that are saying we don't really need a strategic reserve in the US like we did. And the reasons around it being built up in the first place. But I mean, it's been a remarkable source of supply to the market. Well, maybe not remarkable percentage terms. But I mean, the thing has been drawn down by almost a third since they started draining it again in in April. So very rapid fashion. And at that rate, obviously, there's only a few more few more months left before it's effectively empty. But US is a net export. I don't know how much it matters and the equation of things. But you're seeing headlines from fresh attacks on ships by Iran that are doing the Yamani routes of the route that they want, which goes near or through Iranian waters. There was saw a headline of two Chinese of VLCCs turning around because they didn't want to take the risk of headed through the strait. It just feels like, you know, where does this, where is this heading? It feels like Iran very much wants to put up a stern and disruptive face. So that that Trump wears this going into the midterm, it really does feel like it's a, you know, personal to a degree. It's a very large degree on Trump himself. So, you know, this is going to stretch out over the horizon, it feels like. That's the, that's the risk right now that we need to get past November. And that's still a quite a long time in, in these markets. And you mentioned China, John. I think it's worth mentioned that the two biggest Chinese companies, shipping companies, transporting oil from the Middle East, especially to China, they haven't sent in a tanker since July. So that, and that was, you really would have thought that, well, Chinese tankers, they have no one will hit them, especially not the Iranians, but even they are not, they are refraining from getting involved at this point of time. So it is really just a situation that is stuck in the mud for now. Yeah, and it really is key for other markets. I mean, if you look at something like, there's, you know, chart a Brent crude oil price versus, the German yield on five-year yield is one of the ones I random ones I picked. There's almost no differentiation since around mid June. That correlation has been so incredibly tight. It feels like it's loosening a little bit here with this latest. There was a pump in US yields yesterday. The 30 are hit that new high since 2007 above 5.33%. Then reverse sharply. So I think that sharp reversal might be a sign of a bit coming into bonds just because risk sentiment has weakened so much. But, you know, oil certainly critical for yields. And I think yields, as I've mentioned, I think in the last podcast I did last week, they're at levels where if they continue higher, there really is a massive headwind for the equity market. And if they're heading lower, it could be simply as a result of risk sentiment. But meanwhile, maybe they won't have that much lower if these crude oil prices don't correct. And the tenure, by the way, is 4.75%. Obviously, a massive chart sticking point. We've sort of bumped just below that. Was it three or four times over the last few weeks and have not broken up through? And the high previously was 4.9927%. So these these round levels in yields are extremely important. And then rounding out some of the sorry, the commodity space, it feels like precious metals are a little bit stuck in the mud here. We're trying to wonder if we're going to get a follow-up on this momentum. I think maybe part of that link to linked to the bond yield story. But what about we look over at the metals, I mean, outside of precious metals where we're still way, way below those, those spike highs from earlier in the year. But copper has been sort of bumping into record territory and coming back in and out. There's we're still awaiting this this tariff news London versus New York. What's going on in the copper space? Is there a strong underlying underlying demand story? And this is mostly about this bizarre shuffle. What's going on here? Well, it looks like it's mostly stockpiling right now, especially from the US side. A lot of copper has left warehouses monitored by exchanges both in Shanghai and London in recent months been shipped to the US to the extent that the comics now account for around 70% of visible visible exchange monitored stocks. That is just on herd of, especially when you consider that US only consumes around 6% of global copper. So a massive discrepancy there, which has left the rest of the world quite tight. London is stocking the middle between China and the US. And that basically led to this depletion of ready available stocks earlier late last week. And that led to a massive spike in the spot to three, so as I call it, the accommodation. So basically buyers were prepared to pay $500 above the three months price to get the immediate delivery. And that just signals a huge stress in the market. Again, we don't know how much, how many tons is behind the price move like that. But that has been mitigated by companies like Traficura, adding copper back into the warehouse because obviously if they can get in at these very high levels and that's a profitable trade. So that's helping. But overall, it doesn't change the fact that as long as this AI rollout, as long as the power demand is on the increase, we're seeing that now with EVs, EV prices, second and EV price, now in Europe, it's suddenly spiking because with the prolonged cost, the prolonged war being leading to these high diesel and gasoline prices, then more and more consumers have taken that as an incentive to switch. And we've seen that in Denmark, I believe it's eight and nine out of every 10 cars sold now is EVs, and we've seen that spreading. So the amount for power is still there, and that's the copper story, and that basic means we're seeing a correction now as the immediate tightness disappears, but generally, it still looks like a market that at some point needs to go higher in order to incentivize production. - Yeah, and that's slow to come, because it takes a lot of lead time, getting copper or cranking and output cranking. - Yeah, and then we have a protection measures by governments, which has also become much more of a focus. We recently saw Congo banning export of awe, that basically they want to have the refining process themselves. - Yeah, it's melting themselves. - And Indonesia did that for an eagle recently, and there are some stories coming out of South America as well. So that's also part of the story, making supply a bit tight. Just finishing off on the metals, John, you mentioned gold, and I agree, we right now in a, still in a consultation phase, we moved above the 4200 level that has attracted some momentum buying. We are still stuck below the 4500 level, the 200 day moving average, so still some work to be done here, but there are signs that the demand is starting to come back, especially once again, out of China. We just had housing data early in the week from China. The house market has now been falling both newly built, and second hand has now been falling on a monthly basis, every single month since was a 2023. So this is clearly not the place to put your money if your Chinese middle class, they're looking for alternatives, and that's really where the metals, the hard asset comes into focus. - Yeah, and there's a lot of talk in China about this idea of the balance sheet recessions, the parallels with Japan after its late 80s experience with real estate, so you have extremely low yields in China, but nobody wants to borrow because they're sitting there with an asset that is wasting in terms of its underlying value. There's lots of coverage of that. I'll see if I can find a good link or two on that. Maybe just finally on the commodity space, or just a little bit cooking and grains, but not fully moving higher all in sync. What are we looking for next there? - We've had some pretty volatile price actions in the grain space in the last few months. On balance, we are trading higher. Weather has been a bit challenging around the world, to say the least. For the soybeans, exports to China's been pretty firm, robust in the past few weeks, and that's underpinning prices. And then we have the attack on export infrastructure in the Black Sea, which is. - Ukraine can't get its product to market based on this. - Maybe also Russia, is it? - Same goes for Russia. And that basically means, even though potentially, if you look at the wheat inventory levels globally, it looks fine, but if you can't get it, and in the case of China, you can't get wheat from China, because once it's inside China, it's not gonna leave this country, and wheat that's stuck in the Black Sea area, that potentially could also be limited in terms of reach to the market. So these are definitely themes that will be watched and followed up in the coming months. And then just the final word about El Nino, again, we just have to highlight that it is continued to emerge. It is a pretty strong one this time round. - It's gonna hit a record, I'm sure of it. - Yeah, in terms of the temperature anomaly. - Exactly, and we just have to remind ourselves that it's good for some parts of the world. It's pretty bad for other parts. The ones, the commodities that are caught in the crosshairs of this are those that are produced in geographical relatively small, concentrated areas, and that basically means that sugar is probably the one that's most exposed, Thailand, India, two of the top three producers and exporters in the world, and together we're in Brazil. We've seen prices of sugar bouncing by one-third since the low point last year, but looking at the chart, we were way below where we were just within the last decade. So sugar's one to watch. Coffee to a certain extent as well at this point in time. - All right, cool, thanks for the overview. And look through all the commodities, Ola, and there's lots to wrap up on elsewhere as well. I guess I'll pick it up on Macro and go circle back around to Starks. I have a couple of interesting links that we'll put in the podcast episode description today. We saw some more week US data. In this case, it was housing starts down, it was at a 1.239 million annualized pace versus the more than 100,000 more than that expected. And there was a downed revised previous number, but it's a very choppy data series. So you need two, three more months to be looking at this. There is a lot of pain in housing though in the US with these high mortgage rates. And look at the 30 year, it's not helping on the mortgage market and the cost of housing is a huge issue for US households. And then as mentioned on rates, those round bubbles really worth watching and interesting to see that reversal yesterday. There's even stress in Europe. We've been hitting close to the highs at the long end of the curve in Germany as well, 10 years, et cetera. And you're seeing some of the spreads within Europe stretching out. The Germany france spread is the most interesting because France has kind of become as the sort of fiscal and debt basket case, both private and public. It's also the ultimate stressor for European sovereign debt if that spread is widening violently. And it's widened to essentially the highs of the range. We've had, back since the election, tribulants and so on, near 85 basis points currently in the high for the cycle was not that much further above that. So keeping an eye on that, we got a slightly firmer UK court inflation print this morning, 2.6% year on year, I think it was 2.5% expected. But again, it does feel like when I look at a German fixed income, it looks, for example, the yields there looking very much linked to oil at the moment. And then we have, of course, the next big event risk in terms of policy is more Jackson hole than anything else. That's coming up late next week. We're hoping to get a better communication strategy. I think we will get that. I think our worst will do what you can to sound as dovish as possible, regardless of his supposed intent to not provide forward guidance. And that could be picked up as an interesting signal that that dovishness, if he's clear enough on it next week. He has made comments like, well, sometimes the market does its own tightening. And that has certainly been the case with the long end of the curve coming up as much as it has. So key for, obviously, for FX and for the dollar, potentially, dollar yen, if we get that signal, I think global bond yields coming back down since late yesterday, a strong demand for the five-year auction in Japan, and the risk sentiment rolling over, setting us up for, if there's going to be a yen rally, this is like the backdrop you want. So I think some bears on yen crosses, so bulls on the yen might be looking around here and then for shorting opportunities with using the risk point of the recent highs, recent being yesterday's highs, whether it's your yen, whether it's dollar yen, they may just sort of pick and choose there. All right, circling back around to stocks. Again, yesterday's session with the concentrated downside in those high momentum names from the optical interconnect, duo, coherent and momentum. Those are the worst two performers on the S&P 500, down to 12.75% coherent and momentum, almost 10%. And then C-gate, down 9%, and more. Sandisk also down around 9%. And just one of the links I will provide, a single stock-wise, Sarah Bruss. So this company, you know, insanely valued based on, you imagine, very aggressive future growth, IPO'd, not that long ago. Had a horrible day yesterday in line with the stocks of its ilk and the semiconductors, et cetera, but it's announcing a new series of chips in these incredible inference calculation performance claims or metrics. So really key for that company. And, you know, I think it goes to challenge the likes of Nvidia if you're getting that kind of performance increase with their approach. And then just to on the same note, and I'll put a link to this as well. In the Wall Street Journal, an exclusive covering this company etched, so etched like etching a wafer. Obviously, a semiconductor company that is just brand brand new, you know, start up with these young harbor dropouts basically in their young early 20s. Normally they say apparently that it's one thing you can have sort of a wonder kind doing software development, but not a semiconductor and hardware development. But they've broken that mold, apparently. Came up with a chip design, got TSMC to provide their first batch, and they're off to the races with the first major customer in the form of Jane Street. So also looking at this rapid inference calculation area, all of this to say, including what Cerebris is doing, that it is really hard to maintain a monopoly on technology. Some people can do it, but the competition can come and disrupt really quickly. And if you have a series of technologies that are all on par with one another, you wonder if the margins can hold up. And I think that's maybe the long-term implication of this, you know, these things going directly at Nvidia's business. for example, and maybe even to some degree, the business of the hardware, sorry, the memory companies that have been such incredible performance and have realized these historical profit expansion and profit levels, the Samsung SK Hynexes and microns of the world. What else do we have? Meta is really under pressure. Getting towards an interesting chart area, I think it was 520, I can't remember, look at a chart. Five states, you know, the gathering storm of all these lawsuits on the addictive nature of their algorithm, et cetera. No, it's four states, I believe. In any case, California, Colorado, Kentucky, and New Jersey, filing a $200 billion suit on the addiction to young users of their platform. So I think this is, you know, maybe it's not existential, but it's a serious threat. And I think that goes across the industry. And I hope something is done about it, because I think this is terrible for young people. And then there was the news, this unitary, that's the robot name, this Chinese company, Yushu is the name of the actual company IPO today with some insane over subscription amount, not something I'll be following, but it just shows the enthusiasm for robotics in Chinese markets. On earnings front, kind of retail flavor over the next couple of days, we got target up today, pretty big retailers. So it could be interesting after this recent retail sales, a bad miss in the US, if there's some more flavor around that, as well as the company's specific performance, they've had an amazing comeback target. I think an overshooting, really, what any improvement they've actually seen in the underlying business, it did look like a value stock down there below 90, but now it's at 150 plus, they need to probably start performing on earnings to justify where they where the share price has gone. Loads, another big DIY home decoration and, you know, home, well, DIY basically a company reporting today as is TJX companies, analog devices, the latest, maybe AI hardware adjacent name to report also up today. And then tomorrow is the big one on the retail front, really interesting to see anything anecdotal in that not well, not just the results, but anecdotal in the earnings call, and that's Walmart, of course, the US's largest store retailer. Deer and company also reporting tomorrow. All right, again, a couple of links foring the podcast episode description. There's the Wall Street Journal articles on Syribras and etched. I think just, you know, on my turning the risks of the market turning bearish here, the risks of a chunky correction, I think the case is outlined very well in a polemic pain substack post that I'll provide a link to. And I think, you know, anybody that's wildly bullish on the market should at least recognize some of the risks that he runs through for just some kind of market correction. We're not talking about the things that don't have to crash. It's just the market has really been aggressively out there in terms of sentiment. And he brings up some very long form or longstanding sentiment survey that is at wild extremes in terms of the level there. mentions, of course, the things like the acceleration in margin lending, leverage ETFs, and, you know, call option activity and how that moves things around. And then just also running through, you know, the mindset that is a bit of a danger, just bulls must feel so almost invulnerable. I mean, we had the liberation day back in last year. The market was, it came storming back from that. It was about buying the dip. It just seemed like you could survive every single thing that is thrown at the market. Iran oil shock by the dip, tariff thread by the dip, tech solid. Well, we just needed to buy the dip bond yields. Who cares? Well, these things do matter eventually. And it feels like a timing wise with the seasonality of September, October, the midterms, the risk also that geopolitically the US's foes want to make the US look as bad as possible. And for the oil price to be as bad as possible going into the midterms, et cetera, is an added risk that I mentioned earlier in the podcast. So, you know, a couple of links to to tune into there. I think certainly, as you can hear in a very defensive mode here, at least tactically going into the September, October timeframe. That's it for today. Stay careful out there and I'll be back tomorrow with the next Saxo market call. This has been the Saxo market call podcast. Thanks for joining today's episode. We're always happy for your feedback and questions of all kinds. To reach out, you can drop us an email at [email protected]. That's [email protected]. Saxo, serious trading worldwide. [Music]