Hi YXI friends,

The current time period reminds me of October-November 2025, with the market concerned about how far the bull market could go. Right now, the equity indices are at the mercy of the whippy AI stock movements. We need the market to broaden out and find a new leadership for rotation to carry the torch higher.

Housekeeping: I am on holiday next week - July 20-27. Our Multi-model signals will be sent out as usual, but I won’t be writing the macro and TA commentary until July 28.

DISCLAIMER: This newsletter is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

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The macro surface closed Friday, July 10, 2026 with risk appetite at +0.24z, liquidity at -0.28z, and inflation at -0.06z.

Last week's path was choppy, with Risk swinging from +0.88z on July 6 to -0.80z on July 7, then recovering to +0.94z on July 9 before fading back into Friday's close.

Liquidity has drifted from +0.57z on July 6 to -0.28z on Friday. That is the component I am watching most closely.

Inflation sits comfortably neutral at -0.06z, so the pricing pressure is not a live concern here.

My read is that this is a narrow-breadth tape, with the index being carried by a handful of names rather than a broad risk-on impulse. The softening liquidity reading argues against chasing new exposure into the open.

July is seasonally bullish.

SPY has overperformed its seasonal YTD average so far.

2026 is also the best year for SPY among the mid-term years of the past 20 years.

Every chart gets a clear, scored label. Here's how to read them, so nothing is left to interpretation.

Condition: Declining, Tailwind

The TGA has kept draining from its June spike, down to $745B. A falling Treasury cash balance releases liquidity back into the system, so it stays a tailwind for risk.

Condition: Calm

The SOFR-EFFR spread has slipped to -9bp, with SOFR trading below the effective funds rate. That points to ample reserves and no stress in the funding plumbing, so the interbank market stays calm.

We utilise the Fed Funds futures market to gauge market expectations for future FOMC interest rate decisions.

Condition: Expecting Hikes

The market is pricing a touch more tightening than two weeks ago.

The Jan 2027 implied rate has ticked up to 4.00%, and the spread over the current effective rate has widened to +38.5bp. That is roughly a hike and a half priced by early next year, with the implied path peaking near 4.10%.

Condition: Normal

The curve is still normally upward-sloping, but the whole structure has shifted higher over the past two weeks. The 2Y sits at 4.22%, the 10Y at 4.57%, and the 30Y at 5.07%.

Condition: Flattening

Over the past month, the short end has risen faster than the long end, with the 2Y up 16bp against 11-12bp for the 10Y and 30Y. That is a bear-flattening, consistent with a market leaning toward more hikes. The long end staying relatively contained is the more comfortable outcome for the Treasury.