Every week we sort the 60 stocks and ETFs we cover into four trend regimes and publish three numbers for each: the price at which the name may be bought, the first level to take something off, and the level where we step aside. They are written before Monday opens, because a price set in advance is worth more than a decision made while a position is already moving.

What this letter is for. The names we cover are large and liquid and spread across technology, semiconductors, energy, defence, healthcare, retail, metals and European listings, and the work here is not to tell you which of them is a good company. It is to say at what price each one may be bought or traded, and at what price we step aside. Good names bought at the wrong price still lose money, and that gap is the whole reason this exists.

We buy strength that has proved itself rather than weakness that might. When a beaten-down tape snaps back hard we will be late to the names that gapped off the bottom, and we take that trade deliberately: the patience that costs us the first bounce is the same patience that keeps us out of the names that carry on falling.

If a level looks wrong to you, say so in the comments. They shape what gets covered.

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Market Conditions

The S&P 500 closed at 778.57, Trend-Hold and up 1.2% on the week, while the Nasdaq-100 at 751.27 is Trend-Hold and roughly flat on the week.

Beneath the surface, regime breadth turned over:

• Breakdowns went from 24 to 20

• Repairs rose from 3 to 5

• Trend-Holds fell from 26 to 22.

Regime upgrades edged downgrades 12 to 10, with the moves running in both directions at once. Both ends emptied into the middle, with Transitional going from 7 to 13. Fewer names are broken and fewer are trending, which is churn rather than repair.

The buying concentrated in +13%, +11%, +11%, +8% on the upside, against -13%, -12%, -12%, -9% on the other side.

Fresh damage showed up in AIXA.DE and CRWV, dropping to Breakdown.

Trend-Hold was reclaimed in , BRK.B, , and . The repair is real, and it still has to hold what it just took back.

What Changed From Last Week

• Reclaimed Trend-Hold: AMZN, BRK.B, DG, GOOG, LLY. The strongest signal the framework prints, structure fully repaired. The weekly chart still has to hold what the daily just reclaimed.

• Up a step into Transitional: COST, PINS, UNH, WMT. Basing turned into an actual recovery attempt, one notch short of a trend.

• First repair off the lows: AVGO, BABA, INTU. Damaged names showing the first sign of basing.

• Cooled out of Trend-Hold into Transitional: ETHA, INTC, LRCX, NBIS, SMSN.L, TSM, XRPI. The trend is lost and now has to be re-proved.

• Lost the trend, into Repair: IFX.DE. Downgraded a full step, treat as damaged until reclaimed.

• Broke down: AIXA.DE, CRWV. Fresh damage, the framework moves these to the avoid list. AIXA.DE went from Trend-Hold to Breakdown in a single week, which is a three-regime fall and the sharpest kind of break the framework registers.

• ETHA restated its price history. A 1-for-3 reverse split took effect on 6 October, so every ETHA level in last week’s issue is a third of what it should be. The 20.95 entry and 19.52 stop we published read as 62.85 and 58.56 on today’s shares. Use this week’s numbers and do not carry the old ones forward.

How Our Trade Plans Work

Each name is classified into a regime (Trend-Hold, Transitional, Repair or Breakdown) from the 1D EMA stack, with the 1W regime printed beside it in every setup, and every level traces back to a specific indicator. T1 is the first profit-take, T2 the structural objective, T3 the stretch target. Regime sets how much risk a name is allowed and when: Trend-Hold earns full risk but only on a pullback to support or a confirmed breakout, Transitional gets half or nothing, Repair gets a starter only after a reclaim, Breakdown gets none until a reclaim confirms.

Two stops, two jobs, and the tighter one governs. The trade stop is the tactical level where we step aside and let the position go. The regime invalidation is the deeper level where the classification flips and the reason to own the name is gone. Both are printed in every setup, trade stop first, and the tables print whichever of the two sits nearer to price, because that is the one that will actually take you out.

How long a trade lasts, and when to take something. Every level here is a one-week level: take it during the plan week, and if neither the first target nor a stop has been reached, mark it at Friday close and re-read the structure next issue. Take a partial at T1 when it comes rather than holding out for the full ladder.

Size by risk, not by dollars. Stop distances in this issue run from 2.1% to 20%, so the same dollar amount in two names can mean risking 9 times as much on one as the other. Decide what a single losing trade may cost you, say half a percent of the account, and divide it by the distance from entry to stop. The wide-stop names are not off limits, they are simply small.

This update ranks 60 names. You are not meant to trade all of them, or even most of them. Most weeks a handful sit at a level worth acting on and the rest are there so you can check our work.

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The Week Ahead

The plan week carries 3 earnings prints from the universe: UNH on Tuesday October 13, ASML on Wednesday October 14, TSM on Thursday October 15. Read the trigger, not just the date. A published trigger does not wait for the calendar, so it can fill you days before the report and leave you holding a binary the plan never priced. If you want the setup without the coin flip, wait for the print and re-read the structure on Friday.

Just beyond the plan week: NFLX, NOC and RTX on Tuesday October 20, LRCX on Wednesday October 21, LMT on Thursday October 22. Worth knowing now if you are sizing a position you intend to hold through it.

This Week’s Playbook

Same four regimes as above, in the order they earn risk. Regime decides how much a name is allowed, the level beside it decides when. Detailed setups for the top names follow, and the watchlist carries every level.

Within each group the names are ordered by how close the entry sits to Friday close, nearest first, which is what the Trigger odds column in the tables below reports. Those odds measure distance. A level within two thirds of an average day's range is Likely to be reached, one beyond a day and a third is Unlikely, and anything between the two is an even bet. Reaching a level is not the same as profiting from it. Read the top of each list as where a decision is most likely to be needed, and size it off the stop underneath.

Where that leaves your exposure. Of the 60 names we cover, 10 are set up to be bought into weakness, with a dip band already defined (AMAT, AMD, BRK.B, GOOG, LLY, META, NVDA, QQQ, SPY, XRPI). The other 50, 83 percent of the book, need a level that has not arrived: 22 need a trigger to fire, 25 need a reclaim first, and 3 have no usable room between entry and stop. That is not a forecast, it is what the rules produce in a week like this one. More of the book has a defined dip price than last week and fewer names have a trend worth owning, which is a tape that pays for patience and punishes enthusiasm. Cash is an allocation here rather than the absence of one: it costs nothing while you wait, and it is what lets you take a level when it prints. The S&P still carries its Trend-Hold. The Nasdaq-100 still carries its Trend-Hold. Those are the levels that keep risk on the table, and losing either one changes the posture for everything under it.

• Trend-Hold, full risk, but only at a level. On a pullback to support: AMD, AMAT, META, NVDA, BRK.B, GOOG, LLY, QQQ, SPY. Only on strength, above the trigger in the table: FFIV, SHOP, PLTR, XOM, AMZN, MSFT, RBRK, OSCR, DG, PANW, AAPL, ASML.

• Transitional, half size or nothing. The trend is not confirmed, so a position here is a probe rather than a holding. On a pullback to support: XRPI. Only on strength, above the trigger in the table: TSM, WMT, COPX, PINS, COST, TGT, NBIS, SMSN.L, ETHA, INTC.

• Repair, a starter only after a reclaim. Basing, not yet trending, nothing until price takes back the trigger printed beside it: AVGO, FTI, IFX.DE, BABA, INTU.

• Breakdown, no exposure until a reclaim confirms. Not every dip is a setup, and cash is the position: ORCL, ADBE, AIXA.DE, GLD, XRH0.L, NFLX, LMT, NKE, SLV, CRWV, and 10 more carrying the same instruction in the table below.

• Where the payoff justifies the stop. A wide stop is not a bad setup, it is a small one, but some names are not paying enough to be worth any size at all.

• Not paying for the risk, quarter size or skip: INTC (15% stop for 1% to T1), SMSN.L (10% stop for 1% to T1), NBIS (11% stop for 2% to T1), ETHA (9% stop for 2% to T1), PINS (5% stop for 1% to T1), AMAT (5% stop for 2% to T1)

• No usable room between entry and stop, skip entirely: LRCX (0.8 ATR from its entry to the 308.82 trade stop), UNH (nothing holds its dip band up except the 362.60 trade stop underneath it), XOVR (nothing holds its dip band up except the 21.54 trade stop underneath it). Measured to whichever stop is nearer, which for some of these is the trade stop rather than the invalidation printed in the table. Entering there puts you at the exit before the trade has moved.

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Top 5 Actionable Setups

5 names taken only from the Trend-Hold group, after dropping anything overbought above RSI 73, anything whose EMA stack is inverted, and anything without at least one average daily range between its entry and its stop. Preference goes first to names sitting within 3 percent of their 20-day EMA, then to the strongest trends by ADX with momentum confirming. Full detail, levels and both stops for each. Every rule above is mechanical, so you can reproduce this list yourself from the levels we publish. The next tier follows in the Also Actionable table, and the rest of the universe in the full watchlist below it.

NVIDIA Corp. (NVDA), Last close: 229.28

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Penguin Solutions closed Wednesday at $72.61, up 13% on the day and about 20% across 2 sessions. Fiscal fourth-quarter results landed after Tuesday’s close: record sales of $566.7m against a $521.0m consensus, adjusted earnings of $1.00 a share against $0.77 expected, and fiscal 2027 revenue guided up about 40%. From its April 2025 low of $14.53 the stock is up 400%.

The results were genuinely good. What follows isn’t an argument that they weren’t, it’s an argument about what still has to be proven.

5 Things Worth Knowing

1. Fiscal 2026 net sales rose 26% to $1,731.5m. Integrated Memory grew 99% to $924.0m, more than accounting for the group’s entire increase, since the other 2 segments declined. Memory went from 34% of sales to 53%, and 60% of the fourth quarter.

2. Advanced Computing fell 14% to $558.8m, but not because AI demand failed. Management attributes the decline to the Penguin Edge wind-down and lower hyperscale hardware, and reports non-hyperscale AI infrastructure sales up 72% for the year and 99% in the fourth quarter. Both segments are guided to grow in fiscal 2027, Advanced Computing by about 40% and memory by about 50%.

3. The company earned $180.6m on a GAAP basis and used $151.9m of operating cash. Capital spending was $12m, under 1% of sales. This is an asset-light business with a substantial appetite for financing.

4. Working-capital discipline was better than the balance sheet alone suggests. Receivables and payables scale with gross billings of $1.57bn in the quarter, not the $567m of net sales reported, because memory logistics is accounted for on an agent basis. Days sales outstanding were 46, against 51 a year earlier.

5. On management’s own adjusted guidance of $4.45 a share the stock trades at 16.3x, not the 14x the screen suggested when I started. Those are strong-cycle earnings.

Where the Growth Came From

Contract prices for conventional DRAM rose sharply through the first half of calendar 2026, with the major forecasters publishing quarterly increases in the high double digits. Penguin’s memory revenue roughly doubled over a fiscal year sitting inside that window.

How much of that is price and how much is units matters a great deal, and the company doesn’t break it out. Management attributes growth to both, and the DDR5 replacement cycle in its enterprise and networking base is a real volume story. But industry price data can’t be mapped onto one company’s realised selling prices: the periods, product mix, customer base and revenue-recognition basis all differ. Anyone telling you they’ve decomposed it from public figures is guessing.

What can be said is that the mix has shifted hard toward a business whose economics are set by a commodity cycle, and that this is the first of 3 things worth monitoring.

On margins, I’d resist the obvious inference. Full-year adjusted gross margin fell 1.7 points to 29.3%, and the temptation is to read that as memory input costs squeezing a module assembler. Management says the opposite: the decline came primarily from a greater contribution of AI infrastructure hardware, with stronger margins inside Integrated Memory. A consolidated percentage can’t settle what happened inside a segment, and a lower percentage sat alongside record gross profit dollars of $507.9m.

The Cash Question

This is the part that deserves the most attention, and it needs stating carefully.

Receivables rose $488m and inventories $494m during the year. Those are large numbers. But payables, accruals and other liabilities rose $607m, funding most of the build, and the collection metrics moved the right way against the prior year: receivables at 46 days against 51, inventory at 48 against 51, and a cash conversion cycle of 42 days against 49. The sequential picture is less flattering, with that conversion cycle lengthening from 33 days in the third quarter.

What remains true is the headline: $180.6m of accounting profit, $151.9m of cash consumed. Management attributes the outflow primarily to working capital supporting growth, and the mechanism is clear enough. When revenue grows 26% and the fourth quarter alone grows 68%, the balance sheet scales ahead of collections, and here it scales against gross billings several times larger than reported revenue. Worth noting that GAAP profit also carried a $33.9m income-tax benefit, against a $20.1m charge the year before, so the distance between profit and cash isn’t purely a working-capital story.

The useful framing is the one the capital spending exposes. Penguin spent $12m on capital expenditure all year, under 1% of sales. It needs almost no factories. What it needs is working capital, and growth consumes it. The company ended the year with $647m of cash, having raised $750m of zero-coupon convertible notes and repaid its $100m credit facility, so the funding is in place. But a business that converts growth into cash and a business that converts growth into financing requirements are different propositions, and 1 year doesn’t tell you which this is.

What the Multiple Is, and What Could Break It

Adjusted guidance of $4.45 puts the stock at 16.3x. GAAP guidance of $3.50 puts it at 20.7x. Screen multiples closer to 14x rest on consensus estimates above the company’s own midpoint, so use the company’s. At 16x for 40% guided growth, this isn’t expensive on its face.

Showing the multiple is 16x rather than 14x proves nothing by itself. The relevant exercise is what happens if these earnings don’t persist:

• At the $4.45 guidance midpoint, 16.3x

• At $3.56, 20% below the midpoint, 20.4x

• At $2.67, 40% below, 27.2x

Those are sensitivities, not forecasts. I don’t know when the memory cycle turns, and recent industry commentary runs from tightness persisting into 2028 to a profit peak well before that. But they make the concern concrete: at this price you’re paying a reasonable multiple provided the earnings hold, and a demanding one if they normalise.

The dilution picture is milder than the financing history suggests. The fourth quarter already used 62m adjusted diluted shares against the roughly 63m assumed in fiscal 2027 guidance, so the share count is barely moving. July’s refinancing issued about 8.7m shares in exchanges, and that has happened. The new 2031 notes convert initially near $116.70, some 61% above today’s price, with capped calls lifting the point of net dilution toward $175.05. SK Telecom’s $200m preferred, struck at $32.81, is genuinely in the money, and it’s already inside those diluted counts.

The AI Business Has Substance

It’s worth being specific here, because the narrative risk cuts both ways. Penguin was selected to deploy and operate a 36,000-GPU AI factory in Norway for a neocloud provider. The customer has $10bn of contracted compute from a leading AI lab, which is the customer’s figure and not Penguin’s revenue. Contract value, margins and phasing weren’t disclosed.

That’s the third thing to monitor: whether deployments of this kind produce recurring service profits or mostly hardware revenue at hardware margins. Hardware is currently diluting the blended margin, and management describes multiyear managed-service engagements alongside it. The remaining question is how much recurring software and service profit follows the deployments. Guidance of about 40% growth in Advanced Computing says the company expects volume. Whether that volume carries services with it is what would change the quality of this business.

The Price Is Stretched

At $72.61 the stock sits roughly 80% above its 200-day average and around 35% above its 50-day, with the daily relative strength index at 74.7. That index measures the balance of recent gains against recent losses, and a reading this high says gains have substantially outweighed losses, which is a statement about momentum rather than value. Published moving averages differ slightly by source and date, so treat the exact figures as approximate.

Wednesday’s roughly 21m shares were nearly 12 times the average of the preceding 10 sessions. It was an outlier by any baseline you pick.

This stock has also already broken once in this run. It closed at $81.39 on 9 July, then closed as low as $43.70 within the same month, a fall of 46%, and spent the 3 months since between roughly $46 and $64. Nothing here moves gently.

Analysts raised their targets after the results, and the disagreement survived. Rosenblatt moved to $100 from $80, while Goldman Sachs, Needham and Stifel all went to $85, each keeping a buy. Barclays also raised, from $40 to $60, and kept an underweight rating, flagging expected pressure on gross margins. Consensus sits near $83.57. Coverage is thin, with sources listing between 7 and 9 firms.

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BMW trades at 5.2x trailing earnings. Mercedes-Benz at 7.6x. Volkswagen at 6.5x. All 3 sit below half of book value, within a few points of 52-week lows, and carry yields between 7.8% and 8.8%. On a screen, this looks like a shelf of bargains with BMW at the front.

The screen is the wrong place to start. Every one of those numbers is distorted by something, and fixing the distortions changes the ranking.

5 Things Worth Knowing

1. Trailing multiples here divide today’s price by the last 12 months, a period already overtaken by events. BMW’s forward multiple sits above its trailing one, which only happens when earnings are expected to fall.

2. BMW cut its automotive margin guidance on 16 June, from a 4% to 6% corridor down to 1% to 3%, and confirmed that range in July. Second-quarter automotive EBIT was €629m, a 2.3% margin, with tariffs costing 1.25 points and Chinese joint-venture depreciation another 1.2.

3. Mercedes grew group EBIT 22% in the second quarter, but its car division went the other way: Cars adjusted EBIT fell 26% to €909m, a 4.0% margin against 5.1% a year earlier. The group number improved on financial services, vans and consolidation items, not cars.

4. At division level across the first half, the 3 sit closer together than their multiples suggest: BMW’s automotive segment made 3.6%, Mercedes Cars about 4.0%, Volkswagen’s Brand Group Core 4.9%.

5. Returns on equity have collapsed since 2023, from 12.6% to 7.6% at BMW and 15.5% to 5.5% at Mercedes. Volkswagen’s peaked at 9.4% and is now 3.9%. That explains the discounts to book better than any multiple.

Why the Multiple Misleads

A P/E has 2 parts, and almost all the movement here has been in the bottom one, which is also the part most distorted by one-offs.

BMW’s 2022 profit of €17.9bn looks like the start of a catastrophic slide to €7.3bn. But that year included a €7.6bn pre-tax revaluation gain from consolidating the BMW Brilliance joint venture, booked in the financial result rather than earned from selling cars. The after-tax effect is smaller than that headline, so I won’t put a number on the adjustment. What matters is that 2022 isn’t a clean base.

Measure all 3 from 2023 instead, which is free of that particular distortion and is Volkswagen’s actual peak, and the order changes: BMW is down 35%, Volkswagen 56%, Mercedes 64%. These are still reported figures, and later years carry exceptional items of their own, but the company with the cheapest trailing multiple has had the shallowest reported decline of the 3.

What the Car Businesses Actually Earn

Group numbers hide more than they show, because all 3 run large financial services arms whose earnings move independently of cars.

Across the first half of 2026, BMW’s automotive segment made a 3.6% EBIT margin. Mercedes-Benz Cars ran at 4.1% in the first quarter and 4.0% in the second on an adjusted return-on-sales basis. Volkswagen’s Brand Group Core, which holds its volume car brands, made a 4.9% operating margin, within a group operating margin of 3.8%, or 4.3% before special items.

Those figures aren’t defined identically: a reported segment EBIT margin at BMW, an adjusted return on sales at Mercedes, an operating margin at Volkswagen, with different segment boundaries at each. Treat them as the same order of magnitude, not a ranking. What they establish is that all 3 car operations run in the low single digits against the 8% or better they once treated as normal, and that no group headline should be read without checking the division underneath. Volkswagen’s own finance chief called a 3.8% group margin too low.

The causes are shared. German deliveries in China fell between 30% and 41% year-on-year in the second quarter, against a market Volkswagen describes as down about 20%, so the market contracted and the German marques lost share inside it. Tariffs cost BMW 1.25 margin points in the quarter alone, and electrification meant heavy spending into demand that arrived slower than planned.

The Case Against Each

BMW. The guidance cut is real and the second quarter was poor, but the cash position is less alarming than the profit line. First-half automotive free cash flow of €1,290m was down 45%, yet full-year guidance of more than €2.5bn requires only about €1.21bn in the second half, less than the first half produced. Whether conditions allow it is another matter, and BMW has flagged restructuring charges for the period. Automotive net financial assets stood at €42.6bn at the end of June, above the entire €32.6bn market value, and down €1.7bn over the half. Deutsche Bank, still rating the stock a buy, cut its target from €90 to €78 on 29 September and to €71 within the week.

Mercedes. First-half group EBIT fell 3.1%, net profit 6.3% and industrial free cash flow 29.9%. Second-quarter industrial free cash flow of €1.1bn included about €0.4bn from selling down part of the Daimler Truck stake; excluding those proceeds it was nearer €0.7bn, still carrying restructuring and other exceptional items. Against that, it holds €30.4bn of net industrial liquidity against a €37.9bn market value, completed a €2bn buyback in June, and is the only 1 guiding full-year group EBIT above the prior year.

Volkswagen. Reported profit is being destroyed by writedowns while the cash position held: Automotive Division net cash flow of €3.166bn in the first half, against an outflow of €1.350bn a year earlier, and net liquidity of €32.75bn at 30 June. That liquidity is close to the group’s entire €34.0bn market value. The September warning took reported 2026 operating margin to no more than 1% on about €10bn of special items, with roughly 4% indicated excluding them.

Below book is where most readers stop. It’s where the real question starts. Paying 34 cents for a euro of BMW equity, 40 at Mercedes and 19 at Volkswagen only matters if that equity can earn a return, and on net income over period-end equity all 3 have fallen hard since 2023. Volkswagen is the instructive one: its returns were modest even in the good years, peaking at 9.4%. Its discount to book is not purely cyclical.

The Volkswagen Arithmetic

Volkswagen’s 75.4% stake in listed Porsche AG is worth about €29.4bn, against a market value of just under €34.0bn for the whole group. That leaves roughly €4.5bn implied for Audi, Skoda, SEAT, Cupra, the Volkswagen brand, Bentley, Lamborghini, Ducati and Traton.

Hold that loosely. A controlling stake in a listed subsidiary would not change hands at the screen price, and the residual isn’t the market’s price for those brands either, since it carries the rest of the group’s liabilities and pension obligations. Volkswagen’s reported net liquidity also already includes Porsche’s cash, so the stake and the liquidity can’t be added together. The figure signals very low expectations. It’s not a valuation.

The Dividend Question

At these prices you’re paid to wait, and the question is whether the payment survives.

All 3 yields sit well above their own 5-year averages of 5.4% to 6.0%. That’s consistent with the market expecting lower distributions, and equally consistent with investors demanding more for the risk. It’s a reason to check the arithmetic, not evidence of a cut.

So check it. BMW’s stated policy is to pay out 30% to 40% of net income. Applied to forward consensus earnings of €8.75, that implies a dividend between €2.60 and €3.50, against €4.40 today, a reduction of 20% to 40%. That holds only if the estimate and the policy both hold, but it’s the arithmetic behind the 8.1% headline yield.

Mercedes screens better than BMW on the same test, with a €3.50 dividend against forward earnings of €6.75. Both forward figures are Yahoo Finance consensus at 5 October 2026 on an unstated basis, which limits how far either calculation can be pushed, and I haven’t run it on Volkswagen, whose forward estimate I wouldn’t rely on. Mercedes’ recent capacity to fund distributions leaned partly on an asset sale, and a completed buyback evidences past capacity rather than future commitment.

Where the Prices Sit

Over the past year BMW has ranged from €52.36 to €97.92, Mercedes €39.41 to €62.34, Volkswagen €67.02 to €109.15. Each trades 21% to 26% below its 200-day average, which establishes a broken trend and nothing more. Volkswagen is the only 1 at a genuine 5-year low; the other 2 sit around 7% above their 2022 lows. Consensus targets of €71, €56 and €104 are well above spot, and moving fast.

Where I Come Out

I prefer Mercedes of the 3, and I’m not buying it yet. Those are separate judgments.

The preference rests on 3 things: it’s the only one guiding full-year group profit higher, its dividend looks better covered than BMW’s on current forward estimates, and €30.4bn of net industrial liquidity against a €37.9bn market value is a substantial buffer, though BMW’s cushion on its own measure is larger still relative to market value. What holds me back is a car division still deteriorating, at 4.1% then 4.0%, and half-year cash generation down 30% with an asset sale inside the quarterly figure. The condition that would change it is checkable: a Cars adjusted margin that stops falling, with the third quarter the first chance to show it.

The other 2 need different things. Volkswagen needs the writedowns finished and returns on its very large equity base shown to be sustainable and capable of improving from 3.9%. At 19 cents on the euro of book, the bar isn’t a particular headline return, it’s whether the return that persists justifies the price. BMW needs the second-half cash guidance met and the dividend question settled.

Size any of them as cyclicals. The dividends are an output of earnings, and earnings are the thing in motion.

Bottom Line

A trailing multiple ranks these 3 accurately on its own terms. It’s simply a poor basis for choosing between them. Change the base year and the earnings declines reorder; look underneath the groups and 3 car operations in the low single digits look more alike than multiples of 5x, 6.5x and 7.6x suggest.

Cheapness isn’t one test here. It’s 3: whether the car business can earn again, whether the dividend is funded, and whether the assets can produce a return worth owning them for.

Mercedes comes closest on the second, which is why it’s my preference and why I’d still wait for its car margin to stop falling. Volkswagen’s long record of modest returns is reason for caution on the third, not proof it fails. And BMW is where the headline and the underlying numbers diverge most, which is usually where the work is worth doing.

This is research and commentary, not personal investment advice. The author may hold positions in names discussed.

Every Sunday we sort the 59 stocks and ETFs we cover into four trend regimes and publish three numbers for each: the price at which the name may be bought, the first level to take something off, and the level where we step aside. They are written before Monday opens, because a price set in advance is worth more than a decision made while a position is already moving.

What this letter is for. The names we cover are large and liquid and spread across technology, semiconductors, energy, defence, healthcare, retail, metals and European listings, and the work here is not to tell you which of them is a good company. It is to say at what price each one may be bought or traded, and at what price we step aside. Good names bought at the wrong price still lose money, and that gap is the whole reason this exists.

Where our own record supports a claim, we print the number rather than assert it. Names we tagged avoid that never reclaimed fell 2.6% across 150 cases, against essentially flat for the rest of the universe. Where the evidence is thin, we say so in the same breath.

We buy strength that has proved itself rather than weakness that might. When a beaten-down tape snaps back hard we will be late to the names that gapped off the bottom, and we take that trade deliberately: the patience that costs us the first bounce is the same patience that keeps us out of the names that carry on falling.

If a level looks wrong to you, say so in the comments. They shape what gets covered.

Market Conditions

The indexes held their ground this week while the list underneath them thinned. The S&P 500 (SPY) closed at 769.64, Trend-Hold and roughly flat on the week, while the Nasdaq-100 (QQQ) at 749.58 is Trend-Hold and roughly flat on the week.

Beneath the surface, regime breadth deteriorated: Breakdowns rose from 20 to 24, Repairs fell from 8 to 2, and Trend-Holds rose from 24 to 25. Regime upgrades and downgrades were balanced at 6 apiece, a mixed tape beneath the indexes.

The selling concentrated in PALL -8%, LULU -7%, XRPI -7%, NOC -6% on the downside, while AIXA.DE +14%, IFX.DE +14%, AMAT +11%, LRCX +10% held up against the tape.

Fresh damage showed up in ASTS, DG, RDW and UNH, among others, dropping to Breakdown. Trend-Hold was reclaimed in AIXA.DE, IFX.DE, OSCR and XOM. The index trend is intact but it did not extend this week, and the churn underneath cut both ways. That is a rotation inside an uptrend rather than a new leg of it.

What Changed From Last Week

• Reclaimed Trend-Hold: AIXA.DE, IFX.DE, OSCR, XOM. These reclaimed in a week when breadth did not improve, with the benchmarks still in trend. Read that as narrowing leadership rather than a bullish tell. The weekly chart still has to hold what the daily just reclaimed.

• Up a step from Repair into Transitional: AMZN, CRWV. Basing turned into actual recovery attempts, one notch short of a trend.

• Cooled out of Trend-Hold into Transitional: LLY. It lost its trend and now has to re-prove it.

• Broke down: ASTS, DG, RDW, UNH, WMT. Fresh damage, the framework moves these to the avoid list. DG and RDW went from Trend-Hold to Breakdown in a single week, which is a three-regime fall and the sharpest kind of break the framework registers.

How Our Trade Plans Work

Each name is classified into a regime (Trend-Hold, Transitional, Repair or Breakdown) from the 1D EMA stack, with the 1W regime printed beside it in every setup, and every level traces back to a specific indicator. T1 is the first profit-take, T2 the structural objective, T3 the stretch target. Regime sets how much risk a name is allowed and when: Trend-Hold earns full risk but only on a pullback to support or a confirmed breakout; Transitional gets half or nothing; Repair gets a starter only after a reclaim; Breakdown gets none until a reclaim confirms.

Two stops, two jobs, and the tighter one governs. The trade stop is the tactical level where we step aside and let the position go. The regime invalidation is the deeper level where the classification flips and the reason to own the name is gone. Both are printed in every table now, trade stop first. For most setups the invalidation was the only number we showed, and it sat a median of 9% away while the typical trade never travelled more than 3.2% against us: only one trade in seven ever reached it. A stop that far out is a thesis level, not risk control, and printing it alone was our mistake.

How long a trade lasts, and when to take something. Every level here is a one-week level: take it during the plan week, and if neither the first target nor a stop has been reached, mark it at Friday close and re-read the structure next issue. Take a partial at T1 when it comes: 51% of 479 filled setups reached it at some point in the week, and taking it there rather than holding to Friday lifts the share that finish green from 41% to 62%. Be clear what that does and does not do. The average filled setup returns -0.6% held to Friday and -0.6% taking T1, so this improves how often you are right and what the middle trade returns, not whether the book makes money.

Size by risk, not by dollars. Stop distances in this issue run from 1.3% to 17%, so the same dollar amount in two names can mean risking 13 times as much on one as the other. Decide what a single losing trade may cost you, say half a percent of the account, and divide it by the distance from entry to stop. A 1.3% stop carries 13 times the position of a 17% stop for identical risk. The wide-stop names are not off limits; they are simply small.

This update ranks 59 names. You are not meant to trade all of them, or even most of them. Most weeks a handful sit at a level worth acting on and the rest are there so you can check our work.

The Week Ahead

No name in the universe reports during the plan week, so the levels carry without an earnings gap to work around.

Just beyond the plan week: UNH on Tuesday October 13, TSM on Thursday October 15. Worth knowing now if you are sizing a position you intend to hold through it.

This Week’s Playbook

Same four regimes as above, in the order they earn risk. Regime decides how much a name is allowed; the level beside it decides when. Detailed setups for the top names follow, and the watchlist carries every level.

Within each group the names are ordered by how close the entry sits to Friday close, nearest first, which is what the Trigger odds column in the tables below reports. That shows where a decision is likely to be needed, not where the reward is. Of the 464 triggers we have published, the ones we would have called likely were reached 76 percent of the time, even odds 44 percent, and unlikely 15 percent, with roughly half never touched at all. Reaching a level is not the same as profiting from it: of the 181 near ones that filled, the average came back about one percent negative, with about four times in ten closing green. Read the top of each list as the levels most likely to demand a decision, and size them off the stop underneath.

• Where that leaves your exposure. Of the 59 names we can trade, 4 are set up to be bought into weakness, with a dip band already defined (AAPL, OSCR, QQQ, SPY). The other 55, 93 percent of the book, need a level that has not arrived: 27 need a trigger to fire, 26 need a reclaim first, and 2 have no usable room between entry and stop. That is not a forecast, it is what the rules produce when most of the universe sits below its own trend, and it means the default position this week is cash. Cash is an allocation here rather than the absence of one: it is the only holding that costs nothing while you wait, and it is what lets you take a level when it finally prints. The S&P still carries its Trend-Hold. The Nasdaq-100 still carries its Trend-Hold. Those are the numbers that would put risk back on the table. Until one of them prints, do not manufacture a trade out of a name you like at a price the plan never gave you.

• Trend-Hold, full risk, but only at a level. On a pullback to support: OSCR, AAPL, SPY, QQQ. Only on strength, above the trigger in the table: AIXA.DE, RBRK, IFX.DE, SHOP, XOVR, PANW, ASML, LRCX, and 13 more carrying the same instruction in the table below.

• Transitional, half size or nothing. The trend is not confirmed, so a position here is a probe rather than a holding. Only on strength, above the trigger in the table: AMZN, COPX, TGT, BRK.B, LLY, CRWV. GOOG, XRPI sits in the skip list below.

• Repair, a starter only after a reclaim. Basing, not yet trending; nothing until price takes back the trigger printed beside it: COST, FTI.

• Breakdown, no exposure until a reclaim confirms. Not every dip is a setup, and cash is the position: AVGO, ORCL, PINS, RDW, ASTS, UNH, DG, ADBE, and 16 more carrying the same instruction in the table below.

• Where the payoff justifies the stop. A wide stop is not a bad setup, it is a small one, but some names are not paying enough to be worth any size at all.

- Not paying for the risk, quarter size or skip: AMAT (21% stop for 2% to T1), META (19% stop for 2% to T1), COPX (5% stop for 1% to T1), LRCX (23% stop for 3% to T1)

- No usable room between entry and stop, skip entirely: XRPI (1.0 ATR to its 7.31 trade stop), GOOG (1.0 ATR to its 325.63 invalidation). Measured to whichever stop is nearer, which for some of these is the trade stop rather than the invalidation printed in the table. Entering there puts you at the exit before the trade has moved.

Top 5 Actionable Setups

Five names taken only from the Trend-Hold group, after dropping anything overbought above RSI 73, anything whose EMA stack is inverted, and anything without at least one average daily range between its entry and its stop. Preference goes first to names sitting within 3 percent of their 20-day EMA, then to the strongest trends by ADX with momentum confirming, and a name too closely correlated with one already chosen is swapped out for the next candidate. Full detail, levels and both stops for each. Every rule above is mechanical, so you can reproduce this list yourself from the levels we publish. The next tier follows in the Also Actionable table, and the rest of the universe in the full watchlist below it.

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The stock fell on the release and kept falling, ending the extended session at $32.09 and last trading at $31.54 in pre-market dealing at 06:20 New York time, down roughly 10% from Thursday’s $35.15 close. That’s its lowest since 2013, and 82% below the peak of November 2021.

A fall that size invites the obvious question. The price has collapsed, but so has the profit behind it: Nike guided this year to $1.15 to $1.35 against $3.73 in fiscal 2024. Whether the shares are cheap depends on how much of that comes back, and how long it takes.

Key Takeaways

• At $31.54 you pay about 25 times the earnings Nike guides to this year, 15 times what it earned in fiscal 2026, and 8.5 times fiscal 2024. Which number is right depends on how far profitability recovers, and how fast.

• On the revenue Nike guides to, getting back to fiscal 2026 earnings needs a 7.3% net margin and getting back to fiscal 2024 needs 13.0%, against the 6.7% it managed last year. Nike earned 12.9% as recently as fiscal 2022.

• Revenue is still falling. Guidance is a high-single-digit decline, Greater China fell 22% and Converse 28%. North America wholesale, up 9%, is the one line growing properly.

• Dividend cover has gone from 3.05 times free cash flow in fiscal 2024 to 0.91 in 2026, and the buyback is paused. The balance sheet still has room, but less of it.

Prices are Friday pre-market, early and thin, against Thursday’s $35.15 close.

The Quarter Itself Was Not the Problem

Revenue of $11,213 million was down 4% reported and 5% currency-neutral. Gross margin still rose 60 basis points, which Nike puts down to lower warehousing and logistics costs. Selling and administrative expense fell 3% to $3,910 million, with operating overhead down 6% and demand creation up 5%, so the company cut back office rather than marketing. Income before taxes was $921 million against $922 million, and on Nike’s own earnings before interest and tax, which it flags as non-GAAP, $907 million against $904 million.

Earnings per share fell a cent because the tax rate went to 22.7% from 21.1%, not because the business deteriorated. That’s the good-news case, and it’s genuine.

The Guidance, and Why Last Year Is Hard to Compare With

Nike guided fiscal 2027 revenue to decline high-single digits and adjusted earnings to $1.15 to $1.35, excluding about $0.15 of restructuring.

The cleanest way to see what that implies is to stay inside this year. Nike earned $0.48 in the quarter just reported, which leaves $0.67 to $0.87 for the remaining 9 months, about $0.26 a quarter. Nike gave no adjusted figure for the quarter and showed no separate restructuring line, so $0.48 is the reported number. If charges sat inside other expense lines the adjusted figure would be higher and the implied remainder smaller, so the comparison errs in Nike’s favor.

Comparing with last year needs more care than it’s getting. Fiscal 2026 earnings of $2.10 include a $0.52 benefit in the fourth quarter from the expected recovery of tariffs under the International Emergency Economic Powers Act, which the Supreme Court struck down in February. The benefit was $986 million and lifted that quarter’s gross margin by about 900 basis points. Nike says that across the full year the benefit largely offsets the tariff costs the year had already absorbed.

So the annual figure is roughly clean and the quarterly ones aren’t. On the annual basis the $1.25 midpoint sits 40% below $2.10, or about 45% below once both sides are adjusted for restructuring, Nike’s own definition. What you can’t do is set the guided 9 months against last year’s final 9 months, because the refund landed in a single quarter while the costs it offsets were spread across the year.

What You Are Actually Paying For

At $31.54 Nike is worth about $47 billion. That’s 25 times the $1.25 midpoint of this year’s guidance, and nearly 29 times the roughly $1.10 of reported earnings implied once restructuring is counted. On this year’s numbers alone the stock looks expensive, though a trough year is a poor basis for that judgement.

But nobody buying Nike here is buying this year. Against fiscal 2026’s $2.10 the same price is 15 times, and against fiscal 2024’s $3.73 it’s 8.5 times. Neither is a price you actually pay today. Both are prices conditional on earnings returning to a level Nike isn’t guiding to, and the argument is which of them describes the business in 3 years.

Work backwards from the revenue Nike guides to, about $43 billion. Earning $2.10 on that base needs a net margin of 7.3%, a little above the 6.7% Nike actually managed in fiscal 2026 and well above the 4.3% this year’s guidance implies. Earning $3.73 needs 13.0%, above the 11.1% of fiscal 2024. That isn’t unprecedented: Nike made 12.9% in fiscal 2022 and 12.9% in 2021, so the $3.73 case is a return to the margins of 4 years ago on a smaller revenue base. Revenue recovery would lower the bar rather than being strictly required.

The help already identified is harder to place than it looks. Pace is budgeted at roughly $2.5 billion of savings against $1.0 billion of charges, but both are cumulative through fiscal 2031 and stated before reinvestment. A cumulative total doesn’t establish annual earnings power, so it can’t be read straight into the margin for a particular year.

So the margin figures are the thing to hold on to. They tell you what has to happen; the cost program tells you only that management is working on it.

Reduced Flexibility

The balance sheet is what has to carry the company while that plays out. Nike declared $0.410 a share, so $1.64 annualised against a $1.25 adjusted midpoint: a payout ratio of 131% on guided earnings, 149% against the implied reported figure, and 121% to 143% across the guidance range.

Free cash flow was $6,617 million in fiscal 2024, $3,268 million in 2025 and $2,184 million in 2026, while dividends rose every year to $2,407 million. Cover went 3.05 times, then 1.42, then 0.91. Fiscal 2026 is the year it crossed, by $223 million.

That crossing is softer than it looks. Of the $986 million tariff benefit Nike booked, only $302 million arrived as cash by May 31. The other $684 million sat in receivables and the annual report says substantially all of it was collected after the year end, so a sum 3 times the shortfall moved out of fiscal 2026 cash flow and into fiscal 2027. It’s a real cushion, and a cushion that arrives once.

The buyback tells the same story. Repurchases went $5,480 million in fiscal 2023, then $4,250 million, $2,985 million and $146 million in 2026, with none in either of the last 2 quarters Nike has reported. That’s a pause, not an ending: $5.9 billion of the authorization is unused and the board renewed it in June 2026 with no expiry. But the diluted share count has turned, 1,484.2 million against 1,479.0 million a year ago, after 4 years of shrinking. Under the program Nike has bought 124.4 million shares at an average of $97.57. The stock is $31.54.

I’m not forecasting a cut. Nike holds $8.4 billion of cash and short-term investments against $7.9 billion of debt, and a board can fund a payout from reserves for a long time. What the numbers show is weaker coverage and less room than the company used to have, at the moment it needs room.

Where the Damage Is

Greater China is the worst of it. Revenue fell 22%, or 26% currency-neutral, to $1,180 million, and its earnings before interest and tax fell 34%. Converse is worse in percentage terms, down 28% to $263 million with profit down 36%.

The channel split is the more interesting read. Nike Direct fell 8%, with Brand Digital down 13%, while wholesale fell only 1% and North America wholesale rose 9%. That’s the deliberate reversal of the direct-to-consumer strategy working. Wholesale carries lower gross margins but also lower costs to serve, so the effect further down the income statement is less direct than it looks. By product, footwear fell 6% and apparel rose 2%, and footwear is the franchise.

The Case Against Me

Nike isn’t a broken brand. North America, its largest market, grew. Gross margin expanded in a down quarter, and the wholesale rebuild is working, which is the thing that had to.

The bull case doesn’t need my arithmetic to be wrong, only incomplete. A $2.5 billion savings figure is what management will commit to publicly, not the limit of what a program finds once running. Revenue recovery is excluded from my sums entirely, and a brand this size reclaiming a few points of growth changes the margin math quickly, because the cost base is being rebuilt smaller.

What I keep returning to is the clock. Nike has had almost 2 years under this management, the top line is still falling, China is still falling, and the cost program runs to 2031. That doesn’t make the shares expensive. It makes them a bet on duration.

Bottom Line

Nike delivered a quarter that did what it needed to: margin up, costs down, pre-tax profit flat on 4% lower revenue. Read only the first page and the turnaround is on track. The guidance describes a company earning a third of what it made in fiscal 2024, on revenue about $8 billion lower.

So is it cheap? Every answer is conditional. A multiple of 8.5 times fiscal 2024 earnings would be a low price if those earnings came back and held, and 15 times fiscal 2026 would be fair if $2.10 is reachable. The margin figures are how to judge which: 7.3% to get back to $2.10, 12.9% to get back to $3.73, against the 6.7% Nike managed last year and the 4.3% this year’s guidance implies. The first of those looks achievable, the second asks for 2022 again. What you can’t say is that the recovery comes free. Put a 15 times multiple on normalised earnings and $31.54 implies about $2.10, which is the fiscal 2026 outcome already. No recovery at all, on the same multiple against the guided $1.25, would be nearer $19. So the fiscal 2026 case is roughly in the price and the fiscal 2024 case isn’t, which makes the question whether Nike gets past 2026 earnings rather than back to them. I’d rather see revenue stop falling before paying for that. The weekly plan I publish had Nike at Avoid before the results, and the entry never triggered.

This is research and commentary, not personal investment advice. Levels are illustrative; size positions to your own risk tolerance and time horizon. The author may hold positions in names discussed.

Every Sunday we sort the 60 stocks and ETFs we cover into four trend regimes and publish three numbers for each: where to enter, where the idea is wrong, and where to take the first profit. They are written before Monday opens, because a level set in advance is worth more than a judgement made while a position is moving against you.

The claim underneath that is a narrow one. Knowing where you are wrong travels further than knowing what will rise, and the record bears it out unevenly. Names we tagged avoid that never reclaimed fell 2.8% across 132 cases, against roughly 1% for the rest of the universe. Over thirteen weeks the featured five has not separated itself from five names drawn at random from the same watchlist, and the running record is behind the index. All of it is in the scorecard, and none of it changes what the levels are for.

We wait for a reclaim, so when a beaten-down tape snaps back we lag the names that gapped off the bottom. That is the price of the rule, not a defect in it.

If a level looks wrong to you, say so in the comments. They shape what gets covered.

Market Conditions

The broad tape broke higher this week. The S&P 500 (SPY) closed at 771.35, Trend-Hold and up 1.3% on the week, while the Nasdaq-100 (QQQ) at 744.50 is Trend-Hold and up 3.2% on the week.

Beneath the surface, regime breadth improved: Breakdowns fell from 23 to 21, Repairs rose from 6 to 8, and Trend-Holds rose from 21 to 24. Regime upgrades outnumbered downgrades 13 to 10, a broad advance that carried the indexes with it.

The biggest moves went to INTC +13%, META +13%, AMD +13%, XRPI +11% on the upside, against NVO -10%, INTU -9%, OSCR -8%, ORCL -7% on the downside. Fresh damage showed up in BABA, GLD, RTX and SLV, dropping to Breakdown.

The cleanest signal was a full reclaim of Trend-Hold in AMAT, ASML, DG and LLY, among others. That is the confirmation the prior week was waiting on: the reclaim now runs from the individual names all the way up to the indexes themselves.

Broad participation is the strongest version of this signal, but it also means the easy part of the move is behind us. The framework still engages at defined levels: chasing extended names here is how a good tape turns into a bad entry.

What Changed From Last Week

• Reclaimed Trend-Hold: AMAT, ASML, DG, LLY, LRCX, RDW, SHOP, SMSN.L, SPY. The strongest signal of the week. Several got there in a single week, so the weekly chart still has to hold it.

• First repair off the lows: ASTS, COST, CRWV, WMT. Damaged names showing the first sign of basing.

• Cooled out of Trend-Hold into Transitional: BRK.B, GOOG, OSCR, XOM. Leaders that lost their trend and now need to re-prove it.

• Lost the trend, into Repair: AMZN, FTI. Downgraded a full step, treat these as damaged until reclaimed.

• Broke down: BABA, GLD, RTX, SLV. Fresh damage, the framework moves these to the avoid list. GLD and SLV went from Trend-Hold to Breakdown in a single week, which is a three-regime fall and the sharpest kind of break the framework registers.

How Our Trade Plans Work

Each name is classified into a regime (Trend-Hold, Transitional, Repair or Breakdown) from the 1D EMA stack, cross-checked against the 1W chart, and every level traces back to a specific indicator. T1 is the first profit-take, T2 the structural objective, T3 the stretch target. Regime sets how much risk a name is allowed and when: Trend-Hold earns full risk but only on a pullback to support or a confirmed breakout; Transitional gets half or nothing; Repair gets a starter only after a reclaim; Breakdown gets none until a reclaim confirms.

Two stops, two jobs, and the tighter one governs. The trade stop is the tactical level where a single trade is wrong and you cut it. The regime invalidation is the deeper level where the classification flips and the reason to own the name is gone. Both are printed in every table now, trade stop first. For most setups the invalidation was the only number we showed, and it sat a median of 9.9% away while the typical trade never travelled more than 3.1% against us: only one trade in ten ever reached it. A stop that far out is a thesis level, not risk control, and printing it alone was our mistake.

How long a trade lasts, and when to take something. Every level here is a one-week level: take it during the plan week, and if neither the first target nor a stop has been reached, mark it at Friday close and re-read the structure next issue. That is now also how the scorecard grades us, which was not true before, so the record measured something we never asked you to do. Take a partial at T1 when it comes: 36% of 457 filled setups touched it, and holding them all to Friday instead turned a 53% win rate into 40%.

Size by risk, not by dollars. Stop distances in this issue run from 1.3% to 38%, so the same dollar amount in two names can mean risking 29 times as much on one as the other. Decide what a single losing trade may cost you, say half a percent of the account, and divide it by the distance from entry to stop. A 1.3% stop carries 29 times the position of a 38% stop for identical risk. The wide-stop names are not off limits; they are simply small.

This update ranks 60 names. You are not meant to trade all of them, or even most of them. Most weeks a handful sit at a level worth acting on and the rest are there so you can check our work.

The Week Ahead

These names in the universe report during the plan week - Thursday: NKE

Earnings are binary and the framework does not trade into them. If one of these sits at a defined entry, either take it at reduced size or wait for the print and re-read the structure afterwards. A level that was valid on Friday is not wrong after a gap, it is simply no longer the level.

Read the trigger, not just the date. NKE triggers at 37.08, 3.7% (1.4 ATR) above Friday’s close, with 3 sessions to fire before the print. A published trigger does not wait for the calendar: it can fill you days before the report and leave you holding the binary the rule above tells you to avoid. That is not hypothetical. In the week of 31 August LULU reclaimed its trigger on the Monday and reported on the Thursday: the print gapped it 19.4% lower, straight through a stop that works on closes, for a 16.8% loss on a level we published. If you want the setup without the coin flip, wait for the print and re-read the structure on Friday.

This Week’s Playbook

Same four regimes as above, in the order they earn risk. Regime decides how much a name is allowed; the level beside it decides when. Detailed setups for the top names follow, and the watchlist carries every level.

Within each group the names are ordered by how close the entry sits to Friday close, nearest first, which is what the Trigger odds column in the tables below reports. That shows where a decision is likely to be needed, not where the reward is. Of the 413 triggers we have published, the ones we would have called likely were reached 75 percent of the time, even odds 47 percent, and unlikely 16 percent, with roughly half never touched at all. Reaching a level is not the same as profiting from it: of the 162 near ones that filled, the average came back about one percent negative, with about four times in ten closing green. Read the top of each list as the levels most likely to demand a decision, and size them off the stop underneath.

• Where that leaves your exposure. Of the 59 names we can trade, 2 offer a price you could act on at Friday close (LLY, SPY). The other 57, 97 percent of the book, need a level that has not arrived: 26 need a trigger to fire, 27 need a reclaim first, and 4 have no usable room between entry and stop. That is not a forecast, it is what the rules produce when most of the universe sits below its own trend, and it means the default position this week is cash. Cash is an allocation here rather than the absence of one: it is the only holding that costs nothing while you wait, and it is what lets you take a level when it finally prints. The S&P still carries its Trend-Hold. The Nasdaq-100 still carries its Trend-Hold. Those are the numbers that would put risk back on the table. Until one of them prints, do not manufacture a trade out of a name you like at a price the plan never gave you.

• Trend-Hold, full risk, but only at a level. On a pullback to support: SPY, LLY. Only on strength, above the trigger in the table: AMAT, MSFT, AMD, TSM, LRCX, RDW, AAPL, XOVR, and 12 more carrying the same instruction in the table below. NVDA, QQQ are also Trend-Hold but do not appear above: their entry sits on top of their own stop, so they are in the skip list below.

• Transitional, half size or nothing. The trend is not confirmed, so a position here is a probe rather than a holding. Only on strength, above the trigger in the table: TGT, BRK.B, XOM, COPX, XRPI, OSCR. GOOG sits in the skip list below.

• Repair, a starter only after a reclaim. Basing, not yet trending; nothing until price takes back the trigger printed beside it: IFX.DE, CRWV, AMZN, ASTS, WMT, FTI, COST, UNH.

• Breakdown, no exposure until a reclaim confirms. Not every dip is a setup, and cash is the position: SLV, AVGO, GLD, AIXA.DE, LULU, BABA, PALL, SOFI, and 12 more carrying the same instruction in the table below.

• Where the payoff justifies the stop. A wide stop is not a bad setup, it is a small one, but some names are not paying enough to be worth any size at all.

- Tight and paying: RDW (7% stop for 18% to T1)

- Not paying for the risk, quarter size or skip: INTC (34% stop for 3% to T1), SHOP (17% stop for 2% to T1), OSCR (9% stop for 1% to T1), LRCX (16% stop for 2% to T1)

- No usable room between entry and stop, skip entirely: QQQ (1.0 ATR to its 725.13 trade stop), NVDA (1.0 ATR to its 217.14 trade stop), GOOG (1.0 ATR to its 325.63 invalidation). Measured to whichever stop is nearer, which for some of these is the trade stop rather than the invalidation printed in the table. Entering there puts you at the exit before the trade has moved.

Top 5 Actionable Setups

The five names closest to a defined entry that also clear our room requirement, with full detail, levels, and both stops for each. That is a mechanical screen, not a conviction ranking: over thirteen weeks this selection has not separated itself from five names drawn at random from the watchlist below, which is measured in the scorecard. The next tier follows in the Also Actionable table, and the rest of the universe in the full watchlist below it.

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I gave him the short answer. Oil prices are high. The Fed has raised rates, and investors are weighing the possibility of more hikes. The midterm elections are approaching. And when stocks have been trading near record highs, even a small change in expectations can make investors nervous.

But that answer bothered me. It explained why stocks might pull back. It did not explain why the market has held up so well despite those pressures, or what would turn a period of volatility into a more serious downturn.

That distinction is the story: are investors reconsidering what they will pay for future profits, or are the profits themselves beginning to weaken?

Why the Market Has Held Up

The US economy is still growing. Employment has remained steady, consumers are spending, and businesses are investing heavily. When the Fed raised rates in September, it described economic activity as solid. Higher rates put pressure on share prices, but there is still business growth for investors to value.

Earnings estimates have offered some support, too. From the end of June through August, analysts raised their aggregate third-quarter S&P 500 estimate by 1.2%. Estimates usually fall during the first two months of a quarter. Energy led the upward revisions, however, while estimates fell in most other sectors. It was an encouraging August reading, not proof that earnings strength has since spread across the market.

Reported profits require the same care. FactSet estimated second-quarter S&P 500 earnings growth at 50.4% in early August. Excluding Alphabet and Amazon, whose results included unusually large investment gains, growth was 32.0%. That is still impressive. But an investment gain is different from profit a company can reliably earn again by serving its customers.

Two Forces, Moving at Different Speeds

Higher oil prices are the immediate strain. They leave households with less to spend elsewhere and raise costs for fuel users. An airline may raise fares, absorb the cost in its margins, or face weaker demand. Which happens depends on customers and competition, not simply on the direction of oil.

AI is working on a different clock. Spending on chips, data centers, power equipment and construction creates revenue for suppliers today. The companies building and financing that infrastructure must earn a return over many years. Their customers, in turn, must find uses valuable enough to pay for it.

That gap in timing matters. A chip supplier can have a strong quarter while its largest customer sees free cash flow decline under the weight of construction spending. Both results can be true at once. BIS research finds that the scale of planned AI investment is increasing the role of debt in financing the boom, making the eventual return on that spending more consequential.

History offers context without giving us a script. Oil shocks have had different effects depending on their cause, duration and the central bank response. And major technologies have often required years of changes in skills and business processes before their broader productivity benefits became visible. Today’s energy costs arrive immediately; much of AI’s hoped-for payoff lies ahead.

That is why I would be careful with a 1970s comparison. The question is whether expensive energy remains mainly an energy problem or starts feeding persistent increases in other prices and wages. In August, headline US inflation was 3.4%, while inflation excluding food and energy was 2.4%. One gap cannot settle the question. Its evolution matters.

There Is More Than One Stock Market

The S&P 500 can appear calm while conditions change sharply beneath it.

An oil producer and an airline face opposite effects from higher crude prices. A bank may earn more on some loans while paying more for deposits or preparing for borrower losses. A chipmaker may report excellent sales and still see its stock fall if investors had expected even more. A good business result and a good stock return are not always the same thing.

Investors have shown some of that selectivity. During the period covered by its September review, the BIS found that smaller US companies and much of the S&P 500 outside the largest AI names outperformed hyperscalers and semiconductor manufacturers. Broad credit spreads remained contained, although issuance slowed among riskier borrowers. That was an earlier snapshot, not a claim that the rotation has continued every day since.

It does show why I would look beyond the index. Weakness concentrated in expensive stocks may mean investors have lowered their expectations. Weakness that spreads into company earnings and the availability of credit reaches much further.

What I’m Watching Next

The approaching midterms add another source of uncertainty, especially for businesses exposed to trade, tax and regulatory decisions. But “midterm year” is not, by itself, an explanation for a down day. The policies investors come to expect matter more than the date of the election. Research links policy uncertainty to greater stock volatility and weaker investment in exposed businesses.

I would watch three developments together:

• Inflation: Does the energy shock ease, or spread into lasting price pressure that keeps the Fed restrictive?

• Earnings: Do operating profits grow beyond energy and a few technology giants? Are customers buying more, or just paying more?

• Credit: Can riskier businesses still borrow and refinance? Widening corporate credit spreads have historically carried useful information about future economic activity.

  

So, what should I have told my dad?

Oil, rates, the election and high share prices help explain the market’s nerves. But they do not yet tell us that the expansion is ending. The economy and corporate profits have shown genuine resilience, even as investors have become more demanding about the price they will pay for that strength.

If earnings keep broadening and credit holds, this can remain a pullback within a growing economy. If profits weaken and credit tightens together, the problem will have moved beyond share prices and into the economy itself.

This article is for informational purposes only and is not investment advice. The scenarios discussed are possibilities, not predictions. Markets and economic data can change quickly; consider your own circumstances and risks before making investment decisions.

The market spent Friday morning arguing with itself about it. The stock opened lower at $886.62, fell to $883.10, below the September low, then reversed all of it and reached $921.70. Around midday in New York it sits near $918, up about 2.4% from Thursday’s $896.48 close and 16.1% below its May high.

Those results answer one question well and another not at all. They tell you the operating model isn’t breaking. They can’t tell you what the shares are worth, and that is what the last 4 months have been asking.

Key Takeaways

• Membership fees of $5.91 billion were 50.6% of reported operating income, which is not the same as saying half the profit is a subscription.

• The tidy explanation, that investors rotated out of expensive retailers, doesn’t survive measurement. Across 20 names ranked on what they actually cost in May, the rank correlation with what followed is minus 0.21.

• At about 44 times the year just reported, Costco is on its lowest trailing multiple since January 2024. It is still dearer than 37% of the past 5 years.

• Fee income grew 11.0% for the year but only 7.3% in the fourth quarter, because the 2024 price increase has lapped. That belongs in the bear case.

Prices below are Friday intraday unless stated. The peer and valuation history end at Thursday’s close, the last session before these results, and are labelled where they appear.

Where the Money Comes From

Costco sold $297.2 billion of merchandise last year. After $264.3 billion of buying it and $27.2 billion of selling and administrative cost, $5.78 billion was left. Membership fees were $5.91 billion, which is 50.6% of the $11.69 billion of operating income.

Be careful with what that does and doesn’t establish. Costco charges all of its selling and administrative cost against merchandise, so the $5.78 billion is a lower bound and the split is a reporting convention, not a measurement. The warehouses are part of what the fee buys. There is no separately reported subscription profit, and anyone telling you half of Costco’s profit is a subscription is reading a presentation convention as a segment disclosure.

What survives is still worth having. A fee of $5.91 billion arrives from 84.1 million paid members before anything is scanned, while the retail operation converts $297.2 billion of sales into a 1.9% margin. The renewal rate rose to 89.8%, and executive members, who pay double, grew 9.4% to 42.3 million.

Payables of $22.6 billion exceed inventories of $19.3 billion, so suppliers fund the entire stock and then some, and Costco converts 102% of net income into free cash flow. Growth is 25 net new warehouses, from 914 to 939, plus 6.6% adjusted comps.

The Explanation That Didn’t Hold

Here is a story I nearly published. Measure the big retailers from Costco’s May 19 peak to Thursday. Walmart fell 19.8%, Costco 18.1%, Kroger 16.5% and BJ’s 6.0%, while Target rose 22.7% and Dollar General 18.4%. Rank those 6 by earnings multiple and the outcomes run almost exactly opposite: investors sold the expensive ones. Tidy, and I was ready to lead with it.

The test is fussier than it looks. Ranking on today’s multiple is circular, because a stock that fell 30% is cheap now precisely because it fell, so the ranking has to use each company’s trailing earnings as actually reported by May 19. Vendor trailing figures won’t do either: Kroger’s real May multiple was 14.5 times, not the 31 its current number implies, and Albertsons was 7.9 times, not 73.

Done that way, across 20 US retailers and distributors, the rank correlation between what a stock cost in May and what happened to it since is minus 0.21. Across the 6, it’s minus 0.54, well short of the minus 0.89 the first cut suggested. Start the same test on January 2 and the correlation is plus 0.04.

The scatter is the real finding. Casey’s was on 49 times in May and fell 30%, but Albertsons was on 8 times and fell 31%. Chefs’ Warehouse was on 37 times and rose 43%, Grocery Outlet on 12 times and rose 39%. Costco’s decline fits a spring stretch in which the expensive half of this group lagged the cheap half by about 10 points, but that gap reverses if you start in January, and the ordering is too scattered to say how much of Costco’s move came from it.

So I can’t explain the de-rating, and I’d rather say that than sell a pattern that dissolves when you measure it properly. The basket is COST, WMT, TGT, KR, BJ, DG, DLTR, ACI, SFM, CASY, PSMT, SYY, USFD, PFGC, CHEF, OLLI, GO, BURL, ROST and TJX. Returns are closing prices, May 19 to September 24.

Costco’s reported operating data do not show a consumer breakdown. US adjusted comps ran at 7.2% in the quarter against 6.6% for the year, with digital up 19.8% and renewals higher, at a retailer serving 150.4 million cardholders. That is evidence of resilience rather than proof that nothing changed in how people shop.

What You Actually Pay

Near $918 Costco is worth about $407 billion. Cash of $20.2 billion plus short-term investments of $1.1 billion less debt of $6.2 billion is $15.1 billion of net cash, which takes the enterprise value to roughly $392 billion. Subtract the reported long-term operating lease liability of $2.4 billion and that net figure becomes $12.7 billion, though that adjustment covers the long-term line only, not every lease obligation. That’s 44.2 times the year just reported and 33.5 times operating income, on a free cash flow yield of 2.3%.

Now put it in its own history. For each session I divide the closing price by the 4 most recent quarterly earnings per share Costco had already published, counting a new figure only from the session after it lands, because these results arrive after the close. On that basis Costco has spent 5 years between 33.6 and 64.6 times, with a median of 47.6.

Worth being careful here. Thursday’s market was still working with $19.88 of trailing earnings, so the observed multiple into the print was 45.1 times, and only the release itself dropped it. Today’s 44.2 is the lowest reading since January 4, 2024, which is to say in nearly 3 years, and still dearer than 37% of the sessions in that 5-year window. The stock got meaningfully cheaper than it has been through its whole recent run, and it did not get cheap.

At the May peak of $1,094.32, against the $19.23 of trailing earnings reported by then, the shares were at 56.9 times. Measured against the year they turned out to deliver, that peak was 52.7 times. The multiple compressed more than the share-price decline alone suggests, because trailing earnings rose from $19.23 to $20.76 over the period.

The Case Against Me

The bull case doesn’t need the multiple to expand. It needs it to stop falling.

Costco has a long record of resilient renewals and rising executive penetration, a strong net-cash balance sheet, and capital spending of 2.2% of sales while still adding 25 warehouses a year.

Against that, 2 things. The fee line is slowing: 11.0% for the year but 7.3% in the fourth quarter, because the increase that took effect in late 2024 has now fully lapped. From here the subscription compounds at the rate members are added, not the rate prices rise, and membership economics are central to the premium investors pay. And a de-rating from 57 times to the low 40s has no obvious floor, because nothing I can measure identifies what drove it.

The tariff line shows the model working as designed. The quarter carried a $0.15 per share benefit from IEEPA tariff refunds, which Costco says it partly reinvested in lower member prices rather than keeping. That is what a company does when it treats the fee as its return and the goods as the service. It’s also why the shareholder’s claim is thinner than the quality suggests.

The Setup

Costco is in the weekly plan I publish: regime Breakdown, reclaim above $929.93, status Avoid. That plan is dated September 12 and no newer one has been issued.

1. The trigger has not been hit, so the instruction stands. Thursday closed at $896.48, under the $898.43 level the plan flagged. Near $918 the stock has recovered above its 20-day average at $911.97 but remains below the 50-day at $930.25 and the 200-day at $954.24. Thursday’s 14-day relative strength reading of 38 and trend strength reading of 18, which signals a weak trend rather than a strong one, described a drift, not a washout.

2. This morning changed the downside reference. The $883.10 low undercut the September 21 low of $885.50 and was bought back within the session, the first thing this stock has done in 4 months that isn’t simply lower. Below it, the next reference is the December low at $844.06.

3. The level that matters is the published $929.93, on the 50-day average. It is about $12 away, or 0.9 times the $13.71 average daily range, against 2.4 times on Thursday.

4. Even the trade the plan allows isn’t generous yet. Buy the reclaim at $929.93 while treating $862.00 as the invalidation and you’re paying about 1 to 1 to the June high at $997.41. That ratio is part of why the instruction is wait rather than buy the trigger.

5. Bidding below the September low is a different trade from the one I’ve published. This morning it would have worked. It isn’t what the plan says, so I won’t dress it up.

Bottom Line

Costco delivered one of its better years, and Thursday’s release gives you very little evidence of an operating breakdown.

That is narrower than it sounds, because most of the 18% decline happened before Thursday, and results published this week cannot explain 4 months of price action that preceded them. The rotation out of expensive retailers that would explain it is too weak and too unstable to carry the weight. I’d rather say so than invent a cause.

What’s left is a valuation question you have to answer on its own terms. Earnings growth and a 4-month fall have taken a genuinely exceptional business to its cheapest multiple in nearly 3 years, and 44 times trailing earnings still leaves very little room for disappointment. The results settled the case against the business. They didn’t settle the case against the price, and until $929.93 goes, the weekly plan still says wait.

This is research and commentary, not personal investment advice. Levels are illustrative; size positions to your own risk tolerance and time horizon. The author may hold positions in names discussed.

Travel booking shares fell on the news and kept falling. Expedia is down 13.1% since the launch, Airbnb 17.8%, Booking 19.3%, TripAdvisor 13.8%. Meta is up 20.6%.

Then, on September 22, Expedia announced it was joining Muse.

Key Takeaways

• At launch the 2 halves of Muse’s travel product worked differently. Flights ran through a direct integration with Duffel, which Duffel announced itself. Hotels, on Skift’s September 9 test, were shopped on consumer websites the way a person would. Meta’s own announcement names no travel partner.

• Expedia has now joined, without detailing the mechanics. Reporting says Expedia stays the merchant of record while the traveller never leaves Muse.

• That is the real question: not who processes the booking, but who controls discovery and the relationship that follows it.

• Meta’s second-quarter free cash flow was $784 million. It repurchased no stock in the first half, after $22.9 billion a year earlier, and issued $24.9 billion of net new debt.

Prices are the Wednesday September 23 close, the last completed session. Meta’s Connect event runs September 23 and 24, so Thursday is both pre-open and day 2 of the event as this is written.

Discovery, Not Transactions

Flights were the clean case at launch. Duffel, the travel infrastructure company, announced on its own site that “millions of users can now use Duffel to search, book and manage holidays on Muse”, with US users booking “from all major suppliers globally, with live pricing”. No agency in between.

Accommodation was not that. Skift’s hands-on test on September 9 found Muse shopping consumer websites, Expedia among them, operating the way a person would rather than through any integration. Meta’s own announcement is silent on partners and describes only an agent that “opens browsers, fills forms” and “checks with the person before sensitive actions”.

Expedia’s announcement sharpens the question rather than settling it. The integration is planned, not live: no launch date has been given and Expedia hasn’t explained how the connection will work. On the reported terms Expedia would remain the merchant of record, keeping the payment, the service interaction and the account, while the traveller would plan, compare and pay without ever leaving Muse. Chief executive Ariane Gorin used the Skift Global Forum to argue for being everywhere agents live, while doubting that any single agent will own the trip. Expedia already connects to Google’s AI mode, ChatGPT, Claude and Alexa.

So the threat isn’t that Expedia stops getting bookings. It’s that Expedia risks losing control of discovery: the agent decides what to surface, in what order, and the traveller’s habit forms around Muse rather than around Expedia. Whether that costs Expedia the customer depends on what people do next, and nobody knows that yet. That is a slower and less total threat than agents bypassing the agencies outright, which is the concern the share price declines raise.

What the Market Moved

Since the session before the launch Meta has added $324 billion of market value. The Nasdaq 100 rose 3.1% over the same stretch and Meta’s beta to it was 0.80 over the prior year, which accounts for roughly $38 billion. That leaves a market-adjusted move of about $286 billion.

Treat that as an illustration of scale, and not as Muse’s implied value: it isn’t one. A residual like this also carries earnings expectations, rates, positioning and analyst revisions, and the clearest example is Meta’s biggest day: September 21, up 11.3% on 48.7 million shares, 2.5 times its prior 40-session average, on a Wells Fargo target increase to $796 from $640. Travel barely moved that day.

On the other side, Booking lost $29 billion over the period, Airbnb $19 billion, Expedia $5 billion and TripAdvisor about $0.2 billion, against $241 billion those 4 are still worth. Those declines are consistent with agent risk being repriced, but they’re 4 different businesses with different exposures and the period contains more than Muse. What both sets of numbers show is breadth: the Meta move is far too large to be explained by travel, and Muse has already announced tie-ups with Shopify, PayPal and Instacart.

The Advertising Question

There is a second-order effect worth watching without overstating.

Booking spent $8,186 million on marketing last year, 30.4% of its revenue, and calls those expenses “substantially variable in nature”. Its own description of performance marketing lists search engine keyword purchases first, then affiliate programs, meta-search referrals, and “other performance-based marketing, including social media marketing” last. Expedia spent about $7.4 billion on sales and marketing; across the 4 largest agencies the figure was roughly $20 billion.

If agents take over discovery, some of that spending could be displaced rather than redirected, and Meta collects a share of it. But social is one category among several in these budgets, most performance spend goes to search, and an agency that’s losing organic customers may bid harder for the ones it can still reach. This is a question, not an offset anyone can size. Alphabet, which takes considerably more travel search advertising than Meta, is flat over the same stretch.

What Is in the Accounts

Family of Apps, which is Facebook, Instagram, WhatsApp and Messenger, is 99% of Meta’s revenue. In the June quarter it grew revenue 28.0% to $60.4 billion, and its operating income fell 6.3% to $23.4 billion. The reported operating margin went from 53.0% to 38.8%.

Be careful with that. The quarter carried $2.40 billion of legal charges and $1.18 billion of severance from a May reduction of about 8,000 people. Meta doesn’t split those between segments and says the severance hit both. If all $3.6 billion sat in Family of Apps, the margin decline would be about 830 basis points rather than 1,421, and segment operating income would have risen roughly 8% instead of falling. The truth sits between the 2. Either way, employee compensation rose 56% and other costs 75% against revenue up 28%. Reality Labs lost $4.6 billion in the quarter on $431 million of revenue.

The cash statement is less ambiguous. In the June quarter operating cash flow was $31.86 billion and free cash flow, on Meta’s own definition, was $784 million, after capital spending of $31.08 billion including finance lease principal. On the narrower measure that counts only purchases of property and equipment, the quarter produced $1.7 billion against $9.0 billion a year earlier.

How that is being funded matters too. Meta repurchased no stock in the first half, against $22.9 billion in the same period of 2025, and issued $24.9 billion of net new long-term debt. Long-term debt went from $58.7 billion at the year end to $83.7 billion. A further $10.8 billion of money market funds is now escrowed against multi-year infrastructure purchase agreements and can’t be used generally until 2028 to 2030. Full-year capital spending is guided to $130 billion to $145 billion, the low end raised twice from an original $115 billion.

The Case Against Me

This is an excellent business and the quarter says so.

Very few companies this size grow revenue 28%, and the composition is healthy: ad impressions rose 14% and average price per ad 12%. Daily active people reached 3.60 billion. Advertising is 97.6% of revenue and compounding in every region, with Rest of World up 35%. Liquidity is substantial at $90.3 billion of cash and marketable securities, though against $83.7 billion of long-term debt and $28.7 billion of lease obligations that is not a net cash position. At $744.10 the shares trade on roughly 22 times annualised first-half earnings. Management still expects full-year operating income above 2025, and has said so since January.

Muse is not a giveaway either. Meta says it is “free for most of what people need, with subscription plans for people who want to do more”, and launch coverage describes tiers at $20 and $100 a month. There is a model. What’s unproven is paid conversion and whether agent commerce earns a durable take rate.

My reservation isn’t the company. It’s that the stock was down 6.6% for the year on September 4 and is up 12.7% now, so the year arrived in 13 sessions, priced on what Muse might become.

The Setup

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The argument was strong, and it was right. If you don’t ignore the app and the brand strength, SoFi is basically a consumer lender that trades at a tech company multiple. But when borrowers stop paying, SoFi’s true nature started to appear. And that’s what took the stock from USD 32.73 down to it’s USD 14.88 low.

In July, that started to change. Charge-offs fell to 2.62% from 3.03%. Deposits grew USD 5.3B in 90 days. Originations hit a record USD 14.8B, membership crossed 15.8 million, and management raised the revenue guide for the year. Despite all that, the stock closed down 8.9%.

Almost 2 months, later it now trades at USD 17.16, around 2.5% above where it sat the day before those results. The bear case that drove a 50% drawdown lost its evidence, and the stock didn’t move.

Turns out bad loans weren’t the only problem.

SoFi is growing revenue at 42% a year and keeping less of it every quarter. Net margin has gone to 16.9%, then 15.2%, then 12.9% across 3 earnings releases. In July, management lifted the revenue guide but did not change the net profit guidance (~USD 0.6 per share). That one decision says a lot.

The argument isn’t about losses any more. It’s about conversion.

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Key Takeaways

• Q2 delivered record net revenue of USD 1.22B (+42.5%), net income of USD 156.6M (+61%), record originations of USD 14.8B (+69%), and membership of 15.8 million (+35%). That was an 11th consecutive profitable quarter.

• Credit improved. The personal loan annualized charge-off rate fell from the prior quarter, down 21 BP year over year, with 90-day delinquencies flat against last year.

• The problem moved to the income statement. Quarterly net margin dropped from 16.9% to 15.2% to 12.9% while revenue accelerated, and the adjusted EPS guide stayed the same.

• Galileo, the technology segment, fell 23% to USD 84.5M, a third straight decline. That business carries the premium multiple, but lending is carrying the company.

• Price sits mid-range in a 6-month base between USD 14.88 and 20.13, with no trend on either timeframe. Support runs 16.50 to 16.90, repair needs a daily close above 18.05, and 15.80 breaks it.

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What Actually Changed Since June

SoFi runs 3 segments. Lending covers personal, student, and home loans, and generated USD 724.8M of net revenue last quarter, up 63%. Financial Services holds checking, savings, brokerage, and the credit card, at USD 466.3M, up 29%. Technology Platform is Galileo and Technisys, the infrastructure that powers other companies’ banking apps, at USD 84.5M and falling.

The bank charter is what makes the model work. Deposits now stand at USD 45.5B against USD 60.9B of total assets, which funds the loan book far more cheaply than the warehouse facilities SoFi used before. Management put the gap at 156 basis points last quarter.

Since our June coverage here, 2 things are new.

The loan marketplace, where SoFi originates for third-party buyers and collects fees without keeping the credit risk, stabilized. Third-party personal loan volume came in at USD 3.1B against USD 3.0B the prior quarter, producing USD 140.9M of platform fees. Total fee-based revenue reached USD 472.3M, or 39% of the quarter, up 22%.

The other is the stablecoin build-out. On September 22, SoFi moved its entire USD 25B card program to settle on Mastercard’s network in SoFiUSD, its own USD-pegged token. Shares popped almost 6% intraday and but it didn’t stick by market closing time.

Share

Fundamental Analysis

The headline numbers are better than the share price implies.

• Net revenue: USD 1.22B in Q2, up 42.5% year over year. Trailing 12-month revenue USD 4.31B.

• Net income: USD 156.6M, up 61%. Trailing 12-month net income USD 636.3M.

• Adjusted EBITDA: USD 357.8M, up 44%, at a 30% margin.

• Originations: USD 14.8B, up 69%, a record. Personal loans USD 10.7B, student USD 2.7B, home USD 1.4B.

• Members: 15.8 million, up 35%, with a record 1.1 million added. Products 24.4 million, up 42%.

• Deposits: USD 45.5B, up USD 5.3B in the quarter.

• Tangible book value: USD 7.34 per share, up 56%.

• Net interest margin: 5.98%, up 4 basis points from the prior quarter.

Margin on the lending book widened last quarter rather than shrank. Average asset yields did fall 32 BP year over year, but cheaper deposit funding more than absorbed it.

So where did the money go?

Into cost and tax, not credit. The provision for credit losses was USD 13.8M in the quarter, up USD 3.7M from a year earlier, which is far too small to account for it.

Revenue grew USD 118M from the March quarter while net income fell USD 10M. Every dollar of incremental revenue arrived with equivalent incremental cost behind it.

Net margin has now compressed 3 quarters in a row, from 16.9% in the December quarter to 15.2% in March to 12.9% in June, and adjusted EPS has come in at USD 0.12 for 3 straight quarters too. The full-year guide assumes an effective tax rate near 22%.

Growth that doesn’t reach the bottom line is growth the market discounts. That’s the 8.9% selloff, and the April earnings report warranted a similar reaction.

On the valuation:

• P/E (TTM): 34.8. Forward: near 29x this year’s USD 0.60 consensus and about 21x next year’s USD 0.83.

• P/S (TTM): 5.1. P/B: 2.0, or 2.3x tangible book.

• Net margin (TTM): 14.8%. ROE (TTM): 6.2%.

• Debt/equity: 0.31, with USD 3.41B of debt against USD 3.13B of cash. Net debt is roughly USD 279M.

• Consensus: mean target USD 20.34, median USD 19.00, range USD 12 to USD 30, across 22 analysts, with an overall rating of hold.

The 6.2% return on equity is the weak spot. Robinhood earns 23.6% RoE and trades at 55x trailing earnings. Ally earns 9.7% and trades at 9x. earns 6.2% and trades at 35x.

A 42% growth rate validates some of that gap, but definitely not all of it.

Trailing free cash flow is negative USD 8.80B. At a deposit-funded lender, originations held for sale run through operating cash flow while the deposits funding them sit in financing. A lender growing originations at 69% will show deeply negative operating cash flow by construction. Judge this balance sheet on capital, funding cost, and credit, all of which improved.

Fundamental conclusion: The franchise is compounding faster than almost anything in consumer finance, credit is behaving, and funding keeps getting cheaper. What hasn’t arrived is operating leverage. Until net margin stops sliding or Galileo stops shrinking, 35x trailing earnings on a 6.2% ROE asks the buyer to underwrite a profit inflection that management itself declined to guide toward. The October print is the next chance to settle it.

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Technical Analysis

Weekly Chart

Step back far enough and 2026 is one long repair job.

The high was 32.73, and then broke down to almost half by late March. Since then, it’s been oscillating between 14.88 and 20.13. The bottom end has been tested in 5 separate months, from March through July. The ceiling has held strongly, and there hasn’t been a weekly close above 20 since the first week of Feb 2026.

• Trend strength is absent. ADX reads 10.9, and a trend-strength gauge below 20 says range-bound chop rather than directional trend. Breakout entries fail repeatedly in this regime.

• Price is threading the long averages. The 20-week EMA, roughly 5 months of price, sits at 17.81. The 50-week, about a year, is 18.71. Both sit just overhead and both have flattened. The 200-week, close to 4 years of price, is 15.78 and rising into the range from below.

• Momentum is improving from a deep hole. The weekly MACD line at minus 0.49 has climbed above its signal at minus 0.64, with the histogram positive at 0.15 and expanding, meaning downside momentum is fading even though the reading remains below zero.

• The ceiling is higher than the range top. The weekly Ichimoku cloud, a shaded band that acts as trend-following support and resistance, sits at 20.67 to 22.36. Price hasn’t traded inside it since February.

• RSI 45.5 is neutral, with no divergence either way. Weekly volume last week ran at about half its 20-week average, which is what apathy looks like.

A 6-month base holding above a rising 200-week average is good, but the weekly close pattern is not so good.

Daily Chart

The daily picture is tighter and currently tilted against buyers.

Price at 17.16 sits below all 4 daily moving averages, and they’ve bunched into a band barely 7% wide: the 20-day at 17.46, the 50-day at 17.62, the 100-day at 17.90, the 200-day at 18.72. Compression like that resolves eventually. It’s just hard to see which way it’ll resolve.

• The August rally has rolled over. From the July 29 low of 14.88, shares ran to 19.50 by August 28, then made lower highs at 18.71, 18.35, and 17.96. The September lows have held a shelf at 16.53 to 16.83.

• Momentum has turned down. The MACD line at minus 0.27 has slipped below its signal at minus 0.18, with the histogram negative at minus 0.09, so short-term momentum is softening rather than building.

• The trend gauge is flat on its back. ADX 10.7 confirms the weekly read. No trend to trade, so mean reversion inside the range has better odds than chasing either edge.

• Buyers haven’t actually left. Directional indicators sit at +DI 23.8 versus -DI 18.7, meaning buying pressure still holds a slight edge over selling despite the drift lower.

• Short-term momentum has reset. StochRSI at 26 on the fast line is near the oversold floor and curling up, which is where bounces inside a range usually start.

• Fibonacci confluence sits just below. Measured from the 14.88 low to the 20.13 high, the 0.618 retracement is 16.89 and the 0.786 is 16.00. The September base is sitting on the first of those.

Then there’s yesterday, September 22, which was quite an informative session.

SoFi announced that its entire USD 25B card program had gone live settling in stablecoin on Mastercard’s rails. That is a real catalyst. The stock opened at 17.93, hit 17.96, and closed at 17.16 on 98.9 million shares, roughly 2.3 times its 20-day average volume.

A genuine headline, heavy volume, and nearly the whole move sold by the close.

Technical conclusion: Both timeframes say pretty much the same thing. SoFi is moving in a range, and not trending either way really. The base held on 5 separaste occasions, so the floor is being defended. But the ceiling is also not caving in. The setup favors buying into weakness in the lower half of the range, and chasing breakouts might be beneficial under certain conditions where the price move above the major EMAs.

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First, it’s a marketplace generating USD 5.86 billion of quarterly profit. The second company is an AI buildout that burned through USD 9.97 billion of capital in 3 months and produced a loss in the division meant to sell the output.

The first is paying for the second, and the math stopped working this year.

BABA closed Monday at USD 115.75, 39% below where it was last October and 62% below its 2020 peak. Analysts have a mean target of USD 185.90 on it, 61% above here.

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Key Takeaways

• The buildout is bigger than the cash flow funding it. Capex of USD 9.97 billion (up 75% year over year) vs USD 3.38 billion of operating cash flow, with free cash flow of negative USD 6.58 billion.

• China e-commerce is still strong at 41% of revenue, but it fell 8%. Quick commerce and AI cloud both grew 45%. The headline 9% blends those, and the half that's shrinking is the biggest and highest-margin part of the company.

• The AI division loses money. AI Cloud earned USD 0.83 billion. AI Labs lost USD 2.04 billion, which is USD 4.15 of loss per dollar of its own revenue.

• Buyback was cut by 80% to USD 162 million from USD 815 million.

• Adjusted EBITA fell 30% and operating income fell 57% on revenue that grew 9%.

USD figures use 6.785 RMB/USD, the rate in the company’s own release.

runs China’s largest online marketplaces, its largest public cloud, and a set of AI models that compete with other global players. Gartner ranks it fourth worldwide in infrastructure-as-a-service and first in Asia Pacific. Omdia put its share of China’s AI cloud market at 38.1% for 2025, up from 35.8%.

There’s also an ongoing lawsuit to consider. A securities fraud class action is pending that alleges Alibaba misstated its status under the 2025 defence authorisation act as a company tied to China’s industry ministry.

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Fundamental Overview

Capital allocation

Alibaba spent USD 9.97 billion on PPE last quarter, while it generated USD 3.38 billion of cash from operations, about 1/3 less than it spent. CAPEX was also around 25.2% of revenue. 1 year ago, CAPEX was about USD 5.70 billion. Spending grew 75% while the cash paying for it grew 11%.

FCF also came out at negative USD 6.58 billion.

Something had to bridge that gap. The buyback did, falling to USD 162 million from USD 815 million (an 80% cut). Shareholders used to have the priority claim on this cash, but have since taken a back seat to AI spending.

Building the fourth largest cloud on earth is expensive, and those expenditures are starting to materialize. T-Head Semis had shipped over 560k AI chips by April, there’s around 100k Zhenwu accelerators that run on Alibaba’s own cloud, and external cloud revenue grew to 45%.

All this changes what it means to own . A year ago Alibaba was a cash-returning franchise with a cloud option attached. Today it’s a capital project with a side retail business.

Revenue segmentation

• China e-commerce: USD 16.34 billion, down 8%. Still 41.2% of the company and the single biggest line.

• China quick commerce: USD 7.85 billion, up 45%. Instant retail, a land grab with real prize money and negative unit economics nearly everywhere it’s been tried.

• AI Cloud: USD 7.14 billion, up 45%, with AI products inside it at USD 1.82 billion, about 26% of the segment.

• International: USD 4.09 billion, down 1%. Global wholesale: USD 2.05 billion, up 7%.

The e-commerce group grew revenue 4% and its adjusted EBITA fell 1%.

Growth that shrinks profit is a mix problem. The shrinking piece is the high-margin piece and the growing piece is instant retail, so nothing holding up the 19.3% margin is the part expanding.

What AI Labs costs

AI Labs and Applications made USD 0.49 billion of revenue and lost USD 2.04 billion at the adjusted EBITA level. A year earlier it lost USD 0.48 billion. Revenue grew 16% while loss grew more than 4x.

Alibaba reports AI in 2 pieces, and every report quotes the profitable one. AI Cloud made USD 0.83 billion. Put the 2 together and the AI division lost USD 1.21 billion in the quarter, with the applications loss running at ~2.5 times the cloud profit.

Qwen is part of that segment, and the models are good. Qwen3.8-Max runs to 2.4 trillion parameters and Omni-Flash takes text, image, audio and video across a million-token context. But that doesn’t make the AI business profitable.

Relative valuation

At USD 287.7 billion, what you’re paying depends entirely on which earnings you’re looking at.

• Trailing revenue of USD 154.0 billion gives 1.9x

• The June quarter’s non-GAAP earnings annualised gives 23.6x.

• Trailing GAAP earnings, 26.5x.

• The June quarter’s GAAP earnings annualised, 46.3x.

The flattering one is trailing earnings, and it’s the most quoted metric. It contains quarters this company no longer produces. Adjusted EBITA is down 30%, operating income down 57%.

Annualise the outflow against the market value and the free cash flow yield is negative 9.2%.

Fundamental conclusion: the spending is defensible and the balance sheet can carry it. Debt to equity 0.25, current ratio 1.36, and cloud adjusted EBITA up 133%, so operating leverage is arriving where Alibaba is spending. What’s changed is the claim order. The core marketplace is shrinking, the growth inside the profitable division is margin-dilutive, and the AI division loses money once you count both halves.

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Technical Overview

Weekly chart

The long picture is a broken uptrend that hasn’t repaired yet.

The week ended September 18 closed at USD 113.24, below all 3 weekly averages: the 20-week at USD 119.04, the 50-week at USD 125.63 and the 200-week at USD 120.36. It was the 5th consecutive week closing under the 20-week.

One thing still positive is that the 50-week is above the 200-week, so the multi-year structure hasn’t inverted.

Weekly RSI is 44.2. Weekly ADX, which measures how hard a trend is running, is 11.4. Under 15 means no trend at all on this timeframe, so this is more of a range than a downtrend.

The weekly Kijun, a midpoint of the last 26 weeks that often marks the floor of a trend, sits at USD 118.76.

Daily chart

Friday ran 4.33% to close at USD 113.24, reclaiming the 20-day. Monday added 2.22% to close at USD 115.75. Price now sits USD 2.36 above the 20-day of USD 113.39.

• RSI is 52.7, back above 50 for the first time since end of August.

• ADX is 20.9, and the directional lines have crossed. +DI at 32.8 now sits above -DI at 31.6. Buyers have the edge for the first time since August 21.

• MACD has crossed above its signal, -2.27 against -2.60. It’s still negative in absolute terms, so this means momentum is turning, but not good yet.

• ATR is USD 3.16, about 2.7% of price, modest for BABA, so a stop sits further away than the chart makes it look.

Also the 21st straight session below the 200-day at USD 125.90, so nothing structural is fixed.

As for the levels, the 61.8% retracement of the run from June’s low to the USD 145.53 swing high sits at USD 112.44. Alibaba closed below it for 7 sessions straight and bottomed at USD 106.64.

Monday’s high was USD 116.20, the gate, tagged to the cent. The close was 45 cents underneath at USD 115.75. Every rally since July has died below that line, and this one walked up to it and stopped.

Since the June low, 32 of 60 sessions have traded down to the 20-day at some point.

Technical conclusion: a repair in progress, and 2 sessions further into it than last week. Weekly ADX at 11.4 still says no trend on the higher timeframe and price sits below every weekly average. The daily has reclaimed 1 moving average out of 4, though RSI, ADX and MACD all turned at once. What makes it tradeable is the reclaim of the 61.8% retracement at USD 112.44. What stops it being a buy here is the USD 116.20 gate, which Monday touched and failed to close through, on less volume than an average day.

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The Trade Plan

Alibaba hasn’t set a date for the September quarter yet. It reported the same quarter on November 25 last year, so we can expect next earnings to be in around 2 months.

• Entry zone: USD 112.00 to USD 113.50. Filled Monday morning, then vacated.

  • Hovers around the 20-day and the 61.8% retracement. This is a level to wait for.

• Stop: a daily close below USD 106.50.

  • Just below the September 16 low of USD 106.64. From the middle of the zone that risks USD 6.25, or 1.98 ADR. This stock fell 52% between last October and June, so size for that.

• Targets:

  • T1 USD 118.70, where the daily Kijun at USD 118.63, the weekly Kijun and the 50% retracement all cluster.

  • T2 USD 125.50, where the 200-day at USD 125.99 meets the 38.2% retracement at USD 125.08.

  • T3 USD 145.53, the swing high.

The level to watch is USD 116.20, and Monday touched it. The high was USD 116.20 to the cent and the close was USD 115.75, so price came to the line and got turned away on below-average volume. A daily close through it turns this from a bounce into something you can hold. That close is the trigger.

So there are 2 honest ways in from here, and buying Tuesday’s open isn’t either of them. Wait for a daily close above USD 116.20 and take the breakout with the 50-day underneath you. Or wait for price to come back to the zone, which 32 of the last 60 sessions have done at some point.

What the fundamentals change here. With free cash flow negative there’s no cash yield underneath to cushion a disappointment, and no buyback bidding for the stock the way there was 2 years ago. Smaller size, and take T1 and T2 when they come.

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Conclusion

The cloud business is working. Alibaba has a defensible claim to being the AI infrastructure of the world’s second largest economy.

Right now the marketplace is paying for that, which shrank 8%, as well as shareholders who gave up 80% of their buyback. Free cash flow runs near negative USD 26 billion a year, and the applications arm is losing faster each quarter.

At 26.5 times trailing earnings none of that is priced as a disaster, and it shouldn’t be. It also isn’t priced as the largest capital program in the company’s history with nothing to show for it yet.

2 levels decide this, and Monday touched both. On the bottom side, 112.44, lost for 7 sessions this month and taken back on Friday. Monday’s gap fill retested it and held. On the upper side, 116.20, which has capped every rally since July. Monday’s high was exactly that, and it closed below it.

All content provided is for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. The trade plans, levels, and scenarios discussed are illustrative frameworks based on market structure and are not guarantees of performance. Markets involve risk, and losses are possible. Past performance is not indicative of future results. Each reader is responsible for their own investment decisions, position sizing, and risk management.

After three rate cuts in late 2025 and a long pause in 2026, the target range now stands at 3.50%–3.75%. The Fed is considering its first increase since 2023 as renewed inflation pressure - amplified by higher energy prices, tests whether policy became too loose.

Markets have already had time to prepare. Treasury yields have moved sharply higher, the 10-year yield is around 5%, and the rate-sensitive parts of the market have absorbed a meaningful tightening in financial conditions. The quarter-point move matters, but it is no longer the main surprise.

The market will not trade the hike. It will trade the path that follows it.

Key Takeaways

• A 25-basis-point hike is heavily expected and should not, by itself, break the market.

• The best realistic outcome is a hike accompanied by a credible but noncommittal inflation warning.

• The main risk is language or projections that force investors to price several additional hikes.

• A pause is not automatically bullish. A credible pause should help stocks, but a weak pause that damages the Fed’s credibility could lift long-term yields and hurt technology.

• The 10-year Treasury yield will probably provide a cleaner signal than the first move in the Nasdaq.

My Probability Weighted View

Futures markets currently imply roughly a 93% probability of a 25-basis-point hike. My tree assigns 92% to a quarter-point increase and 1% to a 50-basis-point increase. That is effectively the same headline view: there is little edge in predicting the decision itself. The useful disagreement lies in the message that accompanies it.

The probabilities below are judgment-based estimates designed to make that communication risk explicit. I assign a meaningful 25% probability to a hawkish hike, large enough that the guidance, projections and bond-market response matter more than the expected quarter point.

Figure 1 Estimated probability of each decision and communication scenario

Central estimates for the immediate reaction, not price targets. Direction and confirmation matter more than decimal precision.

Why the Message Matters More Than the Move

Today’s decision is complicated by the source of inflation. If higher prices are being driven mainly by oil and geopolitical disruption, monetary policy cannot produce more energy or repair supply routes. It can only reduce demand elsewhere in the economy. That makes aggressive tightening a blunt response.

But doing nothing also carries a cost. If households, companies and bond investors conclude that the Fed will tolerate higher inflation, inflation expectations can rise. Long-term yields may then increase even without an official hike.

This is the counterintuitive part: a credible hike can be better for stocks than an unconvincing pause. A quarter-point increase may reassure the bond market and contain the inflation premium embedded in long-term yields. A weak pause may produce a short relief rally, followed by higher yields and lower equity valuations. A credible pause, by contrast, would probably remain the more bullish immediate outcome.

The Best Realistic Outcome

The cleanest result is a 25-basis-point hike paired with a firm but limited warning: inflation remains too high, the Fed is prepared to act again if necessary, and future decisions will depend on incoming data.

That would protect credibility without committing policymakers to a predetermined sequence of hikes. It would also preserve the ability to stop if energy prices stabilize, inflation expectations ease or growth deteriorates.

Markets can live with one hike. They will struggle with an open-ended tightening cycle while the 10-year Treasury yield is already near 5%.

Figure 2 Central estimate of the immediate index reaction in each scenario

Why Technology Is the Pressure Point

Technology companies are not equally sensitive to interest rates. Profitable businesses with strong balance sheets can continue to grow through a modest increase in borrowing costs. Their valuations, however, still depend partly on earnings expected many years into the future.

When long-term yields rise, those distant earnings become less valuable today. The effect is strongest in high-multiple and speculative growth stocks. Profitable mega-cap technology should be more resilient; semiconductors and high-multiple growth will carry greater volatility; unprofitable companies dependent on external financing are the most vulnerable.

This is why investors should not treat technology as one trade. If the Fed delivers a controlled hike and the 10-year yield falls, quality technology could rally strongly. If yields break decisively higher, even excellent companies may face valuation compression.

Watch the Bond Market, Not the First Candle

The first move may be misleading. Algorithms will trade the headline, individual words in the statement and changes in the projections within seconds. The initial reaction can reverse during the press conference.

The two-year yield, the dollar and expectations for the next two meetings provide useful confirmation. Together, they reveal whether today is being treated as one adjustment or the start of something larger.

What Would Make the Decision Hawkish

Three signals would turn an expected hike into a genuinely bearish event:

• The median year-end rate path moves to 4.25%–4.50% or higher, implying at least two additional quarter-point hikes after today.

• The statement or press conference shifts from data dependence toward language that further tightening will likely be required.

• The 10-year yield moves above roughly 5.10%–5.15% and holds there after the press conference.

The mirror image would be constructive: no more than one additional hike in the projected path, no commitment to further tightening, and a 10-year yield that remains contained near or below 5%.

My Base Case

I assign a 50% probability to a 25-basis-point hike accompanied by a credible inflation warning, without an explicit promise to hike again. Across all communication variants, I assign a 92% probability to a quarter-point increase; almost identical to the market’s roughly 93% pricing.

That base case may produce a noisy and mildly negative initial reaction, particularly in technology. It does not need to become a lasting selloff. If the Fed contains inflation expectations and prevents another surge in long-term yields, the market could stabilize quickly and potentially finish higher after the press conference.

The genuinely bearish branch is narrower: a hike combined with projections and language that force investors to price several additional increases. That would tighten financial conditions far beyond today’s quarter point and challenge the valuations supporting the technology market.

Bottom Line

Today is not simply a contest between a hike and a pause. It is a test of whether the Fed can address inflation without convincing investors that a new tightening cycle has begun.

A controlled quarter-point hike is uncomfortable but manageable. A credibility problem, or the prospect of several more hikes, would be far more damaging. The Fed does not need to sound dovish to support stocks. It needs to sound credible, measured and unwilling to overcommit.

The decisive question is whether investors leave believing that today’s hike may be sufficient, or merely the beginning.

This article is for informational and educational purposes only and does not constitute investment advice. Market scenarios and probabilities reflect the author’s judgment and may change as new information emerges. Investing involves risk, including the potential loss of capital.

Will the Federal Reserve raise rates this week?

Probably.

But the decision itself is no longer the most important part of the story. With markets assigning close to a 90% probability to a hike, 25 basis points should surprise almost nobody.

The more important question is what happens after the announcement.

Does the Fed signal the beginning of another tightening cycle? Or does it deliver one cautious hike, protect its inflation credibility, and return to watching the data?

My view is that the second outcome is more likely.

But that does not mean the old bull market simply returns.

The Fed may be close to finishing before it begins. The real tightening is happening further out on the yield curve, where no central banker has complete control.

That is the thesis.

This is an oil shock, not an inflationary boom

Headline inflation is running at 3.4%. Core inflation is lower at 2.4%.

Gasoline prices are 27.4% higher than a year ago. Fuel oil is up 52%. Gasoline alone accounted for more than one-third of August’s monthly CPI increase.

That does not describe an economy overheating across every category. It describes an energy shock moving through the price data.

The source is physical.

Oil flows through the Strait of Hormuz have been severely disrupted. Saudi Arabia’s East-West pipeline, one of the main alternative routes around the strait, was then shut following drone attacks.

The result is a global economy paying more for less available energy.

At the same time, the IEA expects world oil demand to contract by 2.5 million barrels per day this year, the largest annual decline since the pandemic.

That is not evidence that the problem has solved itself. It is evidence that the price shock is already doing economic damage.

People drive less. Airlines reduce capacity. Factories use less fuel. Consumers redirect money from discretionary purchases toward transport and utilities.

Demand destruction eventually limits oil prices, but it does so by weakening the economy.

This is what makes the Fed’s position so uncomfortable. Higher rates cannot reopen Hormuz or repair a Saudi pipeline. They can only suppress demand elsewhere, hoping that the energy shock does not spread into wages, services, freight, and inflation expectations.

The Fed is not fighting an inflationary boom. It is trying to stop a supply shock from becoming a broader inflation problem.

Why a hike still makes sense

There is a respectable case for raising rates.

Energy shocks can leak into the rest of the economy. Once businesses and households begin expecting persistent inflation, they change their behavior. Workers demand higher wages. Companies raise prices preemptively. Investors demand more compensation for holding bonds.

Recovering lost credibility is much more expensive than protecting it.

The political setting also matters.

Kevin Warsh is leading the Fed while the administration is publicly arguing against higher rates. That does not prove he will hike to demonstrate independence. We cannot know his private motivation.

But it does raise the institutional cost of an unexplained hold.

A hike would show that the Fed remains prepared to act when inflation risks rise, regardless of political pressure. August’s inflation report provides enough economic justification to make that decision defensible.

The mistake would be assuming that one hike automatically means several more.

Employment remains healthy, but the economy is not accelerating uncontrollably. Core inflation has improved substantially. Oil is already destroying demand. Long-term market rates have tightened financial conditions without waiting for the Fed.

That is why I expect a hike accompanied by restraint.

The Fed can raise rates while avoiding a commitment to keep raising them.

If it does, the first market reaction could be a relief rally.

The hike is priced. A limited hiking path may not be.

A relief rally would not solve the real problem

It would be tempting to interpret dovish language as a return to easy financial conditions.

That would be a mistake.

The two-year Treasury largely reflects expectations for the Fed. The 10-year and 30-year reflect something broader:

• Inflation uncertainty

• Government borrowing

• Fiscal deficits

• Global sovereign issuance

• Reduced central-bank balance-sheet support

• Competition for long-term capital

And this is not just an American problem.

Long-term yields have risen across the UK, Europe, and Japan. That tells us the bond selloff is bigger than Kevin Warsh, bigger than one inflation report, and bigger than one Fed meeting.

The global price of duration is being reset.

The Fed can influence the overnight rate. It can heavily influence the two-year yield. It cannot dictate what investors demand to lend money for thirty years.

That means the Fed could deliver a relatively dovish hike, the two-year yield could fall, and the 30-year yield could remain stubbornly high.

Technology might rally while mortgages remain expensive.

The Nasdaq might bounce while commercial real estate continues struggling.

Rate expectations might improve while companies facing refinancing still pay much more for capital.

A dovish Fed is not the same thing as cheap money.

That distinction is the heart of this market.

AI is not broken, but the burden of proof has changed

The AI selloff began with calls to slow the development of advanced models.

What did not happen is just as important:

No major hyperscaler cut capital-expenditure guidance. No wave of data-center projects was cancelled. No semiconductor company announced that orders had collapsed.

The AI problem is still an expectations problem, not an order-book problem.

But expectations matter when technology represents more than one-third of the S&P 500.

At that weight, an AI de-rating is not merely a sector rotation. It is an index event.

The market has spent several years rewarding companies for announcing larger investments, more computing capacity, and more ambitious infrastructure plans. That phase may be ending.

Investors are beginning to ask a more difficult question:

Who can earn an adequate return on all this capital?

That is a healthier question, but not a comfortable one.

The winners will not simply be the companies spending the most. They will be the companies that can convert AI investment into durable revenue without damaging free cash flow or repeatedly returning to capital markets.

Companies with enormous cash generation have room to absorb mistakes.

Highly leveraged infrastructure operators do not.

The AI thesis is not invalidated because semiconductor stocks fall. It is invalidated when customers cut spending, utilization weakens, inventories rise, and revenue fails to keep pace with depreciation.

We are not there yet.

But the burden of proof has shifted from building AI to earning money from it.

Credit is where a correction becomes a crisis

Equities can fall because investors were paying too much. That is a valuation correction.

A crisis begins when borrowers cannot refinance, lenders pull back, defaults rise, and falling asset prices begin damaging the real economy.

That is why credit matters more than the VIX.

Private-credit borrowers are particularly exposed. Many have floating-rate debt. They are now facing the combination of higher interest costs and higher energy expenses.

Those pressures compound.

A company paying more on its debt while also paying more for transport, electricity, and materials does not need a recession to experience financial stress. It only needs margins to narrow far enough.

The most useful market distinction is simple:

If equities fall while credit spreads remain contained, this is probably a valuation correction. If equities fall while high-yield spreads widen rapidly, the market is moving toward an economic and financial event.

For now, the evidence supports caution rather than crisis.

But this is where I would look first for proof that the thesis is wrong.

What I expect next

My base case is a 25-basis-point hike followed by language that avoids promising another one.

That should be enough to protect the Fed’s inflation credibility without pretending monetary policy can solve an oil-supply disruption.

If that happens, technology and other rate-sensitive assets could rally.

But I would not expect a return to indiscriminate growth leadership.

The next phase should reward companies with:

• Strong free cash flow

• Low refinancing needs

• Pricing power

• Manageable capital intensity

• Visible returns on AI spending

It should remain difficult for:

• Highly leveraged small companies

• Weak commercial real estate

• Floating-rate borrowers

• Businesses dependent on repeated capital raising

• AI companies whose spending ambitions exceed their cash generation

Energy should remain supported while physical supply is constrained. But at current oil prices, the risk of a violent reversal is growing alongside the upside.

This is likely to remain a selective market, even if the indexes recover.

What would prove this thesis wrong

The thesis fails quickly if the Fed explicitly signals several additional hikes.

It weakens if core inflation broadens beyond energy and remains elevated across services, wages, and expectations.

The AI argument fails when hyperscalers begin reducing capex, not when executives publish cautionary essays.

And the no-crisis view fails if high-yield spreads widen aggressively, bank funding stress appears, or private-credit weakness begins spreading into public markets.

Those are the signals that would turn a difficult repricing into something more serious.

The bottom line

The Fed will probably hike.

That is not the surprise.

The potential surprise is that the hike may be less important than the market thinks, while the rise in long-term capital costs is more important than almost anyone wants to admit.

Oil is creating an inflation problem by restricting supply and destroying demand. AI is suffering an expectations shock before any confirmed collapse in spending. Neither is yet proof of a macro crisis.

The structural change is in the bond market.

The world is asking governments, companies, and investors to pay more for time, more for uncertainty, and more for borrowed capital.

A carefully framed Fed hike could produce a real relief rally. But it will not reverse that change.

The next market winner will not simply be the company promising the fastest growth. It will be the company that can finance that growth, convert it into cash, and survive without asking the market for permission.

That is not the end of the bull market.

It is the end of easy money being mistaken for a business model.

This article is for informational purposes only and does not constitute financial advice.

What this is. Every Sunday we sort the 60 stocks and ETFs we cover into trend regimes and publish the three numbers that decide each trade: entry, invalidation, target. You have them before Monday opens, so the decision is made in advance and in writing rather than in the moment. This is a risk discipline first and a stock-picking service second.

What to expect. When a beaten-down market snaps back hard we will lag the names that gapped off the bottom, because the rules wait for a reclaim. In a bad tape that wait is the whole point. You do not get to skip the drawdown and catch the first bounce with one rule, and anyone selling you a framework that does both is selling hindsight.

How to check us. Every level we publish is marked afterwards, win or lose, in the scorecard at the end of each issue, along with the running record against the S&P. Nothing gets quietly dropped.

If you already know the framework, skip to This Week’s Playbook. If a level does not sit right with you, leave a comment: we read every one, and they shape what gets covered.

Market Conditions

The broad tape softened this week. The S&P 500 (SPY) closed at 764.29, Transitional and roughly flat on the week, while the Nasdaq-100 (QQQ) at 714.88 is Trend-Hold and roughly flat on the week. Beneath the surface, regime breadth deteriorated: Breakdowns rose from 14 to 23, Repairs rose from 7 to 8, and Trend-Holds fell from 19 to 15. Regime downgrades outnumbered upgrades 23 to 7, a clear risk-off tilt. The selling concentrated in SHOP -11%, BIDU -8%, NVO -8%, RBRK -7% on the downside, while AMD +8%, INTC +7%, FFIV +5%, META +5% held up against the tape. Fresh damage showed up in ADBE, BIDU, CRWV and INTU, among others, dropping to Breakdown. Trend-Hold was reclaimed in AMD, FFIV, INTC and META, among others. That is broader than a rotation: 23 of 60 names now sit in Breakdown and the bucket grew by 9 in a week. It is not yet index-level capitulation, but it is no longer something happening only to the laggards. With trends rolling over, most pullback prices now sit too close to the level that says the idea is wrong, so the triggers that survive are mostly on strength rather than on weakness.

What Changed From Last Week

• Reclaimed Trend-Hold: AMD, FFIV, INTC, META, XOM. These reclaimed while the benchmarks did not, so they are isolated pockets of strength rather than the leadership of an advancing tape. A reclaim into a falling market is the easiest kind to give back, and the weekly chart still has to hold what the daily just took.

• Up a step from Repair into Transitional: IFX.DE. Basing turned into an actual recovery attempt.

• First repair off the lows: AIXA.DE. A damaged name showing the first sign of basing.

• Cooled out of Trend-Hold into Transitional: COPX, DG, FTI, NVDA, PLTR, RBRK, SPY, TGT. Leaders that lost their trend and now need to re-prove it.

• Lost the trend, into Repair: GLD, LLY, LRCX, RTX, UNH. Treat these as damaged until reclaimed, and note GLD fell two regimes in one week rather than one.

• Broke down: ADBE, BIDU, CRWV, INTU, NFLX, NVO, PALL, SHOP, SLV, SOFI. Fresh damage, the framework moves these to the avoid list.

How Our Trade Plans Work

Each name is classified into a regime (Trend-Hold, Transitional, Repair or Breakdown) from the 1D EMA stack, cross-checked against the 1W chart, and every level traces back to a specific indicator. T1 is the first profit-take, T2 the structural objective, T3 the stretch target. Regime sets how much risk a name is allowed and when: Trend-Hold earns full risk but only on a pullback to support or a confirmed breakout; Transitional gets half or nothing; Repair gets a starter only after a reclaim; Breakdown gets none until a reclaim confirms.

Two stops, two jobs. The trade stop is the tactical level where a single trade is wrong and you cut it. The regime invalidation is the deeper level where the classification flips and the reason to own the name is gone. One manages risk, the other manages conviction.

Size by risk, not by dollars. Stop distances in this issue run from 0.9% to 39%, so the same dollar amount in two names can mean risking 43 times as much on one as the other. Decide what a single losing trade may cost you, say half a percent of the account, and divide it by the distance from entry to stop. A 0.9% stop carries 43 times the position of a 39% stop for identical risk. The wide-stop names are not off limits; they are simply small.

This update ranks 60 names. You are not meant to trade all of them, or even most of them. Most weeks a handful sit at a level worth acting on and the rest are there so you can check our work.

The Week Ahead

No name in the universe reports during the plan week, so the levels carry without an earnings gap to work around.

This Week’s Playbook

Same four regimes as above, in the order they earn risk. Regime decides how much a name is allowed; the level beside it decides when. Detailed setups for the top names follow, and the watchlist carries every level.

Within each group the names are ordered by how far the entry sits from Friday close, nearest first. That ordering tells you where a decision is likely to be needed this week and nothing more. Across the 364 triggers we have published, those within half an average daily range were reached four times in five, while those more than one and a half ranges away were reached about one time in seven; roughly half of everything we print is never touched at all.

What proximity does not tell you is whether the trade pays, and we would rather say so than let the ordering imply it. Of the 140 near triggers that have filled, the average came back about one percent negative, with fewer than four in ten closing green. We do not yet have enough fills further out to draw any conclusion about them. So read the top of each list as the levels most likely to demand a decision, not as the ones most likely to reward it, and size every one of them off the stop underneath.

• Trend-Hold, full risk, but only at a level. On a pullback to support: BRK.B. Only on strength, above the trigger in the table: AMD, AAPL, FFIV, INTC, XOM, META, OSCR, TSM, and 4 more carrying the same instruction in the table below. MSFT, XOVR are also Trend-Hold but do not appear above: their entry sits on top of their own stop, so they are in the skip list below.

• Transitional, half size or nothing. The trend is not confirmed, so a position here is a probe rather than a holding. On a pullback, and then only at half size: ORCL, IFX.DE, DG. Only on strength, above the trigger in the table: SPY, AMZN, FTI, NVDA, ASML, PLTR, COPX, TGT, and 3 more carrying the same instruction in the table below.

• Repair, a starter only after a reclaim. Basing, not yet trending; nothing until price takes back the trigger printed beside it: AIXA.DE, GLD, LRCX, GOOG, LLY, RTX, AMAT, UNH.

• Breakdown, no exposure until a reclaim confirms. Not every dip is a setup, and cash is the position: CRWV, WMT, ADBE, NFLX, SHOP, SLV, INTU, RDW, and 14 more carrying the same instruction in the table below.

• Where the payoff justifies the stop. A wide stop is not a bad setup, it is a small one, but some names are not paying enough to be worth any size at all.

- Tight and paying: BRK.B (2% stop for 5% to T1), SPY (1% stop for 2% to T1)

- Not paying for the risk, quarter size or skip: XRPI (35% stop for 3% to T1), TGT (8% stop for 1% to T1), COPX (6% stop for 1% to T1), NBIS (39% stop for 7% to T1)

- No usable room between entry and stop, skip entirely: PLTR (0.9 ATR to its 164.55 invalidation), XOVR (1.0 ATR to its 20.20 trade stop), MSFT (1.0 ATR to its 477.15 trade stop). Measured to whichever stop is nearer, which for some of these is the trade stop rather than the invalidation printed in the table. Entering there puts you at the exit before the trade has moved.

• Where that leaves your exposure. Of the 59 names we can trade, 4 offer a price you could act on at Friday close (BRK.B, DG, IFX.DE, ORCL). The other 55, 93 percent of the book, need a level that has not arrived: 23 need a trigger to fire, 30 need a reclaim first, and 2 have no usable room between entry and stop. That is not a forecast, it is what the rules produce when most of the universe sits below its own trend, and it means the default position this week is cash. Cash is an allocation here rather than the absence of one: it is the only holding that costs nothing while you wait, and it is what lets you take a level when it finally prints. The S&P regains its trend on a daily close above 765.02, +0.1% from Friday. The Nasdaq-100 still carries its Trend-Hold. Those are the numbers that would put risk back on the table. Until one of them prints, do not manufacture a trade out of a name you like at a price the plan never gave you.

Top 5 Actionable Setups

The highest-conviction names sitting closest to a defined entry, with full detail, levels, and both stops for each. The next tier follows in the Also Actionable table, and the rest of the universe in the full watchlist below it.

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As of 7:30am in New York on Friday, before the open, Oracle was indicated about 6% higher and Adobe about 4% lower.

Plenty went into that split. Oracle beat on earnings, on backlog and on a cash burn smaller than feared. Adobe carries a recurring-revenue deceleration, a freemium transition, an AI-competition overhang and a chief executive handover. What follows isn’t a claim about which moved the price, but an argument that the most durable difference between the 2 sits on the cash flow statement.

Key Takeaways

• Oracle spent $28.5 billion on capital projects against $19.3 billion of revenue, and free cash flow was negative $5.4 billion. Adobe spent $85 million and generated $2.4 billion.

• Of Oracle’s record $23.1 billion of operating cash flow, $15.4 billion was deferred revenue, and $11.4 billion of that is prepayment the filing describes as carrying a significant financing component.

• Oracle’s gross margin on cloud and software fell 936 basis points. Its operating margin rose 612, helped by cutting sales and research spending.

• Adobe guided fiscal 2026 ending recurring revenue growth to 10.2%, below the 11.2% it just reported. It fell 4% on a quarterly revenue guide 0.4% light.

Prices are the Thursday September 10 close, the last completed session, hours before both sets of results. Friday is pre-open as this is written.

The Same Week, Opposite Capital Models

Oracle spent more on capital projects during the quarter than it took in revenue. Revenue was $19.3 billion, capital spending $28.5 billion, 147% of revenue. Free cash flow was negative $5.4 billion in the quarter, after Oracle burned $23.7 billion across fiscal 2026.

Adobe was almost asset-light by comparison. Revenue was $6.76 billion, capital spending $85 million, 1.3% of revenue. Free cash flow was $2.4 billion and it returned $2.2 billion through buybacks, 92% of it.

The financing lines complete the picture. Oracle sold $19.9 billion of stock through an at-the-market program, repaid $4.2 billion of debt, and its diluted share count rose from 2,909 million to 3,000 million. Adobe repurchased about 9.5 million shares.

One company is issuing equity to fund a capital buildout. The other is returning almost all of its quarterly free cash flow through buybacks.

Where Oracle’s Record Cash Came From

Operating cash flow of $23.1 billion, up 184%, was the headline number. It deserves reading closely.

$11.4 billion of it sits on a line that didn’t exist a year ago: “increase in deferred revenues from customer prepayments with significant financing component”. That phrase is precise. Economically, part of the arrangement functions as customer financing: Oracle receives cash well before it delivers the capacity, and the standard requires it to account for the time value of that money.

Another $4.0 billion came from other deferred revenue. Together, $15.4 billion, or 66% of operating cash flow, came from increases in deferred revenue. Excluding that increase, operating cash flow was $7.7 billion, against $28.5 billion of spending.

This isn’t a criticism of the model. Being paid in advance by counterparties of that size is a real advantage. As of the June quarter Oracle put the prepaid and customer-supplied hardware portion of its large AI contracts at $75 billion, a figure it didn’t update this time. It guides to $90 billion to $95 billion of reported capital spending this year against net cash spending of no more than $70 billion, a gap of $20 billion to $25 billion it attributes to customer prepayments and financing arrangements.

But it does change what the cash flow statement means. A record operating cash number that is 66% a build in deferred revenue measures demand and payment terms as much as profit.

The Margin Nobody Mentioned

Oracle’s operating margin expanded from 28.7% to 34.8%, which sounds like scale arriving. Underneath, the opposite happened.

Cloud and software revenue rose 33% to $17.2 billion. The cost of delivering it rose 77% to $6.4 billion. Gross margin on cloud and software fell from 72.1% to 62.7%, a 936 basis point decline, consistent with a mix shift toward infrastructure as software revenue declines. Software revenue itself fell 3%.

So where did the expansion come from? Sales and marketing fell $252 million, research and development $90 million, amortization $218 million and restructuring $321 million: $881 million across 4 lines, 36% of the entire increase in operating income.

Research and development went from 16.7% of revenue to 12.4%, sales and marketing from 13.8% to 9.4%, in the year Oracle remade itself into an infrastructure company selling AI compute. That may be efficiency. It’s worth watching whether it’s durable.

The depreciation question sits behind it. Property and equipment went from $100.0 billion to $127.8 billion in 3 months, while depreciation, though it more than doubled from a year ago, was still $3.2 billion. Much of that new asset base hasn’t reached the income statement. Capital spending doesn’t hit operating profit the day it’s incurred; depreciation begins as assets are placed in service, then runs for years.

What Oracle Actually Delivered

The demand isn’t in doubt, and it’s worth stating plainly because the rest of this piece is skeptical.

Remaining performance obligations reached $664 billion against a revenue guide of at least $90 billion. Oracle booked more than $30 billion of new AI cloud contracts, delivered 850 megawatts of capacity and more than 300,000 GPUs, almost triple the previous quarter. Cloud infrastructure revenue grew 121% to $7.4 billion.

The sequential additions are lumpy rather than linear. Oracle’s releases put remaining obligations at $523 billion after November, $553 billion after February, $638 billion after May and $664 billion now, so the quarterly additions run $68 billion, $30 billion, $85 billion, $26 billion.

This quarter’s $26 billion is in line with February’s $30 billion, and May’s $85 billion was the outlier. It’s also a net figure: obligations fall as revenue is recognized against them, which is why Oracle can sign more than $30 billion of new contracts and still show a $26 billion increase. Worth watching, not yet a trend.

Adobe’s Problem Is Not This Quarter

Adobe’s quarter was fine. Revenue beat the $6.69 billion expected, non-GAAP earnings beat about $6.08, subscription revenue grew 14%, the business and consumer group 16%, and the full-year targets went up.

2 numbers best capture the concern.

The first is the fourth-quarter revenue guide of $6.80 billion to $6.85 billion, a midpoint 0.4% below consensus. A rounding error in most contexts, a 4% move here.

The second matters more. Annualized recurring revenue ended the quarter at $27.50 billion, up 11.2%, and the company guided full-year ending growth to 10.2%. In a subscription business the recurring base leads reported revenue, so reporting 13% growth while guiding that base to 10.2% suggests some of today’s growth is the echo of a faster-growing past. That gap, not the guide, is the argument.

Set against that, Adobe converts 97% of operating cash flow into free cash flow and trades at 10.2 times the fiscal 2026 earnings it has one quarter left to finish. Oracle trades at 18.9 times a fiscal 2027 guide with 3 quarters still to run, so the horizons aren’t the same and the gap is wider than it looks.

The market isn’t confused about which is cheaper. It’s judging which still has a future, and it’s judged the whole category. Measured from their own record closes, Adobe is 64% below its 2021 peak, Intuit 61% below its 2025 peak, ServiceNow 44% and Salesforce about a third. This is not a verdict on Adobe.

The Case Against Me

The bear case on Oracle assumes the capital cycle disappoints, and there’s no evidence of that yet. Contracts are signed faster than capacity can be built, customers are prepaying at a scale that materially reduces Oracle’s external funding requirement, and Oracle repaid debt rather than adding it. Net debt is $88.3 billion against $303 billion of assets. Equity funding at these prices is dilutive, but it’s also the conservative choice.

And the bull case on Adobe is that a business growing 13%, with a billion monthly users and 92% of free cash flow going to buybacks, is priced as though generative AI has already taken it, when the evidence is a 1 point deceleration in recurring revenue. Its non-GAAP operating margin was 43.9% and its GAAP operating margin 34.8%. Adobe’s 34.8% GAAP operating margin was the same as Oracle’s, even though Oracle spent roughly 117 times as much capital per dollar of revenue this quarter.

Both could ultimately work. But today’s valuations imply radically different judgments about where the economics of this capital cycle end up.

Bottom Line

Oracle closed at a record $328.33 on September 10, 2025, the session after it first revealed a $455 billion backlog. At Thursday’s close, exactly one year later, it was 53.4% below that peak. Over roughly the same period the backlog grew another 46%, to $664 billion, the capacity is arriving and revenue is growing 30%. The market has spent that year deciding the terms of the deal matter as much as the size.

The terms are now visible. Oracle is funding an infrastructure business with customer prepayments carrying a financing component and with new shares, while the margin on what it delivers compresses and the reported margin rises anyway, helped materially by lower sales, research, amortization and restructuring expense. Adobe is funding buybacks with its own cash while the recurring base that drives its revenue slows by a point a year.

One of those is a growth company taking financing risk. The other is a cash machine taking terminal risk. The market paid 19 times for the first and 10 times for the second, which is a coherent view. It is not an obviously correct one.

This is research and commentary, not personal investment advice. Levels are illustrative; size positions to your own risk tolerance and time horizon. The author may hold positions in names discussed.

Split the quarter into the 2 segments the company reports and it stops looking like one business having a good quarter.

Autonomous Systems, 72% of revenue, grew 21.3% to $346.0 million and earned $62.3 million of segment adjusted EBITDA, an 18.0% margin. Space, Cyber and Directed Energy, the other 28%, shrank 20.6% to $134.5 million and lost $8.9 million.

Consolidated revenue rose 5.7%, the average of a business compounding and a business contracting, describing neither.

Key Takeaways

• Segment adjusted EBITDA fell 5.6% even as revenue rose. Autonomous Systems added $9.5 million; the other gave back $12.7 million.

• Space, Cyber and Directed Energy has lost money in 3 of the 5 quarters since it arrived, and lost $2.6 million across fiscal 2026 on $618.8 million of revenue.

• Guidance implies GAAP earnings of $0.21 to $0.53 a share against adjusted earnings of $3.02 to $3.34. At $140.80 those are 381 times and 44 times.

• The auditor issued an adverse opinion on internal control over financial reporting at April 30, while giving the accounts a clean one.

Prices are the Wednesday September 9 close, the last completed session, hours before the results. Thursday is pre-open as this is written, with the stock indicated roughly 5% to 7% higher.

Which Segment Is Which

It matters what sits in each segment, and the answer isn’t tidy.

Autonomous Systems holds what AeroVironment built, Switchblade and Puma and JUMP 20, but also the air and missile defense, electronic warfare and undersea units that came with BlueHalo, plus ESAero, bought for $177.9 million in March. Its growth isn’t purely organic and the company doesn’t say how much isn’t. Within it, uncrewed aircraft did the work, up 71% to $120 million, while precision strike managed 8%.

Space, Cyber and Directed Energy is different: every dollar was acquired, and AeroVironment had essentially none of it before May 2025. Both halves fell, space and directed energy down 28% to $51 million, cyber and mission solutions down 16% to $83 million.

What That Segment Has Delivered

BlueHalo closed on May 1, 2025. Announced at $4.1 billion in November 2024, the stock fell before completion, so the consideration recorded was $3.53 billion, or $3.48 billion net of cash acquired: 17,425,849 shares at $151.52 plus settlement of BlueHalo’s debt. That purchase was split across both segments, so the price doesn’t attach to the shrinking one alone.

Since then it has posted adjusted EBITDA margins of 2.2%, then -3.8%, -1.3%, 1.0% and -6.6%, and lost $2.6 million across the full fiscal year on $618.8 million of revenue. In the April quarter, seasonally the strongest, it turned $149.2 million into $1.4 million while Autonomous Systems was converting at 28.2%.

Much of the decline is mechanical rather than collapsing demand. In January the government issued a stop-work order, later a termination for convenience, on BADGER antenna work under the Space Force’s Satellite Communication Augmentation Resource program, and that revenue stopped.

Then the accounting. AeroVironment wrote down goodwill in its Space unit and reported a third-quarter net loss of $156.6 million. On June 22 it filed an amended report restating that loss to $243.8 million: the carrying value used in the impairment test had omitted goodwill arising from acquired deferred tax assets and liabilities, understating the write-down by $89.4 million. The restated impairment was $240.7 million, and every dollar sits in this segment.

The amendment said why. The error “originated from a material weakness” in controls over the goodwill impairment analysis: the company “did not have a properly designed control requiring preparation and review of a reconciliation of goodwill by reporting unit.” A second one came in with the acquisition: BlueHalo “did not design and maintain effective information technology general controls” for systems feeding its financial reporting.

Deloitte’s report dated June 29 “expressed an adverse opinion on the Company’s internal control over financial reporting because of material weaknesses”, while giving the accounts an unqualified opinion. In the quarterly report filed September 10, management concluded disclosure controls “were not effective as of August 1, 2026”, remediation ongoing. Nobody says the numbers are wrong. They say the machinery producing them has already failed once.

And Then It Won the Laser

Here’s what stops this being a simple story.

On September 2 the Army awarded AeroVironment $464.8 million to produce LOCUST X3 laser systems under the Enduring High Energy Laser program. The Army calls it its first ever production contract for a high-energy laser weapon, and AeroVironment quotes engagement costs below $5 a shot. It belongs to the segment that just lost money, follows a $52 million first international LOCUST order booked in the quarter, and landed after the quarter ended, so the record $1.5 billion backlog excludes it.

So the bear case and the bull case are the same segment: terminated space work, a $240.7 million write-down and the control failures on one side, the largest award of its kind on the other.

The 66% Fall Wasn’t Just About BlueHalo

AeroVironment closed Wednesday 65.6% below its highest close of the past year, which is tempting to read as the market’s judgment on the acquisition.

The peer group makes that hard to sustain. Kratos fell 64.2% over the same period without making a comparable purchase, and Red Cat 53.2%, while Lockheed fell 22.5%, Northrop 32.9% and the defence sector fund only 13.3%. On daily closing returns since June 1, AeroVironment correlates 0.79 with Kratos and 0.42 with Lockheed.

That doesn’t prove the acquisition contributed nothing. It does show a large common factor moving the expensive end of defense, so buying this because it’s “66% off” is betting on a sector dislocation more than a company-specific one.

2 Sets of Books

At $140.80 the equity is worth $7.16 billion. Add $730.1 million of long-term debt and $120.8 million of leases, which I’m including in enterprise value, take off $580.2 million of cash and short-term investments, and you get $7.43 billion, or 3.4 times guided revenue and 23.6 times guided adjusted EBITDA.

The earnings multiple depends which earnings you accept. Guidance is net income of $10 million to $27 million, $0.21 to $0.53 a diluted share, against adjusted earnings of $3.02 to $3.34. At the midpoints that’s 381 times GAAP and 44 times adjusted.

The adjusted number strips out $0.69 a share of intangible amortization and purchase accounting, plus $0.04 of acquisition costs. It asks investors to look past recurring acquisition accounting while the acquired businesses inside Space, Cyber and Directed Energy are shrinking.

The balance sheet frames the same thing. Goodwill and intangibles are $3.38 billion of $5.73 billion of assets, 59% of everything the company owns, and tangible equity is $1.02 billion. After the impairment, retained earnings stand at $4.1 million against $4.40 billion of paid-in capital.

The Ramp Is Not Hidden

Guidance was maintained, and the shape it implies is steep, but management says so out loud: 45% of revenue to the first half and 55% to the second, adjusted EBITDA roughly 33% and 67%, adjusted earnings 30% and 70%.

So the arithmetic is the company’s own. With $480.5 million banked, revenue of $2.125 billion to $2.225 billion needs $548 million to $582 million each remaining quarter, and adjusted EBITDA $84 million to $91 million against the $53.4 million just delivered.

That shape is normal here: last year’s April quarter produced $140.1 million of adjusted EBITDA against $56.6 million in the July quarter. The question isn’t whether a ramp is required, because management says it is. It’s whether the segment running at negative margin can turn LOCUST volume into the second-half profitability the guidance assumes. One quiet detail: the $3.18 adjusted midpoint sits under the $3.22 the street carried into the print.

The Case Against Me

The drone franchise is genuinely good: 21% growth, 18% margins, uncrewed aircraft up 71%, bookings of $0.7 billion at a 1.4 book-to-bill.

The stronger argument is that the weak segment is absorbing a terminated program while directed energy ramps behind it. On that reading the margin trough is the setup rather than the warning, and the $464.8 million award is exactly what it predicts. Excluding leases, debt less cash and investments is about $150 million, so there’s time to find out. Going into the print, all 20 analysts covering the stock rated it hold or better, with a mean target of $225.77.

My reservation is that we’re 5 quarters past the close, the segment’s revenue is lower than when it arrived, its margin is the worst it has been, and the acquisition-related control weaknesses still aren’t fixed.

The Setup

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Leading a group that moved together isn’t the same as being repriced. On daily close-to-close returns over the 3 months to September 8, IREN correlated 0.85 with Core Scientific, 0.83 with Applied Digital and 0.78 with both TeraWulf and Cipher Digital. When the basket moves, IREN moves.

Tuesday shows what that costs in information. IREN announced that its 2 gigawatt Sweetwater Hub had been conditionally classified as Base Load in the ERCOT process, a genuine milestone on its largest development. The stock rose 5.0% and finished mid-pack. TeraWulf rose 8.2%, Nebius 7.7% on a Palantir partnership, Applied Digital 7.4%.

Underneath sits the fact every write-up reached for. In the June quarter IREN’s AI cloud revenue passed its bitcoin mining revenue for the first time, $70.5 million against $66.7 million. The crossover is real. It’s also not unique, and why it isn’t is the story.

Key Takeaways

• AI cloud revenue was $70.5 million in the June quarter against $66.7 million of mining. Across the full year bitcoin was still 82% of revenue.

• TeraWulf and Core Scientific crossed earlier. What separates IREN is that it buys and runs the hardware while they lease space and power.

• Deferred revenue grew $1.84 billion, 88% of the $2.10 billion of reported operating cash flow. Of the $1,842.6 million closing balance, 97.5% is non-current.

• Contracted obligations were $16.6 billion at June 30, before July’s $2.8 billion and an August deal of undisclosed value.

Prices are the Tuesday September 8 close, the last completed session. Wednesday is pre-open as this is written.

The Crossover Is Real, and It Isn’t Rare

For the year to June, IREN did $707.0 million of revenue, up 41%. Bitcoin mining was $578.2 million and AI cloud $128.8 million, so the old business was still 82% of it. The June quarter inverts: $137.2 million total, AI cloud $70.5 million, bitcoin $66.7 million. The AI share went from 18.2% across the year to 51.4% in the final 3 months.

The annual rate hides the cost. Quarterly revenue peaked at $240.3 million in September 2025 and fell to $137.2 million by June, a 43% decline, because bitcoin collapsed faster than AI arrived. The run rate nearly halved while the full year grew 41%. IREN lost $702.6 million in fiscal 2026, $638.8 million of it non-cash impairment from decommissioning mining hardware.

Now the part that undercuts the easy version. TeraWulf got there first: HPC lease revenue was 62% of its total in March, then $31.9 million against $12.8 million of digital assets in June, 71%. Core Scientific is further along, with June colocation revenue of $136.7 million against $21.5 million of self-mining, roughly 84%. Cipher renamed itself Cipher Digital in February to make the same point.

IREN didn’t cross first and isn’t crossing alone. Anyone selling the crossover as the differentiator hasn’t read the peer filings.

What Actually Separates Them

The difference isn’t that these companies left bitcoin. It’s what they became.

TeraWulf, Core Scientific and Cipher Digital are landlords. They lease space, power and cooling to somebody else who brings the compute. TeraWulf’s Anthropic arrangement runs 20 years over 401 megawatts; Cipher’s capacity goes to AWS and to Fluidstack for Google. Landlord is shorthand: these companies still design, finance and operate complex data centres. The customer owns the compute risk.

IREN is doing something structurally different. It buys the NVIDIA hardware, operates it, and sells AI cloud services directly. Customer prepayments, the company says, cover 45% to 55% of the associated GPU capital cost.

That choice changes everything downstream. IREN carries the hardware, so it absorbs obsolescence risk a landlord never touches. Its portfolio averages roughly 4 years against 10 to 20-year base terms across much of the colocation cohort, so it re-prices sooner, either way. It needs more capital per megawatt. And if it works, it keeps the margin between renting a building and selling compute, which is the reason to take the risk.

That’s a real fork in the road, and the market isn’t pricing it. These 6 names moved within 11 percentage points of each other over those 4 sessions while running materially different businesses.

What the Contracts Say

Microsoft signed on November 3, 2025: 5 years, roughly $9.7 billion of contract value, a 20% prepayment, and an expected $1.94 billion of annualised run-rate revenue once commissioned. NVIDIA followed in May 2026 with about $3.4 billion. In July, Prometheus, Perplexity and Together AI added about $2.8 billion, and in August IREN signed a frontier lab whose value it hasn’t disclosed. Horizon 1, the first of 4 liquid-cooled 50 megawatt Microsoft deployments, arrived that month.

The company’s own measure beats adding up press releases. Unsatisfied performance obligations plus contracted lease value totalled $16.6 billion at June 30, before the July and August additions.

Hold that against the accounts, and mind the dates. The AI business billed $70.5 million in the June quarter, annualising to $282 million of recognised revenue. Operating run-rate was $1 billion on August 26. Contracted run-rate is $4 billion on capacity targeted to be operational by December 31. Those are 3 clocks, and IREN warns run-rate can materially exceed recognised revenue. The distance between $282 million and $4 billion is where the equity value lives.

Management intends bitcoin mining to be effectively decommissioned by the end of December. This is not a hedged pivot.

The Same $20.2 Billion, Divided 4 Ways

At $46.93 the equity is worth $18.5 billion. Add $7.59 billion of borrowings, take off $5.90 billion of cash, and enterprise value is $20.2 billion.

Against the $707 million reported for the year, that’s 28.6 times. Against the AI quarter annualised, 71.6 times. Against the $1 billion operating run-rate, 20.2 times. Against the $4 billion contracted, 5.0 times.

All 4 are defensible and they differ by a factor of 14. Anyone quoting a single multiple has chosen a conclusion first. What the range tells you is that the valuation already assigns substantial value to capacity that hasn’t yet produced reported revenue.

Where the Cash Comes From

Operating cash flow was $2.10 billion. On $707 million of revenue, that should stop you.

It isn’t earnings. Deferred revenue grew $1.84 billion during the year, 88% of the reported figure. That’s customer money, the Microsoft prepayment and its equivalents, sitting as a liability until capacity is delivered. Strip it out as an analytical adjustment and the underlying figure is about $259 million. The closing balance was $1,842.6 million, 97.5% of it non-current, so IREN doesn’t expect to recognise it within 12 months.

Against $4.33 billion of capital spending, free cash flow, on my calculation rather than a reported line, was negative $2.23 billion.

The gap closed in the capital markets. Inflows included $4.74 billion from ordinary shares, $6.30 billion from convertible notes and $938 million from financing facilities. After $1.62 billion of induced conversion payments, capped calls, fees and repayments, net financing cash flow was $9.68 billion. Cash went from $564.5 million to $5.90 billion against $7.59 billion of borrowings, leaving net debt near $1.7 billion, the one comfortable number.

The stack is more layered than it looks. Customers fund a large piece up front, asset-backed lenders finance much of the GPU balance, and the capital markets fund the infrastructure around it. IREN says its Microsoft GPU financing plus prepayments covers 96% of the associated GPU cost, and a newer $2.8 billion of GPU financings covers 90% before any prepayment. Revenue arrives after the capacity does.

The Pattern Worth Noticing

IREN’s intraday high was $76.87 on November 5, 2025, 2 days after the Microsoft contract. The stock is 38.9% below.

Oracle traced the same shape, peaking the session after it revealed the backlog that made it an AI infrastructure company, and sits about 53% below. The announcement was the top; the construction has been the drawdown. If that holds, the re-rating comes not from another contract but from the AI line climbing from $70.5 million a quarter toward the run-rate the company publishes.

The Case Against Me

The bull case deserves stating properly. 2026 capacity is largely sold out, the counterparties are Microsoft and NVIDIA rather than start-ups, Horizon 1 is delivered, and mining is being switched off rather than milked. Roughly 26% of the shares were short in mid-July, so delivery into that can move the price a long way.

The ERCOT ruling is more load-bearing than its reaction suggested, though it’s provisional and a later commitment gate still has to be cleared. If power is the constraint, a ruling on 2 gigawatts beats another contract IREN can’t yet serve.

The model argument cuts both ways too. Owning the hardware is what makes IREN more than a landlord, and it’s also what could ruin it if utilisation or GPU pricing disappoints.

The Setup

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On Thursday evening, after the close, Oracle and Adobe report.

Oracle set its 52-week high on September 10, 2025, the session after a first quarter that showed the market a backlog since grown to $638 billion. The stock rose about 36% that day. One year on, to the day, it reports again 54% below that high, though it has rallied 12% in the 3 sessions just gone.

Adobe, whose problem is not demand but whether it stays the layer where creative work gets monetised, is down 28% from its high. It fell 6.7% on Friday alone, after naming a new chief executive.

That ranking is the thesis. The company that proved AI demand exists has been punished roughly twice as hard as the one whose product AI is supposed to be replacing. The market would rather own contested relevance that generates cash than uncontested demand that consumes it.

Key Takeaways

• Oracle’s backlog is $638 billion, up 363% and 7.1 times guided fiscal 2027 revenue, though only about 12% converts inside 12 months. Some $75 billion is customer prepayment or hardware the customer supplied.

• Serving it costs about $70 billion of net cash capital outlay in fiscal 2027, 78% of that year’s guided revenue, with gross spending $20 billion to $25 billion higher. Fiscal 2026 free cash flow was negative $23.7 billion; net borrowings are $97.6 billion.

• Adobe’s AI-first recurring revenue passed $500 million and tripled. A freemium and pricing trade-off sized on its last call at about the same $500 million runs the other way.

• Adobe converts 40.8% of revenue into free cash flow and trades near 10.3 times it. It reports with a lame-duck chief executive, an interim finance chief and its creative head leaving.

Prices are the Friday September 4 close, the last completed session. Both report after the close on Thursday September 10. United States markets are shut Monday for Labor Day.

The Same Question, Opposite Answers

Every large software company is valued on 1 question: does AI feed it or eat it?

Oracle answered feed, turning from a database company that also sold cloud into a landlord for AI compute. Adobe is the test case for eat: it sells creative software by the seat to people whose work generative models can increasingly do, and has spent 2 years arguing it can sell the models instead.

Both answers are defensible. The risks they create are not symmetrical.

Oracle: The Backlog Is Real, and So Is the Bill

Remaining performance obligations ended May at $638 billion, up 363% and up $85 billion in a quarter. That RPO equals 7.1 times fiscal 2027 guided revenue of $90 billion, and it converts slowly: Oracle expects only about 12% recognised over the following 12 months, roughly $77 billion.

Oracle told you how it was built. Most of the last 2 quarters’ increase came from large AI contracts where the customer either prepaid for the graphics processors or supplied them. Those portions total $75 billion, close to 12% of the backlog.

That matters, but not for the reason it first appears. Management says those structures carry no degradation in margin, so this isn’t about bad contract economics. What the $75 billion does is cut Oracle’s own funding requirement: the customer has already paid for, or supplied, the most expensive component. Gross margins are still guided down through fiscal 2027, but Oracle attributes that to data-centre ramp timing and mix, not these contracts.

The business underneath is strong. Cloud infrastructure revenue grew 93% to $5.8 billion and total cloud revenue rose 47%. The Multicloud AI Database, which puts Oracle’s database inside other companies’ clouds, grew 404%. That matters most strategically, because it’s what rivals can’t replicate: the installed base of mission-critical databases is Oracle’s, and letting customers run it anywhere defends it. The applications half is weak at 10%, a drag carried by infrastructure at a company guiding 18% earnings growth.

What Oracle Has to Fund

Capital spending goes from $21.2 billion in fiscal 2025 to $55.7 billion in fiscal 2026, and fiscal 2027 is guided to about $70 billion of net cash outlay. Read that word: gross reported capital spending could run $20 billion to $25 billion higher, with customer prepayments and timing absorbing the difference. Even on the net figure, Oracle lays out 78 cents for every dollar of the $90 billion it expects to sell.

It funds that externally. Fiscal 2026 operating cash flow was $32.0 billion against $55.7 billion of spending, so free cash flow was negative $23.7 billion. Borrowings ended the year at $129.5 billion against $31.9 billion of cash and securities, so net borrowings of $97.6 billion, with leases on top. It raised $43 billion of debt and $5 billion of equity last year and expects roughly $40 billion more this year, including a $20 billion at-the-market equity programme, and says it expects no further debt issuance in calendar 2026.

None of it is hidden or fatal. Oracle still guides to $8.05 of non-GAAP earnings, under 20 times at $158.78. But the character of the asset has changed. Buying Oracle used to mean buying a toll on enterprise data. It now means underwriting a construction programme whose payback depends on customers honouring multi-year commitments. The reported $300 billion OpenAI contract alone is equivalent to roughly 47% of today’s entire backlog, which illustrates the scale of Oracle’s exposure to a counterparty still expected to consume enormous amounts of cash.

Be fair about the other side. Oracle says global utilisation of its graphics processors runs at 97.5%, and its finance chief puts steady-state return on capital in infrastructure in the high 20s. The bear case isn’t that Oracle signed bad contracts. On management’s own numbers it didn’t. It’s that an enormous amount of capital must arrive, and be spent, before those economics can prove themselves.

Adobe: The Cash Flow Is Real, the Relevance Is Disputed

Adobe’s problem is the opposite shape. Nobody doubts it can collect money. They doubt what for.

The AI progress is real. AI-first recurring revenue passed $500 million last quarter and tripled, and Firefly is approaching $300 million. More than 80% of its experience and content management customers use the agentic features built into those products, and it has pushed its agents into ChatGPT and Claude.

Then the base. Total recurring revenue exiting the May quarter was $27.10 billion, so the AI-first line is 1.8% of it. Tripling from a number that small is a leading indicator, not yet a financial event.

Now the number that reframes it. Adobe’s full-year target of 10.2% recurring revenue growth carries roughly $480 million of acquired book from Semrush, and absorbs a deliberate trade-off sized on the second-quarter call at about $500 million. Adobe didn’t guide to that figure but didn’t dispute the arithmetic, and Shantanu Narayen put roughly half on deferring creative pricing and half on widening the free funnel across Acrobat, Express and Firefly. So the AI revenue Adobe is proudly adding is close to the recurring revenue it’s choosing to give up. One is the future, the other the price of buying users to sell it to.

There is a pipeline underneath: remaining performance obligations of $22.27 billion with 67% due inside 12 months, roughly $14.9 billion contracted for the coming year.

What Adobe has that Oracle doesn’t is cash. Over 4 quarters it produced $10.28 billion of free cash flow on $25.2 billion of revenue, a 40.8% margin, against net debt of $1.4 billion. At $105.9 billion of market value that’s 10.3 times free cash flow, a price the market applies only when it doubts durability rather than profitability.

The Problem Adobe Has Added

It reports Thursday having changed almost everyone who answers for it.

On September 3 the board named Anil Chakravarthy, who runs the enterprise experience business, chief executive from December 1. Shantanu Narayen becomes executive chair after 18 years. David Wadhwani, who ran creativity and productivity for nearly 5 years and was the other internal candidate, is leaving. The finance seat has been interim since June, when Dan Durn left, as it happens for Marvell. The shares fell 6.7% on Friday on nearly twice normal volume.

Read the choice, not the churn. Faced with a creative franchise under AI pressure and a faster-growing enterprise business, Adobe promoted the enterprise leader and lost the creative one. That’s coherent and arguably right. It’s also an admission about where the board thinks the growth is, a week before a print already about that question.

Potential Directions: Oracle

The print is not about the quarter. Consensus revenue is near $19.13 billion and Oracle will probably land close to it.

What decides the reaction. The backlog first: anything below $638 billion would be the first sequential decline of the AI era and would become the story. Second, the prepaid share, which sets how much of the build Oracle funds itself. Third, spending, where $70 billion net is the number to beat either way. Fourth, any change to the $90 billion and $8.05 guide.

The bull path. Backlog grows again, cloud infrastructure holds near 90%, spending is reaffirmed rather than raised, and management details financing costs. That makes Oracle a growth story with a heavy but understood balance sheet, and a stock under 20 times guided earnings has room.

The base path. Backlog roughly flat, revenue in line, spending reiterated, margins stepping down as flagged. Nothing resolves and the stock keeps trading on the financing question.

The bear path. Backlog falls, spending rises again, free cash flow deteriorates faster than expected, or a large contract is restructured. Any of those turns the discussion to the $97.6 billion of net borrowings, and the multiple stops being the constraint.

Potential Directions: Adobe

What decides the reaction. Recurring revenue, and whether the roughly $500 million trade-off implied on the second-quarter call is developing as expected. Then the AI-first line, which needs to compound fast enough to matter before the base decelerates. Then whether the deferred pricing increases stay deferred, and the full-year target of $26.50 billion to $26.60 billion and 10.2%.

The bull path. Recurring revenue beats, the trade-off tracks, AI-first revenue keeps roughly tripling, and the incoming chief executive signals pricing returns next year. At 10.3 times free cash flow, a company merely proving it isn’t shrinking would be worth considerably more.

The base path. In-line quarter, targets maintained, AI metrics good and still small. The stock stays cheap, because cheap is a judgment about the next decade, not this quarter.

The bear path. Recurring revenue misses, the trade-off costs more than $500 million, or the pricing deferral extends again. Then the argument becomes whether the seat count itself is at risk, the only version that justifies the current multiple, and a transition management is poorly placed to answer it.

Bottom Line

Oracle has the demand and must buy the capacity to serve it. Adobe has the cash and must prove anyone still wants what it sells.

I’d watch 1 number at each. At Oracle it’s the backlog, because everything else is downstream of whether $638 billion is still growing. At Adobe it’s recurring revenue against the roughly $500 million that trade-off was sized at, the one line where strategy and results meet.

2 prints, 1 evening, and opposite ways to be wrong.

This is research and commentary, not personal investment advice. The author may hold positions in names discussed.

What this is. Every Sunday we sort the 60 stocks and ETFs we cover into trend regimes and publish the three numbers that decide each trade: entry, invalidation, target. You have them before Monday opens, so the decision is made in advance and in writing rather than in the moment. This is a risk discipline first and a stock-picking service second.

What to expect. When a beaten-down market snaps back hard we will lag the names that gapped off the bottom, because the rules wait for a reclaim. In a bad tape that wait is the whole point. You do not get to skip the drawdown and catch the first bounce with one rule, and anyone selling you a framework that does both is selling hindsight.

How to check us. Every level we publish is marked afterwards, win or lose, in the scorecard at the end of each issue, along with the running record against the S&P. Nothing gets quietly dropped.

If you already know the framework, skip to This Week’s Playbook. If a level does not sit right with you, leave a comment: we read every one, and they shape what gets covered.

Market Conditions

The indexes held their ground this week while the list underneath them thinned. The S&P 500 (SPY) closed at 770.19, Trend-Hold and roughly flat on the week, while the Nasdaq-100 (QQQ) at 718.96 is Trend-Hold and roughly flat on the week.

Beneath the surface, regime breadth deteriorated: Breakdowns rose from 10 to 14, Repairs fell from 12 to 7, and Trend-Holds held at 19. Regime downgrades outnumbered upgrades 13 to 12, a close count, but the damage landed at the bad end: the Breakdown bucket grew by 4.

The selling concentrated in LULU -17%, PINS -12%, PANW -10%, ADBE -9% on the downside, while DG +8%, NBIS +8%, ASTS +7%, INTC +7% held up against the tape.

Fresh damage showed up in AIXA.DE, AVGO, ITA and LMT, among others, dropping to Breakdown. Trend-Hold was reclaimed in DG, NBIS, OSCR and RBRK, among others.

The index trend is intact but it did not extend this week, and the churn underneath cut both ways. That is a rotation inside an uptrend rather than a new leg of it.

What Changed From Last Week

• Reclaimed Trend-Hold: DG, NBIS, OSCR, RBRK, TSM. In a week of net downgrades this short list is what is holding the index up, which is what narrowing leadership looks like from the inside rather than a bullish tell. The weekly chart still has to hold what the daily just reclaimed.

• Lifted out of Breakdown into Transitional: CRWV. An early bounce that still has to prove itself.

• Up a step from Repair into Transitional: INTC, LRCX, META, SOFI. Basing turned into actual recovery attempts, one notch short of a trend.

• First repair off the lows: BIDU, NVO. Damaged names showing the first sign of basing.

• Cooled out of Trend-Hold into Transitional: ADBE, AMZN, PALL, PANW, SHOP. Leaders that lost their trend and now need to re-prove it.

• Lost the trend, into Repair: INTU, NFLX. Downgraded a full step, treat these as damaged until reclaimed.

• Broke down: AIXA.DE, AVGO, ITA, LMT, LULU, PINS. Fresh damage, the framework moves these to the avoid list.

How Our Trade Plans Work

Each name is classified into a regime (Trend-Hold, Transitional, Repair or Breakdown) from the 1D EMA stack, cross-checked against the 1W chart, and every level traces back to a specific indicator. T1 is the first profit-take, T2 the structural objective, T3 the stretch target. Regime sets how much risk a name is allowed and when: Trend-Hold earns full risk but only on a pullback to support or a confirmed breakout; Transitional gets half or nothing; Repair gets a starter only after a reclaim; Breakdown gets none until a reclaim confirms.

Two stops, two jobs. The trade stop is the tactical level where a single trade is wrong and you cut it. The regime invalidation is the deeper level where the classification flips and the reason to own the name is gone. One manages risk, the other manages conviction.

Size by risk, not by dollars. Stop distances in this issue run from 1.7% to 40%, so the same dollar amount in two names can mean risking 24 times as much on one as the other. Decide what a single losing trade may cost you, say half a percent of the account, and divide it by the distance from entry to stop. A 1.7% stop carries 24 times the position of a 40% stop for identical risk. The wide-stop names are not off limits; they are simply small.

This update ranks 60 names. You are not meant to trade all of them, or even most of them. Most weeks a handful sit at a level worth acting on and the rest are there so you can check our work.

The Week Ahead

US markets are closed Monday September 7, so this is a 4-day week. Fewer sessions means less time for a trigger to fill and less time for a thesis to prove itself, so treat every level below as having a shorter fuse than usual.

These names in the universe report during the plan week:

• Thursday: Adobe & Oracle

Earnings are binary and the framework does not trade into them. If one of these sits at a defined entry, either take it at reduced size or wait for the print and re-read the structure afterwards. A level that was valid on Friday is not wrong after a gap, it is simply no longer the level.

That one matters more than the rest of the list, because you have a live instruction on it this week: ADBE is tagged “Wait for breakout”. Take the print as the risk event it is, size for it, or stand aside until it is out.

Read the trigger, not just the date. ADBE triggers at 273.04, 2.5% (0.6 ATR) above Friday’s close, with 2 sessions to fire before the print. A published trigger does not wait for the calendar: it can fill you days before the report and leave you holding the binary the rule above tells you to avoid. That is not hypothetical. LULU reclaimed its trigger on the Monday of last week and reported on the Thursday: the print gapped it 19.4% lower, straight through a stop that works on closes, for a 16.8% loss on a level we published. If you want the setup without the coin flip, wait for the print and re-read the structure on Friday.

This Week’s Playbook

Same four regimes as above, in the order they earn risk. Regime decides how much a name is allowed; the level beside it decides when. Detailed setups for the top names follow, and the watchlist carries every level.

• Trend-Hold, full risk, but only at a level. On a pullback to support: AAPL, BRK.B, GLD, QQQ, SPY. Only on strength, above the trigger in the table: DG, ETHA, FTI, NBIS, NVDA, OSCR, PLTR, RBRK, and 4 more carrying the same instruction in the table below.

• Transitional, half size or nothing. The trend is not confirmed, so a position here is a probe rather than a holding: ADBE, AMD, AMZN, ASML, CRWV, FFIV, INTC, LLY, and 12 more carrying the same instruction in the table below.

• Repair, a starter only after a reclaim. Basing, not yet trending; nothing until price takes back the trigger printed beside it: AMAT, BIDU, GOOG, IFX.DE, INTU, NFLX, NVO.

• Breakdown, no exposure until a reclaim confirms. Not every dip is a setup, and cash is the position: AIXA.DE, ASTS, AVGO, BABA, COST, ITA, LMT, LULU, and 5 more carrying the same instruction in the table below.

• Where the payoff justifies the stop. A wide stop is not a bad setup, it is a small one, but some names are not paying enough to be worth any size at all.

- Tight and paying: GLD (2% stop for 4% to T1)

- Wide but paying, so size small: INTC (21% stop for 32% to T1)

- Not paying for the risk, quarter size or skip: SLV (11% stop for 1% to T1), META (13% stop for 1% to T1), XRPI (35% stop for 3% to T1), SOFI (13% stop for 1% to T1)

- No usable room between entry and stop, skip entirely: COPX (1.0 ATR to its 87.42 trade stop), MSFT (1.0 ATR to its 483.56 trade stop), XOM (1.0 ATR to its 154.45 invalidation). Measured to whichever stop is nearer, which for some of these is the trade stop rather than the invalidation printed in the table. Entering there puts you at the exit before the trade has moved.

Top 5 Actionable Setups

The highest-conviction names sitting closest to a defined entry, with full detail, levels, and both stops for each. The next tier follows in the Also Actionable table, and the rest of the universe in the full watchlist below it.

Read more

The stock fell 2.7% the next day, while the S&P 500 rose 1.1% and Nvidia rose 1.8%.

A week earlier Marvell had beaten, raised its outlook for 2 fiscal years, and fallen 10.3%. Broadcom now sits 27.7% below its June high and Marvell 32.2% below its own.

The growth is not in dispute. What’s being priced is what each company gave up to get it.

Key Takeaways

• Broadcom’s semiconductor segment grew 127% and its software segment 29%. Software fell from 42.5% of revenue to 29.6% in a year, and gross margin fell 210 basis points sequentially to 75% on that mix.

• Operating margin went the other way, rising about 240 basis points to 67.9% as scale absorbed the dilution. Operating income rose 92% to a record $20.1 billion.

• On August 19 Marvell granted Google a warrant over 58.97 million shares, 6.7% of those outstanding. 97.7% of it is performance-based, and full performance vesting requires $120 billion of cumulative qualifying Google revenue, 10 times Marvell’s guided year.

• Marvell’s non-GAAP operating margin is 36.6%. Broadcom’s is 67.9%. On forward guided revenue both trade near 16.4 times.

Prices are the Friday September 4 close, the last completed session.

Both Beat. Both Fell.

Marvell went first, after the close on August 27. Revenue of $2.739 billion, up 37%, a company record. Data centre revenue of $2.171 billion, 79% of the total, up 46%. Non-GAAP earnings of $0.94 a share against $0.33 on a GAAP basis. It raised fiscal 2027 revenue to $12 billion from $11.5 billion and fiscal 2028 to $18 billion, and guided the October quarter to $3.15 billion, 52% growth against 37% just delivered.

The stock fell 10.3% the next session. Be careful attributing all of that to the print: the sector fund fell 3.5% and Nvidia 4.6% the same day. The sector move alone was roughly a third the size of Marvell’s decline.

Broadcom’s reaction is the cleaner signal. It fell 2.7% on September 3 while the market rose, close to 4 points of underperformance with no sector excuse available.

Then on Friday Marvell rose 7.1% to $223.55. Mostly a sector day too, with the semiconductor index up 3.5% and AMD up 4.7%, on 21.2 million shares against a 20-session average of 24.4 million. Lighter buying than the selling it followed.

What Broadcom Is Paying

Broadcom has 2 businesses. Semiconductor solutions did $20.839 billion against $9.166 billion a year ago, up 127%. Infrastructure software, largely VMware, did $8.752 billion against $6.786 billion, up 29%.

So software has gone from 42.5% of revenue to 29.6% in 4 quarters. Not because it shrank: it grew 29%, and is being diluted by a semiconductor business growing 4 times faster.

The 2 halves don’t earn the same way, and you see it in the gross line. Consolidated gross margin came in at 75%, down 210 basis points sequentially, which the company attributes to AI mix. AI semiconductor revenue carries a lower gross margin than software on average, so as accelerators take a larger share of the mix they pull the consolidated figure down.

Now the part that complicates the bear case: operating margin didn’t follow it down. It rose about 240 basis points year over year to 67.9%, and operating income rose 92% to a record $20.1 billion. Scale is absorbing the dilution faster than the mix creates it. The fourth quarter is guided to about 66%, on revenue up another 18%.

So the honest statement isn’t that margins are falling. It’s that Broadcom is accepting a structurally lower-margin mix in exchange for volume, and operating leverage is currently masking the cost. An investor who paid a software multiple is watching the software proportion fall by a third in a year. That’s a change in the thing being valued while you hold it, whether or not the operating margin shows it.

What Marvell Paid

Marvell’s cost is explicit, and it isn’t in the income statement.

On August 19 Marvell disclosed an expanded custom-silicon relationship with Google, covering inference accelerators, storage and network interface controllers, memory interface controllers and near-memory compute attached to Google’s tensor processing unit ecosystem.

The price was a warrant: Google can buy up to 58.97 million Marvell shares at $206.58, exercisable to August 2033. At that strike, exercising all 58.97 million shares for cash would imply an aggregate exercise price near $12.2 billion, though the warrant also permits cashless exercise. Against 876.9 million shares outstanding the cover is 6.7%. Marvell closed Friday at $223.55, so the strike is already 8% in the money.

Look at the vesting. A total of 1,360,867 shares vest on time over the first year, in 4 quarterly instalments of roughly 340,000. The other 57.61 million, which is 97.7% of the warrant, are performance-based: they vest in 240 tranches, 1 for every $500 million of custom-product revenue Marvell records from Google, to the end of fiscal 2033.

Full performance vesting therefore requires $120 billion of cumulative Google revenue. Marvell’s entire guided fiscal 2027 revenue is $12 billion. The warrant is calibrated to 10 times a full year of everything Marvell sells.

That tells you how large Marvell thinks this can be, and about bargaining power: it put real equity behind the relationship to secure Google’s long-term custom-silicon business. On the day it was disclosed Marvell rose 9.9% and Broadcom fell 4.6%, because Google had broadened its supplier base beyond Broadcom, which holds long-term agreements to develop Google’s future accelerators and supply components for its AI racks as late as 2031.

The Gap Between Them

These get discussed as rivals. The numbers side by side make that struggle.

Broadcom’s AI revenue in the fiscal third quarter alone was $16.7 billion, 1.4 times Marvell’s guided revenue for a year. Its guided fiscal fourth quarter, about $34.8 billion, is nearly 3 times Marvell’s guided year. Its fiscal 2028 line of sight is $230 billion against Marvell’s $18 billion of total revenue.

The profitability gap is wider. Marvell’s non-GAAP operating margin was 36.6%, and 16.8% on a GAAP basis. Broadcom’s was 67.9%.

What “Line of Sight” Carries

Broadcom’s $115 billion and $230 billion rest on what it called secured supply and conservative deployment assumptions. That’s real demand backed by secured supply, and I’m not waving it away.

But look at whose spending they describe. Broadcom named 6 custom accelerator customers, and Hock Tan said Anthropic is on track to become the largest in 2027 and stay there into 2028. Google and OpenAI are others.

Google funds capital spending from one of the largest cash-generating businesses in existence. Anthropic and OpenAI fund themselves by raising capital. Their demand is real; whether it converts on schedule depends on rounds not yet raised.

The market has built machinery for that gap, and Broadcom is inside it. In June, Apollo led a $35 billion financing with Blackstone and a group of banks to fund more than 1 gigawatt of Anthropic compute, under an arrangement meant to enable over 20 gigawatts for frontier AI labs through 2028. That cuts both ways: evidence the demand is bankable, and evidence that external capital is an integral part of the funding model. That isn’t a prediction of failure. It’s an observation that the visibility rests on someone else’s capital plan.

The Case Against Me

The strongest counter is valuation.

Broadcom’s enterprise value is about $1,738 billion against roughly $105.9 billion of fiscal 2026 revenue, the 3 reported quarters plus the guided fourth, or 16.4 times. Marvell’s is about $197 billion against $12 billion guided, which is also 16.4 times. The market pays the same multiple of next year’s revenue for a company earning 36.6% operating margins as for one earning 67.9% at 9 times the scale.

On revenue multiples alone Broadcom’s profitability makes the identical pricing hard to ignore, though Marvell’s faster growth complicates the comparison and both could be wrong in the same direction. The sell side leans the same way: Broadcom’s average target is $533 against $357.90, with 3 holds and no sells among 49 analysts; Marvell’s is $285 against $223.55.

The mix argument also has a ceiling. If Broadcom does $230 billion of AI revenue in 2028, the software percentage will be a footnote nobody remembers.

The Setup

Broadcom is in the weekly plan I publish and Marvell isn’t, so I’ll say which is which.

1. This weekend’s plan cut Broadcom to Breakdown and its status to avoid. The reclaim is now above $373.55, invalidation $342.33, first objective $380.62. Note where those come from: $373.55 is the 20-day exponential average and $342.33 is Thursday’s intraday low. At $357.90 the stock sits between them, below its 20, 50 and 200-day averages of $373.55, $382.84 and $368.11.

2. Check the geometry first. Buying $373.55 with invalidation at $342.33 risks $31.22 to make $7.07, about 0.23 to 1. The status is avoid and the geometry is most of the reason.

3. Marvell’s levels are mine. It gapped from $241.45 to open at $225.26 on August 28 and hasn’t closed it. Friday’s $223.55 sits just under the lower edge.

4. The zone is $212 to $224, bracketing both exponential averages and Friday’s close, so the stock is already inside it. Invalidation is a close below $199, under the September 1 low of $200.62. From the middle that risks about $19, or 1.2 average daily ranges, and pays 1.2 to 1 at the $241.45 gap fill and 1.8 to 1 at the upper band.

5. Buying strength above $225.26 instead risks $26.26 to make $27.02, about 1 to 1. The pullback pays better than the chase, though not by much. Marvell’s October 6 investor day is meant to quantify the Google opportunity.

Bottom Line

Both delivered. Broadcom’s was one of its strongest quarters on record; Marvell raised its outlook for 2 years in one release.

Both stocks are about 30% below their highs, and the market appears increasingly focused not on whether the AI revenue arrives but on what winning it costs. Broadcom is paying in mix: the high-margin half is under 30% of revenue, and it shows at the gross line while scale protects the operating line. Marvell paid in equity, handing a customer an option over 6.7% of itself, calibrated to 10 times its current year’s revenue.

Neither is a bad business. But growth bought at a price is not the same asset as growth that arrives free, and the market has started charging for the difference.

This is research and commentary, not personal investment advice. Levels are illustrative; size positions to your own risk tolerance and time horizon. The author may hold positions in names discussed.