Flow Recap

The Spoils of War

Good afternoon folks, happy Friday!

What a week. I mean that. If you stepped away from the screens for even a few hours this week, you probably came back to a completely different market narrative than the one you left behind. That’s the kind of environment we’ve been living in, and honestly, it’s the kind of environment where flow analysis becomes the most valuable tool in the toolkit. Price action tells you what happened. Flow tells you what people were thinking when it happened, and more importantly, what they’re positioning for next.

We came into this shortened holiday week relatively concerned but as noted in last wek’s letter, rather optimistic after last week’s broad selloff, which saw the S&P post its worst week since November while the Nasdaq notched its fifth consecutive weekly decline. AI disruption fears had been spreading like wildfire across sectors that most people hadn’t even considered vulnerable. Insurance brokers, wealth managers, real estate services, logistics companies. The Magnificent Seven were under siege with Amazon alone shedding over $450 billion in market cap across a historic 9-day losing streak. Defensive sectors were catching all the love. Utilities, materials, and real estate were the only places to hide, while tech, financials, and communication services were getting absolutely hammered. Individual investor bullish sentiment had cratered to 12-week lows, and the fear was palpable.

The question heading into this week was simple: is this a dip worth buying (we thought so), or the start of something uglier?

Four sessions later, I think the answer the market gave us is... both. And the flow proved it in real time. Let me walk you through it.