To The Moon

Hello everyone! Today i want to share some ai trading stories with you!

1 Semiconductor stock charts just formed this bearish shape that signals more potential losses

The bears may not be going anywhere on semiconductor stocks.

Quick insight: $VanEck Semiconductor ETF(SMH)$— which counts $NVIDIA(NVDA)$, $Taiwan Semiconductor Manufacturing(TSM)$, and $Broadcom(AVGO)$ as its top three holdings — has begun to form a head-and-shoulders stock pattern, according to Yahoo Finance AlphaSpace chart analysis (below).

The left shoulder took shape starting in mid-May, with the head forming in late June, and now the right shoulder has emerged. The pattern will be official if the ETF falls below the May 19 closing low of $543.

The head-and-shoulders pattern is widely considered bearish, as it suggests that buyers are gradually losing control of the market for a particular stock or ETF.

During the formation of the left shoulder and head, buyers can still push prices to new highs. But the inability to push higher on the right shoulder suggests that buyer demand is beginning to weaken.

Once sellers push the stock below the neckline, many traders interpret that move as evidence that the prior uptrend has ended and that a new downtrend may be emerging.

The backstory: Investors are worrying that the AI spending boom may be cooling after years of extraordinary growth and soaring valuations. The sector is also facing concerns about potential export restrictions, tariffs, and geopolitical tensions that could disrupt chip sales to key international markets. 

At the same time, investors are questioning whether demand for AI chips can continue growing fast enough to justify the massive capital spending plans and lofty expectations baked into many semiconductor stock prices.

"We're seeing the returns on investment," AMD chair and CEO Lisa Su said, pushing back on the bearish narrative, on Yahoo Finance (see video above). "Demand for compute is at a premium today. … We are very confident in the demand picture being there."

Bottom line: Another drop in the chips stock mustn't be ruled out. The bears could remain in control as the bulls await more positive catalysts post-summer.

2 Investors are bracing for a hawkish Fed meeting. Here's what it means for markets.

The Federal Reserve is in the middle of one of its most uncertain policy meetings in years.

Investors are largely anticipating the central bank to keep rates on hold at the end of its July policy meeting, but uncertainty has grown about what the central bank could decide about the direction of monetary policy on Wednesday.

Sticky inflation has left the door open to a surprise rate hike. Investors see a 71% chance that the Fed will keep rates unchanged, and a 29% chance rates will be hiked 25 basis points, according to the CME FedWatch tool.

It marks the highest amount of uncertainty over the Fed's interest rate decision since 2024, when markets were split over how much the Fed would cut interest rates.

In a note to clients on Friday, Bank of America called the uncertainty surrounding the Fed's rate decision "highly unusual."

Even if it doesn't happen this week, investors see a rate hike in the cards sometime this year, but expectations have whipsawed in the past month, largely due to recent swings in oil prices. Brent oil tumbled from its wartime peak as a resolution between the US and Iran appeared close, but jumped back above $100 a barrel as talks broke down earlier this month. Oil is once again back down on Tuesday on renewed hopes for a deal.

Here's everything investors need to know going into the Fed meeting:

Watch for dissents, supply shock talk

Even if the Fed were to keep rates on hold, other central bankers may issue hawkish messaging about what they think the path forward could be, Michael McGowan, the chief investment strategist at Pathstone, wrote on Tuesday.

It's an open question whether a rate hike would be effective in quelling recent inflation, given that higher prices are being driven by supply-side factors. Tightening monetary policy doesn't address the true source of inflation, which is the oil shortage, he added.

"With oil prices remaining volatile and inflation expectations at risk of de-anchoring, we don't expect the Fed can hold with the same conviction it's shown recently. If the Fed holds, potential dissents in favor of hikes could be an interesting tell," McGowan wrote.

Investors will likely zero in on comments around core inflation, given Fed chair Kevin Warsh's stance on the Fed forgoing forward guidance, Bill Adams, the chief US economist at Fifth Third Commercial Bank, wrote in a note.

"If the Committee or Chair Warsh offer even an inkling of guidance, they likely will indicate that the decision between holding rates steady or hiking in September will be data dependent," Adams said.

Economists at MacQuarie added that they're expecting a "hawkish hold with potential dissents" from other central bankers.

Markets are pricing in a 90% chance that rates will end the year higher than current levels, CME FedWatch data shows.

Expect Wednesday to be volatile for markets

Stocks are poised for potentially big swings as investors digest the rate decision on Wednesday. The ProShares VIX Short-Term Futures ETF, one fund that gains when investors are betting on increased volatility in markets, has climbed nearly 2% since last Wednesday.

"The market feels like a coiled spring," Mark Hackett, the chief market strategist at Nationwide, wrote in a note, pointing to fresh inflation figures and an onslaught of large-cap earnings expected this week.

Borrowing costs could push higher

If the Fed comes across as hawkish, borrowing costs could begin to surge in other areas of the economy as investors raise long-term rate expectations.

Yields have already begun to tick higher as the focus on inflation has intensified. The 10-year US Treasury yield briefly spiked above 4.7% last week as oil prices reclaimed $100 a barrel, hitting the highest level since early 2025.

The average 30-year fixed US mortgage rate, which is influenced by the 10-year Treasury yield, rose to 6.58% in the last week, its highest level since August 2025, according to data from Freddie Mac.

"We all, in our hearts, pray that we hear something from the Fed saying that it's found a new way to tame inflation and lower rates, but that's just not the reality," Melissa Cohn, the regional vice president of William Raveis Mortgage, wrote in a note. "What I'm really looking to see is just how hawkish Warsh is," she added.

Rates risk hurting stocks

Rates are already at levels that have some analysts worried about the impact on risk assets, like stocks. Higher rates tighten financial conditions and are generally seen as a headwind to risk asset prices.

In a note to clients in May, HSBC flagged that long-end Treasury yields looked like they were in the "Danger Zone," a range that has historically been associated with lower prices for risk assets.

The 10-year US Treasury yield remains above its key psychological threshold of 4.5%, while the 30-year yield remains above the critical 5% level.

As far as stocks are concerned, what matters is how fast yields and rate expectations rise, strategists on JPMorgan's markets intelligence team wrote in a note.

"If upcoming data or Fed rhetoric supports a further move higher in yields above 4.8%, we should start to see more pressure on rate-sensitive stocks," the bank added.

3 OPEC+ Is About to Pause Oil Output Hikes. Here's What It Means for Oil Stocks.

OPEC's likely decision to pause additional output cuts could impact supplies later this year. The Strait of Hormuz has remained disrupted, forcing the oil market to burn through oil inventories and emergency stockpiles. The economy will eventually need to refill these shock absorbers, which could keep crude prices elevated. Goldman Sachs recently warned that oil could top $120 a barrel in the near term and average $100 next year if current disruptions persist. Higher oil prices would enable oil companies to make even more money.

Rollback reversed

Core members of OPEC+, which includes Saudia Arabia, Russia, and Iraq, will meet early next month to set their output target for September. The group expects to increase their production target by about 188,000 barrels per day (BPD) for September. That's the same monthly increase as June, July, and August. OPEC+ members have been increasing their production quotas due to the impact of the war with Iran on the oil market.

The September increase would mark the end of their phased rollback of a 1.65 million BPD supply cut that the group agreed to in 2023 to boost oil prices. They have been steadily increasing their collective production allotment this year to help offset the impact of the Strait of Hormuz disruption on supplies. However, while OPEC+ has agreed to increase output, several members continue to struggle to get oil to the global market due to supply disruptions. For example, Iraq's oil output has plunged from 4 million BPD before the war to around 1.4 million BPD.

OPEC's strategy of limiting member production has already led the UAE to leave the group this past May. Meanwhile, Iraq recently threatened to leave OPEC if it couldn't increase its output. OPEC's decision to maintain its production after September through the end of the year could hasten Iraq's departure, especially if OPEC doesn't boost its production quota for 2027.

The potential impact on oil stocks

OPEC's likely decision to pause additional output cuts could impact supplies later this year. The Strait of Hormuz has remained disrupted, forcing the oil market to burn through oil inventories and emergency stockpiles. The economy will eventually need to refill these shock absorbers, which could keep crude prices elevated. Goldman Sachs recently warned that oil could top $120 a barrel in the near term and average $100 next year if current disruptions persist. Higher oil prices would enable oil companies to make even more money.

Another potential impact from OPEC's decision is that it could ultimately drive Iraq to leave the group. That could have meaningful implications for several major oil companies.

$Chevron(CVX)$ is working towards agreements to enter the Iraqi oil market. It recently signed memorandums of understanding with its government covering two oil fields, including the potential assumption of operational control over the large West Qurna 2, which alone accounts for 0.5% of global supply and 10% of Iraq's output. Chevron is also considering a pipeline to bypass the Strait of Hormuz. If Iraq leaves OPEC or receives a meaningful increase in its production quota, it could enable Chevron to accelerate production growth in the country.

Meanwhile, fellow U.S. oil giant$ConocoPhillips(COP)$ recently agreed to buy a 42% interest in BP Energy Company of Kirkuk. That investment will help support the ongoing development of four large-scale oil fields currently producing in the untry. The fields hold an estimated 3 billion barrels of oil that the companies can recover through rehabilitation, redevelopment, and optimization activities. There's also additional exploration potential. If Iraq can produce more oil in the future, it could enable ConocoPhillips and BP to invest more money and increase production more quickly.

A pause has potentially meaningful long-term ramifications

OPEC+ seems likely to pause any additional production increases after September. That could impact the oil market later this year as the global economy seeks to rebuild stockpiles caused by the current supply disruption. Meanwhile, it could have a longer-term impact if it drives Iraq to follow the UAE's lead and leave the group. That would allow the country to increase production at will, potentially benefiting Chevron and ConocoPhillips. This potential catalyst makes OPEC's future moves worth watching as it could have a meaningful impact on oil stocks.