SPEAKER_01 0:00

Overnight, the market's uh geopolitical shock community just completely shattered. We're doing a deep dive today into a June 4, 2026 pre-market briefing from Eli Levy at Canon Trading Company to really unpack this sudden regime shift. But before we get into the mechanics of what just broke, a quick regulatory note. Trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

SPEAKER_00 0:44

Okay, so looking at the overnight damage, I mean, growth sectors just took an absolute beating.

SPEAKER_01 0:49

Yeah, led by Broadcom, right? They missed their Q3 AI chip guidance, posting like $16 billion versus the expected 17.2.

SPEAKER_00 0:56

Exactly. And what's really fascinating here is the ripple effect. I mean, uh, a miss in tech somehow triggered uh $1.5 billion in crypto long liquidations.

SPEAKER_01 1:05

Wait, a billion and a half? How does a chipmaker's forecast instantly liquidate Bitcoin traders?

SPEAKER_00 1:12

Well, it comes down to margin calls. Yeah. You know, and just overall liquidity. When a bellwether like Broadcom misses, institutional portfolios take a sudden hit.

SPEAKER_01 1:21

Ah, so they have to scramble to cover.

SPEAKER_00 1:23

Right. Over-leveraged traders are just forced to sell off their most liquid speculative assets, which, you know, happens to be crypto a lot of the time, just to cover those tech losses.

SPEAKER_01 1:33

Aaron Powell, it's like the market's AI sugar rush just wore off all at once.

SPEAKER_00 1:37

That's a great way to put it. But if you look at the dispersion in the index futures, capital isn't just like vanishing into thin air.

SPEAKER_01 1:44

Aaron Powell You mean how tech and growth are bleeding, but but the Dow and Russell are actually holding their ground.

SPEAKER_00 1:49

Aaron Powell Yeah, that discursion tells the real story here. This is a classic rotation. Money is actively fleeing the high-valuation AI space and seeking shelter.

SPEAKER_01 1:59

Seeking shelter in value stocks and industrials.

SPEAKER_00 2:01

Yep. That capital fleeing the tech sector is hunting for yield, which kind of brings us to the commodity driving this next move.

SPEAKER_01 2:08

Oil. I mean, Brent crude is trading above $97 right now.

SPEAKER_00 2:12

It is, yeah.

SPEAKER_01 2:13

But looking at the briefing, I have to wonder: are we really staring down the barrel of $100 oil simply because of shipping risks in the straight of Holmoo's? Or are there actual supply fundamentals at play?

SPEAKER_00 2:23

Aaron Powell It's definitely a combination. You know, geopolitics are the spark. Fresh headlines out of the Middle East create that immediate fear. Trevor Burrus, Jr.

SPEAKER_01 2:30

Right, the knee-jerk reaction.

SPEAKER_00 2:31

Trevor Burrus, Jr.: Exactly. But the fundamentals are adding the fuel. The latest EIA data shows U.S. commercial crude inventories unexpectedly dropped by uh 3.3 million barrels.

SPEAKER_01 2:43

Aaron Powell Wow, 3.3 million? So the physical supply is actually tightening on the ground.

SPEAKER_00 2:48

It is. And the Federal Reserve is watching this super closely. In fact, their beige book explicitly named this Middle East energy spillover as the primary driver keeping inflation elevated.

SPEAKER_01 2:59

Aaron Powell Which completely handcuffs the Fed. Because I'm looking at the ADT jobs report here, 122,000 jobs added. That came in surprisingly hot.

SPEAKER_00 3:07

Very hot.

SPEAKER_01 3:08

So let me get this straight. A booming job market is actually bad news right now because it forces the Fed to keep rates high.

SPEAKER_00 3:14

Unfortunately, yes. Because it's the combination that traps them, right? Sticky energy inflation alone is a problem. But sticky inflation alongside a highly resilient labor market means the Fed simply cannot justify lowering rates.

SPEAKER_01 3:27

Aaron Powell, which shrinks the probability of a June cut to what, like 36%?

SPEAKER_00 3:32

Roughly 36%, yeah. And that persistent higher for longer reality drastically shifts global capital.

SPEAKER_01 3:38

Aaron Powell Because those higher rates act like a financial vacuum cleaner, just sucking investment capital out of foreign markets and into the US dollar.

SPEAKER_00 3:45

Aaron Powell That's the exact mechanism at work. Capital flows to where the risk-free yield is highest.

SPEAKER_01 3:50

And right now, that's here.

SPEAKER_00 3:52

Right. And this unstoppable dollar is acting like a global wrecking ball. I mean, it's pushed gold back below $4,500. Wow. And more dramatically, it's crushing foreign currencies. Countries are selling off their own reserves just to plug the leak.

SPEAKER_01 4:05

Like Japan. Tokyo threw a massive 11.7 trillion yen intervention at the currency market, and it barely even registered.

SPEAKER_00 4:13

When the yield differential between U.S. treasuries and Japanese bonds is this wide, even a historic government intervention gets completely overpowered.

SPEAKER_01 4:21

It's just crushed by the sheer gravity of global capital seeking returns.

SPEAKER_00 4:26

Yep, exactly.

SPEAKER_01 4:27

So just pulling this all together for you, Middle East tensions constrict physical oil supply, which drives up inflation. That inflation, paired with steady jobs, stalls the Fed rate cuts.

SPEAKER_00 4:38

Right. And those sustained high rates create that vacuum cleaner effect that crushes both tech valuations and foreign currencies.

SPEAKER_01 4:45

It's an incredible chain reaction. We want to credit today's insights to Canon Trading Company and the author of the briefing, Eli Levy. You can reach him directly via email at Eli at Canon Trading.com.

SPEAKER_00 4:55

Definitely a must read for anyone navigating this.

SPEAKER_01 4:58

Which leaves you with this final provocative thought to mull over. If a single shipping checkpoint half a world away can trigger massive crypto liquidations and force Japanese currency interventions, how insulated is any modern portfolio from geopolitical shock? I mean, how long until we see tech giants vertically integrating and buying up their own energy infrastructure just to hedge their cloud computing risk against the next shock?

SPEAKER_00 5:23

That is definitely the trillion dollar question going forward.

SPEAKER_01 5:26

Absolutely. Trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.