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* FIEND'S SUPERBEAR MARKET REPORT *

* July 28, 2026 *

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* e-mail: fiendbear@fiendbear.com *

* web address: http://www.fiendbear.com *

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Fiend Commentary
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Oil Relief, AI Rotation, and the Yen Trap

Monday began with the predictable relief rally. The United States paused its attacks on Iran, oil plunged, bond yields eased, and stocks initially moved higher.

By the close, however, the enthusiasm had largely faded. The Dow gained about half a percent, but the S&P 500 barely moved and the Nasdaq fell for a fourth consecutive session. Nvidia dropped 5%, dragging the semiconductor sector lower, while Apple, Microsoft and several defensive names advanced. WTI crude finished at $82.61, Brent at $85.87, and the 10-year Treasury yield eased only modestly to around 4.65%.

That does not look like an all-clear signal.

It looks like a market rotating beneath the surface while investors wait for the Fed, the next inflation report and the next reversal in the Middle East.

The Rate-Hike Odds Refuse to Die

The strangest development is that the chance of a Fed hike remains close to 40% this week and around 80% for September—even after oil dropped nearly $10 from last week’s high.

As of Tuesday morning, futures were pricing roughly a 36% chance of a hike at Wednesday’s meeting and an 81% chance by September. Only a week earlier, the near-term probability had been approximately 16%. The dollar consequently moved to a one-month high.

That is an extraordinary amount of movement for a Fed that has not actually done anything.

Warsh has talked tough. He has eliminated much of the old forward guidance and made the meetings less predictable. But there is still no evidence that he is prepared to raise rates this week, much less before the midterms. The market may be doing exactly what he wants: pricing enough hawkishness to support the dollar and prevent long-term yields from rising even faster, without requiring the Fed to pull the trigger.

In that sense, the rate-hike probability may be part forecast and part monetary theater.

The Fed can allow investors to believe a hike is coming. That keeps metals under pressure, supports the dollar and tightens financial conditions. Warsh gets some of the effect of a rate increase without the political and economic consequences of actually delivering one.

Wednesday’s most likely outcome is still no change, followed by another stern warning that the Fed remains prepared to act if inflation does not improve.

Then everyone moves on to September.

But September is a long way off in market terms. Between now and then, there will be another employment report, more inflation data, GDP numbers, revisions and probably several changes in the Middle East situation. One weak payroll report or one significant downturn in stocks could cut those 80% odds in half almost overnight.

The CME probabilities have repeatedly moved from cuts to holds, from holds to hikes and then back again. They are useful for measuring current positioning. They are much less useful as predictions of what the Fed will ultimately do.

Apple Reclaims the Crown

The technology rotation may be more important than the movement in the indexes.

Apple closed Monday with a market value of roughly $4.93 trillion, reclaiming the title of the world’s largest public company. Nvidia fell to approximately $4.78 trillion after its 5% decline. Nvidia had briefly reached a valuation above $5.5 trillion earlier this year.

The irony is that Apple was criticized for much of the AI boom because it was not spending enough. Now that investors are questioning whether hundreds of billions in data-center construction will ever generate an adequate return, Apple’s relative restraint suddenly looks attractive.

Apple is being rewarded for not joining the spending contest with the same enthusiasm.

Nvidia, meanwhile, is facing questions about financing the very customers purchasing its chips. Reports that it may provide a massive financial guarantee for an OpenAI-related data-center project revived concern about circular financing: suppliers helping finance customers who then use the money or capacity commitments to buy more of the suppliers’ products.

The Curmudgeon has been warning about this exact structure. AI expansion is increasingly being funded with bonds, private credit, structured leases and supplier-backed arrangements. Once capital expenditure outruns free cash flow, the story becomes dependent on refinancing conditions and the market’s willingness to continue funding the buildout.

His earlier charts also highlighted the extreme rise in semiconductor shares and the concentration of speculative enthusiasm in the high flyers.

The bubble is not necessarily bursting. It may be rotating.

Capital is moving from Nvidia and some of the semiconductor leaders into Apple, software, consumer staples and other areas perceived as less dependent on limitless AI spending. That can keep the Dow and S&P 500 elevated even as the stocks that created the mania begin losing altitude.

SpaceX is another example. It closed Monday at a record low around $113.50, leaving the company with a market value near $1.5 trillion and the stock almost 50% below its June peak above $225.

Again, that does not mean SpaceX is a poor company. It means the first-day excitement placed an enormous amount of future success into the price immediately.

A speculative top does not always arrive with every stock falling together. Frequently, the most aggressive names crack first while money rotates into the remaining leaders. The major averages can look healthy for weeks or months after the internal market has begun changing.

Japan May Become America’s Problem

The hidden risk this week may not be Iran or even the Fed. It may be Japan.

The yen has fallen to roughly 164 per dollar, its weakest level in about 40 years. Japanese government bond yields have also climbed to multi-decade highs, with the 10-year recently trading around 2.7%–2.9% and the 30-year near 3.8%. Japan’s government debt remains above 200% of GDP.

That places the Bank of Japan in a trap similar to the Fed’s, only more severe.

If the BOJ raises rates aggressively to support the yen, it risks destabilizing a heavily indebted government and imposing losses on Japanese banks, insurers and bondholders.

If it keeps rates too low, the yen may weaken further, raising the cost of imported oil, food and raw materials. That worsens inflation and makes the currency problem even more politically difficult.

Doing nothing is not really doing nothing.

The weak yen also matters directly to the United States because Japan remains the largest foreign holder of U.S. Treasury securities. Its holdings fell nearly 4% in March but still totaled approximately $1.19 trillion.

If Japan intervenes to support the yen, it may need to sell dollar assets from its enormous reserve portfolio. Some of those assets are U.S. Treasury securities. Heavy Japanese selling would place additional upward pressure on American yields at exactly the moment the Treasury is issuing enormous quantities of new debt.

There is a second risk.

For years, investors have borrowed cheaply in yen and moved the proceeds into higher-yielding or faster-rising assets elsewhere—Treasuries, corporate bonds, technology stocks and other risk assets. That is the yen carry trade.

If Japan raises rates or launches a forceful intervention that causes the yen to rise suddenly, leveraged investors may have to unwind those positions. That means buying yen and selling whatever they purchased with the borrowed money.

U.S. technology stocks could become one of the sources of cash.

There is also a slower version of the same problem. As Japanese bond yields rise, domestic bonds become more attractive to Japanese pension funds, insurers and banks. They have less reason to accept currency risk in U.S. assets when Japanese government bonds finally offer meaningful yields at home.

Even a modest repatriation of Japanese capital could matter. The U.S. Treasury market is already struggling with inflation concerns, nearly $40 trillion in federal debt and long yields close to 5%.

Japan does not need to dump Treasuries to create pressure.

It merely needs to buy fewer of them.

Oil Fell, but the Pressure Remains

The collapse in oil gave markets relief, but WTI above $82 and Brent near $86 are not exactly low prices.

The pause in fighting may hold. It may lead to negotiations. Tanker traffic may improve. But none of the underlying disputes over the Strait, Iran’s nuclear program or shipping rules has been resolved.

The oil market is removing the immediate panic premium, not declaring permanent peace.

That helps explain why bond yields did not collapse alongside crude. Investors may believe this particular oil spike is fading, but they still see deficits, tariffs, persistent inflation and uncertain foreign demand for Treasury securities.

Monday’s market was therefore not as reassuring as the opening rally suggested.

Oil dropped sharply.
The Dow rose.
The S&P 500 went nowhere.
The Nasdaq fell.
Nvidia lost the market-cap crown.
SpaceX reached another low.
Fed-hike odds remained surprisingly high.
The yen moved deeper into dangerous territory.

Wall Street is treating Wednesday’s Fed decision as the big event.

The decision will probably be no decision at all.

The more important story may be what happens after the press conference—whether technology leadership keeps narrowing, whether the 10-year Treasury yield resumes its climb, and whether Japan is forced to choose between defending its currency and protecting its bond market.

The next financial shock may not begin in Washington or the Strait of Hormuz.

It may begin in Tokyo.

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