The Most Worthwhile Review of This Week

What stands out this week is not a single stock's surge, but rather the market's focus narrowing to two key points: rates may be higher for longer, and AI compute chains continue to attract capital. ETF Radar's most notable changes this week also revolve around these two lines.

Key Changes This Week

• There was a clear reversal in the direction of interest rate-related indicators. VGIT shifted from slightly positive to negative, as did TLT and BNDX, which also turned from slightly positive to negative. In short, bond lines were under more pressure overall this week. - The pressure on the major US stock index has increased. SPY moved from mildly bearish to clearly bearish, but not in a panic mode; it seems more like high valuations and interest rates are starting to weigh on the market. - The semiconductor chain continued to strengthen. SOXX and AIQ's positive readings became much stronger, with EWY shifting directly from neutral to positive due to core reasons related to Middle East supply disruptions. - There was an increase in signals related to energy transportation and oil prices. BNO's signal strengthened significantly, while AMLP shifted from neutral to positive, primarily due to Middle Eastern supply disruptions. - New entries that entered tracking status this week include COPX, KWEB, and HYG, but the most focused new opportunities of the week remain in the semiconductor chain and interest rate-sensitive assets. - In terms of stable high signals, IEF and IYR remained negative, while QQQ and KBE remained positive, indicating that the market is not unilaterally one-sided but more clearly divided.

Main Story of This Week 1

Interest rates haven't eased, and bonds and real estate are feeling the pain even more.

What happened this week. First, in the US, retail sales for June 17 were notably strong. Retail sales reflect consumer spending and economic strength as well as inflationary pressures. Strong data makes markets wary that the Fed won't be able to cut rates soon. In Europe, the ECB raised interest rates by 25 basis points on June 11. A basis point is a small unit of interest rate, with 25 basis points equalling 0.25 percentage points. More critically, market expectations for further hawkish policy are still high. Hawkish, in plain terms, means the central bank is more concerned about inflation and less eager to ease monetary conditions. Additionally, Canada and South Korea also showed no clear signs of easing. With major central banks collectively leaning towards tighter policies, markets naturally expect rates to remain at higher levels for longer.

Why This Affects ETFs. Bonds are most vulnerable to upward revisions in market expectations of future interest rates. As new bonds offer higher yields, the appeal of existing bonds diminishes, putting downward pressure on their prices. The real estate sector also fears high interest rates for a simple reason: higher financing costs and more expensive mortgage loans reduce the valuation of commercial properties. In short, interest rates are like water levels. The higher the water level, the harder it is to navigate these two boats, bonds and real estate.

First, let's look at bonds. The ETF Radar model is slightly negative towards VGIT this week, with signals more consistent than last week. It shifted from positive to negative, indicating a clearer short-term pressure in mid-term US Treasuries compared to last week. VGIT primarily tracks mid-term US Treasury bonds, which are not as long as TLT but still very sensitive to interest rate changes. Over the past month, the 20-day signal for VGIT has been negative, aligning with this assessment and serving as a validation. On the TLT front, the readings suggest a slightly negative bias towards long-term US Treasuries, though signals are mixed. TLT represents long-term Treasury bonds with longer durations, meaning they are more sensitive to interest rate changes; any movement in rates will affect them more significantly. This week, it also shifted from positive to negative, although not as decisively as VGIT, the direction has changed. IEF remains consistently negative but with high signals. It tracks 7-10 year US Treasuries, which are particularly sensitive to interest rate changes and easily affected by 'higher for longer' conditions. This reading has been on the negative side continuously, not just noise over a short period.

Now let’s look at real estate. ETF Radar is negative on IYR, with signals that are quite consistent and among the strongest opportunities of the week. IYR represents the U.S. real estate sector. Real estate isn’t just about home prices; it also involves financing costs, rental prospects, and refinancing pressures. Currently, the market sees that inflation hasn’t fully softened, and central banks aren’t rushing to ease monetary policy, making it difficult for the real estate sector to relax. Over the past month, IYR’s tape has been negative, aligning with model predictions. As a side note, let’s mention SPY. The model is slightly negative on SPY but with mixed signals. This doesn’t mean that the broader market must clearly decline; rather, it indicates that high-valuation segments and interest-rate-sensitive parts are facing more pressure. This week, SPY has only seen a slight positive over 20 days, indicating that while the market hasn’t collapsed, upward momentum is not particularly broad.

The key reminder for ordinary investors in this passage is that the market did not suddenly become concerned about a recession this week, but rather has reaccepted an even less palatable reality: the economy is not weak enough to prompt central banks to pivot immediately, which means interest rates could remain at higher levels for longer. Bonds, real estate, and even some overvalued assets in large-cap stocks will likely feel this first.

Main Story of This Week 2

AI Computing Power Chain, Sparked Again This Week by Company News

The second strongest this week is the continued strengthening of semiconductors and the technology chain. The news includes three key points: First, Nvidia's investment of $500 million in Corning. Second, Foxconn reported strong performance in AI server and rack-related businesses; racks can be understood as 'cabinets' that house servers in data centers along with their. Third, there are reports of Apple and Intel's collaboration, further pulling in major end customers. Additionally, TSMC's management publicly stated that its competitive advantage has not been significantly lost, which is another stabilizing factor on the supply side.

Why This Affects ETFs. Currently, the market is not just looking at 'AI being hot', but rather at whether there are actual capital expenditures in terms of real money spent on equipment purchases, expanding capacity, and building data centers. When upstream investment exists, midstream orders are placed, and downstream large customers start to engage, the entire chain becomes more about 'what is happening' rather than just a story. For example, previously the market only heard that highways were going to be built, but now it sees excavators, steel bars, cement, and toll booths all arriving on site.

First, let's look at semiconductors. ETF Radar is slightly positive on SMH with signals that are more consistent. SMH is one of the most typical representatives in this line. This week’s new information has not undermined the original logic but rather made it clearer that AI computing power needs to continue expanding. In the past month, SMH's tape has clearly strengthened, validating the system's judgment. On SOXX, data points towards a positive bias with multiple pieces of evidence moving in the same direction. Its signals are also stronger than last week. Although Apple and Intel’s collaboration raises some questions about structural reallocation, such as whether orders might shift from certain Asian subcontractors to American factories, at least within the 1-3 month window, the market sees the industry's total pie expanding. In the past month, SOXX has risen significantly, making this point very clear. Moving on to a broader tech sector, the model is slightly positive on QQQ with consistent signals. While QQQ is not purely about semiconductors, it includes many large tech companies. Currently, its support comes from AI computing power investment, capital inflows, and increased demand for call options. Call options are contracts that provide insurance or a bet on future price increases. The fact that call options are more expensive indicates real demand for upward exposure in the market. QQQ has also risen significantly over the past 20 days, aligning with our judgment.

There was a notable change this week with EWY. ETF Radar is generally positive about EWY, but the signal is moderate given the significant change. EWY represents the Korean market, which includes many semiconductor chain companies. Therefore, its turn to positive is not because Korea suddenly became a defensive market, but rather due to the of the East Asian semiconductor supply chain. Additionally, there was previously concern over the Bank of Japan tightening monetary policy, which has not been confirmed this week, thus reducing pressure on the short side. In the past month, EWY's tape has been very strong, indicating that the market is already voting with its price. However, it is also honest to say that these varieties, such as EWY, SOXX, and CHPS, have seen significant gains over the past month. The system direction remains positive overall, but this does not mean short-term volatility will not occur. Short-term fluctuations are different from the long-term main trend.

To put it more plainly, the market is not betting on 'all tech being good', but rather on 'who is more like a water seller in AI production expansion and who is easier to continue being seen'. Water sellers are those companies that provide tools and resources during a gold rush, such as semiconductor equipment, foundries, interconnected materials, and server chains. They are now at this position.

Main Story of This Week 3

Middle East Tensions Bring Oil and Defense Back to the Forefront

Worth mentioning, but of lesser importance than the first two points. This week, developments in the Middle East continued to unfold, with mentions of disruptions related to the Hormuz Strait, near shutdowns of Kuwaiti exports, and downward pressure on US crude oil inventories. The Hormuz Strait can be seen as a critical narrow passage for global energy transportation; any blockage at this point can lead to tighter supplies. Additionally, there was an increase in implied volatility from options. Implied volatility indicates market expectations of future price fluctuations. An increase in this number typically suggests that the market is re-pricing risk.

Why Impact ETFs. Oil-related assets are most directly affected by supply constraints. When supply tightens, the market first worries about price increases. The defense sector, on the other hand, acts more like a beneficiary of 'geopolitical tensions', as prolonged conflicts can lead to higher expectations for military orders and security spending.

The ETF Radar model is generally positive but with a moderate signal for BNO, which has become more pronounced this week. BNO tracks Brent oil, and its core isn't about sudden demand spikes but supply-side disruptions. For AMLP, the readings are slightly positive but still moderate, having just flipped from neutral. It represents energy infrastructure, typically moving slower than crude oil itself but also benefiting from rising risk premiums in the energy chain. In plain terms, a risk premium is the extra price the market is willing to pay for uncertainty. Regarding ITA, the model is moderately positive with a moderate signal. The tape for ITA has been generally upward over the past month, with just one day of decline, which seems more like short-term noise rather than a disruption of the main trend.

However, this line is different from semiconductors. It now appears more 'event-driven', with not all evidence being very robust yet. So the direction is clear, but the level of evidence hasn't reached its most focused point. We will need to see if the conflict further escalates or if there's a clear cooling off instead.

Focus Next Week

• First, watch the central bank rhetoric. ETF Radar needs to continue monitoring statements from the Fed and ECB for evidence of higher rates lasting longer, or if there is any softening in their stance. - Second, monitor semiconductor company outlooks. Companies like TSMC, Foxconn, Apple, and Intel along the supply chain should provide incremental information on expansions, orders, and collaborations to potentially reinforce the tech sector narrative. - Lastly, keep an eye on Middle East developments. If the likelihood of a permanent resolution for issues in Hormuz or Kuwaiti exports remains low, energy and defense themes will likely continue to be prominent in the market.

Conclusion

To summarize, the main theme of this week is clear: on one side, global interest rates remain tight, suppressing bonds and real estate; on the other side, AI computing power chains continue to receive confirmation from companies and capital markets, with ETF Radar readings also increasingly aligning with these two sides. As a reminder, the above is the directional prediction of a systemic quantitative model for general market conditions and does not constitute personalized investment advice; please consult a licensed investment advisor before making any investments.