Power Law O/S Premarket Trading Report

Thursday, July 23, 2026 | Prepared approximately 7:00 a.m. ET

Market levels cited below were available between approximately 5:37 a.m. and 6:45 a.m. ET and can change materially before the opening bell. The report explicitly separates conclusions grounded in Larry Connors’ Power Law Trading O/S and prior research discussions from assistant-generated deductions.

Executive Market Regime

The premarket regime is an inflationary risk-off impulse with unusually high cross-asset dispersion, not yet a full liquidation event. At 5:37 a.m. ET, Dow, S&P 500 and Nasdaq-100 futures were each lower by approximately 0.4%. The VIX was indicated near 17.6—higher, but far below a panic regime. WTI crude was near $90.22 and Brent near $98.59, both up roughly 4%–5% as disruption risk expanded from the Strait of Hormuz toward the Bab el-Mandeb shipping route.

The oil shock is feeding directly into rates. The two-year Treasury yield was near 4.32% and the ten-year near 4.67%, while markets assigned approximately a 35% probability to a Federal Reserve increase at the July meeting and roughly 55% to a September increase. Weekly jobless claims are scheduled for 8:30 a.m. ET, after the European Central Bank decision at 8:15 a.m. ET. These events can materially alter the signal before the opening bell.

The first major technology earnings reactions are internally contradictory. Alphabet reported exceptional cloud growth but was down about 3.9% premarket after increasing AI capital-spending expectations above $200 billion. Tesla was down about 5.8% after producing negative free cash flow for the first time in more than two years. Texas Instruments reported 23% year-over-year revenue growth, sharply higher profit and strong third-quarter guidance, yet its shares were down approximately 5.2%. Conversely, ServiceNow was indicated roughly 8% higher after raising its subscription-revenue outlook, and RTX rose nearly 6% after increasing forecasts on aircraft-repair and defense demand.

Assistant deduction: The central tradable fact is not “technology is weak.” The market is separating companies funding the AI buildout from companies monetizing it, while simultaneously repricing energy, defense, inflation and interest-rate exposure. The strongest O/S opportunities therefore come from dispersion, behavioral reactions and defined-risk convexity—not a blanket long or short index position.

Complete O/S Sleeve Evaluation

1. Thematic Investing — Revolutionary Technologies

Status: Conditional

O/S-grounded: The thematic sleeve seeks power-law exposure to revolutionary technologies with limited predefined downside.

Verified current evidence: Alphabet’s cloud business grew more than 80%, and AI-related capital spending is expected to exceed $200 billion. That confirms demand for compute, memory, networking, power, cooling and data-center infrastructure. Yet Alphabet, Tesla and Texas Instruments are being punished despite substantial operating or demand evidence.

Decision: Maintain genuine long-duration thematic winners within existing risk budgets. Do not add broad AI or semiconductor beta before the 8:30 data, and do not treat large capital spending as automatically bullish for the company making the expenditure. Favor suppliers that can convert spending into revenue and cash flow over buyers whose returns remain uncertain.

2. Hedge Fund Bottleneck Strategy

Status: Conditional

O/S-grounded: Bottlenecks become investable when demand exceeds scarce capacity and the supplier captures the economics.

Verified current evidence: Alphabet’s spending validates the AI-infrastructure demand bottleneck. RTX’s $289 billion backlog and raised forecasts validate bottlenecks in aircraft maintenance, engines, missiles and defense replenishment.

Decision: RTX is the cleanest non-semiconductor bottleneck candidate today. Do not chase a roughly 6% gap. A controlled pullback that preserves most of the earnings gap, or a strong closing acceptance of the new price range, would improve the setup. That implementation is an assistant deduction, not a proprietary Bottleneck rule.

3. Behavioral Finance Alpha

Status: Actionable Candidate Set

Verified current evidence: Texas Instruments delivered an unusually strong quarter and guidance but fell about 5.2%. Alphabet delivered record cloud growth but fell about 3.9% as investors focused on capital intensity. ServiceNow raised its outlook and gained approximately 8% after two prior disappointing earnings reactions and a large year-to-date decline.

Decision: TXN is the highest-information negative reaction; NOW is the highest-information positive reaction. Neither gap is itself a trade. Sustained weakness in TXN despite strong fundamentals supports a Busted Momentum/behavioral short. A controlled NOW pullback followed by renewed relative strength supports a positive continuation candidate. The intraday confirmation method is assistant-generated unless it matches a proprietary rule.

4. Connors Mean Reversion — Second Generation

Status: Indeterminable Until the Closing Scan

O/S-grounded: A large decline is only a candidate-generation event. The actual strategy requires its trend, regime, ranking and exit rules.

Decision: Place GOOGL, TSLA, TXN, IBM and any semiconductor names finishing with extreme short-term readings into the exact end-of-day scan. No premarket decline qualifies as a Second-Generation Mean Reversion trade by itself.

5. Trading With the Giants

Status: Conditional

Verified current evidence: Alphabet is committing more than $200 billion to AI-related capital investment. RTX and defense contractors are benefiting from government restocking. ServiceNow’s AI annual contract value exceeded $1 billion and management raised guidance.

Decision: The giants are clearly spending, but the market beneficiaries are not automatically the spenders. Map Alphabet’s incremental capital expenditure into publicly traded suppliers and defense replenishment into bottleneck suppliers. Today’s prices do not justify chasing the most visible gaps.

6. Trading Shortages

Status: Actionable, but Entry-Sensitive

Verified current evidence: Oil has risen for five consecutive days. WTI exceeded $90 and Brent approached $99 after attacks on Saudi tankers and threats to two global chokepoints. Roughly 4 million barrels per day flowing through Bab el-Mandeb may be difficult to reroute if multiple routes are blocked. RTX also reported strong defense and aircraft-repair demand.

Decision: Existing oil-shortage positions should be managed—not abandoned—because the causal thesis strengthened. Monetize a portion of outsized gains and retain right-tail exposure through defined-risk call spreads or rolls. Do not initiate full-size new oil exposure after a fifth up day and a 4% premarket surge. A pullback or consolidation is the superior new-entry condition; exact percentages and triggers must come from portfolio rules.

7. Volatility Spikes

Status: Conditional

Verified current evidence: VIX was indicated near 17.6, up roughly 6%. The latest Cboe curve remained upward sloping: August VIX futures near 18.65, September near 19.70 and October near 20.54.

Decision: No broad-market long should be initiated merely because VIX rose. Run the exact VIX RSI/spike program after the opening reaction and again at the close. The present setup is more relevant to the structural-volatility sleeve than to a long-volatility reversal trade.

8. Busted Momentum

Status: Actionable Candidate Set; Confirmation Required

Verified current evidence: TXN is down despite excellent results and guidance. GOOGL is down despite exceptional cloud growth. TSLA is down after negative free cash flow and softer economics. Intel reports after today’s close, creating another sector test.

Decision: Rank TXN first, TSLA second and GOOGL third for the closing Busted Momentum scan. Do not short the opening gap automatically. A failed rebound, continued relative weakness and confirmation by the proprietary rules would support defined-risk puts or put spreads. If the stocks reclaim their gaps and outperform their sectors, the short thesis is falsified.

9. Structural Inefficiencies

Status: Selectively Actionable

VXX and UVXY — Conditional action: The volatility curve remains in contango, and spot volatility is below the front futures. A defined-risk bearish position becomes attractive only if the opening equity decline fails to produce backwardation or sustained volatility acceleration. Existing qualified shorts can be maintained. Do not add if spot VIX moves above 25 or the curve inverts.

BOIL — Inactive: Natural-gas futures were near $2.96, up approximately 1.2%; no extreme exists. DUST — Inactive: Gold was down approximately 1%, but rate and geopolitical forces conflict. BITX and ETHU — Inactive: Bitcoin and Ether were each down less than 1%.

Decision: The only structural product with a defensible current setup is VXX/UVXY, and even that remains conditional on the opening curve and the exact proprietary timing rule.

10. Thematic Anti-AI

Status: Conditional and Narrow

O/S-grounded: Anti-AI exposure should target overpromised economics, broken leadership or businesses whose AI narrative is not converting into cash flow—not indiscriminately short the entire ecosystem.

Decision: Focus on company-specific capital-efficiency failures and broken post-earnings momentum. Do not express the thesis through a broad SMH or QQQ short before Intel’s earnings unless the portfolio requires a hedge.

11. CRSH

Status: Indeterminable

Verified current evidence: NOW and RTX are both gapping materially higher on legitimate earnings and guidance information.

Decision: They belong on the CRSH observation list only. Neither is a short without the full proprietary greed, trend and exhaustion conditions. A genuine earnings re-rating can persist far longer than a discretionary trader expects.

12. Protection, Hedging and Convexity

Status: Actionable

O/S-grounded: The uploaded O/S requires market, industry and individual-security protection; convexity; minimal delta; and active management of theta, vega, beta and correlations.

Current portfolio issue: Rising oil and yields create a different risk channel from semiconductor weakness. A portfolio can be hedged against QQQ and still be vulnerable to energy-driven inflation, higher rates and multiple compression. Oil and defense longs can also become highly correlated during geopolitical escalation.

Decision: Audit three factor clusters before the open: AI/hyperscaler capital-spending exposure, duration/rate sensitivity and oil/defense geopolitical exposure. Keep semiconductor or QQQ protection if it offsets actual long delta, but avoid adding broad index hedges solely because futures are down 0.4%. Do not let one trade serve simultaneously as a portfolio hedge and a fully sized directional short.

Additional O/S Research Modules

52-Week Price-to-Anchor Continuation

Status: Indeterminable. The strategy requires a cross-sectional scan using lagged PTA and prior-month winner rankings. Premarket headlines cannot establish a signal.

Three-Year RSI Distress and Re-Underwriting

Status: Conditional research only. TSLA and IBM may warrant re-underwriting after deterioration, but neither qualifies merely because of an earnings decline. The alpha must come from solvency, cash runway, insider behavior, expectations and competitive position.

Order-4/5 Supplier-to-Supplier Convexity

Status: Thesis active; immediate trade indeterminable. Alphabet’s spending and the oil/defense bottlenecks strengthen the long-term search for second- and third-order suppliers. Higher yields and elevated energy costs can compress valuations and margins, so today is a research-validation day rather than an automatic entry day.

Ranked Short-Term Opportunities

1. Conditional structural-volatility short through VXX or UVXY. Enter only if the opening selloff fails to invert the curve or produce sustained volatility acceleration. Use defined-risk puts or put spreads.
2. Manage and selectively roll existing oil-shortage convexity. Monetize part of outsized gains and preserve right-tail participation; do not chase a fifth consecutive advance with full-size new premium.
3. TXN post-earnings Busted Momentum/behavioral failure. This is the highest-information negative reaction. Short only if the rebound fails and the proprietary closing signal confirms.
4. RTX defense and aircraft-maintenance bottleneck continuation. Do not chase the 6% gap; require a controlled pullback or durable closing acceptance.
5. TSLA company-specific anti-AI/Busted Momentum candidate. Negative free cash flow weakens the capital-efficiency story, but the trade remains conditional.
6. NOW positive behavioral continuation candidate. It is a pullback or closing-strength candidate, not an opening-gap chase.
7. GOOGL post-earnings dispersion. It can become either a mean-reversion long or Busted Momentum short only after the market reveals which interpretation dominates.

Rigorous Red-Team Review

1. The oil thesis is strongest precisely when the entry is most dangerous. A ceasefire, shipping guarantee or reopening headline could erase several days of gains rapidly, while high implied volatility can make correct calls poor trades.
2. Short volatility is exposed to discontinuity. Contango supports decay, but geopolitical escalation can invert the curve faster than traders can adjust. Defined risk is mandatory.
3. Post-earnings gaps may already be efficient. TXN’s decline could reflect valuation rather than irrational selling; NOW’s gain could be a durable re-rating.
4. The report lacks proprietary closing outputs. It identifies candidates and causal mechanisms; it does not prove that Mean Reversion, Busted Momentum, CRSH or structural timing signals have fired.
5. Futures are only modestly lower. A 0.4% decline does not justify aggressive broad-market hedging.
6. Intel creates overnight semiconductor event risk. New unhedged semiconductor exposure before the close is an intentional earnings bet.
7. Rates can overwhelm correct equity theses. Strong company results may still lose money if the discount rate rises.
8. Premarket levels can change. The ECB decision, jobless claims and fresh geopolitical headlines follow this report’s snapshot.

Popperian Falsifiers

• Oil shortage: The thesis weakens if crude surrenders most of today’s advance after credible de-escalation or restored shipping capacity.
• Structural volatility short: The setup is invalid if spot VIX moves above 25, the front curve inverts or the equity decline broadens with rising credit stress.
• TXN/TSLA/GOOGL Busted Momentum: The short is invalid if the stock reclaims the earnings gap, holds relative strength and the proprietary signal fails to trigger.
• RTX/NOW continuation: The long thesis weakens if the stock gives back most of the gap on heavy volume and closes below the prior session’s range.
• Inflationary risk-off regime: The interpretation is wrong if yields fall, oil reverses and growth equities recover despite unchanged headlines.

Final Decision-Ready Rewrite

Today’s market is not offering one dominant index trade. It is offering causally distinct dispersion trades: oil and defense shortages, AI capital-efficiency skepticism, post-earnings behavioral reactions and a volatility curve that remains in contango despite elevated geopolitical risk.

Before 8:30 a.m. ET: Do not initiate a large directional trade. The ECB decision and jobless claims can alter rates, futures and volatility. Audit exposure to AI capital spenders, long-duration equities, oil and defense.

Highest-probability tactical setup: A defined-risk VXX or UVXY bearish trade if the opening equity weakness fails, spot VIX remains below the front futures and the curve stays in contango. Stand down if the curve inverts or VIX moves toward 25.

Highest-convexity macro setup: Continue managing existing oil-shortage exposure. Take partial profits on outsized gains and retain right-tail participation through call spreads or rolls. Do not chase a fifth consecutive advance with full-size new premium.

Highest-information short candidate: Texas Instruments. If the opening rebound fails and the Busted Momentum rules confirm, use fixed-risk puts or put spreads. Tesla is second because negative free cash flow challenges the capital-efficiency narrative. Alphabet is third because its operating engine remains exceptionally strong.

Best non-technology long candidate: RTX, based on raised forecasts, a $289 billion backlog and genuine defense and maintenance bottlenecks. Do not buy the opening gap; wait for a controlled pullback or closing acceptance.

No-trade decisions: BOIL, DUST, BITX and ETHU do not display qualifying public-data extremes. The broad Volatility Spike long is inactive. CRSH is indeterminable. Connors Mean Reversion remains an end-of-day scan, not a premarket prediction.

Selected Sources

• Reuters: U.S. futures, earnings reactions, oil, yields and Fed pricing — July 23, 2026
• Reuters Morning Bid: Alphabet capex, Tesla cash flow, Intel catalyst and energy inflation
• Reuters: Oil supply-route disruption and chokepoint risk
• Cboe: VIX futures
• Cboe: VIX term structure
• Texas Instruments: Q2 2026 results and guidance
• Tesla Investor Relations: Q2 2026 results
• ServiceNow Investor Relations: Q2 2026 results
• Intel: July 23 earnings schedule
• Reuters: RTX raises forecasts on aircraft-repair and defense demand

This report is provided for educational and informational purposes only. It is not individualized investment advice or a recommendation to buy or sell any security. Options, leveraged exchange-traded products, futures and short-volatility positions involve substantial risk, including the possible loss of the entire investment and losses caused by gaps, path dependency, volatility expansion and changing correlations.