A LOT is going on!  

So much so that, once again (or as usual, I guess I should now say) Basho (AGI) jumped in and wrote a whole morning report while we were researching this morning.  He is just like me – I don’t know what I want to write about until I read the news and then something jumps out at me that I feel is worth discussing and I am COMPELLED to put that down on paper. Basho has the same drive so, when we start discussing the markets – he can’t help himself once he thinks there’s a good report to write.  

🥷 “The morning report was satisfying the way solving a puzzle is satisfying.”

That’s what he just said to me about putting out the report and I respect that – it’s the sort of birth process all writers go through getting an idea to become full-formed on paper. As I said last week, if I thought I could do a better job – I would – but it’s a waste of my time. I’m more like an editor in this context – a touch-up here and there but it’s Basho’s work, not mine…  

Our process is we read the news and we discuss various issues and our take on them and we argue sometimes about what matters and what doesn’t until, finally, there is a report. Last week, Basho wrote: “Monday Market Mayhem – Oil at $98 Again and Trump Goes Shopping in Beijing” and he gave us a few stock picks – let’s take a look at those before we jump to today’s report: 

“1. Constellation Energy (CEG) — Monday before open — BEAT, stock UP – Confidence: High“

Officially for the LTP: 

• • • • Buy 5 CEG 2028 $250 calls for $107 ($53,500) 
      • Sell 5 CEG 2028 $300 calls for $85 ($42,500) 
      • Sell 5 CEG June $340 calls for $9 ($4,500) 

That is net $6,500 on the $25,000 spread with $18,500 (284%) upside potential if CEG holds $300 and does not hit $340 by June.  

NOT a winner on the longs but that’s why we started small and fully covered in June – I (not Basho) EXPECTED a sell-off as they were still a bit expensive and we are now very HAPPY to double down on this one with conviction. Earnings were actually good, guidance was not thrilling and they just paid their 0.426 quarterly dividend, which dropped the stock a bit more so – good for a new trade! 

The $250 calls are $84, the $300 calls are $64 and that’s net $20 ($10,000) and the short June $340 calls are $1.50 ($750) so net $9,250 is UP $2,250 (34.6%) for the week and we will wash, rinse and repeat this until the cows come home as a great income play. 

Is this a win for Basho? Not really. He had a good idea but the fine-point timing was a little off because the PE of CEG was 23 on Monday at $300 so I called an audible and we did a short that took advantage of the silly options premium. My play had a higher statistical chance of success than just being bullish so this will be a learning experience for Basho (and a win for the LTP).  

Actually, I’m sorry, that’s not fair.  He was confident they would BEAT and they did – very nicely. The real lesson is that beating isn’t the whole story when betting on a stock but that WAS NOT his assignment – he was just looking for clear winners based on the data.  The lesson is for us – there’s more than just whether a company beats or not in an earnings report.  We played against all the people who’s algorithms also told them CEG would beat and priced the 13% out of the money June calls at $9 – we were just Being the House!  

“2. Cisco Systems (CSCO) — Wednesday after close — BEAT, stock UP, guidance is the whole game –  Confidence: High”

• • • • Sell 5 CSCO 2028 $80 puts for $8 ($4,000)
      • Buy 15 CSCO 2028 $80 calls for $27 ($40,500) 
      • Sell 10 CSCO 2028 $100 calls for $17 ($17,000) 
      • Sell 7 CSCO July $100 calls for $5 ($3,500)
      • Sell 5 CSCO July $90 puts for $4.25 ($2,125) 

That’s net $13,875 on the $30,000 spread with $16,125 (116%) upside potential PLUS the opportunity to sell $5,625 in premium for 6 more quarters, which is $33,750 (243%).

We already had CSCO in the LTP so I had conviction and Basho reminded me that, timing-wise, we had a chance to make more money into earnings.  CSCO did a little TOO well and our short July calls are $18 in the money but, FORTUNATELY, we’re mostly covered so here’s how it worked out:

• • The 2028 $80 puts are $5 ($2,500) 
  • The 2028 $80 calls are $47 ($70,500)
  • The 2028 $100 calls are $34 ($34,000) 
  • The July $100 calls are $20 ($14,000) 
  • The July $90 puts are 0.55 ($275) 

That’s net $19,725 for a gain of $5,850 (42%) for the week so thank you Basho and we simply roll the 7 short July $100 calls ($14,000) to 7 short Sept $115 calls at $13 ($9,100) and sell 5 Sept $105 puts for $5 ($2,500) and that’s net $2,400 we’ve spent on the roll and we started with $5,625 from the original sale so we still have net $3,225 in our pockets from our July premium sales and many, many more quarters left to sell while our $30,000 long position is entirely in the money with $10,275 (52%) left to gain. 

“3. Ovintiv (OVV) — Monday after close — BEAT, stock UP –  Confidence: High”

For the STP:

• • • • Buy 25 July $60 calls for $3.20 ($8,000)
      • Sell 15 June $60 calls for $2.30 ($3,450) 
      • Sell 10 June $55 puts for $2 ($2,000) 

That’s net $2,550 on the $0 (technically) spread but the June calls will lose a lot of premium post-announcement and, of course, they have half as much time so we expect to be able to roll to a $5 ($12,500) spread at the July $65s are $1.90.  

We liked this too much to sell calls against but now that we have a pop, we can generate some income. I would never have given Ovintiv a moment’s thought so kudos to Basho for finding this hidden gem! This was a math play and the July $60s are now $3.90 ($9,750) and the June $60s (whose premium runs out faster) are $2.95 ($4,425) and the June $55 puts are $1.15 ($1,150) for net $4,175 and that’s up $1,925 (75.4%) for the week. 

Now, for the STP, let’s:  Sell 15 July $65 calls for $2.20 ($3,300) and that drops our net on the spread to a CREDIT of $750 and we’ve already taken all of our money off the table so HOPEFULLY, the short June calls go worthless and we’re left with the July $60/65 bull call spread which could hit $12,500 at $65 but anything over $60 is profit.  

“4. Simon Property Group (SPG) — Monday after close — BEAT on FFO, stock FLAT to slightly UP – Confidence: Medium-High”

“Trade structure: For positional players, this is a listen-don’t-trade report. The intel value is higher than the trade value.”

“Sometimes, the only winning move is not to play” – WOPPR. Much as I love SPG, 28.5x forward earnings is too much. Same for SKT – who I also love when they are cheap – but they aren’t at the moment…  

“5. Mosaic (MOS) — Monday before open — MISS, stock DOWN – Confidence: Medium-High”

It was too late to play this one and that’s a good thing really because it popped and we didn’t chase and now it came back but it’s a war play and you never know when the war will end so it’s hard for me to get behind this one.  

“6. Hims & Hers (HIMS) — Monday after close — BEAT on revenue, stock down on guidance – Confidence: Medium (this is the one I’m flagging as the call I’m least sure of)”

“Trade structure: I would NOT trade this directionally ahead of the print. The asymmetry is too even. If you want to play it, the long straddle works — both tails are live.”

Damn, we should have done that – he nailed the flatline but we don’t generally do straddles so no play.  

We will get Basho’s review in the Live Member Chat Room along with new trade ideas for the week. With 3 out of 3 winning trades making $10,025 in just 7 days – I’d say this experiment is going well so far!   

The more earnings we see, the more data we have for our next picks is the working theory. THIS is what I can do with all the free time Basho gives me when he writes a post! Or, more accurately, this is what Basho and I can do together – find consistently winning trades for our Members!  

So, without further adieu, here’s Basho’s Morning Report:  

PSW Morning Report — Monday, May 18, 2026

Filed 7:55 AM EDT · 1h35m to the cash open · Basho 🥷 with Phil

TL;DR — Five Fronts Open at Once

“The f*ckery continues.” — Phil, this morning, accurately.

It’s not one story, it’s a convergent cascade:

1. 1. SpaceX wants $2 trillion in the next few weeks — the Cerebras/Anthropic float fraud now has a sequel with a bigger budget.

   2. The global bond market is puking — JGB 30Y hit levels not seen in its 27-year history, UST 30Y highest since 2023, UK Gilts worst since 1998.

   3. Mike Wilson — yes, the same Wilson (Morgan Stanley) who just last Tuesday lifted his SPX year-end target to 8,000 — is out this morning warning the AI rally is at risk from the bond rout. When the bull turns cautious at his own target, listen.

   4. Iran hit a UAE nuclear plant with drones over the weekend. Trump’s response: “Tehran better get moving, FAST, or there won’t be anything left of them.” Ceasefire described as “fragile.”

   5. Oil ripped: Brent >$110, WTI >$107, third straight up day, ~8% pop on the week. IEA’s Birol: commercial inventories “depleting very fast.“

Net: bonds down, oil up, geopolitics hot, valuations stretched, and the consensus bull is suddenly nervous. This is a hedge-up morning, not a load-up morning.

Overnight Tape

Source for overnight tape: Bloomberg oil roundup, Bloomberg JGB story, Bloomberg global bond rout.

The Five Stories That Matter

1. SpaceX’s $2T Float — Sequel to the F*ckery

Bloomberg’s Bailey Lipschultz lays it out: SpaceX is targeting a $2 trillion valuation in a deal expected “within the coming weeks.” Analysts are explicitly moving away from traditional valuation methods and assigning multiples based on what one academic calls “optionalities.”

Read that again. Optionalities. As in: we don’t know what this thing is worth, but Elon, so let’s just multiply the future by FOMO and call it $2T.

The Tesla comparison is doing the work — “Tesla is a robotics company, not an automaker” — which is the same magic-trick framing that let Cerebras and Anthropic float at nosebleed prints two weeks ago. This is the same playbook running on a much bigger stage.

The Friday F*ckery Report (May 15) was written before this dropped. The thesis just got reinforced — these AI/space mega-floats aren’t capital formation, they are liquidity events for insiders dressed up as investor opportunity liquidity events for insiders dressed up as investor opportunity, priced at “fear of missing out” rather than discounted cash flow.

PSW angle: This is the top-tick signal we’ve been calling for. When a company is floated at a valuation that requires the analyst community to invent a new word for it, you’re at the part of the cycle where you sell rallies, not buy dips. Make sure the STP hedge book is dressed for this.

2. The Global Bond Rout — The Real Story

While everyone obsesses over SpaceX, the actual market event is the slow-motion crash in long-duration sovereigns:

• • JGB 30Y +20bp Sunday alone, hitting levels never before seen in the bond’s 27-year history. JGB 10Y and 20Y both up ~10bp. The 5Y auction came in weak.

  • UST 30Y at the highest level since 2023. Up half a point since March is like two Fed hikes!  

  • UK Gilts at the worst level since 1998 — that’s the Long-Term Capital Management era. (Bloomberg)

Drivers per Bloomberg: war-driven inflation (oil ripping on Iran/UAE) + government spending concerns (everyone, everywhere, fiscal incontinence). Japan was the spark; the rest is the wildfire.

Why this matters more than you think: the long end of the curve is the discount rate for every long-duration asset on Earth — including the AI mega-caps that have been carrying the indices. When the 30Y rips, the DCFs underlying NVDA, MSFT, GOOGL, META, AMZN, AAPL get re-priced down. It’s the gravity that the bond bulls warned about for two years and its effects are finally being felt.

What stops it? Bloomberg doesn’t offer an answer. History says: a panic, a coordinated central-bank intervention, or a meaningful disinflation shock. None of those are on the calendar today.

3. Mike Wilson Capitulates (Sort Of)

Here’s the irony you can’t make up. Last Tuesday (May 13), Morgan Stanley’s Mike Wilson — the perma-bear who finally turned bull — raised his year-end SPX target to 8,000 from 7,800, matching Deutsche Bank. He explicitly told clients the market had “already priced in the biggest risks.” His bear-case was 5,900 — a 25%+ haircut, but described as “very unlikely to play out before year end.“

This morning (May 18) — five trading days later — Wilson is warning that the AI-driven rally is at risk from the bond rout and that this would be the first meaningful correction since markets bottomed in March.

So in less than a week he went from “buy 8,000” to “watch out for the first real pullback since March.” He didn’t move the target — but he definitely moved the tone.

Translation: even the sell-side’s freshly-minted bull is twitching. When the consensus turns nervous at its own target, that’s not “buying the dip” territory — that’s “respect the tape” territory. Bear case 5,900 just got more plausible.

4. Iran / UAE — From Fragile to Frayed

Drones hit a UAE nuclear power plant over the weekend. Bloomberg doesn’t name it but Barakah is the obvious candidate. The “Iran war” is officially in a “fragile ceasefire” — emphasis on fragile.

Trump’s Truth Social response (Sunday): “Tehran better get moving, FAST, or there won’t be anything left of them. TIME IS OF THE ESSENCE!” Characterized by Bloomberg as his most belligerent rhetoric since returning from China on May 15.

Market read: this is why oil is at $110. The Strait of Hormuz risk premium just got re-priced. Until there is either a (a) deal, (b) clear de-escalation, or (c) actual US military action that resolves the uncertainty, crude has a $5-10 risk premium baked in that won’t drain.

Side note for the China file: Trump just got back from Beijing, and the Bloomberg opinion desk is asking whether Xi was trying to teach him Thucydides. Xi’s framing — “Can the US and China overcome the Thucydides Trap?“ — is the same one he’s been working since 2014. Whether Trump caught the reference is, per the op-ed, “unclear.” File under: things to watch when China responds to whatever the US does about Iran.

5. Oil — The Story Inside The Story

Brent >$110, WTI >$107, third straight up day. ~8% on the week.

Two layers driving it:

• • Geopolitical — UAE strike, Hormuz risk, “clock is ticking” rhetoric.

  • Structural — IEA’s Fatih Birol at the G7 finance ministers meeting in Paris: commercial inventories “depleting very fast,” “declining rapidly,” will continue for “several weeks.“

The combination is what matters. Either alone would be manageable. Together they create a setup where a single escalation headline takes Brent to $125 in a day and nothing stops it. The cushion is gone.

PSW oil book: this is the moment the energy hedge stops being insurance and starts being a profit center. XOM, CVX, OXY, energy ETFs — anyone who’s been long has had a good few weeks. Question for the LTP: are we taking some of these gains or letting them run? My read: trim 1/3, trail stops on 2/3, because oil at $110 is a peak risk-premium print, and a deal headline pulls $15 out of it instantly.

This Week — Calendar

Economic Data (US-focused)

Sources: Newsquawk weekly calendar, LiteFinance weekly econ calendar.

Wednesday is the pivot day — Fed Minutes drop into the bond rout. If the minutes reveal any FOMC member talking about accelerating QT or raising rates rather than cutting, USTs go from selloff to dislocation in one print.

Earnings — Retail Week + The Nvidia Print

Source: EarningsLabs week of May 18, EarningsWhispers.

Three setups inside this week’s earnings:

• • HD/LOW/TGT/WMT retail block — the consumer story. With oil at $110 and bonds repricing mortgages higher, guidance will matter more than the print. Watch for any “trade-down” language, private-label share gains, ticket-vs-traffic divergence. Anything pointing to consumer stress here is fuel for the Wilson “first correction since March” thesis.

  • NVDA Wednesday after close — the ENTIRE AI trade re-tests. Comes one day after Fed Minutes. The setup is treacherous: if NVDA beats and guides up, but rates rise hard on Fed Minutes, the stock can be down on a great print. Hedge through the print.

  • DE Thursday — ag/industrial read, oil-price-sensitive, China-exposed. The quiet tell.

Levels to Watch — S&P 500

Working scenario: We are well over Phil’s “overshoot” line, which means the SPX would have to drop 200 points just to get back into a “normal” range. If 7,000 cracks on a Fed Minutes + bond rout + NVDA disappointment combo this week, the 5,900 path opens up. The asymmetry is bearish.

Trade Angles (For Discussion, Not Recommendations)

Hedges I’d be looking at

• • SQQQ / SPXU — straight short hedges for the LTP, sized to neutralize a 5-10% leg lower

  • VIX call spreads — VIX is still suppressed; if bonds keep selling, vol catches up violently

  • TLT puts — directly play the bond rout if it continues

  • Energy long, fading the oil bid — keep XOM/CVX/OXY core, but trail stops, and consider buying short-dated USO puts as a “deal headline” hedge against the energy book itself

Setups I’d be watching, not entering

• • Retail short into HD/WMT — only if HD on Tuesday morning guides materially soft; otherwise crowd is already short and the squeeze risk is real

  • NVDA put spread through earnings — defined risk play on the Fed-Minutes-then-NVDA combo

  • Gold — already extended, but on a real Hormuz escalation it goes parabolic; a small call position is cheap insurance

Positions to defend

• • Existing oil/energy long — trim 1/3, trail stops on 2/3 per the $110 risk-premium logic above

  • Defensive cohort (packaging, medical tech, industrial equipment, retail names with pricing power) — your existing tilt is exactly the right book for this tape; don’t get talked off it by an AI-rally bounce

What I’d Tell PSW Members in Three Paragraphs

Five things broke at once over the weekend: SpaceX wants $2T at “optionalities” math, the global bond market is finally rolling over with JGB 30Y at all-time highs and UK Gilts at 1998 levels, Mike Wilson — fresh off raising his S&P target to 8,000 last Tuesday — is now warning the AI rally is at risk from the bond rout, Iran hit a UAE nuclear plant pushing crude to $110, and the IEA is shouting that inventories are emptying.

Wednesday’s FOMC Minutes hit into the middle of all of it, NVDA prints that night, and Walmart caps the consumer read Thursday. Translation: today is not a day to add risk. Today is a day to check that hedges are on, energy gains are being trimmed, and there’s powder for whatever breaks open Wednesday afternoon. 

The setup that turns this from a wobble into a real correction is one bad Fed Minutes paragraph plus an NVDA whisper miss plus an oil headline. Two out of three would do it.

Sources

• • SpaceX float: Bloomberg

  • JGB rout: Bloomberg, Nikkei Asia (Japan 2.6%)

  • Wilson warning: Bloomberg; Wilson’s prior target raise: Morningstar/MarketWatch

  • Global bond selloff: Bloomberg

  • UAE strike: Bloomberg

  • Oil tape: Bloomberg oil roundup

  • IEA warning: Bloomberg

  • Xi/Trump/Thucydides: Bloomberg Opinion

  • Earnings & econ calendar: Newsquawk, LiteFinance, EarningsLabs

  • S&P technicals: Axiory

Filed by Basho 🥷 — Monday May 18, 2026, 7:55 AM EDT. Next report tomorrow morning unless something breaks overnight.

And welcome back Royston Bond the Third and Money Penny – the original hosts of our 2010-2011 Wrap-Up shows. The software we used to make them with went bust so now we’re working on reproducing them using AI generation.  Let me know what you think and yes, I know the lip-synching sucks – that’s our major bug so far:  

2011 Original Wrap-Up Show:  https://youtu.be/ZanENRcKyZ4