AM Playbook: Riding the AI Hangover With a Hedged Barbell

Futures are bouncing after yesterday’s AI-led slap, but this still looks like an event- and dispersion-driven tape, not the start of a broad liquidation. Think hangover, not heart attack. The job this morning is to respect the volatility without over-reading it.

Overnight read: noisy, not panicky

Index futures are modestly green, retracing a slice of the AI/mega-cap tech drawdown. Under the surface, this is still very much a headline market:

• Fed cut odds are stuck roughly around a coin-flip for the next move, keeping every data print and Fed quote in play rather than trending toward a clear easing cycle.
• Dollar is softer at the margin, which usually supports risk, but the bid is hardly capitulating—this is more a pause than a regime change.
• Oil is off recent highs, which eases the inflation scare a bit and takes some wind out of energy momentum near term.
• US–China AI export tension continues in the background. Each incremental headline can hit AI hardware and hyperscalers on impact, even if the broader tape shrugs it off later.

Net-net: the macro board is messy but not screaming “crash.” It’s still a tape where individual sectors and themes matter more than the index level print.

Sector map: AI still drives, defensives quietly work

The risk engine is still AI and mega-cap tech. When the big AI complex gets hit, everything else has to decide whether it wants to follow or fade the move.

• AI / Mega-cap tech (AAPL, NVDA, QQQ, etc.): still where the beta lives. Yesterday’s selling looked like de-risking and position clean-up more than a structural turn. Bounces can be violent both ways.
• Retail: split tape. Names tied to value/treasure-hunt and resilient traffic (think the TGT/TJX side of the world) are holding up better than big-ticket, rate-sensitive home improvement (HD/LOW style exposures). This is classic late-cycle behavior: the consumer is choosy, not dead.
• Energy: softer with crude off the highs. The trend isn’t broken, but the easy upside fuel from oil spikes isn’t there this morning.
• Defensives (staples, healthcare, utilities): quietly showing relative strength as traders look for ballast against AI and rate uncertainty.

For an active swing book, that means respecting where the volatility is (AI, cyclicals) and where the stability is (staples, healthcare, utilities) rather than treating “the market” as a single trade.

System posture: AI-heavy barbell, hedged

This is a behind-the-scenes journal of an aggressive, news-driven swing system. It is not a set of trades to follow or copy.

Right now the system is running a barbell:

• On one side: AI-heavy exposure via liquid large-cap and index vehicles (names like AAPL, NVDA, QQQ). That’s the core risk engine and where the system wants to be long when the tape is constructive.
• On the other side: smaller sleeves in defensives (consumer staples exposure similar in profile to XLP), energy (an integrated major such as XOM), and an industrial workhorse (a GE-style profile). These are there to diversify factor and sector risk, not to beat pure AI beta on green days.
• Over the top: a volatility hedge via a levered VIX product (UVXY-type exposure). Position size is slightly above the system’s ideal band but still within acceptable limits while the macro and AI headline risk stay elevated. On a clean vol-crush day, that hedge becomes a prime trim candidate.

The goal is to stay net-long, participate in upside from AI and cyclicals, but keep enough ballast and hedge on to avoid getting forced out at the worst possible spots.

Risk management: floors only move up

Stops in this system are manual and mostly based on daily levels, not every intraday wiggle.

• Raise-only floors: Stop levels get moved up as trades work; they do not get moved down to “give it more room.” If the floor breaks on a closing basis, the system respects the exit, even if the story still feels bullish.
• Daily-close triggers: Intraday breaks in names like a GE-type industrial or QQQ don’t automatically flip the system. The close is what matters. This cuts down on noise and revenge-trading after morning shakeouts.
• Vol hedge discipline: The UVXY-style hedge is treated like any other position: there is a size band and a plan. Slightly above the cap is tolerable into event risk, but it doesn’t become a permanent comfort blanket. If volatility deflates and the tape stabilizes, the system looks to shrink that hedge rather than invent new reasons to keep it.

None of this is about perfection; it’s about being approximately right on direction while being very precise about where the portfolio is no longer allowed to live.

1–3 session playbook

Into the next few sessions, the plan is straightforward:

• Stay net-long but hedged into AI, Fed, and data volatility. This isn’t the spot to be naked-long high beta with no protection.
• No fresh AI beta chases in front of major catalysts. The system would rather buy strength that holds after an event than guess the event outcome itself.
• Respect the floors: If daily closes in key AI or cyclical exposures break stop levels, the system rotates rather than argues. Cash and defensives are valid destinations.
• Rotate toward relative strength if forced to exit: staples, select energy, and healthcare are the first places the system looks when AI and high beta crack on a closing basis.
• Stay nimble in vol: If we get a spike in volatility that doesn’t lead to real damage in price, the UVXY-style hedge is on the chopping block. If volatility expands and price follows, the hedge earns its keep and the system resists the urge to over-trade around it.

That’s the tape for this morning: still AI-centric, still headline-driven, but not yet broken. The job is less about predicting the next headline and more about making sure the next headline doesn’t have the power to blow up the account.

Sources & further reading

• Federal Reserve – Meeting calendars, minutes, and policy statements: federalreserve.gov
• CME FedWatch Tool – Market-implied policy probabilities: cmegroup.com
• U.S. Energy Information Administration (EIA) – Oil and energy statistics: eia.gov
• U.S.–China tech and export control coverage: reuters.com/technology

Nothing in this post is investment advice or a recommendation to buy or sell any security. It is a journal of how one aggressive, news-driven swing system is navigating current conditions.