MARKET ANALYSIS
Here’s All You Need To Know

• The market is digesting Nvidia this morning, and the reaction is telling. Nvidia delivered another very strong quarter, with revenue up 85% and data center revenue nearly doubling year over year, but the stock is still slightly lower premarket. That is not a disaster, but it does show how demanding expectations have become around the AI trade.

• The important point is that Nvidia did not break the AI thesis. Jensen Huang described demand as “parabolic,” Nvidia announced an $80B buyback, and the data center business remains exceptionally strong. The issue is positioning. When a stock has become the liquidity barometer for the entire market, even excellent numbers can struggle to create upside if traders are already crowded into the trade.

• This is why we need to be careful today. Nvidia’s earnings were strong enough to prevent a clean breakdown in AI, but the reaction is not strong enough yet to confirm a fresh risk-on expansion. That leaves the market in a choppy middle ground.

• The broader growth complex still needs confirmation. Semiconductors, XLK, MAG7 and AI infrastructure names bounced into the print, but many of these groups remain technically extended after a multi-week rally. If Nvidia cannot hold a positive reaction, it becomes harder for the rest of the growth trade to push aggressively higher today.

• At the same time, the AI infrastructure theme is still broadening. SpaceX has now filed its IPO prospectus, OpenAI could reportedly file confidentially as early as tomorrow, and AI capex remains one of the biggest liquidity stories in the market. SpaceX also noted that most of its Q1 capital expenditure was for AI, which reinforces how far this buildout has spread beyond just chip companies.

• Quantum is also getting a major catalyst this morning. Quantum computing names are rallying after reports that the U.S. Commerce Department is preparing a $2B award package for nine companies in the space, with the government reportedly taking equity stakes. IBM is expected to be the largest beneficiary, with a proposed $1B award tied to building America’s first purpose-built quantum foundry.

• That matters because speculative growth is not dead. Capital is still willing to chase targeted AI-adjacent themes when there is a clear catalyst. The distinction now is that traders are becoming more selective. Nvidia, quantum and AI infrastructure are still attracting flows, but generic extended growth is no longer being rewarded blindly.

• The power side of the AI trade remains one of the most important secondary themes. Bloom Energy announced a partnership with Nebius worth up to $2.6B in service fees, with Bloom providing onsite fuel-cell power for European AI data centers. Nebius specifically said power remains a key constraint for AI infrastructure buildouts.

• This reinforces the framework we have been discussing. AI is no longer just a semiconductor trade. It is becoming a power, grid, energy, infrastructure and compute-capacity trade. The market is starting to reward companies that solve the physical bottlenecks behind AI deployment.

• The macro backdrop is still not clean. Fed minutes showed most officials believe higher rates could become necessary if the Iran war keeps inflation elevated, while the 30-year Treasury yield only recently pulled back from a near 19-year high. That keeps long-duration growth vulnerable if yields begin pushing higher again.

• Oil also remains a live risk. Prices have eased from the worst levels, but the Iran conflict has not disappeared, and Nvidia itself warned that continuation or escalation of the war could create business uncertainty. That keeps inflation and rate sensitivity in the background even if the market wants to focus on AI.

• The clean read is this: Nvidia was strong fundamentally, but the market reaction is not yet decisive. AI leadership is intact, but the trade is crowded. Quantum and AI power infrastructure are showing fresh strength, while the broader growth complex still needs confirmation.

• Today should be treated as a reaction day, not a prediction day. Watch whether Nvidia can reverse higher after the open, whether semiconductors hold up, whether quantum strength broadens, and whether AI power names continue attracting capital. If Nvidia fades, expect more chop across growth. If Nvidia reclaims strength, the AI trade can stabilize quickly.

S&P 500

46.91%: over 20 EMA | 52.08%: over 50 EMA | 53.67%: over 200 EMA

• Nvidia did what Nvidia usually does. The company beat expectations, delivered another strong quarter, and confirmed that AI demand is still extremely strong. The key question now is not whether Nvidia is fundamentally strong. The question is how the market absorbs the reaction after such a large multi-week move across semiconductors, XLK, QQQ and the broader MAG7 complex.

• SPY came down yesterday and tested the rising 10-day EMA, which was exactly the level we were watching. Price bounced aggressively from that area and formed what now looks like a morning star reversal pattern across the last three candles.

• The bounce was backed by clear demand. On yesterday’s lows around $733.89, the visible range volume profile showed roughly 12M shares traded green versus 8.76M shares traded red. That tells us buyers were active and aggressive at the moving average test.

• SPY is pulling back slightly in premarket, but the broader structure is not bearish. The index remains above key short-term support, breadth has improved, and the percentage of stocks above the 20, 50 and 200-day moving averages has pushed back above 50%.

• The main caveat is extension. SPY is still sitting around 6.61 ATR multiples above its 50-day moving average, so the index is not in a clean buy-the-breakout zone. The bounce is strong, but the best long entries were on the weakness into the 10-day EMA, not into strength after the reversal has already taken shape.

• Nvidia pushed higher yesterday, but it also exhausted a lot of that intraday strength and formed a high-range doji-style indecision candle. This morning, price is pulling back in premarket.

• Nvidia is not particularly extended on the daily structure, sitting around 4.23 ATR multiples above the 50-day moving average, but the weekly structure does show some extension.

• The more important issue is the volume profile above current price. Above yesterday’s close, there is roughly 12M shares traded red versus only 6.7M shares traded green, and at the highs of yesterday’s candle, there were roughly 10M shares traded red versus 6M shares traded green.

• That tells us profit taking is active in Nvidia. This does not mean the stock is weak, but it does mean the market is not allowing an easy upside reaction after earnings.

• The key level to watch is the 20-day EMA around $714.10. If Nvidia pulls into that level, we would be looking for a long opportunity on a bounce. Nvidia has historically respected the 20-day EMA during prior Stage 2 rallies, including the move from late April 2025 into August 2025.

• Semiconductors as a group had a very strong session yesterday and reversed the weakness from the prior dip into the 20-day moving average.

• XSD remains one of the strongest groups in the market, with a 98 relative strength rating versus the SPX, but it is still very extended at roughly 8.6 ATR multiples above the 50-day moving average.

• Yesterday’s candle also completed a valid morning star reversal, which is one of the strongest bullish reversal structures in candlestick analysis. Statistically, this pattern has a high probability of leading to continuation, and in our testing, bullish reversal behavior appears roughly 78% of the time across similar Morning Star examples.

• The issue is not direction. Semiconductors are still leadership. The issue is entry.

• Yesterday came with 165% relative volume, and weekly volume is already around 200%. That confirms sponsorship, but with XSD already showing an 11% weekly range, around 1.3 times greater than its expected weekly range, chasing breakout highs is poor asymmetry.

• The correct trade was buying weakness into the 20-day EMA on Tuesday. From here, semiconductors remain a leadership group, but new exposure should be taken on weakness, not strength.

S&P 400 Midcap

45.25%: over 20 EMA | 56.25%: over 50 EMA | 54.75%: over 200 EMA

• MDY came down to the 50-day moving average, which was the level we expected to be tested, and bounced from that area on 54% relative volume.

• The daily expansion was meaningful, with the range coming in around 1.8 times greater than the expected average true range.

• More importantly, on the weekly structure, MDY bounced directly from the 10-week EMA, which keeps the intermediate Stage 2 trend intact.

• The volume profile also supports the bounce. On the weekly lows around the 10-week EMA test, we saw roughly 1.3M shares traded green versus 960K shares traded red. Buyers stepped in where they needed to.

• We do have overhead supply up toward $670.37, so a minor short-term pullback would not be surprising.

• This is not a short. The mid-caps are setting up as a long opportunity on weakness.

• If MDY pulls back toward the 50-day EMA and 10-week EMA cluster, we would look for entries as close as possible to that area, with stops ideally below $649, which is beneath Tuesday’s lows and below the moving average cluster.

Russell 2000

44.78%: over 20 EMA | 60.90%: over 50 EMA | 56.37%: over 200 EMA

• IWM pulled back into support, tested the 10-week EMA, and bounced strongly on 88% relative volume.

• Relative strength is also strong at 80.5 versus the SPX, and breadth is actually the best among the major index segments.

• That is important because small caps are usually the higher-beta expression of risk appetite. If IWM is holding the 10-week EMA and breadth is improving, it supports the argument that this is a rotation and reset, not a broad market breakdown.

• We do suspect this is now an opportunity to reload growth exposure, but again, the entry has to be on weakness.

• The market has given us several morning star reversals across SPY, MDY, IWM and semiconductors. That is constructive, but it does not mean traders should chase strength after the pattern has already triggered.

FOCUSED STOCK
TSLA: A Huge Morning Star Reversal

ADR%: 3.92% | Off 52-week high: -16.4% | Above 52-week low: +52.7%

• Tesla had a very strong session yesterday, and not enough people are talking about it.

• The stock has formed a morning star reversal, it is pushing higher in premarket, and it is not extended at only 1.9 ATR multiples above the 50-day moving average.

• More importantly, Tesla has no immediate earnings catalyst in front of it. Earnings are already behind us, which makes the setup cleaner than Nvidia or other names with major event risk.

• On the weekly structure, Tesla reversed from the 10, 20 and 50-week moving average cluster, which is a significant support zone.

• The ideal entry was Tuesday. From here, we would look for a fade in premarket strength and then a long opportunity as close as possible to the moving average cluster.

• A reasonable stop area would be around $402.80, which aligns with the 10 and 20-week moving average cluster that price has just tested and reclaimed.

• The key is stop distance. Tesla is viable, but only if the entry is close enough to support to preserve strong asymmetry.

FOCUSED GROUP
QTUM: The Highest Expression of Growth

• Our focus group today is quantum computing, and the reason is obvious. Quantum remains one of the highest-beta expressions of growth risk in the market, and it is now reacting strongly after the Nvidia print and the broader AI strength.

• Quantum has also formed a morning star reversal and is pushing higher.

• Yesterday’s move came on 100% relative volume, which confirms that buyers stepped in with real participation.

• Unlike some of the more extended growth groups, quantum is not as stretched. It is sitting around 6 ATR multiples above the 50-day moving average, which is elevated, but not as extreme as semiconductors or some of the leading AI infrastructure names.

• The group tested the 20-day moving average on Tuesday and bounced aggressively from that level.

• The same entry logic applies here. We are not looking to chase the gap or buy strength blindly. We want entries as close as possible to the rising 20-day EMA, because that gives us the tightest stop distance and the best risk-reward.

• Quantum is very likely to continue expanding higher if growth stabilizes after Nvidia, but the trade still has to be executed properly.

• The cleanest approach is to buy weakness into the moving average structure, not chase the first extension after the reversal.