MARKET ANALYSIS
Here’s All You Need To Know

• The market is entering May with the indices still sitting near record highs, but the backdrop is more complicated than the headline strength suggests.

• The S&P 500 has now closed above 7,200 for the first time ever, while April delivered the strongest monthly performance for the S&P 500 and Nasdaq since 2020.

• Apple is helping support futures this morning after beating earnings and revenue expectations, while also giving better-than-expected guidance for the current quarter.

• The key point is that earnings are still strong enough to keep buyers engaged, especially after the market had started to question the AI trade earlier this week following the OpenAI-related concerns.

• The hyperscaler earnings from Alphabet, Microsoft and Amazon helped confirm that AI infrastructure demand is still translating into real cloud revenue growth, which is exactly what the market needed to see.

• That being said, the market is no longer blindly rewarding every part of the AI trade, and we are now seeing a much more selective environment where investors are rewarding real earnings strength and punishing weaker guidance or excessive spending.

• The biggest macro risk remains oil, with Brent briefly touching $126 yesterday before pulling back, which keeps inflation risk, margin pressure and Fed caution firmly in the market narrative.

• Even though oil has cooled from the spike, it is still elevated enough that traders should not treat this as a clean risk-on macro backdrop yet.

• The important issue is that growth, semiconductors, software and speculative areas have been the main drivers of this rally, and those groups are naturally more vulnerable when oil rises aggressively and rates stay higher for longer.

• The Fed, ECB, Bank of England and Bank of Japan have all held rates steady, which tells us central banks are still being forced to respect the inflation risk coming from energy.

• This matters because the market is now caught between two forces: earnings and AI demand are supporting equity prices, while oil and rates are limiting how aggressively investors can keep chasing extended growth names.

• For traders, the setup has changed from early-April breakout mode into a more selective pullback-entry environment.

• The best opportunities are still likely to come from the strongest growth groups, but the risk/reward is no longer in chasing marginal highs after such a sharp rally.

• We want to see whether Apple’s strength can keep large-cap tech supported, whether oil continues to cool from yesterday’s spike, and whether buyers defend growth names on pullbacks rather than only chasing strength at the highs.

S&P 500

58.84%: over 20 EMA | 56.06%: over 50 EMA | 57.25%: over 200 EMA

• The SPY delivered a meaningful expansion higher yesterday, with relative volume coming in at 85% of the 20-day average.

• That is still below the 100% threshold, but it was a clear improvement versus Wednesday’s session, with relative volume roughly 33% higher day-over-day.

• The reason we are still below 100% relative volume is important to understand. During the distribution phase between the 13th of January and the breakdown that accelerated on the 26th of February 2026, relative volume was extremely elevated, so the current 20-day comparison base is still difficult to clear.

• More importantly, yesterday was not just a price move. It was an expansion in both range and relative volume, which gives more weight to the breakout.

• The intraday range came in at roughly 1.39%, compared with a 20-day average daily range of 0.93%, which makes the session statistically meaningful from a volatility standpoint.

• The SPY is still hot, sitting roughly 5.35 ATR multiples above the 50-day moving average.

• That means chasing breakout highs here becomes more difficult because the stop-out rate naturally increases when price is this extended from its intermediate moving average base.

• We primarily use the SPY as a proxy for how the capitalization-weighted part of the U.S. equity market is behaving, and right now it is telling us that there is still a lot of fuel behind the largest stocks.

• We were personally expecting a possible pullback toward $699, but the market did the opposite and expanded higher instead.

• That is a major sign of strength inside the SPY, and the next important confirmation will come from the Commitment of Traders report that we will publish in Sunday’s email.

• The equal-weight S&P 500, RSP, is also giving us important context because it shows whether the rally is only being driven by mega-cap weightings or whether strength is spreading through the broader index.

• RSP has now formed a clean cup-and-handle structure.

• The left side of the cup began around the 27th of February, with the valley low forming on the 30th of March at $187.46.

• That low came directly into the 50-week moving average, where buyers stepped in and pushed price higher.

• The right-side handle has now formed between the 17th of April and the 30th of April, with yesterday’s strong bounce coming off the rising 20-day EMA.

• RSP also came very close to testing the 10-week moving average, which adds further structure to this pullback-and-bounce setup.

• The key point is that both the capitalization-weighted S&P 500 and the equal-weight S&P 500 are now moving together.

• The capitalization-weighted SPY is still stronger, which tells us that the largest market-cap stocks are outperforming, but RSP is also showing genuine strength.

• From an asymmetry standpoint, RSP is arguably more forgiving than SPY because it is only 2.5 ATR multiples above the 50-day moving average.

• That means liquidity may begin moving further down the market-cap curve, away from only mega-cap tech and into the equal-weight S&P, mid-caps and small-caps.

• The Magnificent Seven chart continues to look extremely similar to the SPY, which is exactly what we would expect given how much influence these stocks have on the index.

• The MAG7 now accounts for just over 33% of the entire S&P 500 weighting.

• More importantly, the MAG7 has contributed roughly 55% of the S&P 500’s gains in 2024 and roughly 46% of its gains in 2025, which shows how critical this group is to the broader index.

• Yesterday, the MAG7 had an aggressive intraday pullback all the way down to 6,486.

• The full candle range was roughly 3%, which is almost twice the expected average daily range and around a 1.8x expansion versus normal volatility.

• The important point is that buyers stepped in aggressively, with relative volume coming in at 144%.

• That created a red hammer candle, which is a major sign of demand at the lows.

• The MAG7 is also only 3.78 ATR multiples above its 50-day moving average, meaning the group is not technically extended in the same way as some of the more overheated areas of the market.

• With Apple rallying in pre-market after earnings, we suspect the MAG7 can continue to expand higher.

S&P 400 Midcap

66.16%: over 20 EMA | 65.91%: over 50 EMA | 59.89%: over 200 EMA

• The mid-caps showed a similar structure to RSP, but with much lower relative volume.

• Yesterday’s MDY session came in at roughly 39% of the 20-day average, which is the lowest relative volume reading we have seen since early April.

• Price bounced materially off the $655 support structure, which is exactly the area we have been tracking.

• On the visible range volume profile, that $655 zone shows roughly 700,000 shares traded green versus about 500,000 shares traded red.

• That shows a clear imbalance in favor of buyer aggression at the 20-day EMA level.

• This was the pullback long opportunity we were looking for, and it is a good example of the type of entry system that is working best in the current market.

• Opening range high breakouts tend to work better at the beginning of an uptrend.

• Once the trend is already extended, pullbacks into rising moving averages usually offer better risk/reward and a lower stop-out probability.

• The mid-caps still have supply overhead up toward $675.77, so we would not be surprised to see MDY trend sideways and consolidate here.

• The fact that relative volume is drying up during this two-week consolidation phase is generally constructive, not bearish.

Russell 2000

62.68%: over 20 EMA | 68.89%: over 50 EMA | 60.43%: over 200 EMA

• The small caps are showing the same type of structure as the mid-caps, but with materially stronger relative strength.

• IWM remains incredibly impressive, and from a capitalization standpoint, this is probably the main area where liquidity should be focused right now.

• IWM is sitting roughly 4.28 ATR multiples above the 50-day moving average, which means it is not meaningfully extended.

• Yesterday’s session saw a 70% relative volume uptick, which is materially stronger than the mid-caps.

• IWM is also still sitting inside a higher-low formation on the weekly structure.

• The most important point is that IWM has a 75 relative strength rating versus the SPX, which is the strongest of any ETF discussed in today’s report.

• Small caps naturally carry higher volatility because they have lower market caps and a higher average daily range.

• IWM’s average daily range is roughly 1.5%, compared with around 0.9% for the SPY.

• That means the same directional market move can produce larger percentage returns in small caps, which is why this group matters so much for active momentum traders.

• From our perspective, IWM remains a firm long-exposure area and should be watched very closely.

FOCUSED STOCK
AAPL: An Earnings Episodic Pivot Breakout

ADR%: 2.05% | Off 52-week high: -5.9% | Above 52-week low: +41.0%

• Apple is our focus stock this morning after a strong earnings reaction and Apple beat earnings estimates by 3.3% and beat revenue estimates by 1.58%.

• The stock is gapping higher in pre-market, and as always with gap-ups, we want to be cautious in the first 15 to 30 minutes to see whether the gap begins to fill or whether buyers immediately defend the move.

• If Apple does fill the gap lower and buyers step in, we would view that as a potential long opportunity.

• We would be cautious about buying a five-minute opening range high breakout immediately because gap-up entries can have a higher failure rate if the first move is too extended.

• Structurally, Apple is now breaking out of a major intermediate-term base.

• The stock has formed a double-bottom structure, with the first low forming during the week of the 20th of January and the second bottom coming through the repeated tests between the 16th of March and the 6th of April.

• Those tests occurred around the rising 50-week moving average, which makes this structure much more important.

• Apple is now beginning to expand higher, with strong relative volume and a 70 relative strength rating versus the SPX.

• Yesterday’s indecisive session was largely due to earnings risk, but relative volume still came in at 220%, showing major participation.

• Given Apple’s importance within the Magnificent Seven, the Nasdaq and the SPY, this is one of the most important stocks to watch today.

FOCUSED GROUP
XLY: Consumer Discretionary Pullback Long

• XLY is our focus group today because it is showing an excellent pullback long setup.

• Yesterday’s bounce off the rising 20-day EMA was a strong entry example.

• The visible range volume profile shows a major point of control around this level on both the daily and weekly structure, which gives the setup much more technical significance.

• We would look for long exposure on XLY around the $116 area, ideally on pullbacks toward that level.

• The stop would ideally sit below the 20-day EMA, around $116, depending on the exact entry and intraday structure.

• The setup is also supported by the rising 10-week and 20-week EMAs, which are both trending higher.

• Yesterday’s bounce came on 100% relative volume, which gives the move more validity than the low-volume bounces we have seen elsewhere.

• From our perspective, XLY is a very strong pullback long setup, and the key is to avoid chasing extended highs while focusing instead on controlled entries near the moving average cluster.