OVERVIEW
All You Need To Know

• Nasdaq futures are lagging as Sandisk, Western Digital, AppLovin, Datadog and other growth names dip, but still remain strong.

• Strong earnings are no longer enough for extended stocks when expectations are already extremely high.

• S&P 500 and Dow futures remain comparatively resilient, showing that the weakness has not spread uniformly across the market.

• Oil is broadly stable as markets weigh progress in Iran-Oman negotiations against continuing supply risks.

Market structure

• SPY: Holding near resistance at 773.41, but Wednesday’s test came on below-average volume.

• QQQ: The weakest price structure of the major indexes. It remains below 726.39 and is testing its 50-day average, though it is earlier in it’s rally cycle.

• MDY: Constructive above its 50-day average, but must clear 707.60 to confirm mid-cap participation.

• IWM: Holding its structure, but needs a close above 302.39 with stronger volume to confirm small-cap broadening.

• Breadth: Mixed rather than broken. Six of 11 sectors declined Wednesday, but equal-weight indexes remain above their medium-term trends.

Today’s game plan

Add exposure if:

• SPY clears 773.41 with improving volume.

• QQQ defends its 50-day average and reclaims 726.39.

• MDY and IWM clear 707.60 and 302.39.

Hold exposure while:

• Existing positions remain above their own respective supports (10, 20 & 50-MAs).

• Equal-weight indexes stay above their 50-day averages.

• Nasdaq weakness remains concentrated rather than spreading across the full market.

Reduce exposure if:

• QQQ loses its 50-day average and technology selling expands.

• SPY rejects resistance and begins losing nearby support.

• Sector declines broaden while MDY and IWM also weaken.

Today’s catalysts

• 8:30 a.m. ET: Weekly jobless claims

• 8:30 a.m. ET: Q2 productivity and unit labour costs

• Tomorrow, 8:30 a.m. ET: July nonfarm payrolls

MARKET ANALYSIS
Expectations Hit Hardware and Software

The pre-market tape is divided rather than uniformly weak. S&P 500 and Dow futures are close to unchanged, while Nasdaq 100 futures are lower as selling spreads across parts of the AI hardware and software complex. That divergence is the central market signal this morning: the broader indexes remain comparatively resilient, but growth leadership is under pressure.

Sandisk and Western Digital both delivered strong operating results and revenue outlooks above published consensus estimates. Their shares nevertheless fell sharply before the open, with Western Digital down approximately 15.5% and Sandisk down 10.1% in Reuters’ latest snapshot. The reaction does not indicate that the companies reported weak results. It shows that expectations had risen even faster than the numbers, following year-to-date advances of approximately 200% in Western Digital and 400% in Sandisk.

That pressure has spread beyond the two reporting companies. Micron, AMD, Intel, Seagate and other memory or semiconductor names were lower before the open as investors reassessed how much future AI demand is already reflected in valuations. Long-term data-centre demand remains strong, but the immediate market response shows that merely exceeding consensus is no longer sufficient for the most extended leaders.

Software is contributing equally important weakness. AppLovin fell 18.7% after missing quarterly revenue expectations, while Datadog declined 22.3% following its results. Atlassian, Salesforce, Adobe and Zscaler were also under pressure. The Nasdaq weakness therefore cannot be described as an isolated storage-stock reaction; it reflects a broader reassessment across several highly valued technology groups.

The distinction is important. This is not evidence that AI-related demand has collapsed. It is evidence that expectations and valuations have become sufficiently demanding that good results can still produce severe negative reactions.

SPY: Resistance at 773.41 Is the First Decision Point

SPY closed Wednesday at 769.77, approximately 0.5% below resistance at 773.41. Relative volume was 0.90 times its 20-day average, so the move toward resistance lacked the participation normally associated with a decisive breakout. SPY remains 3.13% above its 50-day average, leaving its medium-term structure intact.

The immediate test is straightforward:

• A close above 773.41, ideally with volume above the 20-day average, would confirm another leg higher.

• Continued rejection below 773.41 would keep SPY inside its current range.

• The 50-day average, calculated at roughly 746 from the supplied distance data, is the first meaningful medium-term support.

• The reported 729.10 level is deeper structural support, not today’s immediate invalidation level.

The earlier report treated 729.10 as though a retreat toward it would simply mark a failed resistance test. That understates the deterioration required to reach it. SPY would have already lost its 50-day average and suffered a material technical break before testing 729.10.

QQQ: Weakest Price Structure, Not Weakest Breadth

QQQ closed at 717.30, only 0.32% above its 50-day average and below resistance at 726.39. Relative volume was 0.79 times average. This gives QQQ the weakest price structure of the four benchmarks, particularly with Nasdaq futures lower before today’s open.

It does not, however, have the weakest reported breadth.

The Nasdaq McClellan Oscillator stands at 22.95, above the corresponding readings for SPY, MDY and IWM. Its one-day Summation change is also the strongest of the group. The correct conclusion is that short-term Nasdaq breadth has improved, while the cap-weighted index remains technically vulnerable near its 50-day average.

The immediate QQQ map is:

• 726.39: resistance and the level required to begin repairing price leadership.

• Approximately 715: the 50-day average implied by the supplied closing price and distance calculation.

• 661.14: deep structural support, not the level that determines whether the current setup remains healthy.

A loss of the 50-day average would be the first meaningful warning. QQQ should not be described as defensible merely because it remains above a support level almost 8% below Wednesday’s close.

MDY: Stronger Participation, but Still Below Confirmation

MDY closed at 701.88, with relative volume at 1.29 times its 20-day average—the strongest participation of the four benchmark ETFs. It remains 1.87% above its 50-day average and below resistance at 707.60.

The next constructive signal is a close above 707.60. Holding above a distant floor at 675.55 preserves the larger structure, but it does not strengthen the broadening thesis by itself.

The hierarchy is:

• 707.60: immediate breakout and confirmation level.

• Approximately 689: implied 50-day average and first medium-term support.

• 675.55: deeper structural floor.

MDY’s positive McClellan Oscillator supports improving short-term participation, but its lower reading relative to SPY and QQQ argues against describing mid-cap breadth as fully established.

IWM: Close to Resistance, but Volume Remains Light

IWM closed at 299.77, below resistance at 302.39 and on relative volume of only 0.78 times its 20-day average. It remains 2.14% above its 50-day average.

A close above 302.39 would provide the first clear evidence that small caps are contributing to the broadening move rather than following it. Without stronger volume, any breakout should initially be treated with caution.

Its technical hierarchy is:

• 302.39: immediate confirmation level.

• Approximately 293.50: implied 50-day average.

• 287.83: deeper structural support.

The combination of nearby resistance and below-average volume leaves IWM constructive, but unconfirmed.

Breadth Is Mixed

Five of the 11 major sector ETFs advanced Wednesday and six declined. Six declining sectors represent a narrow majority, but the distribution was not broad enough to describe the session as decisive risk-off selling.

Health Care and Materials gained more than 1%, while Energy, Communication Services, Utilities and Technology declined. Financials were slightly positive, and Industrials and Consumer Staples were close to unchanged. The session therefore reflected uneven rotation and profit-taking rather than uniform liquidation.

Equal-weight benchmarks continue to provide a medium-term cushion. RSP remains 3.54% above its 50-day average, while QQQE is 1.78% above its own. Those readings show that the equal-weight structures remain intact. They do not, on their own, prove that Wednesday’s weakness was concentrated in the largest constituents; establishing that would require comparing the same-session performance of QQQ against QQQE.

The breadth evidence supports a balanced conclusion:

• short-term breadth momentum remains positive across all four index universes;

• equal-weight trends remain above their medium-term averages;

• a narrow majority of sectors declined Wednesday;

• but neither MDY nor IWM has cleared nearby resistance.

The market is not displaying broad internal deterioration, but the broadening process remains incomplete.

Oil Is Stable, While Energy Absorbs the Decline

Oil is approximately unchanged this morning rather than continuing to fall sharply. Brent traded near $79.54 and WTI near $75.27 as investors balanced progress in Iran-Oman negotiations against continuing threats to regional supply and shipping. Gulf oil exports remain well below pre-war levels, while reported attacks on Saudi tankers and threats to energy infrastructure prevent the geopolitical risk premium from disappearing entirely.

The proposed agreement could improve shipping through the Strait of Hormuz, but markets remain cautious after an earlier memorandum proved short-lived. The correct cross-asset conclusion is therefore that diplomatic progress has reduced part of the immediate supply premium, not that geopolitical risk has been resolved.

Energy’s 2.10% decline on Wednesday is not evidence that lower oil has failed to provide “sector relief.” Lower crude prices can help the wider equity market by reducing inflation and input-cost pressure, while simultaneously weighing on expected revenue and earnings for energy producers. Energy-sector weakness is therefore directionally consistent with softer oil prices.

Short-duration Treasuries were essentially unchanged in the supplied market snapshot, offering little useful confirmation before this morning’s labour and productivity releases.

The Setup

Two economic releases arrive at 8:30 a.m. ET: weekly jobless claims and the preliminary second-quarter productivity and unit labour cost report. Productivity matters because stronger output per hour can help companies absorb wage increases without passing the full cost into inflation. The July employment report follows Friday at 8:30 a.m. ET.
The reports may alter rate expectations and the opening reaction, but Friday’s payrolls figure should not be presented as certain to “resolve” the market’s technical divergence. Price and breadth must confirm the macro response.