MARKET ANALYSIS
Here’s All You Need To Know

• The market is digesting yesterday’s relief rally rather than extending it aggressively this morning, which is exactly what we should expect after such a violent repricing in oil, tech and global risk appetite.

• The major macro shift is still the U.S.-Iran deal. The Dow closed at a fresh record yesterday, the Nasdaq rallied more than 3%, and oil collapsed as traders priced in the reopening of the Strait of Hormuz. Brent crude is now trading below $80 for the first time since March, while WTI is closer to $77. That is a major change from last week, when the market was still trying to price the risk of a prolonged energy shock.

• This matters because the Iran conflict was feeding directly into the inflation problem. The market was reacting to the possibility that higher oil would force inflation higher again, keep central banks hawkish, and pressure long-duration growth stocks just as semiconductors and the Magnificent Seven were trying to repair from their pullback.

• Lower oil gives the market breathing room, but it does not erase the damage already done. Import prices rose 1.9% in May, well above expectations, while annual import inflation reached 6.7%, the largest gain since August 2022. Fuel and lubricant import prices rose 12.5% on the month, and over the February-to-May period tied to the Iran war, fuel prices surged more than 58%.

• That is the important nuance today. Oil is falling now, which is bullish at the margin, but the inflation pass-through from the shock is already visible in the data. The market can celebrate the collapse in crude, but the Fed and other central banks are still looking at a world where energy volatility has already moved through pricing channels.

• This is why futures are flat rather than exploding higher. The macro backdrop has improved materially, but the market has already had a large relief move. Now it needs confirmation that oil stays lower, the deal holds, and inflation pressure begins to cool rather than simply rotate through the system with a lag.

• The global central bank backdrop also remains mixed. The Bank of Japan raised rates to 1%, its highest level since 1995, as Japan continues to deal with a weak yen and inflation pressure. The Reserve Bank of Australia held rates at 4.35%, but made clear it is still prepared to hike if inflation remains elevated. That tells us global policy is not moving uniformly dovish just because oil is falling today.

• China is another reminder that the global picture is uneven. Retail sales contracted in May for the first time in more than three years, while industrial output held up better than expected. That is not a clean global growth boom. It is a world where parts of Asia are rallying on liquidity and relief, while underlying consumption data in China remains soft.

• The second major story is still SpaceX. SpaceX is continuing to trade like the market’s main speculative magnet. The stock is sharply above its $135 IPO price, trading around the $200 area premarket, and options begin trading today. That matters because options will likely bring a new wave of speculative activity, higher implied volatility, and more aggressive positioning around the stock.

• This is a double-edged sword for the broader tape. On one hand, SpaceX holding up after the largest IPO in history confirms that speculative appetite is still alive. That is supportive for high-beta technology, AI infrastructure, space-linked names and the broader innovation trade. On the other hand, a stock with a valuation above $2T and no profitability is now becoming one of the most important risk appetite gauges in the market.

• The sector action from Monday was also revealing. Technology led the market higher, followed by communication services and consumer discretionary. Energy was the clear laggard as crude collapsed. That makes sense. The market is rewarding the areas that benefit from lower oil and lower inflation pressure, while punishing the sector that had benefited most from the war premium.

• We want to see whether oil can stay below $80 Brent and avoid reversing higher. We want to see whether tech can hold yesterday’s strong move rather than immediately giving it back. We want to see whether SpaceX remains a source of risk appetite or starts absorbing too much speculative liquidity.

• The edge is still in identifying where capital is rotating with confirmation, where price is holding key support, and where the risk/reward has not already been used up by the first move.

Nasdaq

59.40%: over 20 EMA | 59.40%: over 50 EMA | 57.42%: over 200 EMA

• QQQ had a powerful session yesterday, climbing 3.14% after last week’s volatility around the 50-day moving average and 10-week EMA.

• The move came on 106% relative volume, with QQQ’s relative strength rating versus the SPX still very high at 90.

• The positive: the Nasdaq remains one of the strongest major index cohorts, and last week’s bounce from the 10-week EMA continues to hold.

• The caveat: QQQ is now pushing higher on declining relative volume, which means price is improving, but participation is not expanding aggressively with the move.

• On the weekly chart, the structure still looks constructive. Last week’s bounce from the 10-week EMA was strong, and this week could develop into a Morning Star-style reversal if price continues to expand higher.

• We still need confirmation. A possible Morning Star pattern is only confirmed if the index follows through, not simply because it bounced from support.

• The main risk in chasing here is the unfilled gap below price, with the key gap-fill area around $722.

• The best entry was into weakness at the rising 50-day moving average and 10-week EMA, which is the area we highlighted over the last few sessions.

• Fresh long exposure after a 3% move is less attractive. This is now more of a trade-management zone than a clean initiation zone.

• The equal-weighted Nasdaq is the more interesting signal underneath the surface.

• The equal-weighted variant broke out yesterday on 142% relative volume, with expanding participation and stronger relative performance than cap-weighted QQQ.

• That tells us the technology rally is broadening beyond the mega caps, which is healthy.

• It also tells us mega-cap leadership is not the only force driving the tape right now. The broader technology complex is beginning to participate.

S&P 400 Midcap

69.92%: over 20 EMA | 62.40%: over 50 EMA | 61.65%: over 200 EMA

• MDY filled its gap yesterday, and while the candle may look messy at first glance, we do not view it as a major bearish signal.

• Relative volume came in at 142%, and supply did appear near the highs, but that needs to be read in context.

• MDY had already gapped higher, so some digestion and gap-filling was normal.

• This is why we do not want to buy extended gap-ups or push aggressive long exposure after large upside opens.

• The better entry remains the same: controlled pullbacks into support, especially around the 50-day moving average and 10-week EMA.

• MDY may also be giving us a useful read-through for QQQ. The Nasdaq still has a gap below price, and some gap-fill digestion would not be surprising after such a sharp bounce.

• The bigger picture remains strong. Mid-caps have avoided the same technical damage seen in mega-cap growth and continue to hold one of the better index structures.

Russell 2000

65.94%: over 20 EMA | 61.82%: over 50 EMA | 61.08%: over 200 EMA

• IWM also filled its gap and continued higher, but the volume profile was less convincing than MDY.

• The Russell 2000 advanced on 85% relative volume, which is not aggressive accumulation, but the relative strength rating versus the SPX has improved to 85.

• That relative strength reading is important because it shows small caps are beginning to participate properly.

• The market is no longer being carried only by mega-cap technology. Strength is broadening into small caps, mid-caps and equal-weighted technology.

• The caution is that IWM is now pushing through a three-day rally on declining relative volume.

• That does not invalidate the move, but it does reduce the quality of fresh entries.

• The best long entries in IWM came on pullbacks into the 50-day moving average and 10-week EMA, similar to the setups at the end of April, around May 19th, and again on the June 9th test.

• This is now a position-management area for traders who bought correctly into weakness.

• New entries should be more selective, ideally coming from pullbacks rather than marginal highs.

FOCUSED GROUP
XLC: GOOGL Pullback Trade Idea

• The group we are watching today is communication services.

• XLC is forming a potential double-bottom bounce from its 50-week moving average.

• This is the same higher-timeframe support area where the group bounced in late March and early April, making the current reaction technically important.

• The equal-weighted communication services ETF, RSPC, is showing a similar structure.

  

  RSPC VRVP Daily & Monthly

• RSPC is also trying to form a double-bottom-style bounce, most notably around its 20-month moving average.

• The alignment between cap-weighted XLC and equal-weighted RSPC matters because it suggests the setup is not isolated to one mega-cap name.

• Communication services is starting to look like a higher-timeframe pullback group where demand is reappearing.

• GOOGL matters because it sits at the intersection of two important themes: large-cap technology and communication services.

• The stock is pulling into its 20-week moving average, which is the area we discussed last week as the preferred entry zone.

• Price is now starting to tighten around that level, which is exactly what we want to see after a sharp pullback.

• The ideal structure from here would be a few sessions of chop around the 10-week EMA, while price stays underneath the daily point of control and builds a cleaner base.

• This is not a chase setup. The opportunity is in using the pullback toward the 20-week moving average as a risk-defined entry area.

• The stop should be kept as close as possible to that higher-timeframe support, so the trade has clear asymmetry.

• The group backdrop also supports the setup. If XLC and RSPC continue building their double-bottom structures, GOOGL becomes one of the cleaner large-cap pullback-long candidates.