MARKET ANALYSIS
Here’s All You Need To Know

• The market starts the week under pressure from two connected stress points: renewed U.S.-Iran escalation and another sharp unwind across semiconductors.

• The Middle East is back at the centre of the macro tape. The U.S. and Iran exchanged fresh strikes over the weekend, with Tehran claiming the Strait of Hormuz was closed and President Trump disputing that, saying the waterway remains open to commercial traffic. Markets are not waiting for clarity. Oil is repricing the risk immediately.

• Brent crude surged as much as 5% before paring gains, while WTI pushed above $75 at the highs before settling closer to the $73-$74 area. Prices are not yet at crisis levels, but the move is large enough to bring inflation risk back into focus just as markets were starting to price a more stable energy backdrop.

• That makes tomorrow’s CPI report more important. A cooler print could help offset some of the oil shock, but a hot print alongside rising crude would quickly push investors back toward higher-for-longer rate expectations. Treasury yields are not showing panic, but they are not offering relief either, with the 10-year around 4.47%, the 2-year above 4.20%, and the 30-year still above 5%.

• Equities are reacting defensively. S&P 500 futures are down around 0.4%, Nasdaq-100 futures are off roughly 1%, and Dow futures are slightly lower. The Nasdaq underperformance is the key tell: this is not only an oil story, it is also another AI and semiconductor de-risking event.

• Chips remain the weak point. SK Hynix fell more than 15% in Seoul, its worst day on record, after a strong Nasdaq debut on Friday. South Korea’s Kospi dropped almost 9%, Samsung lost more than 10%, and U.S. chip names including Micron, Sandisk, Western Digital, AMD and Intel are also under pressure.

• South Korea has become one of the cleanest global barometers for AI hardware sentiment. When SK Hynix and Samsung sell off this hard, investors are clearly questioning valuation, supply-demand balance and the durability of the AI memory cycle.

• The difficult part is that the fundamental data is still strong. TSMC reported June revenue growth of nearly 68% year over year, and first-half revenue rose more than 35% from the same period last year. AI demand has not disappeared. The issue is that positioning is crowded, expectations are high, and investors are no longer willing to pay any price for the theme.

• This is the shift inside the AI trade: strong demand is now expected. The market wants proof that hyperscaler capex can keep rising, memory demand can stay tight, and margins can hold.

• Earnings season now becomes the next major test. TSMC and ASML will be watched closely for the semiconductor read, while the major U.S. banks will set the tone for broader corporate earnings. Analysts expect S&P 500 profits to grow by more than 23% year over year, so the bar is high. Companies need to confirm forward demand, not simply beat backward-looking numbers.

• Financials are especially important because they have been one of the strongest rotation areas. JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley, Citigroup and Wells Fargo all report this week. If the banks confirm healthy credit, stable margins and resilient deal activity, the broader rotation can continue even if chips stay volatile.

• Precious metals are not giving a clean safe-haven signal. Gold and silver are lower despite the Middle East flare-up, which tells us real yields and Fed expectations are still dominating. This is less a pure fear trade and more an inflation-and-rates shock.

• Europe is showing the same split. Oil and gas names are leading, while most other sectors are weaker. European semiconductor stocks are also following Asia lower, confirming that the chip unwind is global.

• The broader U.S. tape is under pressure, but not broken. The S&P 500 and Nasdaq are both coming off their fourth winning week in the last five. The issue is that leadership was already extended, and now oil, CPI and earnings risk are all arriving at the same time.

• For traders, this is not a clean environment to chase. Rising crude pressures inflation expectations. Higher yields weigh on growth multiples. Chip leadership is under stress. Earnings season can either stabilize the tape or expose how high expectations have become.

Nasdaq

59.22%: over 20 EMA | 59.22%: over 50 EMA | 65.04%: over 200 EMA

• QQQ is still building a 56-day volatility contraction pattern around the rising 10-week EMA.

• When you zoom out to the weekly structure, this still looks strong, expected and normal after the aggressive rally from the end of March 2026. The index has not broken down. It has been digesting.

• Every pullback into the 50-day EMA and 10-week EMA area has continued to act as a viable dip-buying zone.

• That remains the key point. The contraction itself is not bearish as long as support holds and volume continues to decline. In fact, the sharp fall in participation is one of the more constructive parts of the setup. QQQ traded on only 59% of its 20-day average volume last session, while last week’s volume was only around 65% of the 20-week average.

• Inside a contraction phase, that is typically positive because it shows sellers are not accelerating the move lower. We are also still seeing the Magnificent 7 hold up well from a purely technical perspective. That matters because MAGS remain the most important group inside the Nasdaq.

• If mega-cap tech were breaking down aggressively, the QQQ contraction would be far more concerning. Instead, the group is consolidating while support continues to hold.

• Semiconductors are cooling, but they should not be ignored. The group is moving back toward key 50-day EMA areas, which still look like viable pullback-long zones in the stronger names.

• This is not the same setup as chasing extended breakouts. It is a pullback into leadership after a sharp move.

S&P 400 Midcap

55.27%: over 20 EMA | 62.56%: over 50 EMA | 68.09%: over 200 EMA

• MDY pulled back sharply last week into its 10-week EMA, where buyers did step in.

• The weekly candle showed a meaningful expansion in range, with average true range around 1.2x greater than the expected weekly range. That confirms there was real volatility around the support test, but the important part is that the index still held the 10-week EMA.

• The issue remains trade quality. Mid-caps have lacked linearity since April 2026. The structure has been choppy, inconsistent and difficult to hold unless exposure was taken on weakness into mean reversion zones like the 50-day EMA.

• Buying strength in MDY has likely led to getting chopped apart because the index keeps pushing, fading, pulling back, and then bouncing again.

  Right now, we would be cautious. MDY is sitting around the 10-day and 20-day EMAs on declining volume, with a lot of supply still sitting overhead toward the $705 highs.

• That makes the setup less attractive from a fresh long perspective. The index is not broken, but the entry quality is poor unless we get another flush back into a proper support zone.

Russell 2000

57.31%: over 20 EMA | 64.50%: over 50 EMA | 65.56%: over 200 EMA

• Small caps are behaving very similarly to mid-caps. IWM is holding, but the price action remains highly non-linear. This is exactly why we keep emphasizing the importance of focusing on where the real strength is.

• When the leading groups pull back into support, those are usually the areas to prioritise for exposure. Non-leaders can hold up, but they often do so in a way that is difficult to trade.

• The small-cap tape still lacks clean continuation. Price has been moving sideways, chopping around, and failing to produce sustained upside progress.

• That does not mean the group is collapsing, but it does mean the reward-to-risk is not as attractive as it is in leading technology or semiconductor pullbacks.

• We suspect a mean reversion down toward roughly $290 is highly likely. That would bring IWM back toward its 10-week EMA, which is the cleaner level to reassess the group.

FOCUSED GROUP
BOAT: Global Shipping Building A Base

• Our focus group today is global shipping, through BOAT. BOAT has formed a short three-day volatility contraction pattern, which is resolving into a breakout this morning.

• That short-term breakout is developing inside a much larger weekly base that has been building around the 10-week and 20-week EMAs for roughly 133 trading days.

• The group also has strong relative strength, with a rating around 85 versus the SPX. That makes it one of the better areas of the market from a relative performance perspective, especially as equities start to show more distribution and volatility picks up.

• The macro backdrop is also supportive. Oil is pushing higher, the VIX is beginning to lift, and the market is dealing with renewed geopolitical and inflation pressure. Shipping tends to benefit from higher oil, higher commodity sensitivity and tighter global trade conditions, especially when energy and transport risk move back into the tape.

• This is exactly the kind of group that can work when the broader index is choppy.

• We are not looking at BOAT because it is a crowded mega-cap technology trade. We are looking at it because it has a long base, a short VCP, strong relative strength and a macro catalyst that is now moving in its favour.