OVERVIEW
The Morning Setup

• Breakout: All four major benchmark ETFs closed above their recent resistance levels Thursday: SPY 776.85, QQQ 728.54, MDY 713.57 and IWM 303.40.

• VCP: SPY’s breakout came from the tight volatility contraction we have been watching on the daily chart. QQQ also resolved its looser contraction higher. Volume remained below average, so price has confirmed while volume has not yet expanded.

• Premarket: Futures are subdued rather than risk-off. At Reuters’ 6:07 a.m. ET snapshot, Dow futures were -0.12%, S&P 500 +0.07% and Nasdaq 100 +0.18%.

• Oil: Brent is back near $87 as stalled U.S.-Iran talks, the threat of an extended U.S. blockade and attacks on two UAE tankers keep pressure on shipping through Hormuz.

• Today: July retail sales arrive at 8:30 a.m. ET, with consensus around +0.1% MoM. Preliminary University of Michigan sentiment follows at 10:00 a.m. ET.

Thursday improved the market technically and broadened participation beyond the largest indexes. A quiet retest of the breakout levels would be normal; what we do not want to see is an immediate failure back into the prior ranges.

MARKET ANALYSIS
Thursday Finally Broke the Range

Thursday’s session was stronger than another simple move toward resistance.

SPY closed at 777.82, above its prior 776.85 range high. QQQ closed at 732.07, comfortably through 728.54. MDY finished at 714.71 above 713.57, while IWM closed at 303.49, narrowly clearing 303.40.

The S&P 500 itself gained 0.65% to another record close, while the Nasdaq added 0.81%. Seven of the 11 S&P sector indexes advanced, with Communication Services and Real Estate leading.

For SPY in particular, Thursday looks like the first breakout from the volatility contraction that had developed beneath the highs.

The qualification is volume.

SPY traded at 0.72x its 20-day average volume, QQQ at 0.76x, MDY at 0.54x and IWM at 0.68x. Those are not the volume readings we would ideally want on a decisive breakout.

But the context matters. SPY and QQQ had been contracting in both range and turnover before Thursday. Lower volume during that contraction was constructive. Thursday then delivered the price break, but without the expansion in volume that would provide stronger confirmation.

SPY and QQQ: Former Resistance Is Now the Test

For SPY, 776.85 should now be treated as the immediate pivot and apullback toward that area that holds would be normal breakout behaviour, particularly after several sessions of tightening followed by Thursday’s move higher. We do not need SPY to immediately extend vertically for the setup to remain constructive.

A quick failure back below 776.85 would be less encouraging, especially if it comes with expanding selling volume.

SPY’s 50-day average is around 748.5 based on the supplied data. The deeper 729.10 support remains relevant to the larger structure, but it is not remotely the level that determines whether Thursday’s breakout succeeded.

QQQ is similar. Thursday’s close at 732.07 moved decisively through the 728.54 level that had capped the index throughout the recent recovery.

That means we should stop describing Nasdaq leadership as “damaged.” On price, it has repaired the immediate structure.

The percentage of Nasdaq-100 constituents above their 20-day average slipped from 66% to 64% even as QQQ advanced. That is a small divergence worth watching, but a two-point decline does not override a fresh price breakout on its own.

Its 50-day average sits around 713.2. The old 661.14 structural support is far too distant to be useful for today’s exposure decision.

Broadening Is Improving

The most constructive part of Thursday was that the breakout was not limited to SPY and QQQ.

MDY moved through 713.57, while IWM finally pushed above 303.40.

Those are important developments because both indexes had spent several sessions sitting directly beneath resistance.

The break in IWM is admittedly marginal — only nine cents above the identified level — so small caps still need follow-through. MDY’s move was cleaner, although its 0.54x relative volume was particularly light.

Their useful intermediate levels are also much closer than the deep floors highlighted in the original report.

MDY’s 50-day is around 692, while IWM’s is around 295. Those are the areas that would become relevant if Thursday’s breakout begins to deteriorate. The deeper 679.11 and 287.83 levels remain structural references, not today’s first line of defence.

Sector participation also remained constructive. Swingly’s SPDR sector basket had eight of 11 groups higher Thursday, while the underlying S&P sector indexes showed seven of 11 advancing. Either way, the session was clearly broader than a narrow mega-cap rally. Reuters recorded Communication Services as the strongest S&P sector group, while Technology also finished higher.

QQQE also remains further above its 50-day average than QQQ. That tells us the equal-weight Nasdaq retains a healthy medium-term structure; it does not by itself prove whether Thursday’s gains were concentrated in mega caps.

Oil Is the Main Macro Counterweight

The inflation backdrop improved substantially this week. July CPI was benign, and Thursday’s PPI was unchanged on the month versus expectations for an increase. Markets subsequently reduced the probability of a September rate hike to roughly one-third.

Oil is pushing in the opposite direction this morning. Brent is trading around $87 after the United States said its blockade of Iran could continue indefinitely. Shipping traffic through the Strait of Hormuz remains severely constrained, and two UAE-owned tankers were attacked while transiting the strait on Thursday.

This is more than a generic geopolitical headline. There is already material disruption to shipping through a route that handled roughly one-fifth of global oil and LNG flows before the conflict. At the same time, weaker demand forecasts and the largest weekly increase in U.S. crude inventories in more than three years are limiting the upside in oil.

The cross-asset picture is therefore mixed rather than threatening: softer inflation data is supporting equities and reducing near-term Fed risk, while renewed oil pressure prevents the inflation story from becoming completely benign.

Retail Sales Comes First

The main scheduled release this morning is July advance retail sales at 8:30 a.m. ET. The Census Bureau confirms July data is due today, with consensus estimates around a 0.1% monthly increase.

The preliminary August University of Michigan consumer survey follows at 10:00 a.m. ET, not 8:30. July’s final survey showed one-year inflation expectations at 4.2%; today’s report will show whether the renewed rise in gasoline prices has changed that picture.

Retail sales matters more immediately because it tests whether consumer demand remains resilient after this week’s softer inflation readings.

A strong number is not automatically bearish. Strong consumption alongside contained inflation would support the earnings backdrop, although a major upside surprise could put some upward pressure back into yields.

Likewise, a weak number is not automatically bullish simply because it reduces rate pressure. At some point weaker demand becomes a growth concern.

The market reaction around the breakout levels will tell us more than the headline number in isolation.