OVERVIEW
The Morning Setup

• CPI: Consensus is +0.1% headline and +0.2% core MoM, with annual inflation expected at 3.4% and 2.5% respectively.

• SPY: The daily chart has tightened noticeably near the highs. Price is below 776.85 resistance, while both range and volume have contracted. This is the cleanest VCP-type setup across the major indexes.

• QQQ: Also tightening, although the structure is less clean. It remains below 728.54 and only 0.64% above its 50-day average.

• Breadth: Tuesday was mixed beneath the surface. The S&P 500 fell 0.3% and Nasdaq 0.6%, but the Russell 2000 gained 0.3%.

• Premarket: Futures are modestly higher, led by Nasdaq, as CoreWeave, Super Micro and other AI infrastructure names rally.

The setup remains constructive, but CPI arrives before any of these breakouts have confirmed.

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MARKET ANALYSIS
CPI Day: SPY Coils at Highs as AI Rips

SPY has spent the past several sessions consolidating close to its highs after the sharp move at the start of August. The daily ranges have progressively narrowed and volume has eased with them.

That changes how we should read Tuesday’s 0.74x relative volume. Low turnover would be less encouraging if SPY were repeatedly trying and failing to break higher. In the current structure, price itself is also contracting. That is consistent with a VCP-type consolidation, where we want to see volatility and supply diminish before the next expansion.

SPY closed at 770.56, below resistance at 776.85 and roughly 3% above its 50-day average.

The next useful signal is a break through 776.85 accompanied by stronger volume. Until then, this remains a consolidation near the highs rather than a confirmed breakout.

QQQ is showing a similar development, but the pattern is less orderly. July and early August produced much wider swings, and the index is still considerably closer to its 50-day average than SPY.

QQQ closed at 718.45, just 0.64% above its 50-day and below 728.54 resistance. Its 50-day sits around 714 based on the supplied data.

The recent contraction is constructive, but QQQ has less room for error. A move through 728.54 would improve the structure considerably. A loss of the 50-day would be the first important warning that the consolidation is resolving lower.

Broadening Has Not Gone Away

Tuesday’s headline performance understated what happened further down the market-cap spectrum.

The S&P 500 fell 0.3%, the Nasdaq Composite lost 0.6% and the Dow declined 0.3%. The Russell 2000 moved the other way, gaining 0.3%.

That fits with the relative position of the equal-weight indexes. RSP remains 3.52% above its 50-day average and QQQE 2.63% above its own, compared with only 0.64% for QQQ.

This does not tell us which stocks drove Tuesday’s decline, but it does show that the medium-term structure outside the cap-weighted Nasdaq leaders remains healthier.

There are still reasons to avoid treating breadth as fully confirmed. Seven of 11 major sectors declined Tuesday, and MDY and IWM remain below nearby resistance.

MDY closed at 709.05, just below 710.42, while IWM closed at 300.99 beneath 303.06.

Those are useful confirmation levels. If SPY breaks higher while MDY and IWM clear resistance as well, the advance would have much better evidence of broad participation.

AI Infrastructure Leads the Premarket

The strongest theme before the CPI release is AI infrastructure.

At 7:00 a.m. ET, Dow futures were up 0.11%, S&P 500 futures 0.25% and Nasdaq 100 futures 0.65%. CoreWeave was up 18.2%, Super Micro 9.2%, Nebius 9.5%, while IREN and Applied Digital were both up more than 5%.

The common thread is forward demand. CoreWeave raised its annual revenue, operating-profit and capital-spending forecasts, while backlog increased to $104.2 billion. Management also said near-term capacity is effectively sold out.

Super Micro’s report was more mixed than the share-price reaction suggests. The important positive was its fiscal 2027 outlook and stronger gross margin, rather than a uniformly strong set of quarterly figures.

For the broader market, the relevant takeaway is that spending on AI compute and data-centre capacity remains strong enough to support the infrastructure complex despite increasingly demanding valuations.

CPI, Rates and Oil

July CPI is expected to rise 0.1% MoM, while core CPI is expected at 0.2%. Annual headline inflation is forecast at 3.4% and core at 2.5%.

The release is important because rate expectations remain sensitive to any evidence that inflation is proving sticky. Markets were roughly evenly split this morning between another 25bp Fed hike and a pause in September.

Oil remains an additional complication. Brent was trading around $89 this morning after separate attacks on shipping in the Strait of Hormuz and Bab el-Mandeb. Hormuz traffic fell to eight vessels Tuesday, compared with roughly 125–140 per day before the war.

Today’s CPI largely reflects conditions before the latest renewed pressure in energy markets, so an in-line inflation report would ease the immediate concern without removing the oil risk from the outlook.