MARKET ANALYSIS
Earnings Decide the Next Move

• U.S. equities are attempting to recover from last week’s selloff, supported by a reversal in oil and an early rebound across semiconductor stocks.

• S&P 500 futures are up around 0.3%, Nasdaq-100 futures are higher by roughly 0.6%, and Dow futures have gained approximately 130 points. The Nasdaq is leading because chipmakers are trying to recover from their sharpest weekly decline in months.

• Today’s strength should initially be treated as a relief bounce rather than confirmation that the broader risk-on trend has resumed.

• The Nasdaq Composite fell 2.9% last week, while the S&P 500 declined 1.6% and the Dow lost 0.9%. SMH dropped almost 9%, recording its third weekly decline in four weeks, while the Philadelphia Semiconductor Index moved into bear-market territory.

• Semiconductor stocks are stronger this morning, with SMH up more than 1%, Micron gaining over 3%, and AMD, NXP Semiconductors and Teradyne rising by more than 2%. Buyers are returning after last week’s aggressive selling, but one positive session does not repair the technical damage across the group.

• The central question is whether the semiconductor selloff was a normal reset after an extended rally or the beginning of a broader reassessment of the AI investment cycle.

• That question now moves directly into earnings season. Alphabet and Tesla report this week, while Intel and Texas Instruments will provide further evidence on semiconductor demand, capital expenditure and the health of AI infrastructure spending.

• Headline earnings beats may no longer be enough to support technology valuations. Investors will be focused on cloud growth, AI monetisation, capital intensity, margins and forward spending plans.

• Alphabet faces a particularly high bar because it must demonstrate that AI investment is strengthening Search and Cloud rather than merely increasing operating costs. Tesla faces a separate test around demand, pricing, automotive margins and whether its AI narrative can offset weakness in its core vehicle business.

• Brent initially climbed above $90, while WTI approached $85, after the United States completed a ninth consecutive day of strikes against Iran. Tehran has continued retaliatory attacks and has claimed that it intercepted vessels attempting to cross the Strait of Hormuz.

• Oil has since reversed from its overnight highs, with Brent easing toward $88 and WTI falling back toward $82. The reversal followed comments suggesting that intermediaries are still exchanging proposals and that negotiations could resume under the right conditions.

• The decline in crude is a major reason equities are trading higher this morning. The market continues to assume that neither side wants a significantly broader war involving a large deployment of U.S. ground forces.

• As long as investors believe diplomacy remains the eventual outcome, geopolitical selloffs are likely to attract buyers. However, the market may be becoming too comfortable with a conflict that continues to escalate.

• Nine consecutive days of strikes, attacks on regional infrastructure and disruption around Hormuz represent a meaningful risk to energy supplies. Brent above $85 remains an inflation and margin problem even after its retreat from the overnight high.

• The corporate consequences are already becoming visible. Ryanair reported a 34% decline in quarterly profit, partly because consumers delayed bookings during the Middle East conflict and because its unhedged fuel costs more than doubled.

• U.S. gasoline prices have also moved back above $4 per gallon, increasing the risk that higher energy costs begin to weigh on consumer sentiment and discretionary spending.

• This is how an oil shock spreads into the broader economy. Transport costs increase, household spending power weakens, corporate margins compress and the inflation outlook becomes more difficult for the Federal Reserve.

• Treasury yields are not signalling panic, but they remain restrictive. The 10-year yield is around 4.56%, the 2-year is near 4.18%, and the 30-year remains above 5.07%.

• Those yield levels continue to place pressure on long-duration growth assets. Higher oil also complicates the Fed’s path because sustained energy inflation could interrupt the recent cooling in consumer prices and reduce the probability of rate cuts.

• The global market is similarly divided. South Korea’s Kospi fell 4.5%, while Samsung and SK Hynix both lost more than 4%. The decline triggered a temporary sell-side trading halt, confirming that pressure on the AI hardware trade remains global.

• China and Hong Kong were considerably stronger. The CSI 300 gained 1.5%, the Hang Seng rose more than 2%, and Alibaba advanced after unveiling its latest Qwen AI model.

• This divergence shows that global AI investment is not disappearing. Capital is rotating between countries, companies and different parts of the infrastructure stack rather than leaving the theme completely.

• There is no clean focus group today because price action across the market is highly volatile and increasingly fragmented.

• The VIX has been rising aggressively for approximately three weeks, confirming that market risk is expanding rather than contracting.

• In this environment, forcing new exposure across unstable groups is unlikely to provide an attractive risk-to-reward profile.

• The clearest area to monitor is energy.

• XLE continues to move aggressively higher as oil prices remain elevated and geopolitical risk around the Strait of Hormuz persists.

• Energy is currently benefiting from both commodity strength and capital rotating away from weaker technology and cyclical areas.

• However, after the recent acceleration, the priority should be understanding how the sector behaves around its next consolidation rather than chasing an extended move.

• A controlled pullback on declining relative volume would provide a more attractive entry than buying after a sharp upside expansion.

Nasdaq

44.66%: over 20 EMA | 43.68%: over 50 EMA | 63.10%: over 200 EMA

• QQQ remains inside the same Stage 2 volatility contraction pattern that has now been developing for roughly 70 trading sessions since May 8th.

• This consolidation began after QQQ became aggressively extended from its 50-day EMA, reaching more than 10 ATR multiples above the average near $720 on May 14th. Some form of mean reversion and base building was therefore expected.

• The index subsequently consolidated above its 50-day EMA and produced a major bounce from roughly $686 in early June, with elevated relative volume confirming strong demand around that support area.

• The last three sessions have introduced the first meaningful deterioration inside the structure.

• QQQ broke below its rising 10-week moving average on Thursday before forming a wide-bodied doji around $706.50. That level also aligns with the point of control on the visible range volume profile, making it a major area of equilibrium.

• Although QQQ initially held that zone, Friday’s attempt to recover above the 50-day EMA, 10-week moving average and point of control failed.

• The rejection occurred on 121% relative volume versus the 20-day average, showing that participation increased as price failed to reclaim support.

• The volume profile around $706.87 also shows sellers becoming more aggressive. Approximately 16.98M shares traded red around the failed reclaim, compared with roughly 15.44M shares traded green.

• That imbalance is not extreme, but it confirms that sellers are hitting the bid while buyers have not yet shown the level of aggression required to force price back above the broken support cluster.

• The next major level is the rising 20-week moving average near $681-$682.

• The weekly visible range volume profile still shows significant demand around that zone, with approximately 4.7M shares traded green versus only around 836,000 shares traded red.

• That buyer imbalance is why we continue to view a pullback toward $682 as a potential long opportunity rather than automatically assuming a deeper breakdown.

• The ideal setup would be an entry as close as possible to the 20-week moving average, with risk defined below $680.

• A decisive break below $680 would materially change the structure. It would invalidate the Stage 2 VCP thesis and increase the probability that QQQ is entering a Stage 4 decline or Wyckoff markdown phase.

• Under that scenario, the next major destination would likely be the 200-day EMA near $644, representing approximately 8% downside from the current area.

• Given QQQ’s current 1.77% average daily range, that decline could occur within approximately four to five sessions if selling accelerates.

• Short-term breadth is also not yet fully washed out. Approximately 44.6% of Nasdaq stocks remain above their 20-day moving averages, meaning breadth still has room to deteriorate before reaching a more obvious mean-reversion condition.

• The more reassuring signal is that roughly 63% of Nasdaq stocks remain above their 200-day moving averages. That suggests the weakness is still concentrated in the short-term structure rather than representing broad long-term deterioration.

• The weekly chart therefore remains more important than the daily noise. QQQ is currently testing its 20-week moving average inside a broader Stage 2 trend, and that level will decide whether this remains a consolidation or develops into something more serious.

• The Magnificent 7 also weakened sharply on Friday after previously forming the inverse head and shoulders structure discussed last week.

• MAGS gapped lower and produced an intraday range approximately 1.6x greater than its expected daily range, confirming a meaningful expansion in volatility.

• Despite the breakdown, price is now sitting directly on an important support cluster near $66.18, where the 20-day EMA, 50-day EMA and 10-week moving average converge.

• We suspect this level is likely to hold and could develop into a strong pullback-long entry if buyers begin to respond.

• The ideal invalidation level sits near $65.96, just below the moving-average cluster and the recent support shelf.

• We would not necessarily express the trade through the MAGS ETF itself. The individual names inside the group are currently behaving differently, and several have earnings approaching.

• That event risk makes it difficult to establish a clean portfolio-level risk-to-reward setup across the entire basket.

• The better approach is to identify the strongest individual names inside the group and wait for controlled pullbacks into support, while avoiding oversized exposure ahead of earnings.

S&P 400 Midcap

61.96%: over 20 EMA | 66.75%: over 50 EMA | 69.77%: over 200 EMA

• MDY is consolidating around its rising 10-week moving average, but the internal structure remains weaker than the Nasdaq.

• Relative strength versus the S&P 500 has fallen to approximately 63.3, reflecting the continued loss of leadership across the mid-cap complex.

• The visible range volume profile shows heavy supply between approximately $690 and $697, with an additional concentration of selling extending from $697 to $704.

• Around the $698 level, approximately 158,000 shares traded red compared with roughly 66,000 shares traded green, representing more than a two-to-one selling imbalance.

• That supply is continuing to cap upside attempts and push price back toward support.

• We expect MDY to move toward approximately $680, which aligns with the rising 10-week moving average and would also fill the open price gap between roughly $680 and $683.

• That area may produce another viable bounce.

• Since the Stage 2 advance began in April 2026, pullbacks into the 50-day EMA have repeatedly generated sharp recoveries. This occurred in early May, early June and again around July 8th.

• We suspect the same mean-reversion behaviour could continue if MDY reaches the $680 area without a major acceleration in selling volume.

• The problem remains trade quality. MDY has been choppy, erratic and difficult to hold, making it less attractive than cleaner pullbacks in leading technology names.

Russell 2000

54.56%: over 20 EMA | 62.27%: over 50 EMA | 64.95%: over 200 EMA

• IWM is showing almost identical behaviour to MDY, although its relative strength is slightly better at approximately 71.5 versus the S&P 500.

• The small-cap complex is also dealing with substantial overhead supply between roughly $294 and $303, preventing clean upside continuation.

• Price is now moving toward the 10-week moving average and 50-day EMA near $289.

• We expect that support cluster to be tested.

• Mid-caps and small caps tend to be driven by similar institutional risk allocations, so it is reasonable to expect MDY and IWM to continue moving broadly in tandem.

• If MDY falls toward $680, IWM is likely to move toward $289 at approximately the same time.

• A controlled test of the 10-week and 50-day averages could produce another reflex bounce, but the current structure does not offer a strong reason to prioritise small-cap exposure over technology.