MARKET ANALYSIS
Here’s All You Need To Know

• The market is opening firmer this morning, with futures higher across the Dow, S&P 500 and Nasdaq as Wall Street looks set to finish another positive week.

• The S&P 500 is on track for its eighth straight weekly gain, which would be its longest winning streak since late 2023. The Nasdaq is also on pace for its seventh positive week in the last eight, so despite the volatility earlier this week, the primary trend remains strong.

• The key difference now is that the rally is no longer clean. We had Nvidia earnings, a strong AI reaction, a bounce in semiconductors and renewed strength in AI linked names, but the market is still dealing with elevated long end yields and choppy oil prices.

• The 30 year Treasury yield moved above 5.19% earlier this week, which was its highest level since before the financial crisis, before easing back toward 5.09%. That is still a major pressure point for growth stocks because expensive long duration assets struggle when long end yields stay elevated.

• Oil remains another live risk. Brent and WTI are both up around 2% this morning as traders continue to price the uncertainty around U.S. and Iran negotiations. The market is still assuming a deal is more likely than not, but as we have said before, a lot of that optimism is already priced in.

• That means the market may not get much upside from a deal unless the details are materially better than expected. The bigger risk is still that oil stays elevated for longer, keeping inflation pressure alive and limiting the Fed’s ability to become more supportive.

• Nvidia helped stabilize the AI trade, but the reaction was not enough to remove the need for selectivity. Semiconductors and AI infrastructure remain leadership, but many of these names are still technically extended, so chasing strength after the initial bounce is not where the best asymmetry is.

• The AI theme is also continuing to broaden globally. SoftBank rallied hard again, helped by strength in Arm and Nvidia’s earnings reaction, while Lenovo jumped after record earnings and nearly doubled AI revenue. That tells us the AI trade is still alive outside the U.S. mega cap complex as well.

• The stronger message from this week is that the market wants to keep rewarding AI, compute, power infrastructure and data center related names, but it is becoming less forgiving when positioning is too crowded.

• The broader market is also healthier than it felt earlier this week. All major U.S. indices are still trading above their 50 day and 200 day moving averages, and all sectors are less than 10% from their 52 week highs.

S&P 500

50.19%: over 20 EMA | 53.98%: over 50 EMA | 55.17%: over 200 EMA

• SPY is still holding firm after yesterday’s continuation bounce from the Morning Star reversal, but the index remains technically extended at 6.62 ATR multiples above the 50-day moving average.

• Yesterday’s relative volume was low at 63% of the 20-day average, which is not ideal, but it is also not surprising. The market is still stretched on the intermediate trend, so participation naturally becomes more selective as fewer traders are willing to chase at these levels.

• This is still a market where existing long exposure is easier to manage than new long exposure is to initiate. If you already caught the move in growth, semiconductors, MAG7, quantum, software, or other leading groups, the priority now is managing the position. For fresh entries, the asymmetry is much harder.

  

  MAGS VRVP Daily & Weekly Chart

• The main driver remains the Magnificent Seven. The MAG7 complex has now cooled to around 4.99 ATR multiples, which is much healthier than where it was earlier this month.

• More importantly, the MAG7 bounced strongly from the 20-day EMA and has now reclaimed the 10-day EMA. That is a very constructive signal.

• As long as the MAG7 holds this moving average structure, it is very difficult to make a bearish argument for SPY or QQQ. These stocks are still the main engine behind the capitalization-weighted indices.

S&P 400 Midcap

46.50%: over 20 EMA | 55.00%: over 50 EMA | 53.75%: over 200 EMA

• The mid-caps had a strong continuation bounce from the 10-week EMA and 50-day EMA test we saw earlier this week.

• The structure is now much more interesting because MDY has formed a clear double-bottom style setup.

• The first test came on April 29th around the $650 area near the 20-day moving average.

• The second test came on May 19th, again around $650, this time at the 50-day EMA and just below the 10-week EMA.

• That is a strong structural signal. Price tested the same support zone twice, undercut the intermediate moving average slightly, and then reclaimed it.

• MDY is no longer extended either, sitting at only 2.16 ATR multiples above the 50-day moving average.

• That gives the mid-cap complex much better upside asymmetry than SPY or QQQ right now.

• We suspect the mid-caps are preparing for expansion higher, and this is an area where we would be much more willing to look for long exposure.

Russell 2000

49.52%: over 20 EMA | 61.80%: over 50 EMA | 57.58%: over 200 EMA

• IWM is front-running the strength that we expect the mid-caps to show.

• The small caps had the strongest follow-through from the Morning Star reversal and remain the strongest major capitalization group on a relative basis, with a 78 relative strength rating versus the SPX.

• IWM is also not meaningfully extended, sitting at only 3.48 ATR multiples above its 50-day moving average.

• This is important because the Russell 2000 represents the highest-risk expression of equity risk appetite. When IWM starts expanding after a successful test of the 10-week EMA, that is not risk-off behavior.

• The structure is very similar to the mid-caps, with a double-bottom style reversal and strong demand stepping in at the higher timeframe moving averages.

• From our perspective, this is a very strong sign that growth still has room to push higher.

• The market is not acting like it wants to break down. It is acting like it is rotating, resetting, and then reloading higher-beta exposure.

FOCUSED STOCK
DAVE: A Perfect Pullback Long Trade

ADR%: 6.45% | Off 52-week high: -16.3% | Above 52-week low: +58.3%

• DAVE is exactly the type of stock we want to pay attention to in this environment because it combines high momentum, high volatility, strong relative strength, and a clean moving average reset.

• The stock has a 6.45% 20-day ADR, which gives it significantly more movement potential than a broad ETF.

• It also has a 90 relative strength rating versus the SPX, meaning it is still acting like a market leader.

• Most importantly, it is not extended. DAVE is sitting at only 0.99 ATR multiples above its 50-day moving average, which gives it much better asymmetry than many of the crowded growth names.

• The sector context also helps. Financials are beginning to show relative strength, and DAVE sits inside that improving segment.

  

  XLF VRVP Daily & Weekly Chart

• Technically, DAVE has come down and tested the 50-day EMA, which also aligns with the prior breakout area from the 10-week EMA.

• This is significant because the stock has now retested a prior resistance and supply zone going back to the declining trendline from June 30th, 2025.

• That resistance was broken during the Stage 2 continuation rally in the week of April 13th, and now price has come back to test that breakout level as support.

• In other words, DAVE has flipped prior supply into demand and earnings are also behind us, so there is no major immediate catalyst risk in front of the trade.

• From our perspective, this is a high-asymmetry long setup and we would be looking for entries as soon as possible, ideally as close to the 50-day EMA and 10-week EMA area as possible.

• The stop should be placed close to $226, or just below the 10-week EMA.

• If DAVE holds this level and begins to expand, the setup offers a strong combination of tight risk, high ADR, sector support and leadership-level relative strength.