OVERVIEW
What You Need To Know

• SPY: Closed at 772.47, just 0.56% below 776.85 resistance. Daily ranges have tightened near the highs while volume has contracted, keeping the VCP-type setup intact.

• QQQ: Closed at 723.70, below 728.54 resistance and 1.43% above its 713.49 50-day average. The contraction is less clean than SPY, but the structure continues to improve.

• Broadening: MDY and IWM are effectively sitting on resistance at 712.43 and 303.06. Eight of 11 sectors advanced Wednesday, with all four major benchmark ETFs closing higher. - Inflation: Wednesday’s CPI was benign: headline rose 0.1% MoM / 3.4% YoY, while core rose 0.2% / 2.5%. Markets now assign roughly a two-thirds probability to the Fed holding rates in September.

• Today: July PPI and weekly jobless claims arrive at 8:30 a.m. ET. Core PPI is expected to rise around 0.3% MoM.

• Oil: Brent is down around 1.7% to $87.44 and WTI 1.9% to $81.66, taking some immediate pressure off the inflation trade.

MARKET ANALYSIS
SPY Is Still Tightening Near the Highs

SPY closed Wednesday at 772.47, leaving it less than 1% below the 776.85 range high. It remains comfortably above its 50-day average at 748.12.
The daily chart remains constructive.

Over the past several sessions, price has tightened near the highs while volume has steadily contracted. Wednesday’s turnover was only 0.67x the 20-day average, but that should not be treated mechanically as a lack of demand.

In the context of a volatility contraction, quieter volume is what we would expect as the range narrows and available supply diminishes. The volume test becomes important when price attempts to leave the structure.

That puts 776.85 at the centre of today’s setup and a decisive move through that level with expanding volume would confirm the breakout. Continued tight trading underneath it would also be acceptable; there is nothing inherently bearish about further contraction.

The technical picture changes if price begins expanding lower and breaks the recent tight structure. The 748.12 50-day is then the important medium-term reference. The much deeper 729.10 support may still matter structurally, but it is not the level that determines whether this VCP remains healthy.

QQQ is developing a similar, although less orderly, setup. It closed at 723.70, around 0.7% beneath 728.54 resistance. Its 50-day average sits at 713.49, considerably closer to price than SPY’s.

The recent contraction is encouraging, but QQQ still has the weaker large-cap structure. A move through 728.54 would improve that picture. A loss of 713.49 would be the first meaningful warning.

There is little value in focusing on 661.14 while QQQ remains this close to its 50-day.

Broadening Is Becoming More Interesting

Wednesday’s advance was not confined to one corner of the market. Eight of the 11 major sectors advanced, led by Technology, while only Materials, Consumer Discretionary and Communication Services finished lower.
More importantly, the mid- and small-cap indexes are now sitting directly beneath resistance.

MDY closed at 711.71 versus resistance at 712.43 and the IWM closed at 302.71 versus resistance at 303.06. Those are much more relevant levels today than their distant structural floors.

If SPY breaks 776.85 while MDY and IWM simultaneously push through their own range highs, the breakout would have meaningful confirmation across market-cap tiers.

QQQE also remains 3.24% above its 50-day average, compared with QQQ at 1.43%.

The correct conclusion from that comparison is simply that equal-weight Nasdaq has the stronger medium-term structure. It does not, by itself, tell us whether mega-caps or smaller constituents drove a particular session.

Taken together, however, Wednesday’s sector breadth and the position of MDY and IWM support the view that participation is broadening rather than deteriorating.

PPI Is the Next Inflation Check

Wednesday’s CPI helped the market and headline inflation rose just 0.1% in July, while core CPI increased 0.2%. Annual headline inflation eased to 3.4% and core to 2.5%.

That reduced the immediate pressure on the Fed. By this morning, markets were pricing roughly a 66% probability that rates remain unchanged in September, up from approximately even odds before the CPI release.

PPI at 8:30 a.m. ET is the next piece of that picture.

There is one useful change from yesterday: oil is moving lower rather than higher.

Brent is down around 1.7% to $87.44 and WTI around 1.9% to $81.66. The immediate driver is not an improvement in the Middle East. U.S. crude inventories unexpectedly jumped 17.4 million barrels last week, while both OPEC and the IEA cut their demand forecasts. Traffic through the Strait of Hormuz remains severely restricted.

Geopolitical supply risk has not disappeared, but weaker oil prices reduce one source of near-term inflation pressure.

Premarket Earnings Are Mixed

The single-stock tape is less important than PPI this morning, but there are a few useful reads.

Cisco is down around 5.8% despite forecasting fiscal 2027 revenue above Wall Street expectations. Cerebras is down more than 17% after missing quarterly revenue estimates, while Dell and HP are higher following strong results from Lenovo.

The reactions continue to show a market that is discriminating heavily between companies rather than rewarding the entire technology complex indiscriminately.

For the indexes, however, futures remain modestly positive and the larger technical setup has not changed.

We would keep existing exposure where individual positions continue to behave well.

For additional exposure, the cleaner confirmation would be:

SPY > 776.85
QQQ > 728.54
MDY > 712.43
IWM > 303.06

Ideally those breaks arrive with a clear increase in volume and a PPI-driven rejection does not automatically change the broader trend.

The first thing to watch would be whether the current contractions remain intact. For QQQ, 713.49 is the important medium-term reference; for SPY it is 748.12.

The setup is good. The breakouts simply have not happened yet.