MARKET ANALYSIS
Here’s All You Need To Know

• The market is trying to repair some of Friday’s damage this morning, but this is still not a clean risk-on tape yet.

• Nasdaq futures are leading higher, helped by a second day of rebound in chip stocks. Micron is up again in premarket after a 10% recovery yesterday, Qualcomm is also firmer, and the semiconductor ETF is trying to extend its bounce after Friday’s 10% collapse.

• That is important because semiconductors were the epicentre of the sell-off. If the group can stabilize quickly, the broader market can avoid turning Friday’s rout into a deeper de-risking event.

• The key word is stabilize. We are not looking for another immediate vertical breakout in semiconductors. After Friday’s high-volume mean reversion, the healthier outcome would be tightening, holding support, and letting the moving averages catch up.

• Oil is giving equities some relief this morning. WTI is back under $90 after Trump said a U.S.-Iran deal could be reached in “two or three days” and that the Strait of Hormuz could reopen immediately.

• That matters because the market’s biggest macro pressure points have been oil, inflation and yields. If oil cools, it gives growth stocks breathing room and reduces the immediate fear that energy inflation is going to force the Fed into a more hawkish stance.

• The ceasefire situation is still fragile though. Iran has halted military strikes against Israel, but has warned that it could resume attacks if Israeli operations continue in Lebanon. Netanyahu also said the conflict is “not yet over.” So yes, oil is lower today, but this risk has not disappeared.

• Asia gives us a useful read on the relief move. South Korea’s Kospi rebounded more than 8% after Monday’s collapse, while Japan’s Nikkei gained more than 2%. That tells us the market is willing to buy the first panic flush in AI-linked equities, especially after the forced selling we saw yesterday.

• But this still feels more like a relief bounce than a full reset. The AI trade remains powerful, but the question now is sustainability. After such a violent rise in memory, chips and AI hardware, the market is starting to ask whether the earnings growth can keep justifying the valuation expansion.

• That question becomes even more important with OpenAI now confidentially filing for an IPO and SpaceX set to debut later this week. These are not small events. SpaceX is expected to come at an enormous valuation, and OpenAI’s filing adds another layer of speculative excitement around the AI cycle.

• This can work both ways. On one hand, major AI IPOs can bring more attention and liquidity into the theme. On the other hand, blockbuster offerings often arrive when sentiment is already hot, and they can become a real test of how much risk appetite is left.

• That is why we need to be careful here. Friday’s sell-off showed that AI positioning was stretched. Today’s rebound shows the theme is not dead. The next few sessions will tell us whether buyers are genuinely rebuilding positions or simply trading the bounce.

• Outside of AI, there are still signs of rotation. Healthcare remains active, with GSK buying Nuvalent for $10.6B, and financials continue to act better than the most extended tech areas. That supports the idea that liquidity has not left the equity market entirely.

• The trade deficit data also matters in the background. The U.S. goods and services deficit fell sharply, down 49% year to date as tariffs start to take effect. That is politically supportive for the administration, but it also keeps trade policy firmly in the macro conversation.

• Apple is another important tell. The market reaction to its developer conference was underwhelming, with analysts still questioning whether its AI upgrades are enough to drive a real iPhone replacement cycle. That is a reminder that investors are not rewarding every AI story equally anymore.

• The clean read is this: the market is bouncing because chips are rebounding and oil is falling, but Friday’s damage has not been fully repaired.

• Semiconductors are still the key short-term barometer. If Micron, Nvidia, Qualcomm and the semiconductor ETF hold the bounce, risk appetite can rebuild. If this rebound fades, Friday’s sell-off becomes much more important.

• For traders, today is not about chasing the open. It is about watching whether the chip rebound holds, whether oil stays below $90, and whether capital keeps rotating into healthcare, financials and other less-extended groups.

Nasdaq

44.55%: over 20 EMA | 55.44%: over 50 EMA | 56.43%: over 200 EMA

• QQQ is starting to stabilize after Friday’s aggressive mean reversion and the most important change is that the ATR extension has collapsed from almost 10 ATR multiples above the 50-day EMA just four sessions ago to around 3.93 ATR multiples now. That is a major reset in technical extension.

• We are also still seeing elevated relative volume. Yesterday came in around 105% of the 20-day average, after Friday’s meltdown printed more than 240% relative volume. That tells us the market is still active, but the panic phase is starting to cool.

• This is why we would not suddenly turn bearish on all growth stocks as although the Nasdaq had a heavy sell-off and semiconductors finally mean reverted, we are now seeing stabilization in the most important growth leaders. NVDA and GOOGL are both holding key rising moving averages, and the MAG7 complex is still holding its 10-week EMA, which also lines up closely with the 50-day EMA.

• If the MAG7 holds that zone, the broader Nasdaq structure can repair. If it loses that zone with expanding volume, then the pullback becomes a much bigger problem.

• For now, this looks more like a violent reset inside an ongoing Stage 2 trend than a confirmed growth breakdown.

• Do not chase the first bounce, but also do not assume the entire growth trade is dead. Watch whether QQQ can rebuild above its short-term moving averages and whether the MAG7 continues holding the 10-week EMA.

S&P 400 Midcap

54.00%: over 20 EMA | 53.25%: over 50 EMA | 55.25%: over 200 EMA

• MDY is stabilizing much better than the Nasdaq, which is broadly what we expected.

• The reason is simple: the extreme extension was concentrated in semiconductors, AI hardware, mega-cap tech and the MAG7. Those groups do not carry the same weight inside the mid-cap complex.

• That is why MDY has resisted much of the weakness we have seen in QQQ and SPY.

• We still need to be cautious in the short term, because if large-cap growth keeps pulling back, it can drag the whole tape lower. But structurally, MDY remains one of the cleaner areas of the market.

  The level we are watching is around $665, where the 10-week EMA, 50-day EMA and point of control all line up.

• That is the ideal pullback-long zone. If MDY comes into that area and demand steps in, we would view it as one of the better long opportunities in the market because the group is not coming from the same overheated position as QQQ or semiconductors.

• The key message is that MDY is not showing real damage yet. It is consolidating through broader-market volatility and remains one of the better places to look once the market stabilizes.

Russell 2000

53.05%: over 20 EMA | 55.53%: over 50 EMA | 57.70%: over 200 EMA

• IWM is also showing relative strength versus the more extended growth areas, but we do still suspect a pullback toward the 10-week EMA and 50-day EMA is likely.

• Small caps are holding up better than QQQ, but they are not immune to the broader sector pullback.

• The key thing to watch here is breadth. Across the market, we are seeing a fairly broad sector-level pullback, with very few sectors holding up cleanly. If that does not start improving quickly, this can still develop into a deeper market-wide pullback.

• We are not there yet, but it is something we need to respect. For IWM, the setup is similar to MDY. The best opportunity would come from a pullback into the 10-week EMA and 50-day EMA area, followed by evidence of demand.

• Until then, we would avoid forcing breakout entries. Small caps still have better relative structure than mega-cap tech, but the market needs to stabilize before pushing aggressive exposure.

FOCUSED GROUP
XLE: Energy Ready For A Big Move

• Our focused group today is energy as both XLE and RSPG are getting extremely tight on the intermediate timeframe.

• That is important because we are seeing the same message from both the cap-weighted and equal-weighted energy ETFs. This is not just one or two mega-cap energy names holding the group up. The equal-weighted structure is tightening as well.

  

  RSPG VRVP Daily & Weekly Chart

• On the weekly chart, both XLE and RSPG are building higher lows and lower highs, forming a volatility contraction pattern that looks close to resolution.

• This is exactly the type of structure we want to watch while growth is cooling and energy can act differently from the growth complex, especially when oil is firm or geopolitical risk is active. If liquidity continues rotating out of extended mega-cap tech and semiconductors, energy is one of the obvious places it can move into.

• That does not mean we chase anything blindly. We want to see the breakout confirm with price expansion and relative volume.

• The clean read is that growth is stabilizing after a violent reset, but energy is quietly tightening. If XLE and RSPG break out from these weekly contractions, this could become one of the stronger rotation trades in the market.