Breakout? Or bull trap? The market recovery over the last two weeks has been phenomenal. Names related to the AI buildout have particularly posted strong reversals thanks to earnings around compute and data center spending that basically told investors that the AI buildout is still alive and well.
CoreWeave & Nebius
These two names are not new to anybody who’s been watching the AI buildout story. They were in the headlines again last week after the companies posting record / explosive numbers. Both names jumped more than 19-30% following their reports. That strength spread across the AI trade, helping names tied to semiconductors, servers, data centers and power infrastructure recover from what had been a pretty ugly selloff.
More importantly, the broader market participated and regained confidence. Our Hyper Terminal confidence reading has moved from 50 to 67 in just a couple of weeks, and risk appetite and momentum doing a lot of the work to boost optimism.
Inflation Data & Bond Yields
Last week’s inflation data came in slightly more encouraging, helping ease some of the pressure on rates. However, the bigger picture remains mixed. While inflation is cooling in the right direction…energy, particularly oil, has not fully rolled over in a way that would comfortably support a sustained risk on continuation. Equities are pricing in improving conditions, but commodities and parts of the rates complex are not fully confirming that narrative yet. It’s something that we’re keeping a close eye on to gauge whether or not SPY can breakout and sustain 780 or not.
This Week’s Economic & Earnings Data
- Import Prices Report (Tue)
- Industrial Production (Tue)
- FOMC Minutes (Wed)
- Weekly Jobless Claims (Thu)
- U.S. Flash Manufacturing/Services PMI (Fri)
Key earnings this week include: Fabrinet ($FN), Home Depot ($HD), Walmart ($WMT), AliBaba ($BABA), Deere ($DE)…and more!
We’ll be covering any key earnings & economic developments through the week in our daily morning analysis.
SPY Technical Analysis. Are We Officially Breaking Out Again?
The main level to watch going into this week is the $779–$780 zone, where SPY recently stalled after pushing to new highs. This area now acts as a pivot point for the next directional move. A clean breakout above $780 followed by acceptance above that level would signal that this is not just a relief rally, but potentially the start of a new leg higher in the broader uptrend.
However we should note that the nearest “strong” support is around 760.00, so a big rejection at 780.00 could be mean heavy selling back to the downside. This is particularly worth noting ahead of the infamous “September” volatility. The volatility index ($VIX) is sitting at six month lows, which helps support the buying trend, but when things are this calm…you want to stay vigilant. If you weren’t already buying the dip over the last few months on quality names, it may be the time to chase them now, especially those sitting at record highs again. Our watchlist data base includes plenty of names that are “less” popular, but still very much an opportunity…many of them are not sitting at extreme highs / valuations.