Peace Talks Failed Again… (Now What)
The S&P rallied 4.48% last week, making three new record highs.
Markets traded vertically, with virtually no pullbacks offered. There are many gaps that have been left behind, which mind you, do NOT have to fill.
As noted last week, our job is to evaluate how good of a job bulls did producing a reversal… I’d say pretty good.
The name of the game is looking for higher low pullbacks to deploy more capital which we’ll go over in detail later in the newsletter.
Did the Market Price Peace Too Quickly?
Based on last weeks actions, it was quite clear to see that markets have moved on from the Middle East conflict, and pretty much priced in the reopening of the Strait of Hormuz in the most optimistic way possible.
Crude straight down; equities straight up.
However notice that Brent prices really haven’t meaningfully settled below the original 5 day ceasefire price at $89/BBL.
This weekend we have new reports of Iranian media suggesting that the Strait is actually closed, and two ships have reported taking gunfire during attempted crossings.
While this may seem like a big setback for markets, here’s how I see this playing out:
- Futures open on a gap down just like last Monday
- Price pulls back Monday and even Tuesday. Bears have their “I told you so” moment
- Price finds a healthy higher low and rallies back to all time highs as sidelined money comes rushing into the market
Because markets have made huge new all time highs without /BZ breaking below $89, the suggestion seems to be that markets now care less about the war in Iran, and more about how earnings season is going to unfold.
Earnings Season… So Far So Good
Earnings season is off to a hot start with the big banks generally reporting strong numbers on trading activity and deal making.
- GS: record equities trading revenue of $5.33 billion
- JPM: first-quarter EPS of $5.94 versus $5.45 expected, helped by record trading results
- MS: record equities trading revenue of $5.15 billion, up 25% year over year
- C: highest quarterly revenue in a decade at $24.6 billion
- BAC: record equities trading revenue, alongside stronger investment banking fees and a profit beat
- WFC: trading revenue jumped 19% in the first quarter.
The first taste of semiconductor earnings wen’t quite well also.
ASML raised its 2026 revenue outlook to €36B to €40B and said AI-driven demand for advanced chipmaking tools remains strong. Then TSMC backed that up by guiding second-quarter revenue to $39B to $40.2B and calling AI demand “extremely robust.”
The bottom line is that demand still looks real and revenue is not only growing, but margins are continuing to expand.
Next up we’ll wait to hear from the hyperscalers as to what their continued CapEx spend looks like and how their customers are consuming AI.
Trade Brigade Live Squawk
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Check out this recording for a taste of what each morning session is like: 07/09 Live Squawk
Broad Market Analysis
SPY – Weekly
Self explanatory… Solid green bodied bar, higher high higher low, new all time closing high. Looking for continuation of the trend via continuation or higher low pullback.
Ideally the prior ATH level at 698 would act supportive. If the pullback is deeper than that something around 676 offers a ton of confluence with the weekly 20 SMA, aVWAP stack, Fib 38.2.
SPY – Daily
Again, with the strength of this rally, all we’re doing is looking for higher lows. Would prefer that the market didn’t 100% retrace last weeks move to the 50 SMA and weekly ideal HL around 676 area, but thats hypothetically where we can go. There will be a lower high threat in that scenario on the retest of the pATH, but we’ll take that on when and if it sets up.
Important note:
The gaps below us do not have to fill. They are areas of thin structure, and can help us structure trades, but they do not inherently have to fill.
SPY – Hourly
These would be some of the preliminary pathing ideas to consider. Note the anchored VWAP confluence around the pATH level as well as the Tuesday gap fill.
Another thing to note on any pullback is the depth… Because this has been a fairly thin structure grind higher, bears have no major places to get hung up on a down move. A very shallow pullback would be noteworthy and just another sign that sellers are weak.
Market Internals – NYSE
The divergence that was starting to form with weakening internals and higher highs out of the market did not resolve in any pullback. Friday mornings news and gap turned internals right back around to close strong.
Market Profile
Value continues to move higher through the sessions. If the market was weaker, it would leave value towards the lower portion of the range.
Most notable development is the “p” shaped profile that suggests we have a short squeeze on Friday, not new money buyers getting involved. If that’s the case, we’ll see stronger odds of a retracement when and if the 7150 low of the ‘p’ is broken; basically value area low.
XLF – Financial Pose A Risk
A risk to the risk-on group, could be the positioning of the financial sector. The inverted hammer rejecting the 200 SMA isn’t the end of the world noting the reclaim of the 51.2 level, however this will be a MAJOR watch into the coming week. A more bullish market will find a higher low above.
Dollar & Rates – Another Potential Risk
If the dollar ($DXY) finds support on this pullback around the prior resistrance area, that would certainly act as a short term headwind for markets. Pair this with the XLF pullback happening more forcefully off of the 200, and theres logic to start looking for a higher low in the SPY index.
If you want the full take, including all of the nuance of breadth, risk appetite and much, much more, check out the weekend episode here:
Economic & Earnings Calendar
Mainly interested in the Thursday session for:
- Initial Jobless Claims
- S&P Manufacturing & Services PMI
Top watches: GE, ISRG, VRT, GEV, TSLA, LRCX, INTC
Swing Stock Scans
Keep in mind where we are on the broader market. With the potential for pullback from the highest high, mind new long exposure before the index provides a higher low.
ALL – Weekly Chart
Full year consolidation starting to break out last week. Looking for signs that this is ready to go via daily higher lows over 215.75 area.
ATI – Daily Chart
Shallow cup and handle forming on the daily that make up a weekly bull flag up here. Looking for breakouts over the 165 area for blue sky territory.
FIVE – Daily Chart
Flat top base breakout available after Friday’s move higher. Would prefer a day or two pause and then a break from a bullish 3 bar play on the daily.
PNW – Daily Chart
Higher low over the daily 20 SMA and now inside three bar play as of Friday’s action. Looking for a break over 104.75 for a move into new record highs.