Risk-Off Rotation – Defensives Still in Control
The S&P closed down 1.3% on the week, its worst since November. Hard to believe considering we’re still in the broadening formation…
This is the first weekly close under 686 since the breakout attempt. Trend posture is now deteriorated, and prior support is now resistance as of Friday’s high.
Two themes drove the tape this week. One was expected. One was not.
Jobs: A Beat Nobody Fully Trusts
The delayed January jobs report hit Wednesday morning, and came in at 130K jobs added vs expectations of 66K.
With the massive beat the S&P traded higher in the pre-market for an open just 0.2% away from the all time high. However that was short lived…
The problem was that the same report also included revisions that cut total 2025 payroll employment from 584,000 down to 181,000.
The AI Scare Trade Accelerates
What started as a repricing of enterprise software, IGV off 22% in 2026, spread into something much broader this week.
The AI disruption trade is not just a tech story. It’s a business model story.
The catalyst was Altruist’s Hazel platform, an AI tool that reads client 1040s, pay stubs, and CRM data to build personalized tax strategies instantly. The kind of work wealth managers charge substantial fees to perform.
Schwab fell 10.8% on the week. Raymond James dropped 8.7%. LPL Financial lost 8.3%. XLF as a sector dropped nearly 4.5%.
To me its just another signal that we are in a risk-off environment. Sell first, think second.
Sector posture is still dominated by outperformance in defensive sectors while heavy weight risk on sectors stall.
Note that this puts us in a concerning spot when it comes to the business and market cycle overlap…
Fundamental Forces
The 30-year Treasury auction this week posted its strongest bid-to-cover ratio in eight years. Yields hit new year-to-date lows.
Friday’s CPI came in at 2.4% headline versus 2.5% expected. This was the lowest print since May 2025, and yet the markets response? Essentially flat.
When stocks are falling, yields are falling, inflation is falling, thats a pretty troublesome picture…
As always, the charts light the way. Let’s begin.
Trade Brigade Live Squawk
Going crazy in the chop? Cut through the noise. Join the intraday squawk to trade with a plan, not emotion.
Check out this recording for a taste of what each morning session is like: 07/09 Live Squawk
Broad Market Analysis
SPY – Weekly
Last week left us with an inside red-bodied inverted hammer. Sellers stepped up off the weekly high failing the ATH attempt, pushed price through the opening print, and closed in the lower third of the range.
The big deal this week: first weekly close beneath 686, the two-equal-low reference point that’s been our line in the sand since the breakout attempt. And for the first time, we closed beneath the high volume node vs every prior week managed to hold it by the close, even when the lows wicked below.
Still technically above the weekly 20 SMA and Fib 38.2 from the major swing so we’re not jumping the gun on being overly bearish yet. But a clear close and acceptance beneath 675 is the signal that flips the weekly trend to down. Below there, the next major structural target is 653.
Zooming out: a full 10% drawdown from the ATH lands right at the 615–612 zone which is the previous breakout high. A healthy shakeout that re-establishes a base there wouldn’t be unreasonable for the higher time frames.
SPY – Daily
The broadening formation remains intact. 686 is your weekly over-under. Friday’s upper wick rejected it with the 50 SMA and 20 SMA both overhead. The daily trend isn’t confirmed down it’s more of a balance range with no clean trend.
Bear path: Market sets a lower high beneath the 50 SMA → returns to equal lows at 675 area → significantly increased odds of breaking through to start targeting lower levels and the weekly low at 652.95.
Bull path: Market overshoots lower → finds a higher low back over the 674–676.50 zone (bearish engulfer highs from Oct 10 & Nov 20) → mean reversion target: 686.
Expected move for the week: Upper 695.85 / Lower 667.75. Getting to the lower 652.95 level would require a slightly more than 2-sigma move. Less likely, but not impossible if the market really starts to get volatile on sell side.
QQQ – Daily
The NASDAQ continues to be the canary in the coal mine and it’s not singing anything bullish.
Clean sequence of lower highs. The 50 SMA continues to act as resistance. 613 is your overunder. A Brigade Bolt beneath 595.25 unlocks the prior equal lows.
With the S&P carrying 35%+ weighting toward XLK (and more when you factor in Amazon, Tesla, Google, and Meta from XLY, XLC), NASDAQ weakness is a direct and meaningful headwind. The writing seems like it’s is on the wall, we’re just waiting on the S&P to confirm with a balance break.
SPY – Hourly
Thursday was unrelenting to the downside with no bounce attempt at the 20 or 50 SMA, at 686, nowhere. Friday morning was a slow, lethargic grind higher that topped out right at 686 and rolled over into the close.
Nobody wanted to hold longs over the long weekend and shorts saw no reason to scramble and cover.
Any rally that tags 686 and fails is likely a fade. On a dip first, look for a counter-trend long on a look below and fail with a confirmed higher low back inside the range. Don’t be the first long. Wait for sellers to fail at the bottom.
If we go look below and fail, mean reversion targets at 686 still keep the threat of a lower high under the 50 SMA. In that situation, going back down for an equal low retest of 675 area likely increases the odds of a breakdown, triggering a weekly trend change.
Market Internals – NYSE
The internals story is volatility, volatility, volatility. Volume spikes of ±300M just indicate extreme alternating buy/sell days. This is not what confident buyers at the highs look like. It’s the classic “nobody knows what they want to do” print.
If this were a healthy low being set with conviction, you’d see mild, stable action followed by a big volume inflow confirming accumulation. Instead: buy everything → sell everything → repeat.
Market Profile
C/D period single prints from Thursday were barely nibbled on Friday. Not even close to being filled. If shorts needed to cover with conviction, those prints would have been screamed through. They weren’t.
Value did not migrate up to meet price on Friday it stayed lower.
Key trade to watch: Look above and fail at Friday’s high → sweep the poor high → sellers hold the single prints → short continuation. That’s your market structure short setup on the open.
Overhead supply from Mon/Tue/Wed value areas sits well above current price. Anyone long from earlier in the week is underwater. That trapped supply provides resistance on any bounce attempt.
MAGS
The Magnificent 7 ETF finally broke below the neckline of the major topping formation. It’s starting to slow at the daily 200 SMA, however this could be just the start of something more substantial.
Align this with the weakness mentioned in financials earlier and the picture doesn’t look all that great even for the more broad S&P 500.
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
Nothing overly worrisome for the market here… we’ll see if theres a different response to PCE inflation numbers vs last Friday.
Top watches: PANW, CDNS, TOL, CVNA, FIG, WMT, DE, LMND, OPEN
Swing Stock Scans
AMGN – Daily / Weekly
Fresh breakout of a multi month base with daily bull flag forming into all time highs.
CGNX – Daily / Monthly
Earnings gap up with inside day on Friday. Breaking a monthly inverted head and shoulders neckline. Doesn’t have to continue immediately, but on watch with this change in tone.
DG – Daily
Consumer staples are red hot, this fits the theme. Breakout of the trendline was on Friday, but now we have the pivot high to watch. These are 52 week highs, but do take a look further left, there are some prior pivots at 165 to be mindful of along with being parked right at the weekly 200 SMA… short term chart looks good, but has some longer term yellow flags.
FAST – Daily
First flag after a cup with handle breakout. Great pullback right into the 20 SMA.
LITE – Daily
One of the market leaders as of late with a flag at all time highs. Hard to buy breakouts in this market, but if you’re going to do it, may as well do it where there’s relative strength.
MNST – Daily
Solid uptrend, the last few times this has done the dance over the 20 and 50 SMAs its made a nice continuation move. The bars on Thursday / Friday don’t look great, so likely need a look below and fail setup before participating.
NXT – Daily
Balance range after an earnings gap up. Great relative strength on the look below and fail on the 5th. Now supporting right at the daily 20 SMA.
PLAB – Daily
Earnings gap and hold from the prior cycle. Holding over the high volume close the last week. Over the recent highs or 39.75 unlocks blue sky.
PLAB – Daily
Earnings gap and hold from the prior cycle. Holding over the high volume close the last week. Over the recent highs or 39.75 unlocks blue sky.
PSTG – Daily
Old earnings gap above to potentially close. Moving averages are starting to straighten out in terms of stacking properly. Ideally this could get going over 76.5 area for a move into the gap over 80 up towards 91.
ZM – Daily / Weekly
Just a reminder this is still in play.