No New Highs On Killer Earnings… Yikes

Although marked by huge volatility, the S&P closed slightly higher last week, up 0.21%.

Most importantly price was able to sustain a hold Thursday above the key 686 level. Price closed up 1.04% from that level and the next major watch is for this to develop into a firm higher low over the daily 50 SMA.

Not all is well and good though, as we’ll see the market simply looks exhausted here. Earnings came out strong, yet there was no upside rally on the good news.

Earnings Recap

So far Magnificent 7 earnings have been beating street expectations with guidance also coming in mostly positive.

Meta seems to have won the battle of the beasts as the only company seeing meaningful revenue increase due to AI. Their matching algorithm for ad placement was noted as the primary driver.

Outside of Meta though, stock prices really haven’t seen a large markup on the good news. Not really the action we’d like to associate with a healthy market trading near all time highs.

Microsoft clearly lost the battle, gapping down nearly 8% and falling further intraday. This was its worst single day loss since the pandemic. (Wednesday close to Thursday close.)

Markets appear to be reacting negatively to their aggressive capex forecasts while cloud growth while still positive, is slowing below estimates.

Apple seemed to hit their mark with things status quo after a record iPhone cycle.

Tesla spooked investors, noting that they are shutting down Model S and X production in favor of ramping Optimus production.

The problem? In the same conference call, Elon noted that Optimus is still in the R&D phase and “not doing meaningful tasks [yet]” at Tesla factories.

In classic Elon fashion, he also mentioned grand ambitions of massive capex to build out Colossus 2, and even build a chip fab in the future to ensure enough supply of chips.

TSLA closed down 4.88% on Thursday after the earnings call.

This week we get to look forward to Amazon and Google to act as the tie breakers for the hyperscalers.

As seen with Meta vs Microsoft, pay attention to the growth rate of revenue vs any announced capex increase.

Fundamental Forces

• The Fed held rates steady on Wednesday, and Powell’s press conference was indeed more political than policy related.
• Trump nominates Kevin Warsh as Fed Chair (odd considering his history of being hawkish)
• Initial jobless claims tick slightly higher to 209k from prior at 200k (still relatively low)
• PPI came in slightly hotter than the 0.2% expectations at a 0.7% core and 0.5% headline month over month.

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Broad Market Analysis

SPY – Monthly

January closed as a green-bodied doji. The whole monthly theme is “incremental.”

Slowing momentum does not equal a crash. The monthly trend is still up.

If a pullback comes, the higher-low zone is 610–615. That lines up with prior resistance, the monthly 20 SMA, and the 38.2% retracement from the April low.

Big bear markets usually require a clear monthly downtrend. We do not have that yet

SPY – Weekly

The weekly bar looks like the monthly bar. Another indecisive doji with tiny upside progress.

The breakout level is still in play with closes above 688–689.

The two-week equal low at 686 remains the “failed breakdown” trigger. We had volatility, but last week’s low and close stayed above it.

A weekly double top is possible but requires a breakdown under the neckline zone near 675–676. Thats the same bear engulfer high level from 10/10 and 11/20.

Price is above the weekly fib 38.2 and above the anchored VWAP stack. We also closed slightly above the high-volume node.

SPY – Daily

This week’s expected move is wide. The upper bound is 703.9, which implies a new ATH. The lower bound is about 680. That is still above the larger weekly neckline zone and keeps this more neutral than bearish.

Daily structure suggests a potential higher low forming vs the threat of last weeks lower high. It’s developing back above the daily 50 SMA after a short lived 1h down trend.

The key line in the sand is still 686. It is both a structural level and a reclaim point from the prior gap-down.

Friday was an inside, indecisive day. Sellers failed to press below 686 in a meaningful way.

Upside clarity improves over Friday’s high at 693.85. That opens a path toward the ATH and the unrepaired overnight high near 699.

Inside the range, bias stays muted but a decisive break below 686 turns things nasty fast. This market is getting exhausted.

SPY – Hourly

The hourly chart shows volatility, and lack of trend. Thursday summed this up nearly perfectly.

Support did not show up over the two day range high at 690.75 and there was decent overshoot at 686. The snap back is then nearly 100% of the move. Who’s in control? Buyers or sellers?

Noise.

The two levels that matter most are still the same. 686 below and 693.85 above.

Above 693.85, the market pressures shorts. It also increases odds of a push toward 699 and a new ATH.

Below 686, the breakdown aligns with losing a fib 61.8 zone and threatening the daily 50 SMA. That’s where downside risk becomes more substantial. The weekly neckline will be in play.

Market Internals – NYSE

Internals do not scream “crash.” But they do argue against full bore bullishness.

Volume flows showed outflows even as price tried to stabilize Friday. Cumulative ticks were weak all week. AD line was poor on Friday. Thursday damage did not fully confirm, but breadth still looks heavy.

Net-net, internals support a neutral stance first, not really bullish. Bulls would need a spectacular turnout early this week to “reverse the curse.”

Market Profile

Value shifted lower after the breakdown. It did not drift back inside the prior two-day range.

That’s why upside progress requires a clean move above Friday’s high. Value needs to rebuild higher.

There are repaired and partially repaired POC references now. That reduces “air pockets” but doesn’t remove downside risk.

There is not a clean, obvious excess signal on the extremes. Auction looks more balanced than directional.

One bullish tell still stands out. If sellers were truly in control, Thursday’s POC should have stayed lower.

Sector Performance

Software continues to battle against the strength in hardware. The above is filtered by monthly performance, which clearly indicates a rotation from heavier weight risk on sectors to lighter weight more defensive sectors.

If we lose semiconductors, we likely lose the raging bull.

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

Labor report week!

Thus far the weekly jobless claims coming down keeps us optimistic that the unemployment rate will remain stable. All about job growth this cycle. A disappointing number likely softens the Fed’s stance.

Remember that the ISM PMI numbers will also have a labor vs prices paid component as well.

Top watches: $PLTR $AMD $GOOGL $ARM $QCOM $COHR $AMZN $IREN $MSTR $BE

Swing Stock Scans

CAH – Daily

Great ascending triangle forming over the key moving average stack. Ideally it breaks and has a playable entry ahead of earnings to provide enough cushion to hold it through… If not, letting it be until the numbers are out.

BTU – Daily

Cup and handle forming on top of the monthly cup and handle that already broke out. Liking how its trying to hold up near the daily 20 SMA. Also in the hot sector this year, energy. Local high first target and then really nothing until ATH around 47.90 area.

IMVT – Daily

Watching the structural buildout higher… Earnings pose a short term catalyst threat. Looking to keep this on the radar considering how clean the structure is and respond only when and if theres a break or standout volume day indicating accumulation.

TSN – Monthly / Daily

Long standing monthly base starting to breakout. Earnings on Monday so not looking for anything until this confirms a breakout that sticks after the numbers are released. Just have on radar.

CSX – Monthly / Daily

Monthly range high in play with daily Brigade Bolt™ over the short term pivot. Could also look at UNP in the same sector.

ZM – Monthly / Daily

Monthly rounded bottom with daily Brigade Bolt™ over the breakout level. Looking for a move to confirm over 90.85 for continuation higher over time towards the prior balance highs at 120. Not interested if this flops and fails back under 90.85. Friday bar not the best but on watch.