Tariffs on, Tariffs off. Watch The Lower High Threat
The S&P closed higher up 1.14% from Tuesday’s open, but mostly unchanged from the over head balance range.
The gap down and subsequent rebound as we know was the result of “tariffs on, tariffs off” when it comes to Greenland and the EU.
Though the trend is threatening a lower high, so long as price is above the 686 level, not all hope is lost for the bulls.
Over the weekend we have new tariff threats on Canada, but the focus this week will likely shift from policy to Magnificent 7 earnings.
It all comes down to this… EARNINGS
Magnificent 7 earnings have been one of the primary driving forces for the S&P over the last few years completely overshadowing the other 493 companies.
However the dominance is forecast to ease over the next few earnings cycles.
This is primarily seen by the other 493 companies earnings estimates lifting, rather than the Mag 7 declining in a material way.
Below illustrates earnings growth year over year for Q4 2025 vs CY 2026.
Earnings growth from the other 493 companies is set to move from representing about a fifth (20.3% vs 4.1%) in Q4 2025 to more than half (22.8% vs 12.1%) in CY 2026 of S&P 500 total earnings growth.
The data aligns with a more accommodative Fed through 2026 and 2027. Small caps agree.
Our job now is to simply watch how the numbers come in, and then how the market reacts.
So far we’ve seen the banks report absolutely phenomenal numbers, but the market punished the stock prices.
NFLX just reported a decent beat, was a bit shaky on guidance, and the stock still gapped down after having already lost over 7% this year.
In place of NVDA earnings being the major event… the new one stock to rule them all is Sandisk (SNDK).
Current earnings estimates are for $3.58 EPS up 397.2% year over year and revenues of $2.68B up 43% year over year.
The press conference may be the most important part as the company outlines guidance moving forward and if this will be sustained.
We will stream earnings both on Wednesday and Thursday afternoon here: Live Stream Fundamental Forces
Weekly jobless claims continue to sit at multi year lows (green) while continuing jobless claims move lower from 2025 highs (blue).
This is helpful for the Fed to keep a gradual easing cycle (which we want), not one that is in total response to massive layoffs.
Consumer sentiment saw a small uptick on the revised numbers Friday. Bullish for spending.
Flash S&P Global US Composite PMI comes in at 52.8 signaling modest expansion but down over the last two months. This may start to drag GDP (gray bars) closer to a 2-1.5% vs the 4.4% just printed from Thursday.
As always we’ll let the charts and technicals light the way on top of this fundamental backdrop.
Let’s dig in.
Trade Brigade Live Squawk
New year. Same market. Better decisions. Join the intraday squawk to trade with information, not emotion.
Check out this recording for a taste of what each morning session is like: 07/09 Live Squawk
Onboarding support will be available through the evening and Monday morning starting at 6:30am EST before the 8am premarket-prep kick-off.
Broad Market Analysis
SPY – Weekly
If this were a true look above and fail, the gap down last Tuesday should have been a gift to sellers. Instead, they ran out of steam at the weekly 20 SMA near 675. That level aligns with the October 10 and November 20 bearish engulfer highs and will qualify as weekly higher low.
The sellers also failed to accept below the 686 two week equal low.
The next question just becomes, can we go on to make a higher high after setting this higher low? I wouldn’t want to see price to retest 686.
SPY – Daily
The daily trend did flip to down on the gap, but as mentioned on the weekly already reclaiming 686. Price is also back over the 50 SMA and tangled at the 20 SMA.
As long as price holds 686, this is balance with the potential for a soft higher low. A loss of that level keeps the daily trend down with a firm lower high in place.
Thursday and Friday showed resting consolidation and inside bar on lighter volume. This also lines up with IBD follow through day (FTD) logic. Monday qualifies as Day 4+ for a potential FTD.
FTD = A 1%+ up day on higher volume than prior days would “confirm” a new leg higher.
On the upside, a break of the two day equal high opens the door to all time highs and keeping the weekly trend up. Breaking out over 695 should repair the overnight all time high from CPI at 697.3.
SPY – Hourly
Hourly bull flag remains in play if higher lows can continue to build over 686.
A clean break higher from this range favors upside continuation. Especially if tech leads. Of course watch SMH, MAGS, IGV, XLK.
If price balances and accepts below 686, the bias flips short. That would signal a daily lower high starting to step up, and perhaps bears do step back into the market… I would think poorly received earnings would need to be the catalyst to make this a reality.
Market Internals – NYSE
Internals remain flat. No hidden divergence.
Thursday showed volume inflows during balance. Friday was largely neutral.
AD line was positive Thursday. Friday weakness lacked follow-through.
Index score and TICK were flat. This supports consolidation, not secret sellers loading up.
Market Profile
Points of control formed low in the range Tuesday / Wednesday.
Put yourself in the shoes of traders… If you are short from those levels, pressure remains. If you are long, the trade is working.
The key reference remains Wednesday’s value area high 6910 or roughly 684.25 SPY. Holding above it keeps the auction constructive.
Breadth – Markets are widening
Though there is still concern over the MAGS, IGV, SMH, XLK, XLF and the tension that exists there (last weeks thesis), I did want to illustrate that breadth hasn’t deteriorated in a meaningful enough way to signal an outright collapse.
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
Most of the focus will be on earnings this week. The FOMC on Wednesday is likely a more political event where Powell dodges questions about the indictment and whats next for the Fed.
Keep an open eye to headlines on tariffs and government shutdown. The odds have skyrocketed over the weekend for the shutdown, signaling that this could be a potential issue again.
Markets typically don’t care about a shutdown, but its the fallout that could come from social posts that might matter.
Top watches: $ASML $GEV $MSFT $META $TSLA $LAM $AAPL $SNDK
Swing Stock Scans
AA – Daily
Commodities have been HOT. Aluminum is no exception. Earnings out of the way and leaving a nice start to a flag. Love the hammer from Friday over the daily 20 SMA after sellers fail to close the old gap. Monitor that gap as a potential neckline to head and shoulders formation… however for now primarily looking for digestion into a new flag, and some kind of continuation.
BROS – Daily
Still in play. Same setup as last week. SBUX already made the move… this one next? Come on bro!
EXLS – Daily
Cup with handle building pressure right under the 200 SMA. This is interesting considering software as a sector has been beat up recently. I see this as relative strength, and if there is more than just a dead cat bounce in IGV, a strong contender to lead off the lows. Keeping on radar.
MRK – Daily
Great consolidation after having let the 20 SMA catch up. Looking to see if healthcare theme wants to remain hot with this breaking up and over 111.15 to get into 119.25. Not totally dead if 105.7 breaks, but thats where interest remains highest.
PFG – Daily
Flat top base over the moving averages. A bit of a slow mover, but could see a meaningful break if it gets moving on momentum through all time highs… The stock has been consolidating since November 2022