Hyperscalers Scale Capex
It’s almost not even worth tracking % movement in this broadening range with a lack of trend…
If you must know, the SPY was up a whopping 0.15% from Monday open to Friday close.
The good news is just that the market held the Thursday low over the bearish engulfer highs from 10/10/2025 and 11/20/2025.
Is the pain only temporary?
Two weeks ago we made note of the consistent pattern that solid earnings beats have been punished by the market in the major hyperscalers.
Last week was nothing new with PLTR, AMD, GOOGL, AMZN all joining the club.
Decent numbers, but no upside movement out of the stock. GOOGL recovered its gap down, but closed on Friday down roughly 3.5% from the Wednesday pre-earnings announcement close.
Markets continue to seem concerned about capex numbers.
However one thing that we continue to hear in the earnings calls is that providers literally just don’t have enough supply to meet demand.
From the earnings calls:
- [META] : “…we do continue to be capacity constrained. Our teams have done a great job ramping up our infrastructure through the course of 2025. But demands for compute resources across the company have increased even faster than our supply…”
- [MSFT]: “…As mentioned earlier, we continue to see strong demand across workloads, customer segments, and geographic regions and demand continues to exceed available supply.”
- [GOOGL]: “Google Cloud’s backlog increased 55% sequentially and more than doubled year-over-year … The increase in backlog was driven by strong demand for our Cloud products, led by our enterprise AI offerings…”
- [AMZN]: “So we’re growing at really an unprecedented rate. Yeah. I think every provider would tell you, including us, that we could actually grow faster if we had all the supply that we could take.”
In most of these references its to datacenter and compute capacity.
So even though stocks are being punished for this major capex boom, what’s the alternative?
Don’t spend the money and let the customers run away with the potential upside? Don’t spend the money and bet that AI is just going to fizzle away?
There really isn’t one.
Seems like if you believe in the thesis that AI is going to be a revolutionary technology and productivity tool, there are some decent sales out there. Chose carefully.
Fundamental Forces
JOLTS Data
- Job openings falls to the lowest availability since September 2020
- Layoffs remain below pre-pandemic levels at 1.1%
- Hiring continues to trend lower
ISM PMI Data
- Both services and manufacturing signal growth for the economy
- Both services and manufacturing prices paid are increasing
- Possible inflation warning
- Services employment is growing slowly; manufacturing employment is contracting slowly
** Delayed labor data to be released at 8:30am EST Wednesday
Trade Brigade Live Squawk
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Broad Market Analysis
SPY – Weekly
Another green dojiesque / hammeresque bar similar to last week. There was no acceptance at highs or lows.
Location is also neutral with a slightly lower high and a solid lower low. However look at the close… Sellers had plenty of reference points to start a bigger move: prior week low, the 686 equal low, and the breakout pivot.
All failed to trigger follow through.
This doesn’t mean full blown rip and rally. It’s more rotational looking, not momentum driven.
The weekly line in the sand for a true trend reversal is 675. That zone lines up with the October 10 and November 20 bearish-engulfer highs. It would also bring in a breakdown of the potential weekly double top neckline to a lower low.
SPY – Daily
This week’s expected move upper bound is 702.66, which would imply a daily higher high. The lower bound is 678.58. That’s still a slightly higher low versus last week, but it is beneath the short term “comfort zone” of 686.
From a trend perspective, we had a developing daily higher low over the 50 SMA on Tuesday that was blown out to an equal low Thursday. Friday’s close then complicates this with a recapture of the 686 and daily 50 SMA.
The daily structure is becoming messy with a megaphone topping formation developing. Inside this range, a neutral stance makes sense. You need confirmation before leaning into a developed trend either way.
There is the threat of a daily lower high under the 20 SMA near 690.75 as a rejection level to watch.
QQQ – Daily
SPY’s bear thesis is hard to express without acknowledging Nasdaq weakness. If QQQ is under 613, SPY strength is more likely mean reversion than breakout.
If Nasdaq confirms a lower high, SPY likely gets pulled lower. That is the major cross-market tension to watch this week.
SPY – Hourly
The hourly trend flipped back to up quickly after a double bottom neckline break and hold early Friday morning over 681.5 and reclaim of 686.
If we hold above 686, the base case is an hourly higher low and continued rotation. That keeps the “cautiously bullish, incremental” thesis alive.
If we push back to the Friday highs while the Nasdaq stays weak, watch for an hourly double top. That would align with a daily lower high. 686 is also confluence with the daily 50 SMA. It’s near a 50% retracement level as well, which makes it even more meaningful.
If Monday closes below 686 and Tuesday opens below it, expect a retest of the broader range lows. That would be the cleanest bear trigger.
If we re-approach the all time highs, watch the tape speed and participation (sector leadership).
Strong tempo and broad green sectors supports continuation. Sluggish price with weak internals favors a fade right off the highs. Especially if the Nasdaq is still stuck under its key level.
Market Internals – NYSE
Friday showed a big squeeze. Buying volume looked like shorts screaming to cover.
TICK did not build into a huge runaway close Friday. Typically we’d expect a sharp open and taper into the close to signal squeeze… Fairly stable build through the morning.
Thursday also failed to generate the type of extreme negative readings in the TICK and AD line you’d expect on a true breakdown day. Sellers didn’t fully prove themselves, and we see that in the weekly close as mentioned above.
Internals probably argue for neutral stance first. They don’t confirm “crash,” but they also don’t confirm “rip.”
Market Profile
Friday built an M period spike. Spike rules apply heading into Monday. The key reference is the base of the spike, which equals Friday value area high. On ES, that level is around 6943.
- Open above the spike is the most bullish outcome. That favors continuation higher.
- Open inside the spike means two-way trade. You watch for acceptance above high of day or failure back through spike base.
- Open below the spike is a warning. That favors downside rotation and punishes late longs.
Software Dead Cat Bounce
Software (IGV) is still the weakest area of the market sectors / industries but a bounce is possible. Note the extensions from 50 SMA, steepness of the leg, and happening with capitulation-style volume.
The trigger is a move above the inside hammer high, but this is a counter-trend trade only.
The bigger picture damage is severe. This looks like room for weekly and even monthly lower highs unless proven otherwise.
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
This week is all about delayed labor and inflation data.
Markets will pick this report apart considering Kevin Warsh’s notoriously hawkish stance. This is the first inflation report with his official nomination.
Top watches: DDOG, HOOD, ALAB, VRT, NBIS, COIN, ANET, RIVN, FROG, AMAT, CCJ
Swing Stock Scans
AA – Daily
Still in play with daily bull flag. Trend line break and daily 20 recapture looks great for a move to flag highs and monitoring for the breakout.
AAON – Daily
Cup and handle forming over the key moving averages. Looking for a move to the 106.5 area on a potential breakout.
EAT – Daily
Long term inverted head and shoulders. Over the neckline has room to the prior pivot high. Ideally price stays over the daily 200 on any consolidation / pullbacks.
ENTG – Daily / Weekly
Weekly bull flag, first out of a long standing almost year long base. Mind earnings this week, but doesn’t look half bad over the daily balance. Gap and go daily to get the weekly flag in the first place.
LOW – Daily
Low cheat setup under the ATH after a nice hold of the daily 20 SMA. With the head lines swirling for homebuilding ramp up, this along with HD, BLDR could be interesting watches. LOW strikes me as the strongest of the bunch.
RCL – Daily
Gap and hold on earnings. Breaking the downtrend line from compression. Looking to see the ATH if we clear the earnings high.
SCHW – Daily
Ascending triangle at all time highs. Over 105.3 should get going into blue sky. Under the trend line and I would lose interest in the setup.
SLB – Daily
Hot sector right now, with a clean hold over the daily 20 SMA. Looking for a push to prior inflection around 55.4. Needs to hold the 20 and the key trend line.