The Melt-Up Continues As Rate Cuts Beckon – The Market Breadth

Stock Market Commentary

The stock market leaned into a melt-up as a constant stream of IPOs signaled risk-on appetite even as a massive downward revisions in jobs in the 12 months through March, 2025 implied more than expected economic weakness ahead. Rate cuts beckon as a result of this broadening weakness, and Wall Street has chosen the positive side of the ledger. The market was not even fazed by an inflation report showing stronger pricing pressures in the economy. Thus, I see heightened uncertainty surrounding the immediate aftermath of the coming rate cuts. The current melt-up is likely pricing in a lot of good news from rate cuts. The presumed minimal margin for error could easily generate a sell-the-news reaction concomitant with September’s reputation as one of the most dangerous months of the year. On the positive side, the current stability in market breadth maintains a bullish undertone to the market.

The Stock Market Indices

S&P 500 (SPY)

The S&P 500 enjoyed a classic melt-up week with the index rising ever so slightly every day until Friday’s “day of rest.” The index now gently riding the upper Bollinger Band (BB).

NASDAQ (COMPQX)

The NASDAQ looked even stronger than the S&P 500, notching gains every single day of the week, including a 0.4% rise on Friday. The uptrend stayed persistent and confirmed the market’s speculative bent, especially in the wake of Oracle’s blockbuster news (see below).

iShares Russell 2000 ETF (IWM)

The iShares Russell 2000 ETF (IWM) did not quite join the melt-up. Choppy action ended with a 1% pullback on Friday that nearly flattened the week’s performance. Thursday’s 1.9% pop on the inflation reaction set a new high back to early December. I expected follow-through on Friday and held on to expiring options. They were cut in half or worse, so I rolled the remnants into next week’s calls. I continue to trade options around my large core IWM share position.

The Short-Term Trading Call When Rally Reignites

• AT50 (MMFI) = 61.5% of stocks are trading above their respective 50-day moving averages (first overbought day)
• AT200 (MMTH) = 60.3% of stocks are trading above their respective 200-day moving averages
• Short-term Trading Call: neutral

AT50 (MMFI), the percentage of stocks trading above their respective 50DMAs, closed the week at 61.5% and essentially finished where it started the week. My favorite technical indicator dipped in the first part of the week, then enjoyed a good Thursday, and faded again, leaving market breadth a wash on the week. AT200, the percentage of stocks trading above their 200DMAs, also printed a wash at 60.3%, but I like the positioning near the year’s highs that were just set last week. The broader health stayed bullish and constructive even as I keep my short-term stance neutral. I simply see too many rising risks that the market is blithely ignoring.

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The Equities: Melt-Up

Oracle Corporation (ORCL)

Description: Oracle provides enterprise software, cloud infrastructure, and database services for businesses and organizations.
Technical status: ORCL exploded post-earnings with Wednesday’s 36% surge to a new all-time high. Profit-takers stepped in with a a sharp two-day pullback of 6% and then 5%.
Trade commentary: After the breakout on massive enthusiasm tied to Oracle’s mind-lowing long-term guidance on AI demand likely linked to “Stargate”, sellers stepped in to retrace gains from an unusually large move for such a big stock. The guidance was stunningly bullish, reminiscent of late-1990s tech euphoria given the amount of capital spending and fund raising that must happen to meet the purchase promises Oracle has received.I suspect market makers “engineered” the pullback as they scramble to make up for large losses on pre-earnings call option sales. I still have no excuse for failing to hold an ORCL position after lamenting over two years ago about missing ORCL’s all-time high back THEN.

Tesla, Inc (TSLA)

Description: Tesla designs and manufactures electric vehicles, energy storage systems, and related software and services.
Technical status: I tracked building pressure as TSLA bounced off its 50DMA, then its 200DMA, with the 20DMA trending up. Friday delivered a clean 7.4% breakout with no specific catalyst except the technical tailwinds. Thursday’s 6.0% rally was the last sign of the coming breakout that stretched TSLA well above its upper Bollinger Band.
Trade commentary: I missed my ideal entry by getting too cute with limit orders. Instead, I opened a conservative call spread position that benefits if price holds around current levels (short Sep 19 $395 call vs long Sep 26 $410 call). The position took advantage of some very wild trading in TSLA options on Friday.

Micron Technology (MU)

Description: Micron manufactures memory and storage products, including DRAM and NAND solutions for data centers, mobile, and PCs.
Technical status: MU jumped 3.5% in sympathy with AI enthusiasm but did not stop there. The stock kept motoring higher into what I called a parabolic phase. Price repeatedly closed above the upper Bollinger Band, signaling strong buying pressure but also a rising risk of a sharp snapback when momentum finally exhausts itself.
Trade commentary: MU is a buy on the dips. As always, I avoid chasing parabolic moves.

Netflix (NFLX)

Description: Netflix operates a global streaming entertainment service offering TV series, films, and games across connected devices.
Technical status: NFLX sagged into a confirmed 50DMA breakdown and ended the week on a weak note. I suspect rotation into AI beneficiaries (temporarily?) reallocated funds away from the likes of NFLX.
Trade commentary: I would not short NFLX unless its price undercut $1146, with the 200DMA likely to offer support below. Even then, with such a limited profit profile, I will likely instead wait to buy on a bounce off 200DMA support.

Corning Incorporated (GLW)

Description: Corning develops and manufactures specialty glass, ceramics, and optical communications products for consumer and industrial markets.
Technical status: GLW has been in a powerful uptrend, tapping the upper Bollinger Band in an extended walk that accelerated after earnings. Trading volume continues to trend higher, and two prior Bollinger squeezes resolved bullishly.
Trade commentary: As promised, I rode the my GLW position through the last earnings announcement. However, I got too cute shortly thereafter sold short a September $65 call option. I should have covered it as GLW broke out above $65 for new all-time highs. Now I will just accept losing the shares and wait to buy the next dip.

BitMine Immersion Technologies, Inc (BMNR)

Description: BitMine Immersion Technologies operates bitcoin mining operations that utilize immersion-cooling infrastructure and recently began Ethereum treasury operations.
Technical status: BMNR surged 15.3% on Friday and appeared to be bottoming with crypto tone improving. The monster surge in the wake of Tom Lee’s appointment to the Board set a reference area where the last pullback found support.
Trade commentary: When I wrote about Tom Lee and BMNR’s conversion event, I targeted a steeper pullback for buying into the hype. BMNR stopped just short of testing its 50DMA support before popping 15%. I chose not to chase the stock to my detriment. I finally bought in on BMNR’s next test of 50DMA support. After that support quickly gave way, I bought a second tranche of shares. I am now in the green with Friday’s 15.3% gain. Here is what Cathy Wood had to say about BMNR in ARK’s weekly email explaining outsized moves in the ARK portfolio:

“Shares of BitMine Immersion Technologies Inc traded up ~15% on Friday as the rise in Ethereum’s price boosted the value of the company’s large ETH treasury holdings, which increases its mark to market asset backing. Another factor contributing to Bitmine Immersion’s share rise was the company’s $20 million strategic investment in Eightco (OCTO). Once a bitcoin mining company, Bitmine Immersion Technologies now offers investors a publicly traded vehicle to gain exposure to ETH, staking, and other value-accretive mechanisms.”

IonQ, Inc (IONQ)

Description: IONQ develops quantum computing systems and cloud-accessible quantum services based on trapped-ion technology.
Technical status: IONQ soared about 18% to a new all-time high on heavy volume after pressure built off a successful 200DMA test. IONQ held an investor day on Friday.
Trade commentary: I missed entering a new position on the test of 200DMA support. I was next too low to buy a “half” position as the stock drifted higher. Now all I can do is wait for the next pullback.

Bill Holdings, Inc (BILL)

Description: Bill Holdings provides cloud software that automates accounts payable, accounts receivable, and spend management for businesses.
Technical status: BILL has been working through a bearish-to-bullish reversal. The stock is struggling to begin a recovery from a 35% post-earnings collapse in February. Lately buying interest has appeared thanks to an 18% post-earnings surge last month.
Trade commentary: Back in February I designated BILL as a no-touch in the wake of a massive post-earnings loss and 200DMA breakdown. I was not interested in buying until a close above 200DMA resistance. A week ago, I decided to jump in early based on strong follow-through to an 18% post-earnings gain. The very next day came news that activist investor Elliot Management took a stake in BILL. Based on this news I am changing my strategy from speculation to accumulation.

Albemarle Corporation (ALB)

Description: Albemarle produces specialty chemicals with a focus on lithium for energy storage, as well as bromine and catalysts.
Technical status: ALB failed to hold its latest 200DMA breakout and fell back below converged 50DMA/200DMA support on high volume. The larger downtrend from the 2022 peak remains intact.
Trade commentary: After its first 200DMA breakout since December, I boldly declared that I would hold ALB through upcoming earnings. The stock promptly sold into and after earnings. While 50DMA support eventually held, the stock is on the edge of confirming another breakdown. Now I am hoping ALB remains above the last low.

Boeing (BA)

Description: Boeing designs and manufactures commercial airplanes, defense and space systems, and related services.
Technical status: BA broke down below its 50DMA and confirmed the weakness, which made the stock a technical short.
Trade commentary: I am not shorting here but instead keeping BA on the radar as a sector indicator.

Enovis Corporation (ENOV)

Description: Enovis develops medical technology and orthopedic solutions, including reconstructive and bracing products.
Technical status: ENOV drew my attention after the CEO bought about $200,000 of shares, but the long-term trend remains decisively down. The chart also remains mired near the lower end of a multi-year trading range after a 2021 peak accelerated lower this year.
Trade commentary: Insider buying is an insufficient catalyst for me in this case. I will pass until a positive catalyst appears or the stock breaks its prolonged downtrend or, better yet, clears the range. Such prospects look far off. Kudos to the insiders who have likely faithfully bought stock for a while.

Wingstop Inc (WING)

Description: Wingstop franchises and operates quick-service restaurants specializing in chicken wings and related menu items.
Technical status: WING failed at 50DMA resistance, plunged almost straight down for two weeks, and broke its 200DMA support while riding its lower Bollinger Band. The setup is very bearish but increasingly stretched.
Trade commentary: I missed the opportunity to short with a good risk/reward setup. I am now watching for an eventual rebound toward 200DMA resistance to frame either a fresh short setup or a breakout to chase a rebound.

Abercrombie & Fitch Company (ANF)

Description: Abercrombie & Fitch is a specialty retailer of apparel and accessories for men, women, and kids.
Technical status: ANF fell 7% on Friday to close at a two-month low, sustaining a bearish breakdown with the 200DMA capping rallies since January.
Trade commentary: ANF was on the brain after I saw a sleek commercial featuring NFL stars during the Thursday night football game, so Friday’s drop surprised me. There was no company-specific news, just the latest poor showing on consumer confidence. I would not short the stock here given the high short interest. Instead, I want to buy aggressively on a 200DMA breakout given such a bullish move should come on the backs of a coiled spring.

Be careful out there!

Footnotes

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“Above the 50” (AT50) uses the percentage of stocks trading above their respective 50-day moving averages (DMAs) to measure breadth in the stock market. Breadth defines the distribution of participation in a rally or sell-off. As a result, AT50 identifies extremes in market sentiment that are likely to reverse. Above the 50 is my alternative name for “MMFI” which is a symbol TradingView.com and other chart vendors use for this breadth indicator. Learn more about AT50 on my Market Breadth Resource Page. AT200, or MMTH, measures the percentage of stocks trading above their respective 200DMAs.

Active AT50 (MMFI) periods: Day #62 over 20%, Day #60 over 30%, Day #55 over 40%, Day #28 over 50%, Day #2 over 60% (overperiod), Day #35 under 70% (underperiod)

Source for charts unless otherwise noted: TradingView.com

Full disclosure: long IWM shares and call options, long ALB, long BILL, long BMNR, long GLW covered call, long SPY put spreads, long TSLA calendar call spread

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*Charting notes: Stock prices are not adjusted for dividends. Candlestick charts use hollow bodies: open candles indicate a close higher than the open, filled candles indicate an open higher than the close.

* Blog notes: this blog was written based on the heavily edited transcript of the following video that includes a live review of the stock charts featured in this post. I used ChatGPT to process the transcript.