Stock Market Commentary
The market staged a quick rebound this week after the “bears break-in” two Fridays ago. Most losses reversed by Monday’s close as buyers stepped in with conviction and quickly repaired the indices. However, the bounce masked the on-going failure of market breadth to keep pace with the S&P 500 and the NASDAQ, a particularly concerning development with the three months of seasonal weakness in the stock market underway. For example, the Invesco S&P 500 Equal Weight ETF (RSP) recovered from a breakdown below its 50-day moving average (DMA) but made no further progress the rest of the week. RSP even looks in danger of a fresh 50DMA breakdown in due time. Still, there are enough big stocks doing well enough to keep the major indices floating higher. Moreover, the volatility index (VIX) underlined the relative calm by plunging 8.6% on Friday, close to its lows of the year, even as the market absorbed news of hefty reciprocal tariff rates across industries and countries.
The Stock Market Indices
S&P 500 (SPY)
The S&P 500 rebounded sharply Monday with a 1.5% gain and tracked neatly along its 20DMA (the dashed line) for the rest of the week. The index closed just shy of an all-time high and is close to invalidating the previous week’s bearish engulfing pattern. While the market did not deliver the washout drop I wanted for an ideal buy setup, the index demonstrated once again its strong supports.
NASDAQ (COMPQ)
The NASDAQ outperformed, posting a new all-time closing high at 21,450, just under the intraday record of 21,457. This strength underscores the leadership of a concentrated group of large-cap tech stocks driving the index (and the stock market) higher.
iShares Russell 2000 ETF (IWM)
Small caps lagged (what else is new?) with IWM recovering the previous Friday’s losses but failing to match large-cap strength. This underperformance reflects narrow market leadership and adds to the concerning breadth divergence narrative. On Thursday, I “reluctantly” took profits on my calendar call trade at the $220 strike in anticipation of a 20DMA breakout. Instead, IWM closed right at $220 on Friday and would have delivered maximum profit if I held one more day. I did not open a new trade, but I still like buying around my core IWM position with call options at or near support.
The Short-Term Trading Call When Bulls Quickly Repair
- AT50 (MMFI) = 49.6% of stocks are trading above their respective 50-day moving averages (first overbought day)
- AT200 (MMTH) = 49.0% 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 50DMAs, recovered sharply from the previous Friday’s 43% reading, closing the gap by Tuesday before drifting lower. AT200 (MMTH), the percentage of stocks above their 200DMAs, also bounced but stalled well below levels seen during the S&P 500’s last peak. Both indicators confirm that too many stocks are falling behind and not participating in the rally, worsening the bearish divergence with the indices.
I am keeping the short-term trading call at neutral and am very conflicted on how I can flip back to bullish. On the one hand, I would like to return to bullishness when AT50 drops to the “close enough” to oversold level of 30% to 35% which applies in a raging bull market like this one. Such a pullback would likely be consistent with seasonal maximum drawdowns for the August to October period. On the other hand, such a plunge could also create the very breakdown below 50DMA support that would tempt me to go bearish, even for a brief time. As usual, I will take things one step at a time…
The Equities: Bulls Quickly Repair
Financial Select Sector SPDR Fund (XLF)
Description: The Financial Select Sector SPDR Fund tracks the performance of financial companies in the S&P 500, including banks, insurers, and capital markets firms.
Technical status: XLF failed to recover all of the previous Friday’s losses and is pivoting around its 50DMA (the red line).
Trade commentary: My $53-strike call options are set to expire worthless this week as the ETF shows no urgency in regaining lost ground. XLF is has now flipped from helping to support market breadth to becoming a drag on it. A test of 200DMA support (the blue line) could be o the way in coming weeks.
Eli Lilly and Company (LLY)
Description: Eli Lilly and Company is a global pharmaceutical company engaged in the discovery, development, manufacturing, and marketing of human pharmaceuticals. Its portfolio spans diabetes, oncology, immunology, neuroscience, and other therapeutic areas.
Technical Status: LLY has broken sharply below its lower Bollinger Band following a high-volume sell-off tied to its latest earnings report. The stock recently confirmed both 50DMA and 200DMA resistance.
Trade Commentary: The breakdown on heavy volume suggests strong bearish sentiment and potential follow-through selling. LLY’s crash was, incredibly, its largest one-day drop in 25 years. This breakdown ends a near 2-year trading range where the market was trying to “digest” the company’s extremely high valuation. Perhaps the high valuation made LLY particularly vulnerable to bad news about its oral GLP1 obesity drug. Other than that setback, LLY appeared to report solid earnings including an increase in revenue guidance. I am not interested in doing a contrarian buy because the Trump administration is hounding the industry to lower drug prices. The first order seeks voluntary compliance. The next one will not likely be so forgiving.
Sportradar Group (SRAD)
Description: Sportradar Group provides sports data and content to media companies, bookmakers, and sports federations worldwide.
Technical status: SRAD dropped 5.7% post-earnings but held its 50DMA as support.
Trade commentary: I am watching for a potential post-earnings reversal as buyers defended 50DMA every day since SRAD reported earnings.
Ameresco (AMRC)
Description: Ameresco designs, builds, and operates renewable energy and energy efficiency projects for businesses and governments.
Technical status: AMRC surged nearly 50% post-earnings before pulling back to hover above its 200DMA, with support converging at the 20DMA.
Trade commentary: AMRC is now on my buy list as I look for a rebuild of post-earnings momentum. The company simply affirmed its 2025 guidance, so I have to assume that outsized initial reaction to earnings came from some short covering. AMRC has 9% short interest.
Atkore (ATKR)
Description: Atkore manufactures electrical conduit, cable management systems, and other infrastructure products.
Technical status: ATKR plunged 26% post-earnings but stabilized near prior tariff-related lows.
Trade commentary: I sold a put, betting those lows will hold.
SoFi Technologies (SOFI)
Description: SoFi Technologies provides digital financial services, including lending, investing, and banking.
Technical status: SOFI returned to a consolidation pattern after a 6.6% post-earnings gain, with resistance between $23.50 and $25 and support near 19.88.
Trade commentary: Breakouts above resistance are tricky, while breakdowns below support would be bearish.
Mondelez International (MDLZ)
Description: Mondelez International produces snacks, confectionery, and beverages worldwide.
Technical status: MDLZ broke below 200DMA support after a post-earnings drop.
Trade commentary: Selling pressure may reflect concerns over GLP-1 drugs impacting snack demand. I am not interested in shorting MDLZ given rotation out of expensive parts of the market could benefit MDLZ at any given time. I am watching stocks like MDLZ as indicators of consumer spending patterns.
DoorDash (DASH)
Description: DoorDash operates an online food delivery platform connecting customers with local restaurants and merchants.
Technical status: DASH spiked 5.0% post-earnings but quickly reversed all gains the next day.
Trade commentary: I sold my position given DASH was so over-stretched above its upper Bollinger Band after the earnings reaction. I previously planned to hold this recent position for the long-term. Thus, I am on the lookout for a new (lower) entry point.
Duolingo (DUOL)
Description: Duolingo offers a popular language-learning platform and mobile app.
Technical status: DUOL surged as much as 30% post-earnings before fading to a 13.8% gain, with sellers following through to push shares toward 200DMA support.
Trade commentary: If the 200DMA fails, DUOL could quickly reverse all post-earnings gains. It seems the initial excitement was related to relief DUOL had figured out how to make AI work for them. The release of Chat GPT5 on Thursday seemed to start the slide in the stock. From Yahoo Finance: “Thursday’s jolt in the stock came during OpenAI’s demo that unveiled its latest model, GPT-5. The presentation showed a simulation of GPT-5 building a custom web app in just three minutes that taught its user French — Duolingo’s core functionality as a language learning tool.” DUOL has a sky-high valuation so this kind of news could keep the stock under pressure for quite some time.
Six Flags Entertainment (FUN)
Description: Six Flags Entertainment operates regional theme parks and waterparks across North America.
Technical status: FUN fell 20.8% post-earnings to a five-year low, with follow-through selling.
Trade commentary: I am watching for a post-earnings breakout above the earnings day high before considering a contrarian entry.
Snap (SNAP)
Description: Snap develops and operates Snapchat, a multimedia messaging app.
Technical status: SNAP remains under pressure and is approaching April lows after a 17.2% post-earnings plunge.
Trade commentary: I continue to hold for now based on my board-member-driven thesis but will reassess if April lows break.
Pinterest (PINS)
Description: Pinterest operates a visual discovery engine for sharing ideas and inspiration online.
Technical status: PINS bounced off post-earnings lows but failed to reclaim 50DMA support.
Trade commentary: While better than SNAP, the stock remains below key technical resistance and failed right at its highs for the year. Thus, PINS is likely going nowhere for a while.
Toyota Motor (TM)
Description: Toyota Motor manufactures and sells vehicles worldwide under the Toyota and Lexus brands.
Technical status: TM rebounded neatly post-earnings from a 50DMA test after a post-tariff surge faded.
Trade commentary: The stock offered tradable moves both on the fade and the bounce from support. I missed all the opportunities. Now, TM is in a “limbo” area.
Sprout Social (SPT)
Description: Sprout Social provides social media management software for businesses.
Technical status: SPT gapped higher post-earnings but quickly reversed into heavy losses, nearing pandemic lows.
Trade commentary: With a long downtrend since 2021, I see no tradable setup here yet. I have kept a close watch on a basket of digital marketing software stocks, thinking they were sneaky buying opportunities. Instead, each of them just continue to sink lower.
Semrush (SEMR)
Description: Semrush develops online visibility management and content marketing software.
Technical status: SEMR fell to all-time lows after a post-earnings decline.
Trade commentary: I am still holding despite the drop, though industry-wide weakness may be AI-related. SEMR is another one of the digital marketing software stocks that have failed to sustain recoveries and return to previous momentum.
Salesforce, Inc. (CRM)
Description: Salesforce provides customer relationship management software and cloud-based business applications.
Technical status: CRM is down 28% year-to-date and remains below its 50DMA after repeated failures at resistance.
Trade commentary: I am watching for a bounce off April lows. A breakdown to new lows for the year would confirm that CRM is a “broken” stock relative to the NASDAQ and other software stocks.
Datadog (DDOG)
Description: Datadog provides cloud monitoring and analytics platforms for developers and IT operations teams.
Technical status: DDOG slipped below its 50DMA after a post-earnings fade from S&P 500 inclusion highs.
Trade commentary: My decision to exit a DDOG position as it stalled below the highs from S&P 500 inclusion turned out to be a timely move. A 200DMA breakdown would suddenly flip DDOG into bearish territory.
Gartner (IT)
Description: Gartner delivers research, advisory, and consulting services for businesses worldwide.
Technical status: IT collapsed 28% post-earnings to a three-year low amid fears of AI competition.
Trade commentary: I am looking for signs of life before considering a contrarian entry. This crash looks like an over-reaction, but I have zero interest in trying to catch the falling knife of a narrative of AI threats. Gartner’s CEO insisted that AI is not a threat to its consulting and industry research business. From the Seeking Alpha transcript:
“Unlike other AI tools, which provide answers based on public information from the Internet, AskGartner’s responses are fully grounded in our world-class proprietary independent and objective insights. AskGartner also provides users with relevant images and recommends follow-up questions, making our insights more discoverable and fully immersing clients in the Gartner platform.
AskGartner is unique because it marries the power of Gartner insights with AI, and our teams are focused on making sure it gets better and better. We’ve been testing it with internal teams and a pilot group of clients. One client referred to AskGartner as, “a game changer for Gartner.” Some mentioned time savings of up to 75% on the platform. We’re also leveraging AI internally. We’ve introduced more than 50 applications that use AI to improve associate productivity and effectiveness.”
iShares Expanded Tech-Software Sector ETF (IGV)
Description: The iShares Expanded Tech-Software Sector ETF tracks U.S. software and services companies.
Technical status: IGV is trading near all-time highs but looks like it has stalled out.
Trade commentary: With so many software companies seemingly under pressure, especially from AI-related narratives, I am watching IGV closely for confirmation that the sector is in trouble.
Spotify (SPOT)
Description: Spotify offers music streaming, podcast, and audio content services worldwide.
Technical status: SPOT recovered all post-earnings losses and is testing 50DMA resistance.
Trade commentary: I added on the drop and still plan to hold for the long term. I heard the voice of investor Adam Khoo saying to buy good companies on bad news (that does not undermine their business model) because they will recover. I did not expect SPOT to reverse its post-earnings loss so quickly! The apparent catalyst for recovery was news that SPOT would raise prices which contrasted with earnings-related headlines about SPOT standing pat on prices.
Dell Technologies (DELL)
Description: Dell Technologies provides IT infrastructure, software, and services to businesses and consumers.
Technical status: DELL broke above its 200DMA and is closing in on filling a post-earnings gap from November.
Trade commentary: I added to my growing position in DELL on the 200DMA breakout and see potential for a test of all-time highs. I should do more buying on temporary pauses in strength.
Apple (AAPL)
Description: Apple designs, manufactures, and markets smartphones, computers, and other electronics, along with related services.
Technical status: AAPL surged 13% in three days after satisfying President Trump with an additional $100B investment in U.S. manufacturing, surging above its 200DMA.
Trade commentary: My short via a bear ETF is now underwater as bullish momentum takes over. I have not yet decided whether to exit. The sudden and sharp rally looks overdone with AAPL closing well above its upper BB.
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 #38 over 20%, Day #36 over 30%, Day #31 over 40%, Day #26 over 50%, Day #24 over 60%, Day #3 under 70%
Source for charts unless otherwise noted: TradingView.com
Full disclosure: long IWM shares, long GLD call spread, long ARKK, long DASH, long NVO, long ISRG, long MA call spread, long DOMO, long BBY put spread, long MCD put
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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.