Situation Awareness: Bullish, expanding. The tape enters Friday at fresh record highs — the S&P 500 crossed 7,800 for the first time Thursday and closed at record intraday and closing marks after back-to-back market-friendly inflation prints (July CPI in-line, July PPI unchanged) drained Fed-hike anxiety. Nasdaq futures are pointing sharply higher (+109 vs fair value) on mega-cap tech leadership, while S&P futures sit +7, shrugging off a soft July retail sales miss. Trade mode: constructive but selective — lean into tech-led breakouts while respecting a weakening consumer signal. Today’s calls are macro-light but data-sensitive: the 8:30 retail sales dud and the 10:00 Michigan sentiment read frame a consumer that’s cooling even as equities melt up. Regime context — 64.22% of stocks trade above their 40-day SMA (up 3.6pp day-over-day), and the 4% Bull/Bear gauge shows 320 bulls vs. 157 bears, a decisively bullish spread. The 5-day trend shows breadth firming, with the 40-SMA cohort turning up and 4% new-highs pushing from 309 to 320 — early confirmation that participation is broadening beyond the mega-caps.
SIP: AVAH USIO KURA TSSI
- What’s working: the Continuation/2LYNCH scan is rich with 25 signals — solid breadth — led by CVNA, UPST, FIG, ADBE and CDW. The Reversal book adds 7 names (CRM, NOW, DT firing in software).
- Leading sectors (from Thursday’s close, live data unavailable): communication services +1.6%, real estate +1.3%, information technology +1.0%; laggards materials -0.7% and energy -0.1%. Sector ATR/trending feeds are dark with the market closed.
- Key event: July retail sales fell 0.6% m/m (consensus +0.2%), ex-autos -0.3% — a clear consumer soft patch that raises the stakes on 10:00 ET Michigan sentiment.
- Market read: Thursday was a broad, constructive advance with an afternoon rotation from semis into software — chips faded (SOX +0.5% after +2%) while IGV jumped 3.1%. Momentum favors dip-buyers into the open.
- DEP watchlist: no Delayed 9M signals today — lean on the Continuation book instead.
- SIPS: ADBE, CDW, CVNA as swing candidates from the Continuation scan.
Today’s Market Narrative
The bulls carry the week’s momentum into Friday. After Thursday’s S&P 500 (+0.7%) punched through 7,800 for the first time and set fresh record intraday and closing highs, futures point to a mostly higher open: S&P futures sit +7 versus fair value and Nasdaq futures +109, the latter reflecting renewed appetite for growth and mega-cap tech. The Nasdaq Composite (+0.8%) led Thursday, the Dow (+0.1%) eked out a gain, and the risk-on tone survived overnight even as Asia finished mixed and Europe traded near flat lines.
The dominant force remains the inflation story. Two consecutive market-friendly prints — Wednesday’s in-line July CPI and Thursday’s softer-than-expected July PPI — have systematically drained the market’s fear of a September Fed hike. That single dynamic is doing most of the heavy lifting: lower odds of tightening, lower Treasury yields, calmer oil, and a green light for the highest-multiple corners of the tape. The afternoon rotation Thursday — semiconductors fading from a +2% early gain to +0.5%, while the software complex (IGV +3.1%) surged on Workday M&A buzz — tells you leadership is rotating within tech rather than leaving it.
The one crack in the story arrived at 8:30 this morning. July retail sales fell 0.6% month-over-month against a +0.2% consensus, with the ex-autos figure down 0.3% versus a +0.2% expectation. That’s a genuine consumer soft patch and a counterweight to the melt-up narrative. For now the market is reading it through a dovish lens — weaker spending reinforces the no-hike case — but it raises the importance of the 10:00 ET University of Michigan sentiment read. Futures held their gains through the release, so the tape is choosing to look through it, consistent with the Big Picture thesis that rising earnings, not macro headlines, are steering this market.
Breadth backs the constructive read. The Russell 2000 is up 23% year-to-date and the S&P Mid Cap 400 +18.4%, both handily outpacing the Nasdaq (+15.3%) and S&P 500 (+13.9%). Leadership is no longer confined to the Magnificent Seven — 64.22% of names sit above their 40-day SMA, expanding, with 320 fresh 4% breakouts against just 157 breakdowns.
Macro & Policy
The rate picture is the market’s tailwind. Following the PPI report, the CME FedWatch odds of a 25-bp September hike fell to 34.6%, down from 40.6% pre-PPI and 55.0% a week ago — a meaningful repricing that has underwritten the equity advance. Note the unusual framing: this cycle’s risk is a potential Fed hike, not a cut, so every disinflationary print is read as removing a headwind. Both CPI and PPI trended in the right direction on a year-over-year basis (headline PPI 4.7% vs 5.5% prior, core 4.2% vs 4.7%), though absolute rates remain elevated.
Treasuries are quiet and mixed this morning. The 2-year yield sits at 4.13% (-1 bp), the 5-year unchanged at 4.31%, the 10-year at 4.65% (+1 bp), and the long bond at 5.23% (+2 bps) — a modest bear-steepening with the front end anchored by the dovish rate repricing. That front-end stability is the tell: the market is comfortable the Fed stands pat in September. The U.S. Dollar Index is off 0.3% at 99.66, with EUR/USD at 1.1567 and USD/JPY at 159.11 — the yen bears watching after a former Japanese currency diplomat flagged another 50-75 bps of BoJ hikes and the risk of U.S. intervention if the yen revisits its lows.
Geopolitics is a slow simmer, not a boil. Treasury Secretary Bessent signaled “unprecedented” economic isolation measures against Iran coming next week, but with no fresh flare-up, crude is calm — WTI hovers near $81.58/bbl after settling $2.20 lower Thursday. Russia’s Lavrov dismissed a near-term Ukraine ceasefire as unrealistic. Eurozone flash Q2 GDP came in as expected at 0.4% q/q, and Swiss Q2 GDP surprised strong at 1.5%. Nothing here derails the earnings-driven bid.
Economic Calendar Today
- 8:30 ET — July Retail Sales (RELEASED): -0.6% m/m vs +0.2% consensus; ex-autos -0.3% vs +0.2% consensus. A clear consumer cooldown — dovish for rates, a caution flag for discretionary retail.
- 10:00 ET — June Business Inventories: consensus +0.1% | prior +0.3%. Second-tier, minimal market impact.
- 10:00 ET — Prelim August U. of Michigan Consumer Sentiment: consensus 54.5 | prior 55.2. The session’s swing factor — a soft print pairs with weak retail sales to sharpen the slowing-consumer narrative; watch inflation-expectation components.
- Earnings: The heavy tech/consumer reporting wave has largely passed; today is light on marquee names, leaving macro data and Thursday’s movers to drive the tape.
Earnings & Corporate News
The earnings tape is generating sharp, single-name dispersion. Applied Materials (AMAT) is the notable red flag: despite beating EPS by $0.10, beating on revenue, and guiding Q4 above consensus, shares are indicated down 5.34% to $506.89 — a “sell the news” reaction that echoes the choppy semiconductor action from Thursday afternoon. That divergence between fundamentals and price is a reminder to respect momentum in chips even on good prints. Sandisk (SNDK) is the offset: resumed Overweight at JPMorgan with a $2,250 target, the stock is indicated +6.78% to $1,631.79 after its +13.67% surge Thursday on a well-received investor day. The memory complex (WDC +7.31%, SK hynix +7.28% Thursday) remains a leadership pocket.
The software rotation is the cleaner story. Workday (WDAY) exploded +17.78% to $206.45 on Reuters reports that Silver Lake is in talks to acquire it — the catalyst that flipped afternoon flows out of semis and into software, lifting IGV 3.1%. Netflix (NFLX +5.43%) rallied on news that Bill Ackman’s Pershing Square built a new stake, and Meta (META +2.78%) led the Magnificent Seven as communication services (+1.6%) topped all sectors.
In consumer, the read-through is mixed. Birkenstock (BIRK) soared on 13% revenue growth and a raised full-year outlook with DTC accelerating to 16% CC — evidence that premium demand is intact. Tapestry (TPR), by contrast, plunged despite a strong Q4 (Coach +14% CC) because its FY27 EPS guide of $7.80-$7.90 merely met the long-term algorithm rather than clearing elevated expectations. The lesson into a data-soft session: the bar is high, and guidance, not the print, sets the reaction.
WaveFinder Signal Summary
The scan environment is healthy. The Continuation/2LYNCH book carries 25 signals — a rich count that confirms the breadth story rather than a narrow, exhaustion-driven rally. Software dominates the leaderboard (FIG +10.9%, ADBE +4.5%, NAVN, CDW), aligning perfectly with Thursday’s semis-to-software rotation. The Reversal scan adds 7 names, again software-heavy with CRM (+4.2%), NOW and DT firing — a signal the group is inflecting higher, not just holding.
Breadth is expanding where it counts: 64.22% of stocks now sit above their 40-day SMA versus 60.66% the prior session (+3.6pp), and 4% breakouts climbed to 320 from 309. The 20-SMA reading cooled (105% vs 126%), reflecting near-term froth being worked off, but the intermediate 40-SMA trend — the more durable gauge — is clearly improving. No Delayed 9M signals fired today, so the actionable edge lives in the Continuation and Reversal software names.
Today’s Watchlist
- ADBE — $270.49, +4.5% on a 2LYNCH continuation setup; software is the leadership rotation, ride the group strength.
- CDW — $142.05, +3.9%, low ATR (0.9) continuation — tighter risk profile for a steadier trend entry.
- SNDK — indicated +6.78% to $1,631.79 on the JPMorgan Overweight resume ($2,250 target); memory remains a leadership pocket.
- AMAT — $506.89, -5.34% despite a beat-and-raise; watch for a washout-and-reclaim, but respect the “sell the news” signal.
- WDAY — $206.45 after +17.78%; Silver Lake buyout talks — an event-driven name, size for headline risk.
- AVAH — SIP leader, gapped +12.49% on a better-than-expected Q2 with EPS up 644%; momentum plus fundamental follow-through.
Action Codes of the Day
- 2LYNCH — With 25 continuation signals firing into record highs and 320 fresh 4% breakouts vs 157 breakdowns, the breakout book is deep; the continuation scan itself is the edge, led by ADBE (+4.5%) and CDW (+3.9%).
- FFM — In a bullish, expanding regime (64.22% above 40-SMA, +3.6pp), tight-risk names like CDW (ATR 0.9) offer low-risk entries that work from the open when the macro backdrop supports it.