Situation Awareness: Cautious. A softer-than-expected July PPI (0.0% headline vs. 0.1% consensus, core 0.2% vs. 0.3%) followed Wednesday’s tame CPI and pushed the S&P 500 to fresh record territory, crossing 7,800 for the first time and closing +0.65% at 7798.99, with the Nasdaq +0.81% at 26824.05 and the Dow eking out +0.13% at 53839.99; SPY/QQQ/IWM technical levels are (data unavailable) today, so we lean on the index prints from the briefing. Trade mode for tomorrow: selective and constructive — stay long leaders but respect the afternoon rotation out of semis into software. The defining context was disinflation quieting September rate-hike odds (34.6% now vs. 40.6% pre-PPI, 55% a week ago), softer oil (WTI -2.6% to $81.06), and lower yields (10-yr 4.64%). Regime context — 61.19% of stocks closed above their 40-day SMA (vs. 60.7% prior day, regime held at Cautious), and the 4% Bull/Bear gauge shows 266 bulls vs. 139 bears. The 5-day trend pushed to record highs, signaling constructive but narrowing momentum as breadth held rather than expanded.
SIP: WDAY NFLX SNDK COHR
- What’s working: Continuation (2LYNCH) fired 25 signals, D9M 14, Reversal Bullish 8, Darvas Box 31 — trend-following software and financials dominated the tape.
- Leading sectors: Technology +1.28%, Communication Services +0.97%, Energy +0.53%; leading themes: Specialty Steel Alloys +6.38%, Database Software +5.54%, Medical Software +4.52%.
- Key event: Workday (WDAY) surged +17.78% on Reuters report Silver Lake is in talks to acquire it, sparking a 3.1% jump in the IGV software ETF and a midday rotation out of semis.
- Regime threading: morning SA called Cautious (60.7%), closing is Cautious (61.2%) — held, as breadth stayed flat even while the index hit records, a sign of narrow leadership.
- DEP watchlist: FIG, CSGP, TTD, ADBE, CRM for tomorrow’s continuation setups.
- SIPS: CRM, ADBE, FDX from the Continuation scan as swing candidates.
Market Scorecard
- Indexes: S&P 500 +0.65% to a record 7798.99, Nasdaq +0.81% to 26824.05, Dow +0.13% to 53839.99. SPY/QQQ/IWM prices and SMA levels are (data unavailable) today.
- Breadth: 61.19% of stocks above the 40-day SMA (+0.5pp d/d), 4% Bull/Bear at 266/139. The 20-day reading (86%) remains elevated but the day-over-day comparison looks anomalous, so we anchor on the steadier 40-day.
- Volume/flow: NYSE advancers led decliners 1755 to 964 on 1.13 bln shares; Nasdaq 2976 to 1942 on 8.41 bln. Constructive participation, but the afternoon semi fade tempered accumulation — call it mild accumulation, not a broad thrust.
- Rates/commodities: 2-yr yield -6bp to 4.14%, 10-yr -4bp to 4.64%; WTI crude -2.6% to $81.06; gold -1.0% to $4,420.50.
Today’s Scorecard — What Worked & What Didn’t
- Software led the rotation: WDAY +17.78% on the Silver Lake headline anchored the group; the Enterprise theme rose +3.33% with WDAY and WIX (+15.39%), Database Software +5.54% with ESTC +10.83%. CRM (+4.1%), ADBE (+4.5%), MDB (+7.7%), NET (+6.2%) all featured on multiple scans.
- Memory and mega-cap comms: Sandisk (SNDK) +13.67% off its investor day, WDC +7.31%, SK hynix (SKHY) +7.28%; Communication Services led sectors as META +2.78% and NFLX +5.43% on Pershing Square’s new stake.
- What failed: Semiconductors faded hard — the PHLX Semi Index gave back most of a 2%+ gain to close +0.5%, with Coherent (COHR) -7.95% on earnings. Cisco (CSCO) -9.25% pressured the Dow despite a beat-and-raise. Materials -0.7% was the weakest sector on softer precious metals and fertilizer names.
- Breadth trend: 61.19% above the 40-day held steady — the record close was not confirmed by expanding breadth, keeping the regime Cautious rather than upgrading to Bullish.
Key Earnings & Economic Calendar
- Workday (WDAY) +17.78% was the day’s biggest single-name catalyst — an M&A headline rather than earnings, but it drove the software rotation and lifted the IGV ETF 3.1%.
- Coherent (COHR) -7.95% and Cisco (CSCO) -9.25% were the notable earnings-driven laggards; Birkenstock (BIRK) rose sharply on 13% revenue growth and a raised outlook, while Tapestry (TPR) plunged on an FY27 outlook that merely maintained its long-term algorithm.
- Applied Materials (AMAT) reported after Thursday’s close (shares closed $546.05, -0.38% into the print) — watch the reaction Friday for the AI wafer-fab equipment read-through, with Lam (LRCX +3.72%) and KLA (KLAC +1.04%) as peers.
- Tomorrow’s data: 08:30 ET July Retail Sales (consensus +0.2%, prior +0.2%) and ex-Auto (+0.2%); 10:00 ET June Business Inventories (+0.1%); 10:00 ET preliminary August U. Michigan Consumer Sentiment (54.5 vs. prior 55.2). Retail Sales is the swing factor for the consumer and rate narrative.
Tomorrow’s Watchlist & Setups
- CRM at $201.32 — appeared on Continuation, D9M, 9M Catalyst and Reversal Bullish (+4.1%, RVOL 1.9); software leader with confluence, watch for follow-through above today’s high.
- FIG at $26.34 — Design Software breakout (+10.9%) on both Continuation and D9M; volatile (risk 140%), size small and use tight stops, trigger on a clean push through the box high.
- ADBE at $270.48 — Continuation and D9M signal (+4.5%, INST); constructive software pullback-to-breakout, a rotation beneficiary if the semi-to-software shift persists.
- CSGP at $33.05 — D9M and 9M Catalyst (+8.4%, RVOL 1.5, INST); business-services momentum name with real-estate-data tailwind as yields ease.
- FDX at $339.38 — Continuation (+3.9%, RVOL 1.6, INST) with FedEx Freight among S&P gainers; transport strength worth watching into Retail Sales.
- Sector focus: Software/Technology (+1.28%) — the afternoon rotation and IGV’s 3.1% surge make it the cleanest place to hunt continuation setups; keep memory (SNDK, WDC) on the radar for a semi re-acceleration.
Strategy Outlook & Scenarios
- Bullish scenario: A firm July Retail Sales print (≥ +0.2%) that keeps rate-hike odds falling, plus breadth expanding above ~65% on the 40-day, would confirm the record close and justify pressing software/comm-services leaders. S&P holding above 7,800 keeps the trend intact.
- Bearish scenario: A hot Retail Sales or weak Michigan Sentiment that re-ignites September hike fears, combined with a break of the semiconductor group and breadth slipping back under 60% on the 40-day, would flag a regime downgrade toward Cautious-Bearish.
- Signal counts: 2LYNCH 25, D9M 14, Reversal Bullish 8, Darvas Box 31, 9M Catalyst 5 — a healthy continuation environment tilted toward software and financials, consistent with a trending-but-narrow tape.
- Regime forecast: Cautious. Breadth held near 61% without expanding into the record high; leadership is real but concentrated, so the base case is Cautious with a bullish lean only if Friday’s data and breadth both cooperate.
Action Codes
- CRT (Controlled Risk Taking): Records with only 61% breadth argue for taking trades in confirmed leaders (CRM, ADBE, FIG) while keeping position sizes measured.
- T3A (Think 3 Days Ahead): With Retail Sales and Michigan Sentiment Friday, plus the AMAT reaction, plan entries and exits around the data rather than chasing today’s record close.
Summary & Final Thoughts
- Game plan: Lean into software and communication-services leaders on confirmed continuation triggers, but wait for the 08:30 ET Retail Sales print before adding size.
- Key risk: Narrow breadth beneath a record index — the semiconductor fade (COHR -7.95%) and Cisco’s -9.25% drop show individual blow-ups can happen even as the tape rises; manage single-name risk tightly.
- Stance: Selective and constructive — the disinflation backdrop, easing rate-hike odds, and lower oil favor the bulls, but hold Cautious until breadth expands to confirm the new highs.