Inside Markets — Corrective Price Action

A more challenging near-term fund flow dynamic increases the probability of corrective price action. The SPX is in overbought territory and a near-term pullback would be a welcome development in a broadly bullish trend. The near-term rally remains intact above 5990 with a break below that level opening the door to a ~3% pullback to the 5772-5822 support area. Stronger support sits in the 5687-5807 upside gap from May 12 with key resistance at the February high of 6144. Failure to break above that level during the summer could make the technical picture look like a ‘double top’ into a seasonally weak September-October period.

The fundamental outlook remains bullish as long as macro data continues to look resilient, Q2 earnings season results in upward estimate revisions, and trade developments are constructive. Of the three items, we have the most conviction in upside estimate revisions following a ~4% cut to Q2 estimates in April/May. There also seems to be greater visibility on AI themes with off-cycle reports from AVGO and ORCL citing demand visibility well into next year. ORCL’s CEO noted “the demand is astronomical” as the company raised FY’26 capex above $25B and guided to accelerating revenue growth. It seems that recent algorithmic breakthroughs and the rollout of agentic models has generated ‘astronomical’ demand for inference.  Good luck estimating the TAM for inference compute.