Inside Markets — ORCL Anecdote, SPX and SOX

ORCL’s earnings call may temporarily shift the AI narrative away from the recent ROI focus and back to large scale capex plans when Larry Ellison said “the race goes on forever” regarding the buildout of better neural networks. His comment may remind investors of similar comments during calendar Q2 earnings calls from GOOGL and META. He went on to suggest that the AI training phase could last 5-10 years with no slowdown coming on inferencing and references to $100B models and megawatt-scale ORCL datacenters being supplied by multiple dedicated nuclear power plants.

Near-term SPX: The S&P 500 (SPX) remains below its 50-day moving average, which keeps CTA’s of the bids list ahead of rolling corporate buyback blackout window that starts on Monday. These two factors and a month-long period of seasonal weakness (mid-September-mid-October) make the near-term setup more challenging. No one should base an investment decision on seasonality, but negative mutual fund flows into the end of September is just something to keep in mind. Key technical support for the SPX sits near 5440 with bears gaining traction on sustained lower levels. Next level support is ~120 points lower, but a break below 5440 opens the door for a pullback to the 5070-5170 zone (-6.7% below current levels to the midpoint).

SOX: The mid-July bearish technical reversal in the Philadelphia Semiconductor Index (SOX) from 5905 caught our attention with the index mostly holding support in the 4210-4395 range in early August. A break below that level would be surprising given our bullish fundamental view, but from a technical perspective only, a break below ~4210 would make a full retracement of the year-long rally (20-25%) a real possibility.