So far SPY and QQQ have both bounced where they needed to. Both indices, along with much of tech and the AI names, finished last week with strong candles. If you pull up the weekly charts, SPY, QQQ, and SMH are all looking quite strong, while most of the market outside of tech has sold off hard over the past few weeks.
QQQ Weekly Chart
RSP has 6 bearish weekly candles in a row. IWM just printed another bear weekly candle. IYT (transportation) is getting hammered with 6 bear weeks in a row. XLF just had its 3rd bear week as selling intensified. XLY (consumer discretionary) is getting comfortable below its 100-week SMA and continues to print weekly bear candles. XLB (materials) is now 5 weeks of bear candles off the highs. XLU (utilities) is water-falling lower. And XLE (energy) moved down for the second week in a row.
XLF Monthly Chart
A lot of those sector ETFs are getting close to support and possible bounce zones. I don’t necessarily plan on trading them, but if those sector ETFs can start bouncing and printing bull candles across the board while tech also continues higher, the market could see a few weeks of nicely bullish action. That would push QQQ and SPY into new all-time highs right as we come into earnings season, with the big banks reporting to kick things off.
Micron Earnings This Week
Speaking of earnings, MU reports this Wednesday, and that’s going to have an impact on the AI trade. AI held up nicely overall last week, and MU came very close to filling its overhead gap from early July. Solid earnings and guidance from MU, could get the AI/tech trade excited again, giving some of these charts the kick they need to break out of their large consolidation phases. Everyone waits with bated breath for NVDA earnings, but I think MU can have an outsized impact on this market right now too.
MU Daily Chart
Bullish Engulfing on Costco Earnings
Speaking of earnings once again, COST reported Friday and gave us one of the prettiest bullish engulfing candles I’ve seen in quite some time. It gapped down first thing in the morning, buyers came in hard and fast as it dropped into a pocket of liquidity, and it ramped higher from there. Shorts were trapped right out of the gate and got squeezed higher all day long. Friday’s candle had the highest bull volume of any candle in 2026 outside of the one that kicked off the main bull run on January 8th.
What’s great about this trade is we now know COST shouldn’t close below Friday’s candle. That sets our risk mitigation level, the point where the bullish thesis breaks down. From there, it’s just about making the risk/reward work up into a target, which I think it does. If we draw Fibs on Friday’s candle, even a drop into the 23.6% retracement level still gives us decent risk/reward up toward the long-term averages, which are all clustered together, the 100-day, 200-day, and 100-week SMAs all sitting around the $950 level.
I’ll be buying the dip on COST. Who knows, if everything goes as planned, maybe COST will end up paying me for my next 1,000 hot dogs.
10,000 hot dogs