Market Overview: Breakdown Mode with Major Red Flags
The Nasdaq & S&P futures broke through the 200 SMA on the daily charts, the most critical line in the sand on this time frame. This is a key technical level because it’s so widely used and watched, and ultimately breaks in this zone lead to more selling. Selling begets more selling! That means the next downside target is the lows on the year. If and when those lows break, I will expect more downside, especially if they break on bad news and high volume selling. This break is also occurring with daily squeezes, which are consolidation that is ready to breakout.
Oracle and Adobe reported earnings this week. While the initial Oracle move was strong, the bounce stayed within the expected move, only to move lower after that. Companies continue getting hammered post-earnings even on beats – look at Adobe (ADBE) tanking 6% after hours yesterday despite solid numbers, classic for this quarter.
And the Mag 7? This has turned into the Bag 7, and they are leading the way lower – their weakness is leading the market lower, which is a big deal since they usually drag everything up. I will say that the exceptions here are Nvidia (NVDA), Broadcom (AVGO), and Apple (AAPL). Nvidia has an event on Monday where Jensen Huang is expected to show off some of Nvidia’s new offerings. While “buy the rumor, sell the news” is a very typical stock market pattern, I’m still holding out for a positive reaction in Nvidia stock.
Bearish Bets: Software Sector Looking Ugly
I’m bearish on software right now (IGV ETF) – bearish charts, relative weakness, and with AI tools like Claude making coding accessible to anyone, continued adoption could crush traditional players. I’m already short IGV and CRM, and eyeing more like ORCL (post their recent earnings), PANW, and MSFT. Entry wise, shorting on rallies or by using pre or post-earnings momentum is where I get in.
Check out IGV in my Phoenix Finder where I compare relative strength and weakness in a specific ETF or sector all at once:
Trade smart and stay in the hot zones,
VP of Options, Simpler Trading
@traderDanielle on X | Featured on CNBC, Fox Business, StockCharts
Disclosure: Short IGV, CRM; long GLD; long Mag 7 stocks but using short-term options to hedge.
