7/26 Recap

As we await the Fed decision today, the market is surprisingly holding up nicely considering the 2nd largest component Microsoft, a 7% weighting, is down 5%. This structure remains bullish, could that change this afternoon on the Fed? Sure, but until then the resilience continues. That rotation I noted in the recap Friday from tech to healthcare/utilities slowly playing out look at the XLV/XLU today/

Microsoft broke down and now has a few gaps below to target. This is down 10% nearly from the co-pilot news they broke last week. It makes you wonder why they couldn’t just wait until earnings to deliver that news only to come away yesterday telling us that all the AI things they’ve been hyping won’t be material next year. The real AI winner remains NVDA where seemingly the bulk of all the capex announced by Microsoft and Google will go, but even Nvidia is constrained by how many GPU’s they can produce. Otherwise Microsoft had a pretty so-so quarter with 8% revenue growth. These numbers are fine, Microsoft is a great company, but with the current multiple it is sporting, this kind of growth is very mediocre. When these moves happen and the moving averages begin to slope down, it usually isn’t a quick fix. Barring some sort of unforeseen pump I expect MSFT to lag for the next quarter.

GOOG on the otherhand surprised everyone and reported a fantastic quarter where ad revenue grew again and YouTube even turned positive after the last quarter. I expect Google to continue to drift up for the coming quarter and you can see that gap below as a natural spot to sell puts now.

This doesn’t mean Microsoft is bad or Google is better, just simply for now, they should drift in opposite directions over the coming quarter. That is what PEAD implies and why I’ve mentioned multiple times that is my main focus in finding strength. Here is a great read on the topic from Science Direct that I linked many months back

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Trends

Week To Date

2 Week

1 Month

Today’s Unusual Options Activity

113 Trades Today

The one today that stood out was XPEV, it’s been popping up in here for a while it is up 28% today. Look at all the trades I’ve noted in the last month. Disappointed in myself for not noticing all this but then again I don’t really pay attention to small cap China EV makers.