The biggest stocks in the market are breaking down.
And the S&P 500 sits near all-time highs.
Both can’t stay true for long.
I already placed my trade for the moment they reconcile…
And the catalyst for the coming move could drop this week.
Volatility is set to top the charts…
There’s a Fed decision and earnings from three of the largest companies on earth inside a 48-hour time frame.
Wall Street will spend the week arguing over rate probabilities and capex forecasts. The stress is palpable.
But we have a simpler job.
Nvidia Was The Tell
NVIDIA Corporation (NASDAQ: NVDA) just confirmed talks with OpenAI for a $250 billion deal.
Most of that money circles right back around to buy more Nvidia chips. Circular, sure. But it should have been rocket fuel for a stock that traded up to $212 on Friday and has held $200 support for two weeks.
I was awake at four in the morning running the futures math (and I had it pegged near $210 to $211 on the open).
It came in at $208.
The Nasdaq was up 1.5% and its most heavily-weighted stock was lagging. That gap told me everything before the bell rang.
Look what happened next…
The stock fell on news that should have sent it higher.
When the largest company in the market refuses to rally on a $250 billion headline, there’s only one way to go.
And the QQQ followed it lower, with the SPY eyeing a similar move…
The QQQ lost the support level it built earlier this year. The SPY is still up, but stumbling.
I’m trading the direction these indexes are pointing…
The Capex Problem
Alphabet Inc. (NASDAQ: GOOGL) reported last week and handed us a preview of what could come.
The company beat. Cloud revenue grew 82%. Second quarter capital expenditures came in at $44.9 billion against forecasts of $44.7 billion.
Then it raised full-year capex guidance to $195 – $205 billion, up from $180 – $190 billion, with another jump flagged for 2027.
The stock fell as much as 7% the next morning. It’s down 9% across five sessions (and it closed last week under its 200-day moving average).
Barclays strategists say AI capex enthusiasm has started to cool.
That’s concerning because ten AI-adjacent stocks now account for a record 38% of the S&P 500.
The dot-com peak was 27%.
The generals that led the market for years are falling one at a time…
The Coming Wednesday Fireworks
The Federal Reserve announces its rate decision Wednesday, July 29 at 2:00 P.M. ET.
Fed Chair Kevin Warsh takes questions half an hour later.
Rates have held at 3.50% to 3.75% for four straight meetings. A fifth hold is still the base case, but conviction is draining fast.
Futures put the odds of a hold at 62%, down from 87% on July 17. Odds of a hike jumped to 37% from 12%.
The major catalyst is oil back above $100 a barrel. This Iran war is lasting much longer than anyone anticipated.
A rate hike, or even a hawkish tone from Warsh could seal the casket. But that’s not the only catalyst on Wednesday…
Microsoft Corporation (NASDAQ: MSFT) and Meta Platforms Inc. (NASDAQ: META) both report earnings after the close.
Both companies beat last quarter. And both sold off anyway once capex guidance landed.
They’re also both already down on the year.
Here’s where the charts are now, trading near multi-year support…
24 hours after MSFT and META announce earnings, Amazon.com Inc. (NASDAQ: AMZN) closes out the big-tech catalysts on Thursday, July 30, with its own earnings data.
The stock is consolidating below recent highs from earlier this year…
The next few days will be pivotal.
My IWM Trade
The iShares Russell 2000 ETF (NYSE: IWM) is up 10.2% over the last six months.
It ran to nearly $300 in early July and has ground sideways above $290 since.
Look what sits inside the index: Biotech, regional banks, REITs, small software.
Every one of those sectors depends on faith in taking market risks. And the biggest stocks are draining that faith from the market.
Here’s the alert I sent at 10:04 A.M. ET on July 27, when NVDA was trading below my calculations:
BUY IWM 7/28/26 $294 PUTS TARGET $288 – ONE STAR
This could have been a two-star setup. But too much news is swirling around it, plus I’m trading on a short time frame.
Remember, IWM only has to travel a couple of percentages for my contract to move exponentially higher.
There’s a lot of fear in this market. I’m keeping my trades small, my risk tight, and I’m reacting to what the market tells me.
One trade should never put you out of business. If it can, you’re trading too big.
Stay Street Smart,
Jeff Zananiri
*Past performance does not indicate future results, Not typical.
