1/ As Go the MNM’s, So Goes the Market

In a week where four of the Magnificent 7 stocks are reporting earnings, it becomes crystal clear that the trend in the broader markets is essentially driven by the trends in these mega cap growth stocks.  Shares of Meta Platforms (META) are anticipated to break out after a strong earnings beat, meaning META, Nvidia (NVDA) and Microsoft (MSFT) will all be in primary uptrends.

The strength in these three charts represents three winning themes since the April 2025 market low: cloud computing, artificial intelligence, and social media.  And while Nvidia will report earnings next month, both Microsoft and Meta registered solid results this week.  Assuming a post-earnings breakout for META, confirming a move above resistance around $740, I’ll focus on following these trends as long as possible.  The 21-day exponential moving average should serve as an effective tool to track these uptrends in the coming weeks.

2/ Declining Volume Hints at Waning Momentum

Any time a market is moving to new highs, I like to regularly review the evidence to look for any signs of trend exhaustion.  For the S&P 500 index, I’m noting weakening volume readings which could be an early sign of a lack of willing buyers.

We’re using the Chaikin Money Flow (CMF) in this chart, which is a volume indicator created by Marc Chaikin to track volume trends weighted by daily price performance.  With the CMF well into positive territory, this would suggest that the S&P 500 is in an accumulation phase.  But a closer look reveals a bearish divergence between price and the CMF over the last two weeks.  

This suggests that recent down closes on heavier volume represent distribution as investors sell into recent market strength.  If the Chaikin Money Flow would drop below the zero level in the coming weeks, that would be in line with previous pullbacks where a divergence preceded a meaningful decline as sellers took control.

3/ Tesla Remains a “Sit on Your Hands” Play

Earlier this week we referenced a classic Jesse Livermore quote about the “time to go fishing” chart, and used Starbucks (SBUX) to illustrate a consolidation phase.  The key with this type of chart is to wait for the market to make its move, with a breakout from the pattern as confirmation of the new direction.  Shares of Tesla (TSLA) are demonstrating a very similar phenomenon but with a coil pattern of lower highs and higher lows.

A symmetrical triangle or “coil” pattern is formed when a stock experiences a strong move in one direction followed by a narrowing of the range.  The price basically fluctuates higher and lower around an equilibrium price, which in the case of TSLA sits around $320.  Note that the 50-day and 200-day moving averages have flattened out and the RSI is almost dead neutral at 50.  Both of these features serve to confirm the sideways price action.

At this point, a rally above resistance around $340 would exit the triangle pattern to the upside, clearing the mid-July swing high and unlocking further upside targets.  On the other hand, a drop below $300 would confirm a breakdown scenario, making a new swing low and suggesting downside to at least the 38.2% Fibonacci retracement level around $270.  But until we see a breakout from this consolidation pattern, investors could be best served by remaining patient.

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