Bullish Momentum - But Mind the Gaps
Promising fundamentals are driving higher prices, though near-term gaps warrant caution.
As of the end of the trading week on Friday, August 7, 2026, 88% of the companies listed in the S&P 500 have officially posted their actual earnings results for the second-quarter corporate reporting cycle. Overall, the corporate reporting cycle has exceeded Wall Street’s original expectations, driving the index to its broadest and highest profit expansion in several years considering:
86% of reporting companies have beaten their consensus Earnings Per Share (EPS) estimates. This is well above the historical 5-year average of 78% and the 10-year average of 76%.
Approximately 77% of S&P 500 companies have exceeded their revenue expectations. All 11 sectors of the S&P 500 are concurrently reporting positive revenue growth for the quarter.
The blended year-over-year earnings growth rate for the S&P 500 (SPX) stands at 50.4%. If this holds, it will mark the single highest earnings growth rate reported by the index since Q2 2021.
The blended revenue growth rate, currently marks a 14.1% year-over-year, marking a substantial top-line expansion for major U.S. firms.
While corporate fundamentals are performing exceptionally well (and that’s a major bullish factor for the SPX), the global macro and geopolitical context introduces complex undercurrents.
Macro: The July jobs data delivered an unexpected contraction, with non-farm payrolls dropping by 23,000 jobs (missing expectations for an 83,000 gain) and the unemployment rate ticking down to 4.1%. While a drop in hiring looks weak superficially, equity markets translated this as a buffer against further monetary tightening, fed funds futures priced the probability of a September rate hike down to 44% (from 55%), giving the market near-term breathing room and fueling the bullish action on Friday.
Geopolitics: Since war broke out in late February, energy shipping transit via the Strait of Hormuz (which normally moves 20% of global oil) has faced major disruptions. This week, oil markets experienced volatile swings over an Oman-brokered diplomatic layout. CL=F fell -11% this week closing at $77 after a published Iranian draft bill proposed taxing transit and banning U.S. and Israeli vessels from entering the channel.
With all that said, investing and trading rarely present the perfect environment. If you wait for a solid corporate context like the one we have now, with inflation, jobs, consumer sentiment, GDP, and other macro factors favoring the market, and geopolitics entirely peaceful and cooperative, you may find yourself waiting a very long time (if not forever), out of the market or always managing to find a factor to expect a decline.
For that reason, my focus remains on price action analyzed through technical indicators, always keeping the fundamentals behind the charts in mind. By setting targets and risk management with modeled support and resistance levels (proven over more than two years of this publication to be zones where institutional algorithms react) we navigate the markets with discipline and clarity about the context.
Actionable insights:
This Saturday’s publication provides a blueprint of setups across indices, ETFs, megacaps, and crypto. By tracking a consistent watchlist with technical analysis and levels, we successfully monitor rotations across sectors and assets.
Here are the high probability setups that played out this week:
PLTR: Triggered a bullish reversal by recovering the 124 central weekly level 🎯, exceeding its target by far with a 39% weekly move.
TSLA: Executed a bullish reversal, hitting the 328 extended target for a +5.4% weekly gain 🎯.
META: Bounced off a recovery of 564. While noted transparently that the +8% target of 603 might take more than a single week, the stock still rallied +6.3% 🎯.
GOOG: Bullish setup to hit the 381 extended target (+6.9%) 🎯. Before a precise reversal from that modeled zone.
GLD: Remained bullish as anticipated, surpassing the 388 target for a +7.3% weekly gain 🎯.
MSFT: Reached its 491 bullish target for a secure +5.8% move 🎯.
SPCX: Highlighted in Thursday’s daily post to paid subscribers with a successful bullish setup above 111 and providing a complete set of levels to trail stops for the eventual bullish move that indeed happened 🎯.
That is 7 high-probability setups successfully playing out. Trading is never about perfection, of course; this week also included a bearish setup for AAPL that remains in progress and has not yet reached its target.
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Common Questions on the Minds of Investors and Traders
With so much noise coming from mainstream media, and even more from social media, let’s address these three questions:
Is the Economy Strong?
How Are Fundamentals Doing for the Medium and Long Term?
Is It Real There Is an AI Bubble?
Economy: A Modest, Dual-Track Economic Slowdown
The economy is currently showing clear signs of cooling down under the weight of sustained interest rates and localized energy constraints, but it remains structurally resilient rather than collapsing.
The Soft Landing/Cooling Trend: The defining macro indicator of the week (the unexpected loss of 23,000 U.S. jobs in July) proves the labor market is finally easing. However, the equity markets treated this “bad news as good news” because a softer job market drastically lowers the probability of any upcoming Federal Reserve interest rate hikes.
Resilient Consumer Spending: Corporate reports from consumer-facing giants do not indicate a recession. WMT has seen net sales growth forecasts +4.8% to +5.1%, driven in part by value-conscious consumers and strong e-commerce growth., Visa (V) processed a historic $4 trillion in transactions in a single quarter, and JPM saw investment banking fees surge 38%. The consumer is active, though increasingly cost-conscious.
Fundamentals: Structurally Sound with Temporary Margin Pressure
For the medium and long term, corporate fundamentals remain remarkably healthy, though companies are facing short-term profitability hurdles.
Top-Line Growth is Real: Across the board, mega-cap revenue growth is exceptional. AMZN posted a 20% revenue jump, MSFT climbed 18%, and GOOG rose 24%. These are not hollow metrics; they indicate robust demand for secular digital services.
The Margin Squeeze: The near-term headwinds are self-inflicted by aggressive corporate investment. Companies are sacrificing immediate profitability (operating margins) to build out future infrastructure. For instance, TSLA saw its operating margin compress to 1.4% as it shifted capital entirely toward robotic compute, R&D, and pricing adjustments.
AI Bubble: An Infrastructure Overbuild Correction, Not a 2000-Style Dot-Com Crash
The dramatic after-hours sell-offs of companies that heavily beat earnings targets—such as AMD and SpaceX (SPCX) prove that Wall Street is suffering from severe AI Capital Expenditure Fatigue. Investors are no longer blindly cheering artificial intelligence announcements; they are demanding short-term returns on capital expenditures.
Why it looks like a bubble: The cash burn required to participate in the AI race is astonishing. AMD nearly tripled analyst models by spending $808 million in capital expenditures last quarter. SpaceX recorded a jaw-dropping $18.37 billion quarterly capex bill to support orbital data infrastructure. GOOG ($195B–$205B annual forecast) and META ($130B–$145B annual forecast) are pushing spending to levels that create near-term return-on-investment (ROI) anxiety.
Why the fundamentals differ from past bubbles: Unlike the 2000 dot-com bubble, which was built on profitless concepts and eyeball metrics, the 2026 AI expansion is entirely funded by cash-rich, highly profitable monopolies. Furthermore, real enterprise revenue is materializing. PLTR upgraded its full-year revenue projection past $8.15 billion entirely because of domestic corporate AI adoption, and MSFT’s Azure cloud run-rate topped $100 billion.
The market is experiencing is an infrastructure overbuild digestion phase. Stock prices are experiencing corrections because valuations ran too far ahead of near-term cash flows, but the underlying medium-to-long-term enterprise fundamentals, digital migration, and macroeconomic consumer pillars remain definitively intact.
Summary Conclusion: What the market is experiencing is an infrastructure overbuild digestion phase. Stock prices are experiencing corrections because valuations ran too far ahead of near-term cash flows (as technical analysis warned for AMD, MU, weeks ago), but the underlying medium-to-long-term enterprise fundamentals, digital migration, and macroeconomic consumer pillars remain strong.
Today’s Agenda
Market Context: Charts+levels for SPX, Indices, ETFs, VIX, Breadth, and Crypto.
Deep Dive: Individual analysis with charts and targets for Mag Seven and setups.
Momentum Map: Analyzing the stage of every security in a single view.
Setups Blueprint: Entry levels for short and long setups with price targets and invalidation levels for all the securities in the watchlist prioritizing stronger setups.
Let’s begin.
Over the past few days, I have highlighted the potential for an SPCX bounce. SPCX made its first appearance in the Weekly Compass last week, and my bullish outlook stems from an objective study of its technicals, alongside the Market Intelligence study I published on June 10th analyzing the historical price behavior of previous IPOs including TSLA, PLTR, BABA, META, and others. SPCX is following the script.
For new paid subscribers, please read the study here, today the chart analysis for SPCX is consistent with it:
SPX: What is the Next Strong Resistance?
I anticipated 7,638 as a major resistance zone before the index topped at 7,620. The price declined from there and printed choppy price action for over two months, we have now navigated the first turbulent zone outlined in this April analysis:
The chart below presents the next major resistance to watch and the technical conditions suggesting specific direction for the index: