Ivanhoff Capital

MarketSurge powers the charts in this video.

July consumer inflation came in at 3.4%. This is significantly higher than the Fed’s 2% target, and yet most stocks rallied. The number was within analysts’ estimates, which supposedly means lower chances of the Fed raising rates at its next meeting. This is how the market works. It is a sentiment machine in the short term.

Inflation wasn’t really the big news last week. It was the reaction to NBIS (Nebius) and SMCI’s earnings, and SNDK (SanDisk) investors’ meeting. As expected, NBIS beat estimates and raised guidance. All AI stocks have done the same so far this summer. The surprising part was the market reaction. Instead of selling the great news as it did with MU, SNDK, WDC, ASML, among many others earlier this earnings season, it gapped up and never looked back, lifting the entire AI data center space with it.

SMCI beat earnings estimates by 84%. It gapped up and ran, boosting other AI server stocks like DELL and HPE.

Memory stocks were left for dead and underperforming in a strong market before SanDisk reaffirmed its strong growth prospects during an investors’ meeting. Those comments sparked a rally in SNDK, WDC, SKHY, STX, MU, among others. There was no new material information. The only thing that has changed is the market sentiment.

Now the big question is whether the semiconductor group can also join the rally. SMH is stuck in a tight-range consolidation right near its flat-ish 50-day moving average. It won’t take much to break out if the overall tape remains strong.

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1. NBIG +101%, 2x long NBIS. AI data center play, raised guidance, gapped above its 50dma, and staged a massive short squeeze as 30% of its float is short.

2. SNDG +79%, 2x long SNDK. Memory chip leader reaffirmed its growth prospects during their Investor Day, staging a recovery in the entire memory chip space – MU, WDC, SKHY, STX, etc.

3. AEHG +65%, 2x long AEHR. Designs and builds specialty machinery that screens microchips for hidden defects. Range contraction near its 52-week highs with 14% short interest and notable relative strength – one of the cleanest and easiest setups to catch last week.

4. SMCL +58%, 2x long SMCI. Beat estimates and raised guidance, lifting the entire AI server space – including DELL and HPE. SMCI gapped up above its 200dma and had an immediate follow-through the next day.

5. SKHU +43%, 2x long SKHY. The Korean memory chip maker benefited from a strong recovery of the Korean stock market and the enthusiasm surrounding SanDisk’s Investor Day.

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Disclaimer: Everything I share is for educational and informational purposes only, and it should not be considered financial advice. Read my full disclaimer here.

MarketSurge powers the charts in this video.

The SP500 followed through and made new all-time highs last week. The reason is not that the Fed hasn’t increased interest rates in the face of high and rising inflation. It is not that there might be another peace agreement in the Middle East – the last one lasted only a couple of weeks. Almost 90% of the S&P 500 have already reported, and the index is on track to more than 50% year-over-year earnings growth. The question is how much of that is already priced in?

Not everything was roses and rainbows last week. Memory leaders WDC and SNDK absolutely crushed earnings estimates and still sold off harshly, reminding us that the sentiment in some AI areas is still sour. One of the cybersecurity leaders, DDOG, also beat estimates and declined 20%. In all of those cases, the market had already priced in the good news. The true earnings surprises are reflected in the market reaction. CRSR gained 35% and finished near its daily highs. SHOP and TWLO gapped up 20% and finished near their weekly highs. The same with PLTR and TEAM.

The jobs report came well below estimates -23k vs expected 85k. Counterintuitively, this might be good news for the stock market because it reduces the chances of a rate hike later this year. The Fed had a dual mandate – under 2% inflation and full employment. The latter is more important, especially in an election year. Maybe this is why we finally saw metals to wake up. The week was strong for gold, silver, copper, and steel, which benefited from the latest sector rotation. 

From a 10,000-foot view, the indexes just had a high-volume range expansion followed by a few days of sideways consolidation. People are looking for more risk – stocks in highly speculative areas like space, nuclear, solar, AI applications, rare earth metals, etc., are bouncing.

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