AI Chip Rally and Strong Macro Data Put 7,450 in Sight for S&P 500 Index

Markets are up and are rotating back into AI. Micron (+11.36%), Intel (13.84%), SanDIsk (12.11%), Qualcomm (8.53%), Lam Research (7.09%), Applied Materials (5.35%), AMD (3.77%) and Broadcom (3.49%) have put in the work in today’s trading. There is noise that Apple may use Intel as a chip supplier and Micron and ScanDisk are being pushed higher as AI demand keeps squeezing storage and high-performance memory supply.

But not everywhere is green. Palantir is down 6.59% due to ongoing valuation concerns and Netflix (-3.21%) is softer too. The softness could be attributed to lingering post-earnings and guidance fatigue.

But the train is still going. Trend higher to make new all-time highs.

S&P 500 Heat Map Shows a Strong Chip-led Bid

S&P 500 Index Heat Map

Source: TradingView

US Trade Deficit Narrows vs Forecast, Giving S&P 500 Bulls a Small Cushion

There was a modestly better than expected print for US Trade. But it is still wider than the prior reading. The data overall is muddling through. Domestic demand is holding up.

US Trade Deficit Print at -$60.3B, Slightly Better Than -$60.9B Forecast

Bar Chart of US Trade Deficit

Source: TradingView

ISM Services PMI Holds Expansion, But Momentum Cools Slightly

While it was less than forecast ISM Services PMI is still above 50 which is a positive signal on the US economy. The services sector is still holding up, which would help earnings and the overall economy.

US ISM Services Printed at 53.6, Slightly Below 53.7 forecast

Bar Chart of US ISM Services PMI

Source: TradingView

US New Home Sales Beat Forecast, Giving S&P 500 Bulls a Growth Pulse

Results for new home sales were released today. It came in at 682k, above the 650k forecast and also higher than the 635K previous reading. This isn’t a weak print at all. There is demand in the US housing market even with interest rates increasing due to geopolitical tensions. It goes without saying that strong housing supports homebuilders, building materials, consumer discretionary names and banks. It also helps with the soft landing narrative.

US New Home Sales Beat Forecast as Housing Demand Stays Firm

Bar Chart of US New Home Sales

Source: TradingView

S&P 500 Renko Bulls Regain Control as 7,450 Comes Into View

The bulls have the tape. And they are running with it. Looking at the Renko, the S&P 500 Index is above trend and after a bit of a pullback as observed by the red bricks, it has pushed higher, switching the Supertrend back into positive mode. The Z-Score SMA has turned higher and is far from overstretched so that indicates that there is more room to go for the S&P 500 Index. I’m not seeing any real cracks in the Index. So all eyes are on 7,450.

12-Brick Renko Shows Demand Pressing Toward 7,276.3 Swing High

12-Brick Renko Chart of S&P 500 Index

Source: TradingView

The Verdict

Current Trend Direction: Bullish

Bias: Positive

Support Levels: 7,000, 6,525, 6,310

Resistance Levels: 7,450, 8,150

Medium Term Path: The AI story seems to be back and tech is expected to carry the S&P 500 Index higher towards the 7,450 zone. This is a bullish tape if I ever saw one. As long as the Index holds the 7,000 support zone, dips should attract demand. And then a clean break above 7,450 would make me want to see an 8,000 S&P before I really start to get worried.