The stock market is riding a wave of renewed optimism following a strong rebound in the previous session. The narrative has shifted from “AI disruption fears” back to “AI growth potential,” significantly boosting tech and semiconductor stocks. Concerns that AI would instantly replace existing software companies (which caused a sharp dip on Monday) have cooled. News from Anthropic regarding its “Claude Code” tool and positive analyst commentary from Wedbush have helped stabilize sentiment in the software sector.
AMD surged notably on a major Meta AI chip deal (6-gigawatt GPU partnership), boosting sentiment in semiconductors and AI hardware. NVIDIA reports earnings after the bell today. Markets are bracing for significant volatility, as this report is seen as a referendum on the health of the global AI supercycle.
Despite the rally in the S&P 500, there is no indication that this rally is the start of a larger rally . This rally is still viewed as counter trend as long as the decline resumes today at the open. So far the S&P 500 is still below the 55-period moving average, something you would expect in a downtrend. But the pattern is not impulsive, which is a warning. Not impulsive because the bounces are large, normally in a downtrend rallies are small and the waves don’t overlap. If the rally to 6917 was the end of the counter trend bounce, the decline will resume today. If the decline don’t resume and the index rallies above 6917, the odds of a larger rally in progress will increase.