Market Breaks Down, Volatility Returns
Weekly Outlook 07/20/26
Market Recap
Money moved early in the week, just not into anything resembling conviction. The rotation went into the mega caps while memory carved out a lower high and rolled over again, showing clear backside behaviour and distribution.
Crude continues to climb, with the Iran situation not having improved much. However, the conflict isn’t really the main driving narrative for the market, as tech has been selling off for a few weeks now.
Market tone in tech remains negative, this week saw both $ASML and $TSM report earnings and neither print was rewarded. TSMC posted net profit up 77% year over year and lifted its capex guide, ASML beat and raised full year revenue guidance, and both ended lower. That pattern also repeated across the sector in other stocks, showing overall appetite in the AI trade is still low.
On Tuesday. $IBM pre-announced weak preliminary Q2 results and closed down 25.21% at $217.07, the worst single day in the company’s history. Revenue came in at $17.2 billion against $17.86 billion consensus. Krishna wrote an unusually blunt letter admitting the company faltered and pinned it on clients redirecting budget toward servers, memory and storage rather than software.
Watchlist
The market deteriorated further this week. $QQQ has spent the summer inside one large range between the all time high and the June low, and this week the intermediate range finally gave way. 710 broke Thursday, 700 was breached overnight, and price went on to test the June low. We got a short term oversold bounce out of it, but the close landed in the middle of the day’s range, which remains uncertain.
Volatility is the bigger tell. $VIX hit 18. Memory names have been volatile for weeks, but this is index level volatility now, and that is a different regime. $SPY had largely ignored the tech weakness until Friday, when it finally took a hit and closed underneath the 50sma.
When volatility rises, correlation rises with it, and most names start trading as one instrument. There are not many clean individual charts this week as a result. The focus stays on memory, because it remains the most in play narrative and the best trading vehicle in the market.
Kospi futures did not trade Friday with the Korean market shut for Constitution Day. Worth noting Thursday’s session there was carnage, with $KOSPI down 6.37% on heavy semi selling and a surprise Bank of Korea rate hike. All of that reaction is still queued up for the Monday reopen.
$DRAM, $SOXL, $QQQ, $SNDK, $MU, $SKHY as the basket. The whole group was short term extended into Friday and gave a clean morning bounce, which was a good trade. Next week comes down to one question. Either we take out Friday’s high or we stay weak.
$SPCX continues to remain extremely weak, despite receiving a compute deal from the Pentagon on Friday, where the news was heavily sold into.
$LCID had bankruptcy rumors last week that were denied, and it has been squeezing whatever shorts are left ever since. Watching for a proper blowoff or a fizzle.
Cybersecurity has clearly held up, there isn’t really any sustained trend there. Relative strength in a choppy downward market still doesn’t go anywhere.
Closing Thoughts
Volatility is up and the indices have no trend, which makes this a daytrading environment rather than a swing one.
Friday may have been a short term washout in memory. The Korea reopen is the tell, and if that session turns we can start cautiously positioning long for a bounce. If instead the selling gets steeper, a capitulation trade sets up, and that is the better outcome of the two. Either way the group tells us first.
Until then, stay nimble. Intraday ranges are wide, correlation is high, and it remains a hit and run tape.
If you enjoyed this read, please consider leaving a like on the post, and let me know in the comments if I missed anything or what you’re watching for this week!
P.S.
If you haven’t checked out the Valhalla Portal yet, it’s where I track catalysts, setups, and market activity in real time - a live feed of everything that moves the tape, built for the community. I’ll be doing a dedicated post soon walking through all the features in detail, so stay tuned for that. In the meantime, you can check it out here: