Semi Slump Met with Dip-Buying as July OpEx Hangover Fades

The morning session belonged to the bears as a continuation of Friday’s profit-taking hit the AI heavyweights. NVDA opened with a gap down, testing the previous week’s value area low before finding a firm bid at the $118 handle. The early weakness in mega-cap tech provided a brief window for IWM bulls to extend the rotation trade, but the small-cap index stalled out near 2,240, suggesting the 'everything rally' is still lacking a true catalyst for a breakout above multi-year resistance.

Price action turned constructive during the European close as liquidity stabilized. We saw a classic mean-reversion setup in the Nasdaq, with the QQQ recouping its 1.2% morning deficit to finish nearly flat. This intraday 'V-recovery' was fueled largely by short-covering in the semiconductor space, specifically AMD and SMCI, which both printed hammer candles on the daily. Momentum traders focused on the tape noticed a distinct shift in order flow around 1:30 PM ET, where large block buys began hitting the offer across the MAG7.

Heading into tomorrow, the focus remains on whether the tape can sustain this bounce or if we are merely carving out a lower high. The 10-year yield is hovering at a sensitive junction, and any further cooling in the macro data could accelerate the move into rate-sensitive cyclicals. Watch the 20-day EMA on the SPY; as long as we hold above it, the structural bull case remains the default, though intraday volatility is clearly trending higher as we enter the heart of earnings season.

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