Market Outlook for Next Week

I. Broad Market: Indices are diverging, but the trend hasn't deteriorated yet
Q: Converging triangle, direction selection imminent (Figure 1)
Q is still within the 4-hour converging triangle, with lower highs and higher lows, entering a typical directionless consolidation phase.
This structure won't last long; next week will likely see a direction choice. I personally lean toward an upside breakout.
Main reasons:
1. Korea's stock market saw clear recovery on Friday, with SK Hynix and Samsung both rebounding, and Nasdaq futures strengthening simultaneously.
2. Q left a gap-up window above; historically, most such gaps get filled.
3. July is a seasonally strong month, and I still believe indices have a chance to test previous highs.
Additionally, VIX is currently around 15.8.
Historically, this is a relatively low level, indicating market sentiment remains optimistic, but also suggesting short-term volatility may expand again. So I prefer to view the current environment as low volatility, a market for buying on dips.
SPY: Clearly stronger than Q (Figure 2)
Compared to Nasdaq, I believe SPY is significantly stronger right now.
SPY looks more like a bullish flag consolidation at highs, without a real breakdown. The key level remains around 739-740. As long as it holds above that, the uptrend remains intact.
I've previously mentioned that the real reason the market is resilient is sector rotation. In the past two days, capital has clearly flowed into healthcare (XLV), financials (XLF), consumer (MCD, Costco), and Apple.
These companies with stable cash flows and higher defensive characteristics are acting as market stabilizers. This explains why Q has dropped more while SPY hasn't truly lost control.
If this rotation continues, I still believe SPY has the potential to push toward 7600 in July, and even challenge the 7700-7800 area.
Russell 2000: Starting to take over
Another area to watch is Russell 2000.
In June, small caps closed with a very strong bullish candle and hit a new stage high.
This week's non-farm payroll data came in below market expectations, further reducing concerns about continued policy tightening.
If interest rate expectations continue to improve, small caps are likely to attract more capital allocation.
II. Semiconductors: Short-term rebound possible, but high volatility persists
SMH has reached the lower edge of its triangle consolidation (Figure 3).
It's also near the important support of the EMA50. This is a technically favorable area for a rebound.
If Korea's market recovery continues, the memory sector is likely to lead a semiconductor rebound next week.
My latest view: I lean toward seeing this as a technical rebound, not a return to a sustained uptrend. Expect high-level consolidation and patient grinding. The real direction will be determined by the earnings season starting in July.
If companies continue to deliver better-than-expected earnings, current concerns about slowing AI CapEx will naturally fade.
For those with short-term calls, you can reduce leverage appropriately during the rebound. Long-term holders of physical shares don't need to worry about short-term fluctuations; just hold patiently. I personally lean toward long-term investing and holding, but given everyone's different holding periods and risk tolerance, I'll also share some short-term coping strategies—please refer to based on your own situation.
III. July looks more like sector rotation than a broad rally
July won't see all sectors rallying together. This is a classic two-factor market.
It's been very clear in the past two days: when hardware drops, software, healthcare, biotech, and financials rise. Conversely, when semiconductors rebound, these defensive sectors are likely to enter consolidation.
So for short-term traders, a better strategy in July is to maintain some sector balance. For long-term holders, AI remains the main line—the final market rally will still be driven by AI, so patience is key.
IV. Regarding Meta
Recently, the market has been discussing whether Meta's AI infrastructure is overbuilt.
The biggest short-term change is market sentiment. After the news came out, the market began repricing semiconductor valuations, causing significant volatility in the sector. Later, rumors of Meta partnering with Samsung on AI chips further intensified fund speculation. Zuckerberg himself sold, then bought back😂. So I expect semiconductors to remain highly volatile in the coming period—this is what the market needs to adapt to most right now.