Risk-on is expected through Sept. 30, with PCE and MU as the next catalysts, but the setup is framed as late-stage strength rather than open-ended upside. MSFT is treated as the main AI beneficiary: cloud sales up 43%, 30 million paid Microsoft 365 Copilot accounts, and $40.6B of quarterly operating profit support the bull case, while $41B of infrastructure spend and a bearish ascending channel argue for profit-taking near 529-531. SPY is also near a decisive fib area, with 783 and RSI resistance watched for a next-week push that could either extend the rally or precede momentum fading and a larger rollover.
Risk-on was expected through Sept. 30, ending next Wednesday, with PCE and MU earnings as the two catalysts to watch.
MSFT was the focus because a stock projected to run to $530 had not yet reached that level.
MSFT was framed as a major AI beneficiary because investors think its huge AI bet can ultimately make money.
Azure and other cloud sales grew 43% last quarter, Microsoft 365 Copilot had 30 million paid accounts, and operating profit was $40.6B, up 18% y/y.
MSFT was cast as a potential toll booth for AI business: it can charge for AI-capable computers, AI tools for employees, and usage-based AI services that should scale earnings with usage.
The risk to MSFT is $41B of infrastructure spend last quarter; if growth slows, that spend becomes the reason to take profit at lofty prices.
Technical resistance was placed around the 531 fib level, with profit-taking set more conservatively at 529 and a bearish ascending channel expected to break lower.
MSFT RSI was described as healthy above 60 but stalled near 66; if price reaches 529, that would coincide with RSI resistance and a take-profit zone after a long extension.
MSFT was expected to run into early next week before Wednesday and tag the 530 area and the 1.618 trend-based fib extension; two candles closed above it would be needed to argue for a higher immediate move.
If PCE is bullish, MSFT could keep blasting higher; if the 1.618 fib rejects, the downside target was 460, tied to the 382 fib level, potentially stretching through October.
SPY was said to be back at the middle of its channel, a decision-point resistance area, after earlier calling for a roll-over from 775 to a 750 bounce and then a higher move that played out.
SPY’s next major un-hit fib level was 783, and next week could open with a move straight to that level where sellers are expected to be camped out.
SPY RSI was described as above 60 but declining, with bearish divergence: price rising while momentum falls, and repeated touches of a white dotted RSI line have historically preceded violent pullbacks.
If SPY cannot clear the white dotted line and does tap 783 next week, momentum was expected to fade like prior touches before a violent roll-over; a drop back below 60 RSI before year-end was posed as the key downside watch.
Next week’s market direction was tied to PCE, the Fed, and MU earnings, with the question centered on whether MSFT should be taken off near 530 or held if PCE comes in soft and the Fed does not need more hikes.