Thoughtful insights and approachable analysis.

• Apple's (AAPL.us) strong earnings, powerful momentum, and a key support zone could create an attractive buy-the-dip opportunity.
• Amazon.com's (AMZN.us) record margins, booming AWS growth, and a potential pullback setup make it one to watch closely.
• Alphabet's (GOOG.us) record AI-driven growth and strong technical support levels make GOOG one to watch closely.

Quick Market Overview

Markets paused after a strong rally, with investors turning cautious ahead of key earnings from Nvidia and major retailers later this week. Technology shares weighed on the market, particularly chipmakers, as traders prepared for what could be a major test of the AI-driven rally that has pushed the S&P 500 to record highs. Nvidia remains central to that story, given its outsized influence on both earnings growth and market sentiment. Meanwhile, Walmart's and other retailers' results are expected to offer insight into how consumers are coping with rising prices and inflation pressures.

General Equity Market Health (SPX500)

Last week we noted that the SPX500's RSI had moved above 80, suggesting the market was stretched in the short term. Since then, the index has pulled back and the RSI has normalised. Over the past week, the SPX500 has been caught between powerful AI-driven momentum and growing macroeconomic pressure. The index initially pushed toward fresh highs as investors continued piling into mega-cap technology and semiconductor stocks on expectations of strong earnings, massive AI infrastructure spending, and resilient corporate profits. However, hotter-than-expected inflation data and a sharp rise in Treasury yields created pressure beneath the surface, particularly for expensive growth stocks that are highly sensitive to interest rates. Rising oil prices and renewed Middle East tensions also fuelled concerns that inflation could remain sticky, further reducing expectations for near-term Fed rate cuts. Fundamentally, earnings growth and AI optimism continue to support the broader bull trend, but the rally remains narrow and increasingly reliant on a small group of heavyweight technology companies continuing to deliver exceptionally strong results.

Potential Trade Setups

The 10-year Treasury remains elevated near 4.6%, which could continue to pressure equities and trigger further pullbacks. Today's AlphaTrack focuses on stocks still showing strong relative strength versus the broader market, although they may face short-term weakness. That could create attractive opportunities to buy at key support levels, allowing investors to potentially exploit dip-buying opportunities within established uptrends. The names covered today have featured before, but this time we are watching to see whether broader market weakness offers a chance to enter at more favourable prices.

Apple (AAPL.us)

Technical Analysis
- AAPL has been a standout performer through April and May.
- The stock gained nearly 7% in April and has added close to 10% so far in May.
- Given the strong rally, it is not surprising that the RSI briefly signalled overbought conditions (blue arrow).
- If higher yields begin to weigh on AAPL, the 275–280 support zone becomes an important area to watch.
- A pullback towards those levels should be monitored for signs of support, as it could present an attractive opportunity to re-enter the uptrend.

Caveat
- A break below the 275–280 support zone would suggest weakening momentum.
- However, a sustained RSI move below 50 would be a more concerning technical development.

Fundamental Perspective
AAPL looks like a compelling "buy the dip" candidate because the recent risks facing the stock appear far more macro-driven than company specific. AAPL just delivered an exceptionally strong quarter, with revenue climbing 17% year-on-year to $111.2 billion and earnings per share jumping 22%, comfortably beating expectations. iPhone demand remained extremely strong, Services revenue hit another all-time high near $31 billion, and management reinforced confidence by authorising an additional $100 billion share buyback alongside a dividend increase.

Importantly, the market is beginning to view AAPL less as simply a hardware company and more as a cash-generating ecosystem with recurring, high-margin revenue streams.

While it is not seen as the outright leader in AI in the same way as rivals its growing "Apple Intelligence" ecosystem gives it a potentially powerful long-term monetisation opportunity across its enormous installed base.

Near-term pullbacks remain possible, especially with US Treasury yields elevated and investors still debating how aggressively AAPL can compete in AI, but that weakness may ultimately create more attractive entry points into a company that continues to generate enormous cash flow, expand margins, and benefit from one of the strongest consumer ecosystems in the world.

Amazon.com (AMZN.us)

Technical Analysis
- AMZN delivered a superb performance in April, rallying an impressive 27%.
- The sshare has been relatively flat through May.
- Its EMAs have rolled over and produced a bearish crossover (blue ellipse).
- Despite the recent weakness, the broader long-term trend remains upward, suggesting this may be a potential buy-the-dip opportunity within an ongoing uptrend.
- In that context, key support levels should be monitored for signs of renewed buying interest.
- One important level to watch is the 255 support zone.
- Ideally, the RSI should remain above 50.
- That would indicate underlying bullish momentum, which could continue to support the share price.

Caveat
- If the EMAs begin to show greater downward angle and separation, it would point to increasing weakness.
- A sustained move in the RSI below 50 would suggest momentum is shifting more decisively to the downside.

Fundamental Perspective
AMZN makes a compelling case as a buy-the-dip candidate because the company's underlying fundamentals remain exceptionally strong despite growing market concerns around AI spending and elevated bond yields.

Its latest quarter was outstanding, with revenue rising 17% year-on-year to $181.5 billion, while AWS revenue surged 28% to $37.6 billion, its fastest growth rate in roughly four years as demand for cloud computing and AI infrastructure accelerated sharply.

The company also delivered record operating margins, strong advertising growth, and a significant jump in profitability, reinforcing the view that Amazon is evolving into a broader high-margin technology and infrastructure business rather than simply an e-commerce giant.

Importantly, much of the recent investor anxiety around AMZN centres on its enormous AI-related capital expenditure plans rather than any deterioration in demand or execution. Yet that spending is increasingly being viewed as strategic positioning for long-term dominance in cloud computing and AI services, areas where AMZN already holds enormous scale advantages through AWS.

While short-term pullbacks remain possible, particularly if yields stay elevated or markets become nervous about heavy AI spending across mega-cap tech, any weakness may ultimately provide a more attractive entry point into a company still benefiting from powerful structural growth trends in cloud, AI, advertising, logistics, and digital commerce.

Alphabet Inc. - Class C (GOOG.us)

Technical Analysis
- GOOG enjoyed a very strong April, rallying 33%.
- The stock has added a further close to 3% in May.
- Given the strength of the rally, it is not surprising that the RSI briefly moved into overbought territory (blue rectangle).
- Although the RSI has since normalised, elevated Treasury yields could still weigh on the share price.
- If that occurs, underlying support levels may provide attractive buy-the-dip opportunities.
- One key area to watch is the gap support zone between 253 and 263.
- A move back into that region could attract buyers looking to accumulate the stock at more favourable levels.
- Ideally, the RSI should remain above 50, signalling that underlying bullish momentum remains intact.

Caveat
- A break below the gap support zone would be a negative technical development.
- If the RSI falls below 50 and remains there, it would suggest underlying weakness is beginning to emerge.

Fundamental Perspective
GOOG continues to make a strong case as a buy-the-dip candidate because the company is delivering exceptional growth across Search, Cloud, AI, and subscriptions at a time when many investors expected generative AI competition to pressure its core business.

Its latest quarter was extremely strong, with revenue rising 22% year-on-year to $109.9 billion, while Google Cloud revenue surged 63% to more than $20 billion as enterprise demand for AI infrastructure and services accelerated sharply. Just as importantly, Google Search revenue still climbed 19%, helping to ease fears that AI chatbots would significantly disrupt Google's dominant advertising model.

The market's primary concern now centres on Alphabet's massive AI infrastructure spending plans, with the company sharply increasing capital expenditure as it expands data centres, AI capacity, and cloud infrastructure. However, investors are increasingly viewing that spending as a strategic long-term investment rather than reckless expansion, particularly as Google Cloud backlog has surged above $460 billion and AI-driven demand continues accelerating.

While elevated Treasury yields and broader weakness in mega-cap technology could still create short-term volatility, any pullback may ultimately offer a more attractive entry point into a company that remains deeply embedded in several of the market's most important long-term growth themes.

Hot News, Cold Logic

Bond markets are increasingly pricing in the risk that US interest rates may stay elevated for much longer, with some strategists now focusing on 5.5% as a potential target for 30-year Treasury yields. Sticky inflation, resilient US growth, and higher energy prices linked to the Iran conflict have weakened expectations that investors will quickly step in to buy bonds after selloffs. Markets are even beginning to price in the possibility of future rate hikes rather than cuts from the Federal Reserve. The concern for investors is that if long-term bond yields continue climbing, they could eventually undermine the strong rally seen in equities and other risk assets.

Final Thought

Markets are once again balancing resilience against rising macro strain: equities remain supported by strong earnings and AI-driven momentum, even as elevated oil prices, sticky inflation and geopolitical uncertainty keep bond markets volatile and force investors to rethink the path for interest rates.

For now, the bull market remains intact, but the character of this rally is changing, less about abundant liquidity and more about whether earnings and AI optimism can continue to overpower the growing weight of inflation, geopolitics and increasingly fragile market breadth.