A few things you need to know before next week Let's start with the conclusion: the overall market appears calm, but the underlying funds are undergoing a significant reshuffle. On Thursday, the S&P 500 basically closed flat, and in early trading, it surged to around the key option exercise price of 7550, which is close to the historical high of 7600. The net cash flow of options in the first 30 minutes was positive, pushing the market upward;. But the area between 7500 and 7550 has accumulated a large amount of gamma exposure from market makers. Once the capital flow turns negative, it triggers hedging selling pressure from market makers, and the market is hit back in the late trading session, ultimately closing flat. QQ fell 1.71% on the same day. Behind this differentiation, it is actually the relative performance of S&P against the Nasdaq that is bottoming out and rebounding, indicating that S&P is launching a supplementary rally against the Nasdaq and funds are flowing out of the overcrowded semiconductor sector. More importantly, observing the proportion of individual stocks above the 5-day, 20 day, 50 day, and 200 day moving averages reveals that the overall breadth of the market actually improves when prices stagnate or even decline, indicating a healthy sector rotation. Where did the funds go: AI core stocks cool down, SaaS and defense sectors are making up for gains In the past week, there has been a significant reshuffling of capital flows at the bottom of the market. AI core stocks are generally oscillating at high levels, with Micron falling 5.57% during consolidation and closing around 975. They have already fallen below the 20 day moving average and are currently above the 50 day moving average and the main trend line since April. However, the leading momentum for two consecutive months has slowed down and trend line support is being tested. At the same time, the SaaS line is clearly gaining momentum: although Microsoft has AI attributes, its massive SaaS business provides support, and it rose 1.41% against the trend on Thursday. ServiceNow has rebounded for five consecutive trading days. The SaaS sector as a whole shows the potential to break through low levels and move upwards. If AI funds continue to flow out, software stocks like Salesforce, which have been suppressed for a long time, have room for further growth in the future. Defensive and cyclical sectors are also taking over simultaneously, with the industrial sector leading the Dow Jones Industrial Average to a historic high, while previously neglected areas such as healthcare, essential consumer goods, residential construction companies, regional banks, and biotechnology are attracting funds. The operational rhythm of the storage and chip sectors The AI storage line (MAmericaNDK, SOXL, etc.) has fallen to the vicinity of the key moving average, and the probability of a rebound next week is not small. However, after encountering upward pressure in the first wave of rebound, it is highly likely that it will be difficult to break through directly. For short-term long positions, it is recommended to reduce holdings when approaching the pressure zone and if there is resistance, if there is a second dip, observe whether the low point stabilizes and decide whether to re-enter the market. Another important variable this week is the ADR listing of SK Hynix, which needs to be closely monitored. If the price rises before this Friday, it is recommended to secure short-term positions with leverage first to prevent a repeat of the "good news cashing out and bad news" scenario. Long term positions should be held patiently. The adjustment of the optical communication line is coming to an end. Taking LITE as an example, this round of consolidation is aimed at a better upward trend in the future. The next increase in positions is in the range of 600 to 650, and the 200 day moving average is around 610. AXTI's 200 day moving average has rebounded around 53, and if it hasn't fallen to the bottom yet, there is a high probability that it won't be lower than the gap around 42 and 45 where the 200 day moving average is located. AAOI can look at two positions: the 200 day moving average of 100 and the 50 day moving average of 82. If NOK falls below 11.3, buy some more. The financial report for July 22nd is likely to be good. After the adjustment before the financial report, if the financial report slightly exceeds the expectation, it will usher in a good supplement. Macro line: Data moisture is not small, but liquidity is still abundant There is a macro phenomenon worth noting: in the 17 months since the beginning of 2025, the non farm payroll data in the United States has been adjusted downwards for 14 months afterwards, resulting in a cumulative loss of 710000 jobs. The total for April and May has been adjusted downwards by 74000, with an average monthly injection of about 42000 according to official data. According to this pattern, the newly announced non farm initial value for June is 57000 yuan. After deducting this regular downward adjustment, the actual increase may only be around 15000 yuan; The number of full-time employees plummeted by 507000 in June, marking the third consecutive month of decline. But even though the economic data is relatively soft, the US stock market remains strong, with the S&P only about 2% away from historical highs, and the core driving force is liquidity. In May, the M2 money supply surged to a historical record level, the largest increase in the same period in the past five years, and a large amount of cash continued to flow into the stock market. From a seasonal perspective, S&P has recorded positive returns in July for 10 consecutive years since 2014, which is one of the reasons why even though semiconductors have fallen sharply in the past two days, the overall market has remained stable. Technical aspect: The market is accumulating strength in a triangle, and there is a high probability that it will still break through in July At present, the market is in a high volatility range within a triangular consolidation zone, which will eventually be broken through because the seasonal pattern in July is bullish. The S&P sees 7700 to 7800, and the short-term volatility in the triangle is more like accumulating strength for a breakthrough. Don't lose patience because of the sideways trend in these few days. Several directions that can be laid out at low prices The healthcare ETF (XLV) is worth paying attention to, as it has already surpassed the two-year consolidation resistance level of 159 in volume. In the mid-term election year, the healthcare sector has performed positively every year in history, currently around 163, and ISRG in the sector can also be monitored. The UNH in the medical sector is also launching a bottom counterattack and is expected to break through the resistance zone of 430 this week to test the next strong resistance zone of 445 to 450. MCD (McDonald's) in the consumer sector is worth paying attention to. Thursday's surge of over 4% is a rare anomaly for this stock, which has a daily volatility of only 0.78%. In the long run, its main upward trend line since mid-2022 has once again received perfect support in this 22% pullback. In history, every pullback has been accompanied by a strong V-shaped reversal. In the long run, you can directly buy stocks, and in the short term, you can use call options as a band. In addition, if the seven giants MAG7 continue to be suppressed by bears before the earnings season, it may also be an opportunity window for short positions to be replenished.