Crazy: AI Forced Selling Turns Into Mammoth Hyperscaler Rally

Yesterday, the Nasdaq was almost down 10% from its highs, or in correction territory. From June 1 to July 30, the S&P is down 1.82%, and the Nasdaq is down 6.96%.

While both markets are still down over the last two months, yesterday’s rally stopped the bleeding and gave the bulls some breathing room. Is the selloff now in the rearview mirror? I am not sure about that, but one thing is for sure: There was a big end-of-the-month buy-side rebalance, and there could be more of that today.

You know the old saying that the worms go in and the worms go out? Well, that can also be said about the tech/AI stocks. They sold on the way out, and they bought on the way back in.

We can’t say these are normal times because they aren’t. You can’t say we have seen this before because we haven’t. But what we can say is that when the selling gets to a fever pitch, there are always some big firms/institutions that will come in and scoop up the severely beaten-down sectors/stocks.

Our lean: Welcome to the last trading day of July and the Week 4 Friday options expiration. I think there is more upside, but I also do not think the markets go straight up. I have a rule that says after a big up day, the ES and NQ tend to go sideways to down, but I also think if they do go down, they will rally again. When it comes to the ES, we started hitting buy stops above 7480 yesterday and last night, but if the ES starts going bid again above 7500, 7520 and 7540 come into play. What I do not want to do is overshoot the upside. I can’t recommend buying at 7500 or just above early in the day, but I think any decent drop between 7443 and 7416 would be a nice pickup, and if it failed in that range, 7404 to 7390 would be my line in the sand.

SK Hynix Surges 25% and Samsung Soars More Than 20% as the AI Rally Roars Back

Get instant access to our partners’ real-time market data and insights not available anywhere else. Here is last night's Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. - MrTopStep

Founder's Note:

PM Note

A rebound in the semiconductor sector (SOXX +9%) lifted the broader market, with stocks such as Micron (MU +18%) and Sandisk (SNDK +26%) posting double-digit gains. The Nasdaq 100 surged 3.4% after pulling back roughly 10% from its June all-time highs.

There is also Wall Street chatter that today's strong AI-related gains occurred in the top holdings of the hedge fund Situational Awareness, which was reportedly liquidated yesterday, with the portfolio sold to Citadel.

SPX traded within a 104 bps range and closed at 7,438 (+1.7%). Our Risk Pivot at 7,450 once again acted as resistance throughout the session. The volatility complex reset lower, with the VIX closing at 17.08 (-17%) and VVIX at 94.66 (-14%).

The SPX remained in a negative gamma environment, contributing to elevated intraday volatility in both directions.

S&P 500 HIRO recorded +$7B of net bullish flow on the day, driven by approximately $3B of 0DTE put selling (light blue line) and $4B of longer-dated call buying (orange line).

S&P equities also posted bullish HIRO flow, led primarily by $3.5B of longer-dated call buying. Notably, roughly $2.3B of that equity flow came from the Magnificent Seven stocks.

Fixed Strike Volatility moved sharply lower across the curve, declining by roughly 1-6 volatility points on the day. As noted in this morning's AM Note, the removal of FOMC and PCE event volatility was expected to generate vanna-related buying, providing support for the market.

Today's standout FlowPatrol winners were MSFT calls and KORU calls.

In the July 28 FlowPatrol report (one day before Microsoft earnings), we highlighted approximately 10,000 contracts of September 430 calls bought to open.

Microsoft stock soared 16% and closed at 451 today, its biggest one-day gain since October 2008, adding nearly $500 billion in market capitalization. The move was more than double the options market's implied move of roughly 6%, indicating that implied volatility significantly underestimated the earnings reaction. It is also notable that the prevailing negative gamma environment likely amplified the rally from approximately 390 to 450.

Those MSFT September 430 calls increased from roughly $10 to $35 over the following two sessions after appearing in our FlowPatrol report, representing a gain of approximately 250%.

In addition, this morning's FlowPatrol highlighted approximately 7,500 contracts of KORU August 30 calls bought to open. KORU, the Direxion Daily South Korea Bull 3X Shares ETF, rallied 35% on the session, while those calls increased from approximately $0.30 to $0.50, a gain of about 67%.

KORU has experienced extreme volatility recently due to the leveraged nature of the ETF. For example, at-the-money implied volatility is approximately 330% for tomorrow's expiration and 212% for next week's expiration. These elevated implied volatility levels suggest that outright long options, such as those highlighted above, are relatively expensive.

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ES Levels

The bull/bear line for ES is 7449.25. ES is currently trading near 7500.50, keeping the intraday bias bullish while price remains above 7449.25.

The first support is 7498.00. Holding above this level keeps buyers in control and opens the door to 7537.75, today’s upper range target. A sustained break above 7537.75 could extend the rally toward 7621.25, with 7638.00 as additional resistance.

If ES falls below 7498.00, look for support at 7472.50 and then the 7449.25 bull/bear line. Losing 7449.25 would weaken the recovery and expose 7420.00.

The lower range target is 7360.75. Below that level, additional support is located at 7338.00 and 7331.00. A break under 7331.00 could accelerate selling toward 7277.25.

Overall, the trend is bullish above 7449.25, but ES still needs to clear 7537.75 to confirm continued upside momentum. The preferred bullish setup is a pullback that holds 7498.00 or 7472.50. A sustained move below 7449.25 would shift the advantage back to sellers.

NQ Levels

The bull/bear line for NQ is at 28066.00. NQ is trading near 28544.75, keeping the intraday bias bullish while price remains above this key level.

The immediate support is 28414.50. Holding above it keeps buyers in control and favors a move toward 28684.50, today’s upper range target. A sustained break above 28684.50 would open the way to 28877.50, followed by 29266.50.

If NQ falls below 28414.50, the next support is 28237.75. Losing that level would put the 28066.00 bull/bear line back in play. A break and hold below 28066.00 would shift the bias bearish and increase the risk of a deeper retracement toward 27447.50, today’s lower range target.

Additional downside support sits at 27202.00, followed by 26976.50 and 26865.50. These levels become relevant only if the strong rebound from the recent low begins to unwind.

Overall, NQ remains bullish above 28066.00, but buyers must clear 28684.50 to extend the recovery. The most important near-term support is 28414.50.

Polaris Trading Group Summary - For Thursday, July 30, 2026

Thursday developed into a strong Cycle Day 1 recovery session following Wednesday’s sharp post-Fed selloff. The market met several upside objectives, reclaimed most of the prior day’s decline, and provided important lessons about adaptability, risk control, and trading without emotional carryover.

Market Setup

• Overnight strength completed the first upside objective near 7405.

• David identified the session as Cycle Day 1, with elevated volatility expected.

• Key market influences included:

  • The Federal Reserve

  • Corporate earnings

  • Middle East developments

• Traders were reminded to remain aligned with market structure and select only triple-A setups.

Morning Session

• Early trade was relatively quiet and rotational.

• David established an initial active sandbox of 7425–7445.

• As the market moved lower, he adjusted the sandbox to 7400–7420.

• The adjustment helped traders respond to changing conditions instead of remaining attached to an earlier bias.

• The morning produced a clear Wyckoff-style distribution and a short opportunity.

Positive Trades and Results

• Steve captured approximately six points on a short trade.

• Although he exited earlier than intended, the trade was profitable and led to a valuable discussion about trading psychology.

• The published 7405 overnight objective was achieved.

• The Cycle Day 1 objective at 7436.68 was fulfilled and exceeded.

• The next target at 7460.50 came into play.

• Price later returned to the 7475 area, nearly reclaiming the entire Fed-day decline.

Afternoon Session

• David noted that morning trading generally provides the best action.

• The afternoon initially slowed into a typical summer pace.

• Buyers eventually regained control and continued the recovery.

• By late afternoon, price had returned to what David called the “scene of yesterday’s crime” near 7475.

• The market appeared to have successfully reversed most of Wednesday’s aggressive selloff.

Market Interpretation

• David viewed Wednesday’s decline as an effort to remove weak holders.

• The selloff allowed stronger participants to establish inventory at lower prices.

• Thursday’s rebound showed how quickly the market can rotate once positioning has been reset.

• Wednesday produced a 177-point range.

• Thursday followed with another large 131-point range, despite expectations for slower summer trading.

Key Lessons

• Treat every trade independently.

  • Previous losses, fear, or hesitation should not influence the current setup.

• Focus on risk of ruin before profit potential.

  • The priority is staying financially and emotionally capable of taking future trades.

• Adapt as market structure changes.

  • David’s sandbox adjustment demonstrated the importance of updating expectations in real time.

• Do not force afternoon trades.

  • Slower conditions often require greater patience and selectivity.

• Avoid emotional reactions to large moves.

  • A dramatic selloff may be an inventory adjustment rather than the start of a lasting trend.

• Remain selective.

  • The best results come from waiting for high-quality setups instead of trading simply because the market is open.

Overall Assessment

• Thursday was a productive recovery session.

• Multiple upside objectives were completed.

• The market nearly erased the previous day’s Fed-related decline.

• The strongest takeaway was the importance of combining market structure, disciplined risk management, and emotional control.

DTG Room Preview – Friday, July 31, 2026

Market Tone

• US equity futures are steady to slightly higher as easing crude prices support risk sentiment.

• Improving traffic through the Strait of Hormuz has reduced some of oil’s geopolitical premium.

• Lower energy prices are helping rate-sensitive, consumer, transportation and manufacturing stocks.

• Geopolitical risks remain elevated and could quickly reverse the decline in crude.

Technology and Earnings

• Microsoft surged after a strong earnings report, providing significant support for the Nasdaq.

• Apple also beat expectations on solid iPhone demand.

• Apple warned that higher memory-chip prices could increase supply-chain costs later this year.

• OpenAI’s announced price cuts could accelerate AI adoption, but may pressure margins across AI software and infrastructure companies.

• Nasdaq direction will likely depend on continued strength in mega-cap technology stocks.

Economic Calendar

• 8:30 a.m. ET: Employment Cost Index

• 9:45 a.m. ET: Chicago PMI

• 10:00 a.m. ET: University of Michigan Consumer Sentiment

• 10:00 a.m. ET: University of Michigan Inflation Expectations

Notable Premarket Earnings

• Chevron

• ExxonMobil

• Shell

• AbbVie

• Eaton

• Ferrari

• Colgate-Palmolive

• T. Rowe Price

Volatility and Positioning

• Volatility remains elevated following the FOMC meeting.

• The ES five-day average daily range increased to 117.25 points from 111.50 points.

• Additional economic data and geopolitical headlines could keep intraday volatility high.

• Large-trader positioning is leaning bearish on light overnight volume.

ES Technical Outlook

• ES is approaching its 50-day moving average at 7530.25, currently acting as loose resistance.

• A sustained break above that level could turn it into support.

• The 7470–7475 trend-channel area remains the key near-term pivot.

• Holding above 7470–7475 would give bulls room to extend higher.

• A break below that area could shift momentum back toward lower support levels.

Key ES Levels

• Resistance: 7621–7626, then 7845–7850

• Support: 7470–7475, 7427–7436, 7318–7321, 7284–7289 and 7135–7140