Lower Inflation Lifts Stocks as AI Leads and Key Resistance Looms

The CPI report gave markets some relief because inflation came in essentially in line with expectations. Headline CPI rose 0.1% month over month and 3.4% year over year. Core CPI increased 0.2% month over month and 2.5% year over year. Shelter rose 0.1% and accounted for roughly two-thirds of the monthly gain. Food increased 0.1%, food away from home rose 0.3%, airline fares jumped 2.2% and were up 25.5% year over year, medical costs increased 0.4%, and motor vehicle insurance declined 0.3%. Another component showed a 24.6% year over year increase.

The bigger market reaction is happening in rates and the dollar. Before CPI, expectations for the September Federal Reserve decision were basically split. Now there is a 55.9% probability of no rate increase at the September 16 meeting versus a 44.1% probability of an increase. Even if September brings no increase, the odds still slightly favor one in October. Another jobs report comes before that September meeting, so labor market strength or weakness remains important.

The 10-year Treasury yield is down to 4.656%, and the U.S. Dollar Index (DXY) is also falling near major technical support. A weaker dollar and lower yields are helping risk assets because falling rates reduce the relative appeal of bonds and make equities more attractive.

That brings us to the S&P 500 Index (SPX). Futures were mostly sideways overnight before moving higher, and CPI added to that momentum. The market had already been consolidating after moving from technical support into resistance, and even with oil moving back into the mid $80s, stocks did not break materially lower. If this consolidation produces a breakout, the stated upside zone over the next couple of months is 81 to 8200, roughly another 6% move. The concern is that a move into that area could eventually develop into a major top as the relationship between the S&P 500 and M2 money supply approaches a significant parallel channel tied to the dot-com era.

Artificial intelligence stocks are also helping. CoreWeave, Inc. (CRWV) is up nearly 20% following earnings. The major resistance level is $122, where a descending trend line, a previous pivot high, and the 0.618 Fibonacci retracement come together. The stock was around $107.

Super Micro Computer, Inc. (SMCI) is moving sharply higher after guidance came in roughly 35% to 40% above consensus. Resistance sits around $36.75, followed by $38.15, with the larger level at $40.50.

Nebius Group N.V. (NBIS) is also up nearly 20%. The first aggressive level is around $230. Another higher risk area sits around $240 to $241. For a longer swing setup, the more important area involves filling the previous gap from roughly $275 down to $240. That broader strength could also support SanDisk Corporation (SNDK) and Micron Technology, Inc. (MU) as interest returns to artificial intelligence infrastructure and semiconductors.

CAVA Group, Inc. (CAVA) is also recovering after earnings and guidance. Management indicated that middle-income customers are beginning to return and spend again. The stock once traded around $160, and the current rebound faces resistance around $74.40, followed by the more important $76.75 area.

In commodities, Gold (XAU) continues pushing higher but is still working through significant resistance. The VanEck Gold Miners ETF (GDX) is showing strong momentum, with resistance around $94. Silver (XAG) has broken above its descending trend line, although it remains below the previous day's highs. If silver eventually pulls back toward that former trend line, that becomes an important area to watch after the breakout.

West Texas Intermediate Crude Oil (WTI) remains trapped in a tightening wedge as the situation involving Iran and the United States stays unresolved and the Strait remains closed. Enough oil is still reaching the market from the United States and through alternative routes to keep crude inside its current range. Renewed fighting could produce an upside breakout, while an agreement that reopens the Strait could pressure oil lower. For now, crude remains in sideways compression.

Natural Gas Futures (NG) are bouncing but still struggling with short-term resistance around 283. A daily close above 283 could open the door to $3. If that level continues to hold as resistance, the longer trend line below remains the next technical support.

Bitcoin (BTC) is also catching a modest bid after two consecutive down days. The move itself is not especially strong, but the important point is that Bitcoin continues holding its breakout and remains above the longer-term trend line. As long as that trend line holds, the bullish structure remains intact. If it fails, the probability changes, and the setup needs to be reassessed.

So right now, lower yields, a weaker dollar, improving expectations around September rates, and strong artificial intelligence earnings are supporting risk assets. But several markets are also approaching meaningful resistance. This is where patience matters: respect the levels, avoid chasing strength, and let price confirm the next move.