Market Backdrop
The Federal Reserve decision tomorrow matters most because it shapes the bond market, which is driving stocks. Yields that run too high cap the stock market. Any retreat in yields or Fed commentary would ease those worries. The AI story is pushing markets and also showing how fragile they are. Anthropic's S-1 filing shows that one filing can restart and energize the AI trade, while other headlines can knock it down. That is volatility and uncertainty.
The technical setup looks good. The SOX (semiconductor) index found support at the 40-week level on the weekly chart. The S&P 500 and the technology sector both found resistance at the 13-week moving average. The equal-weight index sits above its 13-week moving average, which shows broader participation and a healthy setup into earnings. That level needs to hold.
Apple (AAPL) - Stock Pick of the Year
Apple (AAPL) is the top pick and remains the consumer AI pick. As AI becomes part of daily life through faster devices and a deeply tied-together ecosystem, it could spark a multi-year upgrade cycle. Apple has the money to invest in that future while still making large cash flow. The target is agentic AI driving a multi-year device upgrade cycle.
The M6 launched today, delivering five times faster on-device AI performance than the M4. Even consumers use Macs to run competitor AI models. Apple products are LLM agnostic, which helps both the upgrade cycle and users.
Cash generation stands out. Free cash flow reached $51.55 billion in December 2025, up 91% year-over-year. It then dropped to about $31.91 billion the next quarter, but re-accelerated in June 2026, up 31% year-over-year. Against other hyperscalers on cash, Apple scores very well with a healthy balance sheet and strong consumer adoption.
Apple (AAPL) is the top performer in the "mag seven," up just under 30% both year-to-date and over the last 52 weeks.
AAPL Technicals
The stock is attempting a breakout. After getting hit when the AI story was not in its favor, it held the 200-day moving average and broke to the upside in a higher-low pattern, which is bullish. A triangle formation is forming - higher lows against roughly equal highs - and it has traded in the same range for two weeks. A break above resistance points to another $25 to $30 upside, reaching about $380 as the next major resistance. The RSI is flat (making lower highs and higher lows), reflecting consolidation. The MACD is flat too, with the 12 EMA and 26 EMA at the same level. If no breakout, the 20-day moving average is first support, then the 50-day.On the 3-year weekly chart the stock is making higher highs and higher lows, has broken a channel that held for 2.5 years, and is making new relative highs. Volume is filling out at current levels, showing heavy transactions, with no full flush yet. There is a small bearish RSI divergence (lower highs), but the MACD is bullish with the 12 EMA above the 26 EMA. The longer-term setup stays bullish.
Apple trades at 347.32, up about 1% on the session, and about $4 off its recent all-time high.
Micron (MU)
Micron (MU) came from a stock screen run on the large-cap universe (about 1,800 stocks) using Schwab's screener. Filters: positive EPS estimate revisions over the last 30 days, positive year-over-year revenue growth, positive EBITDA margin growth, EPS revisions greater than the 1-month price return (to catch the gap between price and forward P/E), improving free cash flow per share year-over-year, and the bottom 50% in debt-to-equity ratio (important given the interest rate environment). That cut 1,800 stocks down to 20, heavily dominated by information technology.
Micron is moving past the old boom-and-bust memory cycle. AI demand, tight supply, and long-term customer contracts are improving profit and cash flow - a strong free cash flow turnaround. There is an AI bottleneck from memory shortages limiting AI system performance, which is a catalyst for Micron because the memory is needed. Robotics is a second catalyst: a tweet from Elon Musk predicts future RAM demand for robots, and physical AI still needs memory, making Micron a beneficiary. Contract visibility comes from 3-to-5-year take-or-pay agreements that stabilize future revenue. Memory demand supports multi-year growth, and robotics is extra upside not yet captured. It is a high-beta name with upward momentum on fundamentals. Free cash flow grew about 20 times from fiscal year 2025 to 2026.
MU Technicals
Momentum fell off over the last month but the last few sessions show optimism, with a possible bounce-back rally over the coming weeks. Around $1,200 the stock got stretched, with aggressive 5% and 8% daily swings for about a week and a half to two weeks. Then it broke down, printing a bearish hangman and a bearish shooting star, followed by a hammer off the 20-day moving average that failed. It broke below the 20-day and 50-day. A pattern that looks like a bear flag formed (higher lows and higher highs, but the price trajectory broke it). It sits below both the 20-day and 50-day.The last 3 days of price action were strong. The RSI is breaking upward, and the MACD is flattening and curling, with the 12 EMA trying to cross above the 26 EMA (not done yet). First resistance is the 20-day and 50-day; above that, the next major resistance is near $1,150.
The weekly chart is more bearish, though a counter-trend rally is possible over the next three weeks. After an outsized move and consolidation, it holds lower support but sits below the 20-week moving average. On March 30 of this year the 20-week acted as support; now it acts as resistance. A break down points to $700 downside on the longer-term frame; upside target is 1090. The weekly RSI makes lower highs, and the MACD is above zero but with the 12 EMA below the 26 EMA. Cautiously optimistic for a one-to-two-week counter-trend move, but overall perceived technical weakness remains.
Lumentum (LITE)
Lumentum (LITE) came from the same screen as Micron - looking for a name that sold off while analysts still revised EPS upward, the divergence being the signal. Lumentum gives exposure to the next AI infrastructure bottleneck: high-speed data connectivity, relevant to SpaceX, data centers, and the AI buildout.
Corning's results support the industry outlook while Lumentum's improving EPS expectations support the investment case, valuation, and execution. Corning's optical revenue rose 44% year-over-year to $2.4 billion, well above expectations. Lumentum's revenue rose 109.3% year-over-year in fiscal Q4 2026. Lumentum's revenue revisions are up 4.32% while its shares fell 13.12% over the 30-day period - the divergence (a sell-off over 13% against EPS revisions a little over 4%) suggests a possible bounce. Its debt-to-equity ratio is about 0.36; a lower ratio shows it funds more with earnings than with debt, which matters as the bond market influences equities. This is mainly the AI story driving markets and earnings revisions.
LITE Technicals
Looking back to February this year, the stock traded in a well-defined ascending channel with clear support and resistance for about 2.5 to 3 months, then stalled and broke below the 20-day and 50-day. It fell to the 200-day moving average, held 2 days, then saw aggressive buying and a near-term bounce. It built another ascending channel of 2.5 to 3 months with higher highs and higher lows, then broke down, retested the 200-day, held 2 days, and buyers stepped in - where it is now, up about 6% on the session.A former channel support near $900 now acts as resistance. Break above that and the 20-day and 50-day are next; above those, the upper resistance sits near $1,100. The RSI looks to have bottomed and is turning up, and the MACD is curling. Nibbling at current levels makes sense ahead of a possible MACD cross, which should give follow-through over the coming weeks.
On the weekly chart, Lumentum traded around $57 in April 2025 with little interest, then AI exposure ramped it up aggressively. There is a sharp cup-and-handle pattern, with the 50-week moving average as support and the 20-week moving average now as resistance. The weekly RSI makes lower highs and the MACD is more bearish. The stock must close above the 20-week moving average at 865 (it trades above it now) by week's end to build confidence. The volume profile shows heavy volume around the 890 area over the last 3 years. If it retests the 1085 level and breaks out, a $250 extension points to about 1250 to 1300. The chart is constructive but breaking down on the longer-term frame; recovering the key weekly moving averages would turn it more bullish.
Lumentum trades at 871.02, up about 6.5%, with earnings due November 5 as a near-term catalyst.
