Wall Street posted a second day of recovery on Tuesday, led by semiconductor and AI stocks after last week's brutal selloff. The Nasdaq Composite extended Monday's gains, the Philadelphia Semiconductor Index (SOX) showed a more mixed picture, and the conversation among technical analysts on X focused on a single question: is this a healthy wave 2 correction, or a warning that the larger uptrend has run its course?

The Macro Backdrop

Easing tensions between Israel and Iran supported a pullback in oil prices, relieving pressure on growth and tech stocks. Meanwhile, Nvidia CEO Jensen Huang's visit to Seoul produced a multi-year AI memory partnership with SK Hynix, sending the Korean chipmaker's stock up 15% and injecting fresh optimism across the sector.

The S&P 500 traded above 7,400 after opening the week with losses, while the Nasdaq led the advance following Monday's 0.9% recovery.

The Core Debate: Elliott Wave Counts

The dominant Elliott Wave narrative in the technical community identifies the June 2 high of 7,620 on the S&P 500 as the completion of wave 5 of the impulse that began from the March low near 6,300.

Under this scenario, last week's sharp 2.6% selloff and the current bounce are both part of a larger corrective structure — wave 2 or an A-B-C zigzag. The key support zone sits at 7,310-7,420. If the index holds above this area, the expectation is for wave 3 to begin — typically the longest and strongest leg of an impulse.

A more bearish alternative count sees the entire advance from 2009 as a completed cycle wave, warning that the recent decline is not a temporary correction but the start of a broad downtrend.

QQQ: Wave 2 Correction in Progress

The tech-heavy QQQ ETF presents a particularly clear wave structure. The all-time high at $748.65 (June 3) likely marked the completion of wave 1 of the impulse that began from the $555.55 low in late March. The sharp drop to $705 on Friday and the recovery to ~$722 on Tuesday look like a textbook wave 2 correction.

The critical support level from the wave analysis is $695-705 (the prior sub-wave 2 low). As long as QQQ holds above this zone, the impulsive structure remains intact, and the market is expected to resume higher in wave 3 once the correction completes.

Semiconductors: A Complicated Picture

The chip sector offers one of the most interesting technical setups right now. The SOX index plunged 10% on Thursday — its worst single-day drop in six years — a move that often signals trend exhaustion and possible reversal. The recovery over the past two days has been swift, with Intel up over 11% from its low.

However, the SOX index itself traded down 3.5% on Tuesday to around 12,459 points, indicating the recovery is uneven, and some names remain under pressure. Immediate support sits at 12,343 (today's low), with resistance at 13,000-13,100.

Individual Stocks in Focus

NVDA: The stock is coiling in a relatively tight $203-211 range amid the recovery. The $200 level serves as a major psychological support. Immediate resistance sits at $212-220, and a break above $220 could open the path back toward the highs near $236.

TSLA: Relative weakness persists — the stock traded around $392-397 intraday, with critical support at $390. A potential double-top pattern is a concern, and a break below $390 could send the stock toward $370 and below.

Breadth Divergence: A Red Flag

One of the most prominent topics in the technical conversation is breadth divergence. Only about 52% of S&P 500 constituents trade above their 50-day moving average, and the cumulative advance-decline lines have not confirmed the recent highs. This means the rally is being driven by a narrow group of stocks — primarily mega-cap tech and semiconductors — while most of the market is not participating. Historically, this pattern tends to precede corrections and increased volatility.

The Bottom Line

The second day of recovery leaves the market at a decision point. The wave structures of the S&P 500 and QQQ support a scenario of a temporary correction within a rising trend. But the breadth divergence, the ferocity of last week's semiconductor rout, and the alternative long-term wave counts serve as reminders that risk remains elevated.

The coming days will be decisive: holding the 7,310-7,420 zone on the S&P 500 and $695-705 on QQQ supports the bullish case. Breaking below would give the bears the upper hand.