OVERVIEW
🟧 Moderate Risk-On

Earnings strong, breadth weak → With 92% of S&P reported, ~82% beat expectations, yet few stocks are making new highs. Index strength is masking internal deterioration.

Macro light → Retail Sales inline at +0.5%. Consumer Discretionary (XLY, RSPD) moving lower in unison — rare and bearish. No big catalysts this week except Powell on Friday.

Nasdaq (QQQ/QQQE) → QQQ defended its 10-EMA Friday, but QQQE is forming a textbook head-and-shoulders top (Bulkowski rank: 9/36, avg. -16% decline). Breadth is rolling over → bearish bias.

Midcaps (MDY) → At risk of a double-top rejection near $592. Rising 10/20-EMAs still support, but a break opens a deeper pullback (-1.6%). Chop dominates → stay defensive.

Small Caps (IWM) → Strongest group. $227 has flipped from resistance → support. Best breadth profile and highest relative strength, supported by short squeeze + rate-cut tailwind potential.

Healthcare (XLV/RSPH) → Breadth confirmation. Both cap- and equal-weighted ETFs closing above key resistance. Structural shift toward leadership.

Focused Stock (TSLA) → One of the cleanest setups. Pullback into 10/20-EMA + $321 POC. $330 flip from resistance → support would mark a major bullish character shift.

MARKET ANALYSIS
Don’t Let The Indices Fool You

With over 92% of S&P 500 companies reported, ~82% have beaten earnings expectations (FactSet). On paper, that’s a blockbuster season. But under the hood, breadth is deteriorating with fewer stocks making new highs, and long exposure being highly selective.

The real signal isn’t in headlines — it’s in tape action. Earnings beats are not translating into broad participation. Follow-through is scarce, volatility remains elevated, and conditions remain choppy.

Friday’s Retail Sales print came in line at +0.5% (prior +0.9%), confirming steady but slowing consumer demand. Notably, both the cap-weighted and equal-weighted Consumer Discretionary ETFs (XLY, RSPD) have been moving lower in tandem — a rare alignment that underlines weak leadership from the sector most tied to consumer strength.

Note: there is a volume x price divergence forming in XLY which typically is not a health indication the short term uptrend. This often results in a short term mean reversion lower.

There are no real major macro catalysts are on deck this week (with Fed chair Powell’s speech on Friday being an exception), so there’s no point over-analyzing noise.

Nasdaq

Market Breadth
% over 20 EMA: 45.54% | % over 50 EMA: 48.51% | % over 200 EMA: 62.37%

The cap-weighted QQQ has seen relative volume steadily rise over the past five sessions. This started with the Aug 11 push higher, but momentum has since rolled over — erasing most of that advance.

Friday’s candle printed as a high-volume hammer, with demand defending the rising 10-EMA. On the surface, that looks constructive. Underneath, however, breadth weakness across Nasdaq components shows that strength is increasingly concentrated in fewer mega-cap names.

The equal-weighted QQQE strips that concentration out, and the picture turns far more concerning. After the CPI gap-up on Wednesday, QQQE completely unwound the move on Thursday and pressed even lower Friday, now clinging to its 10/20/50-EMA cluster.

Price structure is beginning to form a head-and-shoulders top — one of the highest-probability reversal formations in technical analysis.

🔎 Bulkowski’s Research (Head-and-Shoulders Top, bull market):

• Rank: 9/36 (1 = best performing)

• Average decline: -16%

• Break-even failure rate: 19%

• Pullback rate: 68%

• % hitting target: 51%
  (Based on >2,800 sample trades)

⚠️ Implication: The neckline in QQQE aligns with the rising 50-day EMA, sitting roughly -0.97% below current levels. From our perspective, a test of this zone in the next 1–2 weeks is the highest-probability outcome.

Unless breadth meaningfully re-expands, we remain bearish on QQQE (and broadly the QQQ) here, viewing any failed retests as confirmation of a developing head-and-shoulders reversal.

S&P 400 Midcap

Market Breadth
% over 20 EMA: 51.62% | % over 50 EMA: 60.59% | % over 200 EMA: 50.71%

Midcaps initially threatened a head-and-shoulders top back on Aug 11, but that setup was invalidated during last week’s post-CPI euphoric surge. True to this choppy tape, that move is now being unwound — raising the risk of a double-top rejection near the $592 zone, which has capped price twice over the last two months.

For now, support remains intact, with the rising 10/20-EMA cluster likely to attract demand on the first touch. But the test is critical:

• If 10/20-EMA holds → potential consolidation, keeping the uptrend viable.

• If 10/20-EMA breaks on high relative volume → opens the door to a deeper pullback toward the 50-day EMA, roughly -1.59% below Friday’s close.

⚠️ Implication: This is classic chop behavior — failed breakdowns turning into failed breakouts, and vice versa. It’s why we continue to stress defensive positioning until the market signals sustained breadth expansion (raising cash & avoiding entries).

Russell 2000

Market Breadth
% over 20 EMA: 57.27% | % over 50 EMA: 57.78% | % over 200 EMA: 50.71%

Small caps remain the strongest capitalization group in the market. The pullback into the $227 zone on both Thursday and Friday produced two strong rebounds — a technically significant development given this same level acted as resistance throughout July 2025.

The shift from resistance → support marks a bullish change in character and opens the door for a pullback long entry if demand continues to step in.

That said, caution is still warranted. This is not a market to be overconfident in, but relative to large and midcaps, the Russell has:

• Best breadth profile of the three groups.

• High short interest which resulted in a squeeze event last week.

• Clear evidence of demand at prior resistance.

• Structural positioning to benefit from both short covering and potential rate-cut tailwinds.

⚡ Implication: IWM continues to look like the highest-quality long candidate among the major cap groups… provided $227 holds as support.

🧠 Mindset Check: Cash Is a Position

Most traders suffer from action bias — the urge to always be in a trade. Others know the opposite: cash is an active, alpha-generating decision.

It has risk/reward, opportunity cost, and — in today’s rate environment — positive return.

Why Cash Is a Weapon

• Capital Preservation = Compounding Power
  If your account is +50% from April–July 2025, defending that gain through August–September chop compounds wealth as effectively as a winning trade — but without the downside risk.

• Positive Carry
  In 2025, USD cash yields ~4%. A $250K account parked for 2 months earns ~$1,667 risk-free, while staying fully liquid.

• Flexibility & Strike Power
  Cash-rich traders can hit high-conviction setups instantly instead of clawing out of drawdowns.

Historical Cash Triggers
After 3–4 month surges (Aug–Nov 2020, Mar–Jun 2023), broad market win rates dropped 25–40% in the next 4–8 weeks.

Our breakout model (42% baseline win rate) typically falls below 30% win rate after such aggressive market runs. That’s our personal signal to shift defensive.

Your Cash Checklist:

1. Market breadth narrowing?

2. System win rate <30%?

3. High prior gains to protect?
   If yes to 2+ — cash is the highest-ROI position.

FOCUSED STOCK
TSLA: A Potential Pullback Buy

ADR%: 3.60% | Off 52-week high: -32.3% | Above 52-week low: +63.2%

Amid choppy conditions across growth and tech, TSLA stands out as one of the cleaner setups.

The stock broke out in early August and is now pulling back into the rising 10/20-EMA cluster, sitting just above the $321 Point of Control (POC).

Pullback entries have been far higher-probability than breakouts in this tape, and TSLA fits that profile well.

Structurally, TSLA has been building a base since mid–late May. A successful retest here would confirm demand is still stepping in.

🔑 Key Level: Watch $330 very closely. This zone acted as major resistance from June through August.

If it flips into support on today’s session, that would mark a bullish change in character and reinforce TSLA as a relative strength leader inside the MAGS group.

FOCUSED GROUP
RSPH: Big Moves In Healthcare

ADR%: 1.39% | Off 52-week high: -10.1% | Above 52-week low: +11.4%

Healthcare has quietly emerged as one of the strongest groups we’re tracking. The recent parabolic strength in Pharma (XPH) last week has acted as the spark, pushing the broader, cap-weighted Healthcare ETF (XLV) decisively higher.

But the real tell here is breadth: the equal-weight variant (RSPH) has now confirmed participation. After months of stalling in a structural Stage 1 base under its daily 200-EMA, RSPH closed above both that long-term barrier and its Point of Control (POC) into Friday’s session.

That’s only the second clean close above the 200-EMA in several months — a significant technical shift.

📊 Why this matters:

• When both cap-weight (XLV) and equal-weight (RSPH) confirm, leadership is broad-based — not just a few mega-cap healthcare names carrying the sector.

• The next visible volume cluster for RSPH sits up near $29.60, opening room for continuation.

• Structurally, this is the first time in months healthcare is showing true breadth and trend alignment.

➡️ Takeaway: Healthcare is transitioning from a lagging, defensive sector into a potential leadership group. Both XLV and RSPH are now back on our radar for continuation setups, with pharma still the key driver of upside momentum.

Q&A
Got a trading question? Hit reply and ask!

Q: “I have a big problem with overtrading. I keep my risk to equity low as I see you guys recommend (<0.5%), however I just take a bunch of trades at that low risk to equity and I still get massive drawdowns. Any tips?”

A: The issue isn’t just how much you risk per trade, it’s how those risks compound when clustered together in a system with natural streaks.

1️⃣ The Reality of Losing Streaks

The table below shows the probability of X consecutive losses within 100 trades at different win rates.

Example:

• A system with a 40% win rate has an 88% probability of experiencing 6 straight losses in any given 100-trade sequence.

• At a 35% win rate, you’re almost guaranteed (75%) to even see 8 losses in a row.

For breakout trend-following systems, it’s completely normal (and expected) to run sub-40% win rates across a 12-month period.

That means streaks of 6–8 losers in a row aren’t “bad trading”… they’re statistically inevitable.

The only way you survive them is by respecting aggregate portfolio risk caps.

2️⃣ Risk ≠ Static, It’s Dynamic

We don’t just look at risk-to-equity. We track the health of the system itself:

• Equity curve vs. EMAs: If our equity curve breaks below its 10 or 20 EMA, we know something’s structurally wrong — time to get defensive.

• Win rate vs. moving average: In strong regimes, win rate will surge above its MA. If it starts breaking down, that’s a real-time signal that edge expression is deteriorating.

Think of these as system-level breadth indicators for your own trading.

3️⃣ Controlling Portfolio Risk

• Single-trade risk cap: 0.20–0.50% equity per trade.

• Portfolio risk cap: max 2–3% across all naked positions.

• Correlation filter: no more than 2–3 trades in the same group/sector.

This ensures that even if you hit an inevitable losing streak, you don’t blow through -10% drawdowns in a week.

4️⃣ The Asymmetry Principle

In a system with a 40% win rate:

• 60 losers out of 100 are expected.

• But the 40 winners, when structured with a payoff ratio of e.g. 3:1 or higher, drive all the profitability.

That’s why sizing correctly matters more than “being right.” The whole game is to:

• Lose small, systematically.

• Stay solvent through the streaks.

• Let the few asymmetric winners compound into outsized equity growth.

Or as we frame it inside Swingly PRO: you’re not trading individual outcomes, you’re trading the math of expectancy.

If you’re ready to trade with the math, not emotions → Join Swingly PRO today.