OVERVIEW
Trump Pushes for "Total Victory" in Trade War — But at a High Cost

In a new interview, President Donald Trump laid out his vision for "total victory" in the ongoing trade war: keeping U.S. tariffs high — up to 50% — for at least another year. Trump argued that steep tariffs would make the U.S. "a fortune" by reshoring production and boosting domestic jobs. However, many economists and business leaders warn the reality could be far more painful for consumers and companies.

Currently, America’s effective tariff rate stands at 22.8%, the highest among developed nations, driven largely by a 145% duty on Chinese goods and widespread tariffs on steel, autos, and other imports. Trade with China has already slowed to near zero, and businesses are warning that once pre-tariff inventory runs out, consumers could see major price hikes or empty shelves.

The Federal Reserve’s latest Beige Book highlights growing uncertainty, with businesses pulling back on hiring and investment. Consumer sentiment has plummeted, and companies across multiple sectors have cut profit forecasts, blaming tariff-related costs.

Despite the risks, Trump insists tariffs will force foreign companies to invest in the U.S., although reshoring production is complex, costly, and time-consuming. Meanwhile, the president says hundreds of trade deals are "in the works," though their details — and timelines — remain unclear.

Markets dipped slightly after Trump's comments, reflecting continued investor unease about prolonged trade tensions and their broader economic fallout.

MARKET
Something Big Is Brewing Under The Surface

This week, the focus shifts to earnings reports, which are expected to play a crucial role in shaping market sentiment. So far, the results have been mixed, with around 73% of companies surpassing analysts' expectations, a bit below the 5-year average of 77%. However, Wall Street is lowering its growth outlook for the second quarter and the rest of the year, largely due to the ongoing uncertainty surrounding tariffs and their potential impact.

While it’s premature to call the end of the underperformance this year, the recent rebound off key support levels suggests we may be on the verge of a shift back toward risk-on leadership. It's important to remain vigilant and watch for signs that this trend could continue.

In addition to earnings, there will be important economic data this week, including reports on labor markets, inflation, and overall economic growth. Last week, we saw a strong bounce in the S&P 500, marking its longest positive streak since January, as sentiment improved following President Trump's comments about easing pressure on the Federal Reserve and potential progress on the U.S.-China trade conflict.

With 180 S&P 500 companies set to report their earnings this week, all eyes will be on how these results shape expectations for the rest of the year and influence broader market dynamics. The recent softening of tariff rhetoric has helped reduce recession fears, but the market’s reaction in the coming days will be key to confirming whether we are in the early stages of a more sustainable rally.

Nasdaq

The Nasdaq finds itself at a pivotal crossroads this week, with potential strength on the horizon, driven largely by earnings from the market's heavyweights—Apple (AAPL), Microsoft (MSFT), Meta (META), and others. These companies, often grouped as the Magnificent Seven, are market leaders whose earnings results carry outsized influence, setting the tone for investor sentiment and broader market direction.

At this critical juncture, the Nasdaq is testing key technical levels. The declining 50-day EMA is a notable resistance point, aligned with a confluence of factors that could dictate the next move for the index. This includes a dense area of overhead supply on the Visible Range Volume Profile (VRVP), signaling where sellers have historically positioned themselves. Moreover, the 200-day EMA, a widely-watched long-term moving average, adds another layer of resistance. Compounding this is the proximity of the Point of Control (POC), representing the price level with the highest traded volume, which further emphasizes the significance of this technical zone.

This convergence of resistance points sets the stage for a critical test in the market. If the earnings reports from these major tech names exceed expectations, it could trigger a breakout above this resistance zone, propelling the Nasdaq higher and potentially signaling the start of the next leg in the bull market.

Given how crucial these companies are to the Nasdaq's overall performance, a move past this resistance would not only validate the underlying strength of the tech sector but also help reverse the broader market's recent underperformance. This setup could well mark the beginning of a new phase of growth, particularly after the recent market struggles, making it a crucial week for positioning and sentiment- especially with the interest rate decision coming next week.

S&P Midcap 400

The midcaps are exhibiting a similar technical structure to the broader market, particularly mirroring the movement of the Nasdaq. This alignment is evident in the declining volume on an ascending price, a pattern we've identified as potentially concerning due to the divergence it suggests. From a Level 2 or order flow perspective, while prices are climbing, the lack of strong buying interest or conviction behind the moves raises questions about the sustainability of the rally.

The Point of Control (POC) remains a key resistance level overhead, much like the QQQ, and we expect it to be tested this week. As we’ve observed, the midcaps have been consolidating for the past three days above the rising 20-EMA—an important development, as this marks the first time the index has managed to stay above this level since the initial breakdown. This consolidation coincides with the broader market's leaders breaking higher, reinforcing the positive sentiment that’s pushing the market forward.

Russell 2000

The small caps, much like the midcaps, are currently consolidating below their Point of Control (POC) level and the declining 50-day EMA, which presents a critical technical juncture. While small and midcap stocks tend to be more volatile—due to their smaller market caps and higher speculative nature—it’s important to note that these segments often follow the lead of the larger, more established growth stocks. As such, the most prudent focus should be on the large-cap and mega-cap growth stocks.

Historically, large-cap stocks tend to be the primary leaders in any sustained market rally. This is because they represent the most significant weight in the indices, possess greater liquidity, and often have more stable earnings, which provides them with an inherent advantage. When large-cap stocks demonstrate strength, this momentum tends to trickle down to mid and small-cap stocks, though it can take time. For this reason, large-cap growth stocks should be the focal point of attention in the current market environment.

DAILY FOCUS
Remember The Big Tech Earnings

The next round of earnings, particularly from the biggest names in tech, is going to be pivotal for market direction. These reports will be more than just a look at past performance; they’ll offer crucial forward guidance that will inform the market’s outlook for the rest of the year. With ongoing supply chain disruptions, inflationary pressures, and the ongoing trade war and tariff situations, companies will be addressing how they’re handling these issues and what they expect moving forward. This makes the forward-looking statements even more important than the actual earnings numbers themselves.

Why are we so focused on this? Because forward guidance serves as a critical barometer for investor sentiment. If companies issue strong, optimistic guidance — especially in the face of challenges — that signals resilience and adaptability, which can instill confidence in investors. Strong earnings, paired with positive projections, often act as a magnet, pulling more capital into equities as investors look to ride the momentum. When Big Tech reports solid earnings and shows they can still grow despite macro challenges, the money flows in. The potential for earnings to exceed expectations and lead to upgrades across the sector is high, particularly if supply chain issues are seen as being managed effectively or if companies are able to pass costs onto consumers without significant loss of demand.

However, if these companies show weakness — if they point to further supply chain disruptions or worsening margins due to inflationary pressures — that could reverse the narrative and prompt investors to reassess their positions, potentially leading to downside risk in the broader market.

This backdrop reinforces why we continue to focus on leaders like those in technology, consumer discretionary, and communication services. These sectors, despite facing headwinds, have continued to show relative strength. The relative outperformance of these sectors, combined with strong earnings, suggests that the market is willing to reward leaders, even in uncertain times. As we’ve seen historically, when leaders are driving strength, the broader market tends to follow. Thus, even with potential volatility, there’s a solid case to stay long in high-quality growth stocks that are showing resilience in both their earnings and price action.

WATCHLIST
Our Top Priority Trades Today

QUBT: Quantum Computing Inc.

• QUBT is positioning itself as one of the leading momentum names within the quantum computing sector, and it has shown remarkable resilience, particularly during the recent sell-off across the broader market, especially in the growth sectors.

• Over the last few months, we've seen QUBT consistently form higher lows, which is characteristic of a stock building a solid base. The pullback we've observed has been notably linear, suggesting controlled consolidation rather than panic-driven selling, and now the stock is showing recovery, trading above its 200-day EMA on the daily chart.

• What stands out most is the tightening of the price range, with volume beginning to pick up. This tightening typically signals a potential breakout, as the stock is clearly building up pressure for a move. Given that QUBT has a high ADR (average daily range) percentage, a breakout from this tight range could easily result in a significant price movement — potentially even a 100% move in a short time frame.

• To provide context, the last time QUBT broke out, in late 2024, the stock surged over 2,000% without closing below its rising 20-day EMA once.

ZS: Zscaler Inc

• ZS presents a different kind of setup, but still aligns with our broader strategy of looking for range breakouts after a prolonged accumulation period. What makes ZS unique is that it is positioned to break out of a multi-year base, which offers a much stronger foundation for the breakout. This multi-year accumulation is significantly more robust than shorter-term patterns, providing a much higher probability of sustained follow-through once the breakout occurs.

• The key advantage of this setup is that the breakout from such a long consolidation period is more likely to have lasting power, as the market has spent considerable time digesting previous gains and positioning itself for the next phase. ZS is also a fundamentally strong company, which differentiates it from more speculative stocks. The fact that ZS is backed by solid fundamentals adds confidence that the breakout isn't driven purely by momentum or market noise but by real, sustainable growth prospects.