OVERVIEW
Tech Sell-Off & China Names Gap Lower

Yesterday, the market took a breather, with both the S&P 500 and Nasdaq Composite pulling back from record highs. Tech stocks, in particular, showed weakness, with Nvidia leading the charge lower after news broke that Chinese regulators are investigating the company for potential antitrust violations. This sent Nvidia down around 2.6%, although the stock has still seen impressive gains in 2024, up over 180%. As we head into the final weeks of the year, markets are looking for fresh catalysts, especially with key inflation data coming up.

Wednesday’s consumer price index (CPI) report is a major focus. It’s the last big economic data point before the Fed meets next week, and any signs that inflation isn’t progressing could impact expectations for further rate cuts. With market participants already pricing in an 80% chance of a quarter-point rate cut next week, the CPI data will likely dictate whether that expectation holds or begins to shift.

So, what does all of this mean for today’s session?

Simply put, we’re in “watch and wait” mode. The market is in a bit of a holding pattern right now, with no clear trend emerging. We’ve seen a pullback from the recent highs, especially in tech, and investors are waiting for key data—like the CPI report on Wednesday—to help guide the next move.

The recent pullback in China’s market is another reminder of the challenges the government faces in restoring investor confidence. Despite ongoing efforts, including a stimulus push in late September, the economy has yet to show strong signs of recovery. As we move into the key annual economic policy meeting this week, investors are hoping for more concrete plans on how the government intends to ramp up its monetary and fiscal easing efforts.

However, as investment director Xin-Yao Ng pointed out, the actual delivery of these plans has often fallen short of expectations in recent years. Investors are once again in a holding pattern, waiting for the numbers to see if they’ll meet the lofty promises made.

On Tuesday, China’s stock market had its first chance to react to the government’s announcement of a “moderately loose” monetary policy for 2025, signaling a shift in strategy for the first time since 2011. Along with this, the Politburo has pledged to take a more proactive fiscal approach, with a focus on stabilizing the property and stock markets, and boosting consumption. The question now is whether these measures will be enough to turn the tide and give investors the confidence they’ve been waiting for.

Nasdaq

The Nasdaq is holding up the best among the major US indices, consolidating around its demand zone at $522. What we're seeing looks like a period of consolidation, with profit-taking likely occurring as the QQQ nears a potential short-term pullback to $516. This level coincides with the rising daily 10-EMA, which further increases the likelihood of this move. Additionally, there's an unfilled gap between $520-$516, as indicated by the visible range volume profile, reinforcing the potential for this pullback.

Right now, the majority of the large-cap tech stocks—GOOG, AAPL, MSFT, AMZN, and META—are still performing well. The only real exception is NVDA, which is significantly underperforming and weighing on the capitalization-heavy Nasdaq.

S&P Midcap 400

Midcaps are continuing to show signs of weakness, with a high-volume rejection at the overhead supply and Point of Control (POC) level of $613, which led to significant selling pressure and a drop in the MDY. The index has now pulled back to its rising daily 20-EMA, which is likely to be tested today. This level is crucial for support, as it's the last strong line of demand before the 50-EMA at $592.

Given the recent lack of buyer presence and the softness in the market over the past two weeks, we’ll need to see a substantial shift in character for the midcaps to regain momentum. While the short-term action shows some weakness, the medium-term trend remains strong, so it’s important to keep an eye on whether this support holds or if further selling pressure will test deeper levels.

Russell 2000

The small caps are in a similar situation, facing rejection at their POC level and supply zone at $241, which pushed the Russell 2000 down below its daily 10-EMA once again. The index is currently finding some support at the $237 demand zone. However, relative volume was notably low yesterday, indicating passive buying with little real demand to drive the small caps higher. Sellers were firmly in control, as evidenced by the weak, full red candle that closed the session.

The analysis here mirrors that of the MDY—it's critical for the rising 20-EMA at $236 to hold. If this level fails, a deeper pullback looks increasingly likely. Similar to the midcaps, small caps will need a significant shift in market behavior to regain momentum, especially as support levels are being tested.

DAILY FOCUS
Do Not Let One Bad Day Derail You

Yesterday was a tough reminder that the market doesn’t always go your way. It’s easy to get caught up in the excitement when things are going well, but moments like this show just how quickly things can change. We saw a significant portion of unrealized gains wiped out in positions like NVDA, which gapped down at the open, and DUOL, which came down to our break-even level and closed us out for a small win. It stings, no doubt. But here’s the important part: none of that matters unless we look at how we managed the situation. The question isn’t whether we avoided a pullback—it’s whether we handled it according to our plan.

Let’s face it: stocks don’t go up forever. The longer and faster they climb, the harder they pull back when they eventually do. This isn’t news; it’s just the market doing its thing. Consolidation and pullbacks are inevitable, and as traders, our job is to manage risk, not avoid every down day. You can’t time the top. If you’re trying to lock in every last bit of profit, you’ll never be happy with the result. Instead, focus on making sure you’ve got a plan in place to manage risk when things do shift. Whether you sell some positions proactively when stocks are overextended, defensively when key levels are broken, or rotate to other opportunities, the key is consistency.

One bad day doesn’t mean the trend is over. We saw a lot of weakness yesterday, but that doesn’t mean we’re officially in a bear market. Just because your portfolio takes a hit doesn’t mean the sky is falling. It’s all about managing the process. As much as you might want to panic and hit the sell button, remind yourself: this is just one day. Take a step back and assess. Is your position still valid based on the data? If it is, don’t feel compelled to overreact just because the market throws a curveball.

At the end of the day, the most important asset you have is your mental capital. If you’re losing sleep over your trades, it’s time to reassess. Fear and greed are normal parts of trading; the key is recognizing them and making decisions from a place of clarity. The reality is, you won’t win every trade. You won’t even win every week. But if you stick to your plan and manage your risk, you’re setting yourself up for long-term success. No trade is a bad trade if it aligns with your process, and if you’ve planned for the worst, you’ll be ready for whatever the market throws your way.

The market is a marathon, not a sprint. Stay focused, keep your perspective, and trust the process. You’re building something bigger than just this trade or this week—keep your eyes on the long-term goal and keep showing up.

WATCHLIST
Nothing To Declare

Right now, there are no actionable set-ups. The market is too volatile, and without clear trends or relative strength, it’s best to stay patient. Don’t force trades—wait for stocks to show leadership and strength before jumping in. Once we see a solid trend or momentum shift, we’ll have opportunities to act. Until then, sit tight and let the market come to you.