Key Takeaways 
Sellers Remain In Control

• Exposure Status: Risk Off

• Breakout Efficacy Rate: Low

• Fear is Rising: The VIX has surged over +9%, signaling growing market volatility and uncertainty. With the VIX now above all key EMAs, caution is warranted as fear dominates sentiment.

• Energy Sector Strength: Energy prices are climbing sharply, with crude oil exceeding $80 per barrel amid falling Russian exports. Energy-focused ETFs like XLE, FCG, USO, and RSPG are reaching new highs, reflecting this sector's resilience in a volatile market.

• Tech Weakness: The Nasdaq and high-growth tech stocks like Nvidia, Palantir, and others are leading the sell-off. Key support levels are breaking, with investors moving away from these names amid rising bond yields and inflation concerns.

• Critical Economic Data Ahead: This week’s economic calendar is packed with PPI and CPI reports, both of which could significantly impact market sentiment and Federal Reserve policy expectations.

• Be Patient, Not Aggressive: Elevated volatility and uncertainty call for a risk-off approach. Focus on preserving capital and waiting for clearer market trends to emerge before taking on new exposure.

OVERVIEW
Fear Keeps Rising: Stocks Fall Even Lower

Energy prices are rising sharply, with crude oil climbing above $80 per barrel. This jump is linked to a drop in Russian oil exports as the U.S. tightens sanctions on the country. Higher oil prices push up costs for businesses and consumers, adding to worries about inflation, which remains stubbornly high. Unsurprisingly, the energy sector is showing strength. Energy-focused ETFs like XLE, FCG, USO, and RSPG are hitting new highs as oil and natural gas prices climb. This makes sense, as rising energy prices often boost profits for companies in this sector. As a result, investors are shifting toward energy stocks, which have become a clear standout in an otherwise cautious market.

Premarket trading today is reflecting these concerns with the S&P 500 (SPY) down -0.56% premarket, while the tech-heavy Nasdaq is down -0.89%. Tech stocks, which have driven much of the market’s recent gains, continued to fall. Nvidia and Palantir, two popular stocks among retail investors, both fell over 3% in premarket trading. These losses build on last week’s declines when Nvidia dropped nearly 6% and Palantir lost 11%. Investors seem to be moving away from these high-growth tech names as concerns grow about inflation and rising interest rates. This similar type of breakdown is seen in other leading tech names including: Google, Tesla, Microsoft, Netflix & Amazon that are all below their key moving averages.

Friday’s jobs report added to the market’s uncertainty. The report showed the labor market is still strong, which is normally good news. However, it also means inflation could remain high, making it less likely the Federal Reserve will cut interest rates soon. This sent bond yields soaring, with the 10-year Treasury yield reaching its highest level since late 2023. Higher bond yields make bonds more attractive compared to stocks, especially riskier ones like tech, and have been a major factor behind the recent sell-off in growth stocks.

Nasdaq

The Nasdaq is at a pivotal point, with the QQQ showing clear signs of weakness on its daily chart. The ETF has dropped below its point of control (POC) at $512, a level where the most trading volume has occurred, signaling significant support and resistance. On Friday, the QQQ broke below its 50-day exponential moving average (EMA) with high relative volume, an important support level that failed to hold. This breakdown has shifted attention to the weekly chart, where the rising 20-EMA at $501 now serves as the final major support level before a deeper bearish move.

If the 20-EMA fails to hold, the QQQ could drop to the weekly POC level near $482, marking a significant bearish breakdown. Such a move would suggest growing downside pressure that traders are hoping to avoid.

However, there are reasons to expect the 20-EMA to hold. While predicting market moves isn’t what makes traders profitable—it's reacting to trends that matters—the visible range volume profile (VRVP) highlights the importance of the $501–$502 level. The VRVP shows heavy trading volume at this area, indicating significant demand that could attract buyers and provide the support bulls need to prevent further declines.

S&P Midcap 400

The midcap sector is also showing signs of strain, with the MDY ETF breaking below its ascending support line—a level that had been respected since the bounce on December 20. This breakdown increases the likelihood of a test of its rising 200-day EMA, currently at $558, in the coming days.

Friday's price action was particularly telling. The MDY tested its point of control (POC)—a key level representing the area of highest trading volume—but instead of holding, it acted as resistance and rejected the ETF. This rejection highlights that sellers remain aggressive, continuing their dominance over the past month, while buyers have yet to show any meaningful strength.

With the 200-EMA looming as the next significant support level, the spotlight is now on whether this key demand zone will attract enough buying interest to halt the decline. Until then, the continued weakness in midcaps signals caution, as sellers appear firmly in control for now.

Russell 2000

Small caps showed even greater weakness on Friday, with the IMW ETF gapping lower and barely holding above its critical 200-day EMA during the session. However, premarket action today has already broken the IMW below this key support level, which now appears to be acting as resistance.

This breakdown is a troubling signal for small caps. The last time the IMW fell below its 200-EMA and was rejected at that level was in September 2023, which led to a significant -13% drawdown and confirmed a clear bear market trend. The current rejection at this level suggests a similarly bearish scenario could unfold if buyers fail to step in.

DAILY FOCUS
A Time For Patience, Not Exposure

Volatility is on the rise, with the VIX gapping up over +9% today, breaking above all its key exponential moving averages (EMAs). This is a strong signal that market uncertainty is growing, and traders should take note. Historically, a rising VIX indicates increased fear and potential for sharper market swings, which makes this a time to step back and reevaluate rather than jump into new trades.

Adding to the cautious tone is a packed economic calendar this week. Critical data releases include the Producer Price Index (PPI) and Consumer Price Index (CPI)—both key measures of inflation. These reports have the potential to significantly influence market sentiment and Federal Reserve expectations. In a volatile environment like this, economic data can quickly swing markets in either direction, making it all the more important to stay disciplined and avoid unnecessary risks.

The message here is clear: be patient, not aggressive. In times of heightened volatility and uncertainty, preserving capital is just as important as making gains. For now, the best strategy is to stay risk-off, carefully monitor how markets react to economic data, and wait for clearer opportunities to emerge. Markets are at a crossroads, and this is a time to focus on preparation rather than exposure.

WATCHLIST
One Of The Strongest Stocks On The Market

PSTG: Pure Storage, Inc.

• PSTG is providing a textbook example of relative strength, showcasing how a stock can hold firm even in a broader market pullback. Each time PSTG has dipped to its rising 20-day EMA, it has found robust buyer support, indicating aggressive demand and limited selling pressure.

• Friday's price action further emphasized this dynamic, with a high-relative-volume bounce off the 20-EMA, reaffirming the strength of this support level. This kind of price behavior highlights strong market conviction, as buyers step in consistently to defend key levels.

• While we’re not looking to add new exposure in this market environment, PSTG serves as a prime example of the criteria we focus on when scanning for relative strength. Stocks that show resilience by holding above critical moving averages with solid volume support are the types we want to prioritize when conditions improve.