OVERVIEW
Will Powell Spook The Market?

Markets staged a recovery on Tuesday after Monday’s sharp sell-off, which was driven largely by weakness in the tech sector. The Technology Select Sector SPDR Fund (XLK) climbed over 2%, reversing some of its 4.9% drop from the previous session. At the center of Monday’s turmoil was Nvidia (NVDA), which was hit hardest by the emergence of DeepSeek AI, a Chinese artificial intelligence startup that unveiled exceptionally efficient and cost-effective AI models. The fear was that DeepSeek’s innovations could threaten Nvidia’s dominant position in the AI semiconductor space, causing NVDA to shed over half a trillion dollars in market value in a single day—one of the largest single-session losses in history.

However, in a remarkable turnaround, NVDA rebounded aggressively on Tuesday, with high relative volume as buyers stepped in at a critical technical level—the daily 200-EMA, which coincides with the weekly 50-EMA and two key support levels. This strong reaction suggests that Monday’s sell-off may have been an overreaction, and with buyers showing significant aggression at these key areas, fears of a major bearish breakdown have so far been alleviated.

Despite the bounce, today marks a critical day for the markets as investors prepare for two major catalysts:

1️⃣ Big Tech Earnings After the Bell – Heavyweights like Tesla and Microsoft will report earnings after market close, and given the tech sector’s influence on broader indices, their results and guidance could set the tone for the next move in equities. Tech stocks have been a major driver of market gains, and any signs of slowing growth, margin pressure, or weak outlooks could weigh on sentiment and especially right now with how much their weighty valuations are being put into question, this is going to most likely have a larger effect on the market than what we usually see.

2️⃣ The Federal Reserve’s Interest Rate Decision – The Fed is widely expected to keep interest rates steady at 4.25%–4.5%, but the bigger focus will be on Fed Chair Jerome Powell’s comments during the post-meeting press conference. Markets are looking for clues about the timing and pace of future rate cuts, especially as inflation remains above the Fed’s 2% target but has moderated enough for some to argue that easing monetary policy could be warranted later this year.

This decision comes at a particularly sensitive time, as President Trump has been publicly pressuring the Fed to cut rates aggressively, arguing that borrowing costs should be much lower especially with the relatively cool labour market and Trumps big plan to pump economic growth to allow for the US to grow it’s way out of the 125% Debt to GDP ratio. However, Powell and the Fed must balance political pressure with economic realities—if they cut too soon, they risk reigniting inflation, but if they wait too long, they could slow economic growth more than necessary.

Currently, the market sees less than a 2% chance of a surprise rate cut today, meaning the decision itself is unlikely to be a shock. However, Powell’s tone in the press conference will be critical. If he signals that rate cuts are coming soon, stocks could rally. But if he suggests the Fed remains cautious and is in no rush to ease policy, markets may react negatively, particularly in rate-sensitive sectors like tech which are the most critical areas right now under pressure.

Nasdaq

The Nasdaq clearly highlights the impressive recovery in large-cap tech stocks. While NVDA’s massive weighting in the QQQ naturally skews the picture, the strength across the broader sector remains undeniable.

The QQQ now finds itself at a critical overhead supply zone and point of control (POC) level near $522. A break higher from this level could trigger a rapid and aggressive gap fill up to $530, likely accompanied by breakouts across the broader technology sector, which continues to lead the market.

S&P Midcap 400

Midcaps had a much quieter session yesterday, which isn’t surprising given their greater sensitivity to interest rates. Unlike large-cap tech stocks, midcaps rely more heavily on borrowing, meaning higher interest rates have a bigger impact on their growth and profitability. Additionally, they have less direct exposure to AI-driven momentum, which has been the primary driver of recent market swings.

Currently, midcaps are in a phase of consolidation and indecision, likely waiting for clearer signals from today’s Fed decision and Big Tech earnings. If the market reacts positively—especially with signs of strong risk appetite—midcaps will likely follow suit in a broader rally.

Russell 2000

From a technical standpoint, small caps are mirroring midcaps, with both consolidating around their daily 10-EMA and 20-EMA—a healthy sign of short-term stability. However, overhead supply remains a hurdle, meaning they will need sustained momentum to break higher.

Fundamentally, small caps are more dependent on a high-growth, low-interest-rate environment, as they typically rely on cheaper borrowing costs to fuel expansion. Additionally, they tend to perform best when overall market sentiment is strong. Given this, small caps remain in a holding pattern, likely waiting for clear direction from today’s Fed decision and Big Tech earnings. The real move will probably come tomorrow, once markets digest these key events.

DAILY FOCUS
Your Position Management Is Key Here

With the market showing a strong response yesterday, we are actively looking to open new long exposure—but with strict risk management in place. Several stocks on our Swingly Pro Focus List have triggered breakouts, including Reddit (RDDT), CrowdStrike (CRWD), and others, signaling momentum in key areas of the market.

That said, given the uncertainty surrounding today’s Fed decision and press conference, we are not looking to force exposure. We will be cautious with position sizing, limiting long exposure to a maximum of 0.25% NAV risk per trade.

If the market remains strong and follows through, we will gradually increase exposure—but if we see a weak session leading into the Fed announcement, we are fully prepared to remain patient and wait for clearer signals.

Many traders focus solely on how much they’re risking per trade—for example, setting a stop loss so that they risk only 0.25% of their Net Asset Value (NAV) per trade. While this is a crucial part of risk management, it’s only half the equation.

What many don’t fully appreciate is that the total percentage of NAV allocated to a single trade is just as important. You could have a tight stop loss, but if you’ve allocated 50% of your account to one stock, a massive gap down can wreak havoc on your portfolio—even if you were only risking 0.25% on paper.

Take NVIDIA (NVDA) as a perfect example. On Monday, the stock suffered a brutal sell-off, wiping out over half a trillion dollars in market cap in a single session. If a trader had allocated an oversized portion of their NAV to NVDA, they would have been exposed to catastrophic losses overnight—far beyond their planned risk.

WATCHLIST
Our Top Stock To Watch

APP: Applovin Corporation

• APP (AppLovin) has continued to be one of the leading names in the market, consistently appearing at the top of our relative strength leaders list and leading the daily industry group scans. The stock is currently forming a multi-month base along its daily 10, 20, and 50-EMAs, signaling potential strength ahead.

• This base formation is characterized by a contraction in both trading range and relative volume, which is a healthy sign of consolidation. These patterns often precede strong breakouts once the stock gathers enough momentum. With APP’s strong relative strength, it remains a top candidate to watch, especially if it starts to break out of this base in the coming sessions.