OVERVIEW
Spotlight On The Labour Market

The market continued to push higher yesterday, with strength in large and mega-cap stocks lifting the broad indices. This week, all eyes are on key economic data, starting with today’s October job openings report, followed by Friday’s highly anticipated November payrolls report.

These reports are important because they give us a clear picture of the job market. Job openings show how many companies are looking to hire, while payrolls data reveals how many jobs are actually being created and the unemployment rate. Right now, the general consensus is that interest rates will continue to be cut, and with the labor market showing signs of pressure, the Fed is expected to take action. If the job data points to slower hiring or higher unemployment, it will likely push the Fed to lower rates further to support the economy. This comes ahead of the Federal Reserve’s policy meeting in mid-December, where there’s a nearly 75% chance they will announce another rate cut.

The job openings report will be released just 30 minutes after the market opens today, which means we’re likely to see a muted start to the session as investors wait for the data. With so much attention on these reports, traders will be holding off on making big moves until they can gauge the health of the labor market as this will naturally cause some swings in the market.

Nasdaq

The Nasdaq had an impressive session yesterday, with the QQQ pushing through the $515 level and easily breaking past a dense supply zone. As mentioned in yesterday’s report, this area was expected to pose significant resistance, but instead, the Nasdaq powered through it with ease, indicating strong bullish momentum.This surge is largely driven by the strength of key tech giants like Apple (AAPL), Google (GOOG), and Microsoft (MSFT), all of which are pushing higher on their own breakouts, helping to drive the QQQ to new levels.

At the same time, we're seeing an interesting divergence between large-cap value and growth stocks. The S&P 500 Value ETF ($IVE) has been underperforming relative to the S&P 500 Growth ETF ($IVW) in recent sessions, with growth stocks breaking higher while value stocks remain in consolidation. This divergence highlights the current market preference for growth-oriented sectors, particularly in technology, as investors appear more confident in the future earnings potential of these high-growth names. The strength in AAPL, GOOG, and MSFT, combined with the broader shift towards growth, is helping fuel the Nasdaq’s momentum, while value stocks, typically seen as more stable but slower-growing, struggle to keep up.

S&P Midcap 400

The midcaps have been consolidating and trending sideways for the past five sessions, staying around their point of control (POC) level of $616. The most recent intraday breakdown saw the MDY dip toward its rising daily 10-EMA. However, the key takeaway is that the MDY remains above its 10-EMA, with all major EMAs (10, 20, and 50) pointing upward. This overall structure still supports the view that the market is in an uptrend, despite the recent choppy price action.

Russell 2000

The small caps are in a similar position, holding above their daily 10-EMA and showing resilience. Yesterday’s intraday retracement down to $240 saw buyers step in aggressively, indicating strong support at this level. This was reflected both in the price action and volume, with a strong red hammer candle signaling demand and a notable increase in relative volume. The combination of these factors suggests that, despite the pullback, there is continued buying interest, and the trend remains intact for now.

The main focus now is whether the Russell 2000 will pick up momentum and make another strong push above $244. A break above this level would signal a firm uptrend for small caps and potentially propel them to new all-time highs. With the prevailing strength in the market, along with the supportive macroeconomic factors like rate cuts, it’s tough to bet against this scenario. The combination of favorable economic conditions and strong price action suggests that small caps are well-positioned for further gains, and we could see them build on this momentum in the near term.

DAILY FOCUS
It Is Still A Risk On Environment

Perspective really matters, especially during times when we see shifts in market leadership. We've been witnessing a rotation from previous leading sectors, but now there's a resurgence in technology and semiconductors (XLK, RSPT, and SMH). These sectors, which had been underperforming in the last few weeks, are now showing renewed strength, signaling a potential change in market dynamics. This is very clearly seen in the breakout in the Nasdaq (QQQ) and the S&P 500 growth ETF (IVW).

In light of this, our focus has shifted to identifying the most actionable set-ups within these groups. However, it’s important to note that while we’re actively seeking new opportunities, we must also recognize the increasing risk of failure in new positions. The MMTW, which tracks the percentage of stocks above their 20-day moving averages, is showing strength in the market, but it's entering a historically extended zone above 70. This is a level where we often see reversals or breakdowns, so caution is warranted as we navigate through this period of strength. While the overall trend remains positive, the heightened risk of a pullback or consolidation makes it crucial to manage exposure carefully.

Keeping this in mind, our exposure status remains in moderate risk on with us being allowed to open new exposure however we are using half sized risk (0.25% of net asset value) for any new trades as we are aware just how fragile this uptrend is given the potentially over-extended breadth conditions.

WATCHLIST
Today’s Breakout Watch

SRAD: Sportrader Group AG

• SRAD has shown exceptional strength over the past month, following a stellar earnings report in early November, which sent the stock soaring by +41% in just five trading sessions. The company has demonstrated impressive revenue growth, doubling its sales over the past four years and posting a 25% increase in revenue year-over-year.

• As the market begins to see strength in the technology sector, SRAD has held its daily 10-EMA, showing resilience during a period of contraction in both volume and price range. This setup suggests the stock is positioning itself for a potentially big move in the near future.

• We are closely monitoring the stock for a break above $17.70, as a successful move above this level could signal a continuation of its bullish trend. A high relative volume breakout (+100% on an hourly candle), aligned with a 5-minute opening range breakout, would be a key signal to watch.

DUOL: Duolingo, Inc.

• DUOL is another standout in the tech sector, showing strong potential as a growth leader. The stock is forming a potential pullback bounce trade, testing its daily 10-EMA, with yesterday's session demonstrating aggressive buying as the stock held firm. This action suggests that the pullback may be nearing its end.

• The fundamental growth of DUOL is exceptional, making it not only a momentum leader but also a strong fundamental player. The volatility contraction over the past week appears to have reached its climax, signaling that the stock may be ready for a breakout.

• We are looking to take an aggressive position on DUOL, focusing on a break above the psychological level of $350.