OVERVIEW
The Large Institutions Are Getting Aggressive

This week, all eyes are on the U.S. stock market, as some of the biggest names in tech are set to release their highly anticipated earnings reports. Investors worldwide—whether they're large institutions or retail traders like us—are closely watching these announcements to see if they’ll drive the market to new highs. Five of the “Magnificent Seven” mega-cap tech stocks—Alphabet, Apple, Amazon, Microsoft, and Meta—will be reporting, following a strong reversal in the Nasdaq last week that shifted from an early dip to a record-breaking close. With these giants leading the charge, traders are hopeful for a positive ripple effect across the S&P 500 as well.

But it’s not just about earnings. This week is also packed with crucial economic data that could impact the broader market direction. On Wednesday, we'll get an early look at third-quarter GDP, which will give insight into the overall health of the U.S. economy. Thursday brings the September personal consumption expenditures (PCE) price index, a key indicator for inflation, and on Friday, all eyes will be on the September jobs report.

In the premarket today, we're seeing notable strength as investors digest a complex situation unfolding in the Middle East. Israel conducted strikes on Iran, but the market appears relieved that these actions were directed solely at military targets, avoiding oil and nuclear facilities as many had feared. This restraint has helped ease concerns over potential disruptions to the global supply chain, especially around energy. While any escalation is unsettling, the focused nature of these strikes has provided some relief, allowing the market to find stability as it assesses the broader impacts.

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

This sets up an unexpectedly favorable backdrop for U.S. equities, even amid the high-stakes presidential race between Harris and Trump, with the election just days away. On Friday, we saw strong follow-through in Tesla's earnings-driven pivot, a clear signal of institutional demand for big tech. This week will be key in determining whether institutional investors are ready to continue ramping up their exposure to tech.

This setup offers a promising low-risk entry opportunity if big tech stocks get a positive reception from the market. Large institutions often take days or even weeks to build their positions to the desired size, giving us ample time to spot these accumulation patterns and capitalize on the trend. By watching these moves closely, we can ride along as these stocks gain momentum, potentially positioning ourselves for some solid upside.

For those interested in a deeper dive specifically on this very topic, our weekend report provides an in-depth breakdown of these market dynamics. You can access it here.

Nasdaq

The Nasdaq stands out as the market's strongest performer today, with major momentum building over the past two days. Friday saw a significant move as the QQQ—the ETF tracking large-cap tech stocks—gapped above its declining resistance level around $495, breaking through a major supply zone that had caused choppiness for some time.

This is a critical development because QQQ, which is heavily weighted in large tech stocks, is showing clear relative strength against all other market groups. Given Tesla’s impressive move on Thursday and the upcoming earnings from other tech giants, we're closely monitoring QQQ's behavior. Its strong performance gives us a particularly bullish outlook for the week ahead.

S&P Midcap 400

Midcaps are currently a prime example of relative weakness. When comparing QQQ and MDY (the midcap ETF) side by side, it’s clear that MDY has struggled over the past two weeks while QQQ has held its ground, even pushing higher to break new levels. In contrast, MDY remains under pressure, trading below both its 10- and 20-day EMAs. On Friday, the declining 10-EMA acted as significant resistance, pushing MDY down to its rising 50-EMA and the key point of control (POC) at $565.

This divergence aligns with a clear market rotation: investors are moving away from higher-risk, speculative stocks and reallocating into big tech, especially the mega-caps, where the primary focus is concentrated right now.

Russell 2000

Small caps add further support to the case for a market rotation into mega-cap and large-cap stocks- specifically mega cap technology names. The Russell 2000, represented by the IWM ETF, mirrors the S&P Midcap 400’s recent weakness, with IWM slipping below its 10- and 20-day EMAs and just barely holding above its point of control (POC) at $218 and the rising 50-EMA.

It’s worth noting that this retracement in both MDY and IWM isn’t surprising. The market is naturally becoming more cautious ahead of the election, compounded by rising tensions in the Middle East and an uptick in oil prices. Higher-risk groups like small and midcaps are typically more sensitive to these macro shifts. Rather than seeing this pullback as concerning, it’s a clear sign of where the money is rotating—away from speculative areas and into more stable, large-cap tech names and you should focus your attention there.

DAILY FOCUS
Never Trade With Politics In Mind

It's easy for newer traders to feel lost when the market doesn't look too promising at first glance. If you’re checking out the indices or the daily breadth reports in Swingly Pro, you might notice that a lot of stocks are declining, making things appear pretty weak overall. But here’s the key difference between good and struggling traders: just because many stocks are down, it doesn’t mean that money is leaving the market altogether or that everything’s headed for a big sell-off. In reality, funds are rotating into a select few themes, which means that instead of broad selling, there’s a shift in where the focus is.

As swing traders, our goal isn’t to trade based on our personal opinions or biases; it’s to follow the trends. Right now, that means identifying these accumulation patterns in certain stocks and rotating our focus as the market shifts. Our job is to go with the flow, not force our viewpoint on the market.

With this rotation in mind, it’s helpful to consider how politics might come into play. We’re not here to predict or discuss who’ll come out on top in the U.S. election—that’s not our focus. Instead, let’s dive into why we believe the market is unlikely to see a major downturn right now, even with the election drawing closer.

Support from the Fed: The Federal Reserve is actively lowering interest rates and increasing liquidity, which creates a supportive backdrop for the market. Historically, the Fed’s actions hold more sway over market trends than who’s in office. It’s often said, "Don’t fight the Fed," and this rings true here.

Seasonal Boost: November and December are typically among the strongest months for the market. This seasonal strength often helps keep spirits high as we head toward year-end, providing a natural lift.

Technical Stability: Despite recent fluctuations, the main indices remain above key moving averages, showing ongoing support from big institutional players. Many top-performing stocks continue to act well, and as the saying goes, "As the leaders go, so goes the market."

This week, our focus is on taking a more aggressive stance—but specifically within the large and mega-cap tech stocks releasing earnings. We're watching these names closely, looking for strength as they report. Meanwhile, we're being cautious with other stocks reporting earnings or attempting breakouts in sectors that aren’t correlated with the QQQ (Nasdaq), which is currently the strongest subgroup in the market. By concentrating on the dominant sector, we’re positioning ourselves to follow the strongest trends while minimizing exposure to less-aligned areas.

WATCHLIST
Today’s Major Earnings Gappers

PRCT: PROCEPT BioRobotics Corporation

• PRCT is showing a promising premarket gap up after delivering impressive earnings, breaking above its declining 10, 20, and 50-day EMAs. This move indicates a significant shift in momentum, especially since PROCEPT had been in a downtrend for several weeks

• While there’s potential for follow-through, we need to be mindful of the major overhead supply. Since PRCT isn’t part of the leading theme in the market, we’re approaching it with caution. We’ll be keeping an eye on the 5-minute Opening Range High (ORH) for a potential entry point, but our primary focus remains on the other names within the Magnificent Seven.

• PRCT is definitely a name to keep on your radar, especially for those with smaller accounts. Its higher volatility compared to large and mega-cap stocks can make it an appealing choice for traders looking for quicker movement and the potential for faster profits.

SERV: Serve Robotics Inc.

• SERV has been establishing a pattern of higher lows over the past few months, but since early October, we’ve observed a contraction in its trading range, characterized by a series of lower highs and declining volume.

• This setup suggests that a significant move could be on the horizon once this consolidation phase concludes. Given how well the ascending support level has held up for SERV, it’s tough to overlook the potential for an entry. We’re considering a position with half or a quarter-sized risk if it breaks above $10 on high relative volume.