OVERVIEW
All Risk Assets Continue To Break Down

Last week's promising finish quickly evaporated as risk assets failed to see any meaningful follow-through. The market took another turn for the worse, with investors once again shifting into a risk-off mode. Ongoing uncertainty around U.S. tariffs has pushed institutional players to adopt a more cautious stance, leading them to liquidate positions in the most volatile asset classes—especially equities and cryptocurrencies.

Bitcoin, for example, once again followed the broader market trend. After a strong recovery at the end of last week—where it rebounded to reclaim losses after a complete breakdown of its rising 50-EMA—Bitcoin has now slipped further, breaking lower by another 12% in a single session. This volatility underscores the challenges faced by inexperienced cryptocurrency traders who often find themselves on edge during these sharp moves. The reason we share this is that we expect the same behavior to occur in the equities market, reflecting the overall sentiment: sell first, ask questions later. This approach underscores the current risk-off mentality, where investors are quick to offload positions at the first sign of weakness rather than waiting to gather more information.

Despite the absence of any breaking news to explain this sell-off, the market continues to decline. Every attempted bounce is met with even greater selling pressure, reinforcing the overall cautious sentiment. Rather than trying to pinpoint every cause, we focus on the price action itself. It tells us what is really happening, and right now, that message is clear: caution remains the order of the day.

Nasdaq

There’s a lot to unpack with the Nasdaq, so let’s dive into the technicals. As we discussed in our earlier report, we identified a significant triple-top reversal pattern forming on the QQQ’s weekly chart. The first strong upward move occurred in December, reaching an exhausted climax. This pattern repeated twice more in 2025—once in January and again in mid-February—validating the triple-top reversal formation.

We’ve been paying close attention to the rising 20-week EMA, which interestingly aligns with the QQQ’s point of control (POC). This combined level now acts as the neckline for the reversal pattern. If the QQQ were to break through this neckline, it would confirm the reversal. However, as of yesterday, we decisively broke through that level.

Following a very strong open, the market experienced a complete fade and rejection at the $511 level. Now, the QQQ is moving toward the rising 50-week EMA—a level that has proven to be extremely significant. Over the past two years, we’ve observed two breakdowns to this moving average, and in both cases, the QQQ found strong demand that ultimately reversed its direction, creating an ideal environment for trend traders.

However, there was an instance when the 50-week EMA was broken without finding sufficient demand, leading to a 29% decline that lasted nearly a full year from January 2022 to January 2023. While we’re not forecasting another similar move, it’s crucial for traders to remain aware of this history, as a breakdown below the 50-week EMA will be difficult to not consider bear market territory.

S&P Midcap 400

The midcaps have also validated their multi-month reversal pattern on the weekly chart, and in this case, it's a head and shoulders formation—one of the most reliable reversal patterns in technical analysis. The neckline on the MDY, which aligns with the Point of Control (POC) at around $560, acted as a major supply dump in yesterday's session. The MDY opened strongly, only to turn into a bull trap that launched it into another leg lower. Now, having broken its 50-week EMA, the MDY appears to be heading into what is likely to be a multi-week markdown phase.

The last time the midcaps (MDY) lost their 50-week EMA after a sustained uptrend was back in 2022. During that period, we saw a roughly 16% decline that lasted for about nine months, and then the midcaps languished in a base for nearly 636 days—almost two years—making minimal progress. While we’re not predicting that history will repeat itself exactly, this context is important. It shows us that when key support levels fail, the market can enter prolonged periods of stagnation and weakness, and there is nothing more important that arming yourself with the research to best handle the situation currently presented in front of you.

Russell 2000

For the IWM, we are observing a similar head and shoulders breakdown forming on the weekly chart—arguably even more pronounced than what we’re seeing in the midcaps. This is not entirely unexpected, given that the small-cap segment tends to be the first area investors liquidate during times of heightened volatility and economic uncertainty. Small businesses, which make up the bulk of the IWM, inherently offer less stability and resilience when economic and rate-related pressures hit the market.

DAILY FOCUS
How To Actually Handle A Bear Market

Navigating a bear market is brutal for everyone. Long traders get chopped up, short sellers get squeezed, and the worst mistake you can make is style drifting—abandoning your proven strategy out of frustration. That’s how traders destroy years of progress.

One of the best traders at handling bear markets is Kristjan Kullamägi—a verified trader who turned $5,000 into over $100 million by mastering momentum trading. He is exactly the reason we trade the way we do and we highly encourage everyone read his story. His approach has shaped a lot of what we know today, and his strategy for bear markets is simple: sit in cash, constantly scan for future leaders, and wait for the market to present real opportunities.

Here’s how to apply his method to protect yourself and set yourself up for massive success when conditions improve:

1. Sit in Cash – Bear Markets Are NOT Worth Trading

Most traders lose money in bear markets—not just longs, but even shorts. Why?

• Choppy conditions wreck both sides – sudden rallies and breakdowns make it impossible to hold positions.

• Shorting is NOT a great edge – even in weak markets, most stocks don’t go straight down, and bear market rallies can be violent.

• You’re fighting against time – statistically, bull markets last longer and offer much better trading conditions.

Smart traders like Kullamägi sit in cash during downturns, avoiding unnecessary losses while waiting for the market to reset.

2. Scan Every Day – The Next Leaders Will Reveal Themselves

While sitting in cash, your job is NOT to be inactive—it’s to observe, scan, and prepare. Every day, scan the market for stocks that:
✅ Hold up while everything else is breaking down
✅ Show relative strength against the indices
✅ Build constructive bases instead of rolling over

These will be the stocks that lead the next bull run. If you’re not tracking them now, you’ll be behind when the market turns.

3. Stay Disciplined – The Worst Mistake is Trading for the Sake of It

Most traders feel pressure to "do something" in a bear market. That’s exactly what kills accounts. Kullamägi emphasizes that trading is NOT about being active all the time—it’s about striking when the conditions are right which he simply outlines as a rising 10 and 20-day EMA on the Nasdaq.

Think about it:

• A baseball player doesn’t swing at every pitch.

• A sniper doesn’t fire at every movement.

• A great trader doesn’t take every trade—only the best ones.

Your job is not to trade constantly. Your job is to be ready when the market turns.

WATCHLIST
76% Of Stocks Are Currently Breaking Down…

We’re continuously running our daily scans to update our list of relative strength names. However, because the market is so dynamic, it’s challenging to present a definitive list without causing confusion. Once clear trends begin to emerge, we’ll update you with our refined list.

Stay safe out there!