MARKET ANALYSIS
Here’s What You Need To Know

• U.S. futures are flat this morning after a heavy sell off to start the week, but the bigger message is that momentum has clearly stalled across the broader market.

• The Dow dropped roughly 1.7% yesterday, the S&P 500 lost around 1%, and the Nasdaq fell just over 1%, which pushed the S&P back into negative territory for the year.

• Trade policy is still creating confusion. The administration signaled a possible 15% blanket tariff, yet the rate that went into effect was 10%, which keeps businesses and institutions guessing about what the real endgame is.

• Europe has already voiced concern, and this ongoing back and forth is adding friction to global capital flows.

• At the same time, artificial intelligence disruption fears are back in focus. Major AI product announcements this week are forcing investors to reassess which companies benefit from AI and which may get displaced.

• Software and financial stocks were hit hard yesterday, which matters because those two groups were previously carrying a significant portion of the market’s weight.

• Nvidia earnings tomorrow remain the key event. The market is unlikely to commit to a strong directional move before that catalyst, given how influential Nvidia is for the Nasdaq and the broader AI narrative.

• What is more important than the headlines is the internal rotation. Over the last quarter, defensive sectors like staples and energy have materially outperformed, while technology and financials have struggled.

• However, there is an important nuance developing. While broader momentum has stalled, the Nasdaq itself is beginning to stabilize from a breadth perspective after being aggressively sold off earlier.

• When the most beaten down segment starts holding while the rest of the market rolls over, that is often the early stage of what becomes maximum pain.

• Of course, maximum pain in this context would mean continued chop, failed breakdown attempts, and eventual upside resolution once positioning becomes too defensive.

• We are not there yet, but the stabilization in the Nasdaq, especially relative to mid caps and small caps, suggests that the asymmetry may slowly be shifting back toward growth.

Nasdaq

47.52%: over 20 EMA | 48.51%: over 50 EMA | 49.50%: over 200 EMA

• QQQ rejected the declining 10 day EMA yesterday, which also coincided with rejection near the 20 week EMA around 607 to 609.

• The move into resistance printed 112% relative volume versus the 20 day average, confirming that participation expanded on the test of supply.

• At yesterday’s highs, the visible range profile showed an almost perfect balance between buyers and sellers, with 4.48 million shares traded green and 4.43 million traded red. That confirms equilibrium rather than decisive demand.

• Most importantly, QQQ held the demand zone that has been active since September 2025. That is now approximately 160 days of consistent demand at this level.

• We have bounced off this zone multiple times, including February 5 and February 17, both of which were reactions off the lower boundary of the descending broadening wedge.

• There are now two clear scenarios. The first is continued sideways drift that results in an upside break from the broadening wedge.

• The second is a downside move of roughly -1.16% toward 593.10, which was the February 17 low. That would still keep price inside the green demand box and would not invalidate the structure.

• If 593 fails to hold, the next level is 583.25, which is where the rising 200 day EMA sits. That would represent roughly -3% downside and would materially shift the weekly structure toward a Stage 4 breakdown.

• Broadening wedges historically resolve higher approximately 83% of the time based on Bulkowski’s database, which keeps the upside probability slightly favored.

• However, weekly relative volume has expanded during the selloff, confirming that the decline has been valid.

• The Nasdaq currently offers the best asymmetry for long exposure because it has already been heavily sold off relative to other segments.

• Nvidia earnings tomorrow introduce elevated event risk. Overnight technology exposure carries higher risk into that catalyst.

S&P 400 Midcap

46.73%: over 20 EMA | 55.52%: over 50 EMA | 63.56%: over 200 EMA

• Mid caps declined yesterday on 110% relative volume, confirming active participation on the downside.

• Price remains slightly extended above the 10 week EMA at 637.57, which is approximately -1.52% below current levels. That area aligns with tightening demand and volume support.

• The real weakness is showing up in breadth rather than price. Only 46% of mid cap stocks remain above their 20 day EMA, and 55% remain above their 50 day EMA. Both measures declined sharply in a single session.

• Mid caps had the most to lose from a breadth perspective because they were previously the most extended and strongest segment.

• While this does not signal imminent collapse, it does suggest short term fragility and with participation deteriorating quickly, this segment is less attractive for long exposure in the immediate term.

• From a longer term perspective, roughly 64% of mid cap stocks remain above their 200 day EMA, which means there is still substantial room for further breadth deterioration if selling accelerates.

• Relative to the Nasdaq, mid caps show less stabilization and more internal weakness.

Russell 2000

38.04%: over 20 EMA | 54.11%: over 50 EMA | 58.54%: over 200 EMA

• Small caps experienced weakness yesterday but remain within a constructive Stage 2 continuation structure on the weekly timeframe.

• IWM tested the rising 50 day EMA at 258.20 and bounced on 115% relative volume, confirming demand at that level.

• The 10 week EMA continues to act as support, and price has consolidated above it for approximately 42 days.

• The short term structure remains a weekly contraction rather than a breakdown.

• The worst case near term scenario would be a -2.72% move toward the 20 week EMA at 252.84.

• At that level, the volume profile shows approximately 6.6 million shares traded green versus 5 million red, indicating dense historical demand

• If tested, that zone would likely produce a technical bounce and right now the small caps are consolidating rather than collapsing, but they do not currently display the same relative resilience that the Nasdaq is showing.

FOCUSED STOCK
LLY: Leading Pharma Name Ready To Push

ADR%: 3.34% | Off 52-week high: -6.5% | Above 52-week low: +70.6%

• Eli Lilly delivered one of the strongest technical sessions in the market yesterday and presented what was technically the optimal entry.

• Price pulled back into the 10, 20, and 50 day EMA cluster at 1,033 and bounced precisely from that level.

• That reaction also aligned with a test of the rising 10 week EMA, which is a primary trend reference level for position traders.

• Eli Lilly has now been consolidating in a Stage 2 continuation base for approximately 91 days and the broader Stage 2 rally began with the breakout in September 2025, and the stock advanced approximately 36% from that breakout. For a trillion dollar company, that magnitude of move is extremely impressive and confirms institutional sponsorship.

• Yesterday’s bounce printed 150% relative volume, which was the highest relative volume session since early February. That expansion in participation at a major moving average cluster is what made it the ideal entry.

• Healthcare remains one of the strongest sectors in the market, and it has displayed extremely clean and linear price behavior even while the broader market has been choppy.

• There are always rotating pockets of strength in the market, even during volatility. As a trader, your edge comes from identifying where capital is flowing and aligning with that rotation rather than fighting it

• Pharmaceuticals represent more than one third of the XLV weighting, which means leadership within pharmaceuticals matters significantly for the healthcare sector as a whole.

• The ideal entry was yesterday’s test of the EMA cluster. At current levels, there is visible supply overhead up toward 1,100, which means chasing strength is not optimal.

• A pullback toward short term moving averages would provide a tighter stop and better asymmetry. The tighter your stop distance, the greater your potential reward multiple relative to risk.

• For traders using a weekly structure approach, stops beneath the weekly candle low remain a viable framework, especially if price drifts lower pre market and offers a more favorable entry.