OVERVIEW
Stay Rational Today: Watch & Observe

Nasdaq still king → QQQ is going vertical toward $600, QQQE confirms breadth. Short-term overbought, but structurally risk appetite is strong.

Midcaps rejected → MDY smacked down at supply on >160% relative volume. $595 demand is the make-or-break level — below it opens $589 (50EMA).

Small caps messy → IWM holding 10EMA, but breadth collapsing (% >20EMA only 34.9%). Trend intact, but character + volume = avoid for momentum traders.

Mindset check → Pre-market noise is irrelevant if you’ve defined your trade. Stops are the most probable outcome, and they should be painless if size is right (<1% risk). The only real danger = oversized big losses.

Focused stock: NVDA → Coiling against $178 POC with higher lows at 50EMA. Not the cleanest momentum name, but its resolution will dictate semis — and semis lead markets.

Focused group: Clean Energy (PBW) → Explosive breakout above $25.15 on volume. Currently +6.4x ATR above 50EMA (stretched), but group relative momentum is back. Dig into leaders inside the ETF for asymmetric setups.

MARKET ANALYSIS
A Very Messy Pre-Market

Stocks are starting the week on a softer note after a record-breaking run. The S&P 500 and Dow both hit fresh all-time highs last week, with the S&P up 1.2%, the Dow up 1%, and the Nasdaq leading with a 2.2% gain. Small caps also joined the rally, with the Russell 2000 logging its seventh straight week of gains.

The backdrop remains all about the Fed. Last week’s quarter-point rate cut (the first since December) was widely expected and, after some initial market jitters, taken as confirmation of a more dovish tilt. Markets are now pricing in two more cuts by year-end.

This week’s spotlight is on the PCE price index, the Fed’s preferred inflation gauge. PCE carries weight because it captures a broad basket of spending and often signals where inflation is really headed. A hotter-than-expected number could revive chatter about sticky prices, while a softer print would reinforce the Fed’s dovish shift.

That said, the immediate impact may be limited. With the first cut already delivered and more expected, traders are likely to view PCE as another piece of the puzzle rather than a game-changer. The focus now is less about “if” the Fed cuts and more about how smooth the path looks from here.

Nasdaq

% over 20 EMA: 54.45% | % over 50 EMA: 51.48% | % over 200 EMA: 59.40%

The Nasdaq continues to be the undisputed leader among the major indices. Friday’s action was another decisive show of strength as QQQ is going near vertical, with price surging toward $600 and doing so in a manner that leaves little room for dip buyers.

This is Strength That’s Hard to Fade

• The push from $584 demand earlier this week has now turned into a straight-line rally.

• As much as we want to emphasize short-term mean reversion risk (QQQ is now extended well above its 10EMA), the strength is undeniable as sellers simply aren’t getting traction.

• This is the kind of tape where fading momentum is far more dangerous than missing a chase entry.

QQQE Confirmation: Broadening Out

The equal-weight Nasdaq ETF (QQQE) has confirmed the move. Last week it broke through multi-month resistance around $99.50, showing this is not just a mega-cap surge.

When QQQ rallies without QQQE, the story is usually narrow leadership (NVDA, MSFT, AAPL carrying the tape). When they move together, it’s a broad Nasdaq rally and raises the probability that this will sustain

As long as QQQ holds trend and QQQE confirms participation, it’s difficult to argue against the broader bull case. Short-term overbought risk is real, but the structural message is clear: risk appetite remains strong, and the leadership index is leading exactly as it should.

S&P 400 Midcap

% over 20 EMA: 38.09% | % over 50 EMA: 57.14% | % over 200 EMA: 60.15%

The midcaps continue to lag their large-cap peers, and Friday’s tape highlighted that divergence in stark terms.

Major Rejection at Supply

MDY was rejected hard at the overhead supply zone that has capped every attempt higher through September.

Friday’s rejection came on >163% relative volume, a sign that sellers were active and defending that level aggressively.

This has been the “line in the sand” for the entire month, and buyers have yet to prove they can clear it.

Why Volume Matters Here

Heavy relative volume at rejection points is rarely bullish. It tells us institutions are using strength to unload, not accumulate. For MDY, that’s the third time this supply zone has attracted real selling interest in as many weeks.

Key Levels to Watch

The real test is $595 demand (the green box). As long as that level holds, midcaps remain in a grinding consolidation.

A breakdown beneath $595 would be a negative structural development, likely opening the door for a move toward the rising 50-day EMA near $589.

Russell 2000

% over 20 EMA: 52.74% | % over 50 EMA: 66.88% | % over 200 EMA: 62.07%

The Russell 2000 is still climbing, but the quality of the move is questionable. On the surface, IWM is holding trend above its rising 10EMA and the textbook line that keeps momentum traders aligned with strength (KISS: Keep It Simple, Stupid). That’s the positive. But dig deeper, and the picture isn’t as clean.

🔹 Price vs. Character

• The Russell has moved higher, but the candles are messy with overlapping ranges, failed intraday pushes, and inconsistent follow-through.

• Contrast this with the Nasdaq (QQQ), where momentum is linear and trader-friendly. That difference in character matters: clean trends attract momentum capital, chop does not.

🔹 Volume Behavior

• We’re seeing rising relative volume on weak or indecisive candles, which suggests distribution or two-way battling, not smooth institutional accumulation.

• This is exactly the type of tape where traders get chopped out repeatedly as the trend “looks” intact, but the texture of price action tells a different story.

⚡ Our Take: IWM is clearly trending, but it’s not the place to deploy momentum capital right now.

Traders should recognize the distinction: structural risk-on vs. tactical trade quality. Structurally, the Russell holding above the 10EMA supports the broader bull case. Tactically, the choppy action, weaker breadth, and volume profile make it an avoid until we see real internal improvement.

🧠 Mindset Check: Don’t Let Pre-Market Scare You

Pre-market’s main weapon is doubt. One headline, one gap, one random wick at 8:45, and suddenly your brain wants to throw out yesterday’s whole thesis.

It looks dramatic because the order book is thin, volume is light, and every tick feels amplified. That’s exactly why so many traders sabotage themselves before the real session even starts.

The fix: don’t improvise.

As a swing trader, every trade should already be defined before the bell:

• Entry trigger

• Stop level

• Target zones

• Position size

• What invalidates the setup

That checklist is your anchor. Your trade thesis was built on structure with daily and weekly levels, trend, demand zones. Pre-market rarely changes that. It just shakes your confidence.

When you’ve done the work up front, pre-market can’t rattle you. If price opens inside your plan, you trade your plan. If it gaps straight through your stop, you’re out by design… no hesitation, no panic.

Getting stopped out is the most probable outcome of a swing trade. 

Most breakouts fail, most pullbacks chop, and only a minority trend into those “big win” buckets.

So why fear the stop? The only reason it feels painful is if you’re sized too big. Proper swing risk is tiny (Always <1% of account per trade). At that size, a stop is just a data point, not a drama.

The real danger isn’t small losses. The real danger is avoiding the stop, letting it balloon into a big loss, and nuking your capital curve.

Think of it like this:

• If 50–60% of your trades stop out, that’s just the cost of admission.

• With correct size, those stops are background noise while you wait for the few trades that actually trend.

• Your edge doesn’t come from dodging stops, it comes from keeping them small and giving yourself enough shots to catch the fat tails.

If you rely on gut feel in pre-market, the noise will always beat you. If you rely on your checklist, the noise is just that… noise.

FOCUSED STOCK
NVDA: The AI King Is Coiling

ADR%: 2.49% | Off 52-week high: -4.2% | Above 52-week low: +104.0%

NVDA is coiling tight against point of control supply at $178, a level that has acted as the fulcrum since mid-August.

That $178 zone has absorbed the highest traded volume in recent months (visible on VRVP), making it the key decision point for institutions.

Structural Setup

• Since the September lows, NVDA has carved a series of higher lows, each defended at the rising 50-day EMA.

• Volume patterns suggest defensive accumulation: sellers are unable to push price meaningfully below the 50-day, while buyers consistently step in on weakness.

• We’re seeing a compression between the 50-day support and $178 overhead supply, a classic energy build.

Relative Positioning

• The semiconductor group remains a market leader (SOXX, SMH both near highs).

• Leadership has rotated: MU and AVGO have shown cleaner momentum trends, while NVDA has been lagging. But lagging leaders matter when a multi trillion-dollar heavyweight like NVDA resolves compression, the signal carries weight across the entire sector.

• NVDA’s market cap is now >$4.2T, larger than the entire U.K. equity market. That scale means its price action is not just about NVDA, it’s a proxy for institutional allocation into semis.

FOCUSED GROUP
PBW: Clean Energy In A New Power Trend

Clean energy just reminded the market it’s still alive. On Sept 15th, PBW exploded above the $25.15 resistance level, triggering an aggressive breakout rally. The move came on high relative volume and exactly the kind of confirmation you want to see when institutions are stepping in.

Since then, momentum has gone vertical. PBW is now trading at 6.4x its ATR multiple above the 50EMA. That’s stretched in the short term and raises the risk of mean reversion.

But paradoxically, that stretch also highlights just how powerful the relative momentum is right now as buyers are willing to chase.

⚠️ Focus: The group is back on the map, but chasing after a 6x ATR extension is not the high-probability play. The smarter move is to dig inside the group and isolate the top growth + momentum names and the ones showing the strongest relative strength vs the market over the past 1–3 months.

Those are the stocks that institutions are most likely to defend on dips. That’s where the real asymmetric opportunities will be if PBW consolidates and sets up again.

Q&A
Got a trading question? Hit reply and ask!

Q: “What’s the point of selling into strength if you’re trying to play for a bigger move? Why not just trail everything with moving averages?”

A: Trailing-only sounds perfect in theory: ride every move until it ends, catch the monsters. But in reality, it fails because it all comes down to distribution and expectancy.

🔑 Step 1: What Most Trades Really Do (Backed by Research)

Decades of research from O’Neil’s How to Make Money in Stocks, Weinstein’s stage analysis, and academic studies like Jegadeesh & Titman (1993), all confirm the same thing:

• Most breakouts fail or stall.

• A smaller portion trend cleanly for weeks.

• A tiny fraction deliver the outlier returns that drive long-term performance.

For example, O’Neil observed that many of the best winners make their sharpest percentage gains within the first 2–3 weeks of the breakout. Jagadeesh & Titman showed that momentum works on average, but returns are highly skewed- meaning a small handful of trades generate most of the gains.

This “fat-tail” behavior has been confirmed by many follow-up studies (Moskowitz & Grinblatt 1999, Asness et al. 2013).

🔑 Step 2: The Five Outcomes Framework

Every trade ends up in one of five buckets:

1. Big loss (avoidable with risk <1%).

2. Small loss.

3. Breakeven.

4. Small win.

5. Big win (fat tail).

The best trades don’t try to predict which trade will be #5. They build rules that push trades upward through the buckets:

small losses → scratches → small wins → optionality for the rare fat tails.

🔑 Step 3: Why Sell Into Strength?

Because the most probable part of a breakout is the early momentum burst (Stockbee’s system shows this best).

By selling a portion into that strength you:

• Lock the probable outcome. That 2–5 day burst pays something instead of nothing.

• Shift the curve upward. Instead of taking a clean –1R loss when a breakout fails, you might bank +0.5R or scratch the trade.

• Buy staying power. A smoother equity curve means you survive long enough, financially and mentally, to capture the rare multi-month runners.

🔑 Step 4: Why Not Just Trail?

Trailing-only systems do great in trend years (2020, 2023 AI melt-up). But in sideways markets (2015, 2018, much of 2022) they:

• Suffer long strings of full stop-outs.

• Depend entirely on rare outliers that can’t be predicted in advance.

• Demand psychological resilience most traders don’t have (sitting through 8–12 losses in a row waiting for “the big one”).

That’s why it’s best to blend both by scaling AND trailing.

🔑 Step 5: A Practical Illustration

Imagine 100 trades. It often looks something like this:

• ~60 go nowhere (small losses or scratches).

• ~25 give a quick 10–20% burst and fade.

• ~10–15 trend for weeks.

If you only trail:

• You absorb the 60 losers.

• You miss monetizing the 25 burst trades.

• Your P&L relies entirely on the 10–15 trenders.

If you scale + trail:

• Many of those 60 losers become scratches or small wins.

• The 25 bursts contribute real P&L.

• You still hold exposure to the 10–15 trenders.

Same market. Same entries. But your distribution and equity curve, are transformed.

Inside Swingly PRO, we meet up every week and discuss how these exit models behave across different market regimes, which methods reduce drawdowns, and which deliver the highest expectancy when conditions change.

If you found today’s report helpful, consider joining the team.