OVERVIEW
Flat Tape, Rising Tension

🟥 Risk-Off: The market is quietly fraying beneath the surface. QQQ pushed to new highs yesterday on gap-up selling, with a high relative volume fade that signals distribution, not strength. Most earnings are solid, but reactions are weak which is a classic sign of exhaustion. Outside of semiconductors, leadership is eroding fast.

📊 Breadth and Market Structure: There’s no collapse, but there’s no follow-through either. Breakouts aren’t sticking. Many growth stocks are hovering just above key EMAs, while momentum names like AFRM and PLTR are coiling or breaking down.

🏗️ Midcaps and Small Caps Breaking Structure: MDY failed to hold post-POC breakout levels, and momentum is fading. IWM broke below its 10-day EMA on rising volume with the tail end of the risk curve now under pressure.

A Wyckoff-style distribution range may be forming. Institutional selling often hits small caps first — and it’s starting.

MARKET ANALYSIS
Will Powell Spook The Sell-Off?

There’s no new macro catalyst driving action this morning as futures are flat, but beneath the surface, reactions are telling the real story.

Yes, earnings have been strong on an absolute basis- beat rates remain high, margins are holding, and most of the big names are posting solid top-line numbers. But the market's reaction has been underwhelming.

Why? Positioning and extension.

Most of the upside in recent weeks has been driven by a narrow set of semiconductors and AI names. Outside of those, breadth is softening. Leading growth stocks are starting to break down, and even strong earnings (e.g. Visa) are being met with selling. That’s not a comment on fundamentals but a function of how far we’ve already run and how crowded this tape has become.

The price action is telling you the market is tired.

Meanwhile, Powell takes center stage this afternoon. CME FedWatch shows a 98% probability of no hike- so the real risk isn’t the rate, it’s the reaction. That’s where we’ll focus next in the Mindset Check section.

Bottom line: The surface looks calm. Underneath, it’s not. Respect the distribution and stay nimble.

Nasdaq

• Gap-up + full red fade + high relative volume: We opened strong on back of anticipation for mega-cap earnings, but that strength was immediately sold into. Notably, relative volume surged well above average, signaling that institutional players used the gap to exit into late buyers, not chase.

• Visible Range Volume Profile (VRVP): We’re sitting right on top of a heavy volume node just above the $560–565 range. There’s now clear volume resistance directly overhead, with mostly red shown on the VRVP demonstrating dense selling pressure. That makes any breakdown more vulnerable to fast momentum unwind moves.

• Macro context: Earnings are good in absolute terms. But the market is failing to reward results. Breakouts aren’t sticking, and participation is narrowing with semiconductors doing all the heavy lifting. Tech leadership is decaying beneath the surface.

Bottom line: This is how tops form- not with panic, but with euphoric highs quietly handed off to late money. Stay tactical. If QQQ closes below its 10EMA on high volume, a deeper pullback is likely in play.

S&P 400 Midcap

The midcaps continue to grind sideways in a lethargic stall pattern. Despite briefly reclaiming the Point of Control (POC) last week, there’s been zero follow-through, and price has now settled back into a low-volume drift.

While yesterday’s bounce off the rising 10EMA technically preserved trend structure, momentum is clearly fading. Each attempt to extend higher is being met with apathy and fewer stocks are participating all as volume continues to dry up.

This group is structurally far more vulnerable than QQQ or SPY if we get a real de-risking move. Why?

• Lower liquidity and less crowding protection

• More exposure to real economy cyclicals

• Increased sensitivity to CTA unwinds or fund rebalancing

Russell 2000

Small caps are starting to visibly unravel, with IWM printing a decisive break below its rising 10-day EMA on a clear uptick in relative volume. This comes after several weeks of compression following the late-June thrust with what initially looked like a healthy flag is now increasingly resembling a Wyckoff distribution structure.

We’ve seen:

• Buying Climax (BC) into the late June highs

• Automatic Reaction (AR) and Secondary Test (ST) playing out in a tightening range

• And now, the start of a Sign of Weakness (SOW) as price breaks short-term trend support with deteriorating internals

The Russell represents the risk frontier of the equity market, and its breakdown often leads or confirms broader deleveraging. With large caps stalling and midcaps unable to follow through, the relative weakness in small caps is a key tell that institutional appetite for risk is fading.

If this is true distribution, the next phase is a breakdown below range lows, which would align with increased risk-off behavior across the board.

For now, this is not a buy-the-dip zone. Treat small caps as a canary. If they continue to unravel, the pressure will ripple upward.

🧠 Mindset Check: Don’t Try to Outsmart a Loaded Dice

According to the CME FedWatch Tool, there’s a 97.9% probability that the Federal Reserve holds rates steady at 4.25%–4.50% today. The market has priced in "no surprise." But that’s not where the real risk lies.

The danger isn’t in the base case but it’s in the reaction to what Powell says.

This is classic second-order risk. Traders don’t blow up because they were wrong about the Fed. They blow up because they were right about the decision but wrong about how everyone else would respond.

What makes this meeting particularly sensitive:

• Trump’s pressure campaign on Powell to cut rates (and floating ideas to remove him) has elevated political tension around Fed independence — this may alter Powell’s tone or trigger defensiveness in his language.

• Earnings season has disappointed: breadth is weakening, participation is narrowing, and upside momentum in leading growth stocks (e.g., NVDA, PLTR, SMCI) is eroding. The market’s appetite for further upside is getting thin.

• Positioning is stretched: Hedge funds and quant systems are loaded up on stocks right now at near the most aggressive levels we’ve seen in years. If Powell sounds even slightly less supportive, that could cause a wave of selling as funds rush to reduce risk.

💡 Sector Sensitivity: Watch These Groups Closely

• Mega-cap Tech & Growth (NVDA, PLTR, ARKK, SMCI, etc): These names are long-duration and ultra-sensitive to rate expectations. Even a minor shift in Powell’s tone could cause violent intraday volatility.

• Gold & Miners (GLD, GDX): Will react primarily to real rates and USD direction. Strength heading into the meeting implies expectations of a dovish tilt. Reversal post-FOMC would hint at risk-off recalibration.

• Financials (XLF, KRE): Not about the base rate. These care more about the shape of the yield curve. If Powell causes a flattening or bull steepening, it will directly impact financial sector rotation.

The Real Risk Comes After the Decision

Don’t try to front-run the Fed. The trade isn’t the rate decision, it’s the dislocation after the fact. Manage your exposure accordingly:

• If you’re in winning positions: reduce risk if extended, tighten stops, and trim size.

• If you’re flat: stay flat until you see clear confirmation post-meeting. The best trades often come after volatility spikes, not before (and this could be the catalyst for stocks to finally pullback much harder after a 3 month rally).

Remember: When everyone’s leaning one way, you don’t need to be contrarian, but you do need to be surgical.

FOCUSED STOCK
AFRM: What to Watch in a Pullback

Affirm remains one of the best examples of what you want to see during a potential market pullback: sustained structural demand, compression near highs, and rising institutional support levels.

📉 Context

• AFRM broke out of a multi-month inverse head-and-shoulders pattern in late May 2025. We missed the initial breakout, but it’s what followed that matters more now.

• The stock is now flagging into a symmetrical triangle, compressing just below a key prior resistance at ~$68. This is classic linear contraction after a trend impulse and textbook setup construction for us momentum swing traders.

🔍 Technical Structure

• Three clean higher reaction lows have formed off the rising 10-week EMA (not shown here but confirmed on the weekly), indicating strong intermediate-term demand.

• The 10, 20, and 50-day EMAs are coiling, showing tight contraction and setting up the potential for explosive resolution once the triangle breaks.

• Volume has declined during the pullback, exactly what you want to see when gauging whether sellers are in control.

📊 Volume Profile Insight

• The Visible Range Volume Profile (VRVP) shows a large volume node between $67 and $70, meaning we’re trading inside a congestion zone with prior acceptance.

• Once price clears this region decisively, particularly above $70 on volume, we could see a rapid expansion move as there’s very little overhead supply until $75–77.

🧠 Why This Matters

AFRM isn’t actionable today with its high relative volume rejection yesterday plus a softening equities market, but it’s a prototype of what to study and flag when markets are pulling back. You want to be preparing a “next-in-line” list of structurally strong stocks:

• Former leaders

• Tight patterns

• Rising moving averages

• Favorable volume profiles

In pullback conditions, preparation > prediction. AFRM shows you how.

FOCUSED GROUP
USO: The “Crude” Awakening

USO broke out above its 5-month base at $78 with elevated relative volume two sessions ago. That move was confirmed yesterday with even greater relative volume, indicating strong institutional participation. This two-day surge pushes USO into a new technical regime.

🧱 Visible Range Volume Profile (VRVP): Dual Signal

• The breakout cleared a major high-volume shelf around $76–78, which had previously capped every advance since March.

• However, the VRVP shows stacked overhead supply between $80 and $83 and this is the next major battleground. It's dense, and historically has been a zone of distribution.

Momentum is strong, but supply isn't gone: We’re entering a zone where trapped longs may look to exit. That makes price behavior in the next few sessions absolutely crucial.

🧮 Moving Averages

USO is trending above a rising 10/20/50-day EMA stack- all accelerating. The 200-day MA is catching up and curling higher, but still lagging. Momentum is clearly to the upside, and pullbacks to the 10/20 EMA should be watched for continuation setups.

📊 Why it Matters Now

This oil strength is happening just as growth stocks are beginning to stall or break trend. If extended tech begins a deeper unwind, and capital rotates into energy and commodities, USO is in prime position to benefit.