MARKET ANALYSIS
Here’s All You Need To Know

• The market is taking a breather this morning after a very strong six week run, with futures mostly flat as oil moves higher again on renewed U.S. and Iran tension.

• Trump rejected Iran’s latest proposal over the weekend, calling it “totally unacceptable,” and that immediately pushed crude higher, with WTI back above $97 and Brent above $103.

• This is not a major risk off open, but it is the first session in a while where the market is being forced to respect oil risk again.

  

  WTI VRVP Daily & Weekly Chart

• WTI crude itself is starting to look technically strong. Price is holding above its rising 10 week EMA and tightening inside a clear consolidation structure, which is beginning to look like a volatility contraction pattern.

• That matters because if crude starts expanding out of this base, we would expect the oil and gas ETFs to follow. The main groups to track are XOP, XES, and broader energy exposure through XLE.

• XOP gives us the cleanest read on oil and gas exploration and production, while XES is important for oil and gas equipment and services. If both start expanding with volume, that would tell us crude strength is translating into sector leadership.

• This is also important for stock selection. If crude breaks higher and the ETFs confirm, the strongest individual names inside those groups should start moving quickly.

• We would not ignore this rotation. Growth is still strong, but if oil begins breaking out at the same time, energy could become one of the most important areas of the market to track this week.

• The broader market has become very good at absorbing the Iran conflict, but that does not mean the risk has disappeared. Oil at these levels is still a headwind rather than a market breaking shock, but another major leg higher would start to feed more directly into inflation expectations, consumer pressure and Fed policy.

• That makes this week’s inflation data important. Investors will be watching CPI and PPI closely to see whether the oil shock is starting to show up more clearly in the data.

• If inflation stays contained, the market can continue to focus on earnings, AI and growth leadership. If inflation reaccelerates, the Fed becomes a much bigger problem again.

• Last week’s jobs report helped the bull case because payrolls came in stronger than expected, but not hot enough to completely change the Fed conversation. The economy still looks resilient, which is why the market has been able to keep pushing despite the geopolitical noise.

• Earnings are also doing a lot of heavy lifting. The S&P 500 and Nasdaq both posted their sixth straight winning week, with the Nasdaq up more than 4% last week and the S&P 500 up more than 2%.

• Technology and AI remain the main engine of the rally. South Korea’s Kospi surged again overnight, led by chip strength, with SK Hynix rallying more than 11% and the index closing at another record high.

• That matters because this is not just a U.S. tech rally anymore. The AI and semiconductor trade is still lifting markets globally.

• The key split in the market is clear. Growth, semiconductors and AI linked names are still attracting capital, while anything directly exposed to higher oil costs, such as airlines, remains vulnerable.

• This is why we still treat the current market as risk on, but not risk blind. The trend is strong, buyers are active, and earnings momentum has not broken, but after the size of the move we have had, the market probably needs some digestion.

• The S&P 500, Nasdaq 100, information technology and communication services have all been pushing into overbought territory, so a pause or pullback would be healthy here rather than bearish.

Nasdaq

56.43%: over 20 EMA | 55.44%: over 50 EMA | 57.42%: over 200 EMA

• The Nasdaq remains extremely extended, now sitting around 10 ATR multiples above its 50 day moving average.

• Mean reversion was already becoming likely a few sessions ago, but at this level of extension the probability is now materially higher.

• This is not the point in the trend where we want to be forcing fresh long exposure on marginal highs.

• This is now a trend trader’s market, meaning the best entries were either on the pullbacks between April 23rd and April 30th, or ideally on the breakout from the inverse head and shoulders structure on April 7th.

• If traders are already positioned from those levels, this is the type of strength where trimming into the move makes more sense than adding aggressively.

• That can feel counterintuitive, because most traders want to push exposure once the market looks strongest, but asymmetry is now much worse for fresh longs.

• From our perspective, the better trade is now shifting toward waiting for a pullback, and we would be watching for a potential parabolic short setup in QQQ if extension continues.

• The equal weighted Nasdaq, QQQE, is already starting to mean revert this morning, down around 0.7% in premarket.

• QQQE has also gone almost straight up for six weeks and is now sitting around 8.48 ATR multiples above its 50 day moving average.

• The Magnificent Seven are also starting to show early signs of mean reversion this morning.

  

  MAGS VRVP Daily & Weekly Chart

• The MAGs themselves are around 7 ATR multiples above their 50 day moving average, so nearly every major growth component driving this rally is now extended at the same time.

• This matters even more because WTI crude oil is holding its rising 10 week moving average and beginning to show evidence of potential expansion higher.

• If oil starts pushing again, that can weigh on the growth equity trade, especially when the Nasdaq, QQQE and the MAGs are all already this extended.

S&P 400 Midcap

52.00%: over 20 EMA | 63.50%: over 50 EMA | 58.25%: over 200 EMA

• The mid caps have started to weaken over the last two sessions, which is exactly the type of action we expected to eventually see in the Nasdaq as well.

• Thursday’s session had an intraday range of roughly 2.17%, which is about 1.8 times greater than the expected average daily range.

• Friday then printed an inside hammer candle on very low relative volume, only 29% of the 20 day average.

• That shows some short term weakness, but not the type of heavy volume selling that would imply a major trend break.

• There is still a gap to fill toward the rising 10 day moving average at 668, and from our perspective that now looks like a likely scenario.

• None of this threatens the longer term trend.

• Mid cap breadth is still healthy, with around 63.5% of stocks above their 50 day moving average and around 58.25% above their 200 day moving average.

• This still looks like a short term pullback after a very strong six week rally, not the start of a broader breakdown.

• A move into the rising 10 day EMA would be healthy and would help reset the structure.

Russell 2000

58.16%: over 20 EMA | 69.73%: over 50 EMA | 61.72%: over 200 EMA

• The Russell 2000 is largely mimicking the mid cap trend, which makes sense because both groups are traded by similar risk appetites.

• Mid caps and small caps are both further down the risk curve, with higher volatility and higher average daily ranges than large caps.

• IWM has also gone almost straight up for six weeks, rallying roughly 21% in that period.

• It remains the strongest capitalization group from a relative strength standpoint, with a 77 relative strength rating versus the SPX.

• That strength is impressive, but the move is now stretched, with IWM sitting around 5.3 ATR multiples above its 50 day moving average.

• From our perspective, a pullback toward the rising 10 day EMA at 279.90 would be the cleanest and healthiest outcome.

• That level also lines up with a strong demand area on the visible range volume profile.

• Around the 10 day moving average, we have roughly 2.2M shares traded green versus only 660,000 shares traded red.

• That is more than a 3 to 1 buyer imbalance, which tells us there is strong demand sitting near that level.

• A pullback into that zone would not be bearish. It would likely create a better long entry for traders who missed the earlier move.

FOCUSED GROUP
GDX: You Must Not Ignore Gold Miners…

• We remain extremely focused on the gold mining segment.

• GDX is tightening into what looks like a volatility contraction pattern after building a higher low structure since the April dip.

• GDX found support on the rising 200 day moving average and is now getting very tight below the 10 week moving average, the declining 50 day EMA, and the daily point of control.

• That compression matters because when price gets this tight around key moving averages and volume structure, it often precedes a larger expansion.

• The setup in GDX is being confirmed by the underlying metal.

  

  XAUUSD VRVP Daily & Weekly Chart

• XAUUSD, the gold spot price against the U.S. dollar, is also getting extremely tight and narrow.

• We generally prefer trading XAUUSD directly where possible, because gold trades 24 hours and provides cleaner execution.

• GDX can still be used for traders who do not want direct commodity exposure, but opening range breakout entries can be harder because the stopout risk is often higher.

  

  XAGUSD VRVP Daily & Weekly Chart

• Silver is even more interesting here.

• XAGUSD often front runs gold expansions, and silver is already beginning to break out.

• We have been discussing gold and silver since the beginning of last week, when both started testing key structure around $70 on XAGUSD and around $4,500 on XAUUSD.

• Both have now reset, tightened, and are moving in tandem.

• This looks like an intermediate trend breakout in both gold and silver.

• From our perspective, gold and silver are now among the highest asymmetry long opportunities in the market.

• We would be aggressively focused on silver and gold exposure here, because unlike the Nasdaq and many growth groups, these setups are not already deeply extended.