OVERVIEW
🟥 Risk Off: Weakness Is Spreading

Narratives Fade: Nvidia & Oracle dragging tech lower for a 3rd day → AI trade showing valuation fatigue. Don’t marry a single theme.

Macro Watch: Labor market in focus — jobless claims steady, Powell signaling jobs > inflation. Friday’s PCE + potential gov’t shutdown = macro overhang.

Nasdaq (QQQ): Breadth thinning (20 EMA: 51%) → bounce off 10-EMA lacked conviction. Below = fast air pocket to $581 (-2.5%).

Midcaps (MDY): Demand shelf at $596 broke → Wyckoff Sign of Weakness confirmed. Next anchor = 50-day EMA (~–1.2%).

Small Caps (IWM): Erased 2 weeks of gains in 48hrs → sliding into VRVP void toward $238 20-EMA. Clear vulnerability.

Mindset Check: Cash is a position. Preserve April–July gains, collect 4% yield, stay liquid for the next high-conviction wave.

Sector Rotation: Growth (XLK, XLY, CIBR) rolling over. Energy (XLE, RSPG) breaking out on exceptionally high relative volume → baton of leadership shifting.

MARKET ANALYSIS
This Is Why You Don’t Marry A Narrative

The market’s been losing a bit of steam this week, with Nvidia and Oracle sliding for a third straight day and pulling tech lower with them. After such a big run, some profit-taking isn’t a surprise, but it’s also a reminder that the AI trade ,while powerful, isn’t immune to questions about valuation and sustainability.

The bigger story right now is the labor market. Weekly jobless claims are out today, and while layoffs have ticked up here and there, Powell has already made it clear the Fed is more worried about jobs than inflation at this stage. Unless we see a sharp jump in claims, most don’t expect it to snowball into something bigger.

Looking ahead, Friday’s PCE inflation report and the possibility of a government shutdown are hanging over the market. For now, the tone feels cautious—balancing excitement around AI with some very real macro risks.

Nasdaq

% over 20 EMA: 51.48% | % over 50 EMA: 44.55% | % over 200 EMA: 59.40%

Structurally, QQQ bounced yesterday at the rising 10-EMA, but the quality of that bounce matters more than the headline print. Demand stepped in, yes, but it was on materially lighter volume than Tuesday’s bearish engulfing candle.

In plain terms: sellers shouted, buyers whispered. That imbalance raises our conviction that deterioration, not recovery, is now the dominant risk.

The volume profile adds further weight. Above current levels, liquidity is thin with a hollow pocket with no real sponsorship. Below, there’s a low-volume air pocket stretching down to $581, just under the daily 20-EMA.

That’s the next dense volume cluster, the level where meaningful demand last organized. If today’s undercut of the 10-EMA fails to hold, the market will almost certainly be magnetized toward $581, a move of roughly –2.5% from here.

This is the typical setup we see at distribution turning points: breadth narrowing, bounces on weak volume, and a VRVP profile that leaves price “hanging” over thin air.

The bulls’ job is simple but difficult. They must defend the 10-EMA with real conviction. Fail there, and QQQ is staring straight into the $581 shelf.

Momentum traders thrive by respecting when the character shifts.

Right now, the Nasdaq’s message is less about opportunity and more about risk. When the profile thins out beneath you, you don’t press harder, you step back, protect capital, and let the market prove it still has sponsorship before you lean in again.

S&P 400 Midcap

% over 20 EMA: 33.58% | % over 50 EMA: 51.37% | % over 200 EMA: 60.40%

The midcaps have tipped their hand — and the message is bearish. For weeks, MDY had been grinding sideways in what looked like a balance phase, but yesterday the tape broke decisively: the $596 demand shelf snapped.

\That shelf wasn’t just another line on the chart; it was the level that had quietly absorbed selling pressure through multiple tests. With it gone, the market has shifted from “holding the floor” to “searching for the next one.”

When mapped through the Wyckoff lens, this isn’t consolidation, it’s distribution. The sequence has been playing out in plain sight:

• Buying Climax (BC): The initial push into early September highs.

• Automatic Reaction (AR): The first retreat that defined $596 as the lower boundary of the range.

• Secondary Tests (ST/UT): Multiple failed rallies back toward resistance, each weaker and on lighter demand.

• Sign of Weakness (SOW): Yesterday’s clean break of $596, with no responsive demand.

That breakdown marks the tape’s transition into weakness — the point in the Wyckoff cycle where institutions have already sold into strength and the market begins to slide under its own weight.

The danger is amplified by the volume profile. Beneath $596 sits a thin pocket — almost no historical sponsorship until the rising 50-day EMA, about 1.2% lower. Markets hate empty air like this.

Once price loses its footing, it tends to cascade until it finds the next dense demand cluster, and right now that anchor sits at the 50-day.

Russell 2000

% over 20 EMA: 47.02% | % over 50 EMA: 63.12% | % over 200 EMA: 62.20%

Small caps have flipped from strength to fragility in just two sessions. What looked like an orderly advance through September has now unraveled — IWM has effectively given back the entire run from September 11th in only 48 hours.

That velocity alone is a tell: when gains that took weeks to build are erased in days, it’s not healthy consolidation, it’s distribution pressure asserting itself.

Technically, IWM now sits in a vulnerable pocket on the volume profile. The ETF is sliding into a thin liquidity zone that stretches down toward $238, where the rising 20-day EMA provides the next structural anchor.

Markets rarely stall in low-volume voids; more often they traverse them quickly until they reconnect with dense demand. Right now, that anchor sits directly at $238.

For traders, the implication is clear: this is not the place to press aggressive longs. Momentum thrives when leadership is expanding and shelves are holding. Here, strength is fading, shelves are breaking, and gains are reversing.

Until IWM can stabilize above $238 with conviction, small caps sit squarely in the vulnerable camp — another piece of evidence that distribution is spreading beneath the surface.

🧠 Mindset Check: Cash Is a Position

Most traders suffer from action bias — the urge to always be in a trade. Others know the opposite: cash is an active, alpha-generating decision.

It has risk/reward, opportunity cost, and — in today’s rate environment — positive return.

Why Cash Is a Weapon

• Capital Preservation = Compounding Power
  If your account is +50% from April–July 2025, defending that gain through August–September chop compounds wealth as effectively as a winning trade — but without the downside risk.

• Positive Carry
  In 2025, USD cash yields ~4%. A $250K account parked for 2 months earns ~$1,667 risk-free, while staying fully liquid.

• Flexibility & Strike Power
  Cash-rich traders can hit high-conviction setups instantly instead of clawing out of drawdowns.

Historical Cash Triggers
After 3–4 month surges (Aug–Nov 2020, Mar–Jun 2023), broad market win rates dropped 25–40% in the next 4–8 weeks.

Our breakout model (42% baseline win rate) typically falls below 30% win rate after such aggressive market runs. That’s our personal signal to shift defensive.

Your Cash Checklist:

1. Market breadth narrowing?

2. System win rate <30%?

3. High prior gains to protect?
   If yes to 2+ — cash is the highest-ROI position.

FOCUSED GROUP
RSPG: Energy Pushing Is Not Good

One of the most important developments in the past 72 hours has been the clear divergence between the growth complex and energy.

Across XLK (Tech), XLY (Discretionary), and CIBR (Cybersecurity) we’re seeing a coordinated pullback. Breakouts that looked powerful two weeks ago are now rolling over, and former leaders are failing to extend. That weakness isn’t isolated, it mirrors the deterioration in RSP and confirms that institutional appetite for high-beta growth has cooled sharply.

Energy tells the opposite story. Both XLE (cap-weighted) and RSPG (equal-weight energy) have broken higher, but the key signal lies in RSPG. Unlike XLE, which can be carried by mega-caps like XOM and CVX, RSPG reflects the performance of the average energy stock.

Its decisive breakout in the past two sessions has been accompanied by exceptionally high relative volume, the kind of profile that only appears when institutional sponsorship is entering at scale.

In a tape where breadth is deteriorating and volatility is rising, capital consistently seeks out sectors with tangible earnings leverage and defensive attributes. Energy fits that bill. The juxtaposition of growth rolling over while RSPG accelerates on volume is exactly the type of sector inflection that precedes larger leadership shifts.

For traders, the implication is straightforward: the baton has moved. The growth-driven rally that dominated two weeks ago is losing sponsorship, while energy is emerging as the only sector with both structural breakout patterns and institutional volume confirmation.