OVERVIEW
Follow the megacaps — or Stay in Cash

Market tone: Leadership remains concentrated in a few mega-cap tech/AI names while the rest of the market chops sideways with thin follow-through.

Breadth divergence: Equal-weight vs. cap-weight spreads in both Nasdaq and S&P 500 have widened sharply — typical late-stage behavior that raises fragility risk.

Midcaps (MDY): Back-to-back rejections at declining EMAs and POC; sitting right on the 50-EMA.

Small caps (IWM): Resilient flag build at POC despite decade-high short positioning.

Catalysts this week: CPI (Tue) and PPI (Thu) could spark volatility, but unless we see a shock print, the broader tape is still in digestion mode.

Playbook: This is an either/or tape — stay aligned with the few liquid leaders in strong Stage 2 trends, or stay in cash until a cleaner expansion emerges.

MARKET ANALYSIS
Digestion, Chop & Frustration

No macro “game-changers” on deck this week. Liquidity is still crowding into a handful of mega-cap tech/AI leaders, while the rest of the market chops with thin leadership and inconsistent trends.

Yes, CPI (Tue) and PPI (Thu) could spark short-term volatility, and Jackson Hole looms later this month — but barring a shock print, the dominant theme remains sector rotation and digestion, not a broad macro reset.

Why it matters:

• Best case → Controlled consolidation allows prior leaders to rest and build new bases.

• Worst case → Choppy tape lures traders into chasing low-quality setups.

For now, the danger isn’t the digestion — it’s forcing trades inside it.

Nasdaq

Market Breadth
% over 20 EMA: 46.53% | % over 50 EMA: 50.49% | % over 200 EMA: 60.39%

The gap between QQQ (cap-weighted) and QQQE (equal-weighted) has become impossible to ignore. Liquidity is now concentrated in a handful of mega cap tech and AI names, not the broad base of leaders we had earlier in the cycle. That narrowing is typical late in a move but it also increases fragility risk.

Inside QQQ, price is still pressing higher but on falling relative volume — a pattern that rarely fuels sustainable multi-week rallies and often sets up bull traps.

The line in the sand is simple. If QQQ can break to new highs and stay there, leadership can extend. If it fails and rolls over, the divergence likely resolves with speed.

Key trigger: a decisive hold above recent highs with breadth expansion would keep the uptrend intact. Failure to hold those highs — especially if %>50 EMA continues to fall — would raise the probability of this divergence resolving to the downside.

S&P 400 Midcap

Market Breadth
% over 20 EMA: 39.90 % | % over 50 EMA: 52.36% | % over 200 EMA: 48.37%

Midcaps closed last week on the defensive after back-to-back rejections at key resistance. Thursday’s gap-up into the declining short-term EMAs and Point of Control (POC) was met with sharp selling. Friday confirmed the tone with another rejection at the falling 10-EMA.

We’re now parked just above the 50-EMA — the immediate battleground. A decisive breakdown here would expose the rising 200-EMA as the next logical target, with the visible range volume profile showing heavy demand waiting in that zone.

Why it matters: Midcaps have been the “swing sweet spot” in past upcycles, often leading recoveries when risk appetite returns. Holding the 50-EMA could set the stage for a rotation back into mid-tier growth names. Losing it with breadth already sub-50% would suggest a shift toward risk-off positioning.

Russell 2000

Market Breadth
% over 20 EMA: 36.57% | % over 50 EMA: 46.54 % | % over 200 EMA: 43.43%

Small caps are actually holding up better than midcaps — a surprising divergence given that institutional short positioning in the Russell 2000 is at the highest level in over a decade. That type of aggressive short build-up can act as fuel if we see price start to push higher and force a cover.

From our perspective, the higher-probability capital allocation still lies in megacap tech leadership. But technically, IWM has shown resilience: last week it bounced multiple times off its Point of Control (POC) around $220, with four straight closes above that level.

Undercuts below have been quickly bought up, and price is now building a flag along this support zone. If that structure resolves higher, shorts could be caught leaning the wrong way (which will fuel a very aggressive short squeeze).

🧠 Mindset Check: Understanding Your System

The market’s “tempo” changes — and right now, it’s faster than it was a few months ago. If you’re still trading like it’s May, you’re out of sync.

Two things we know from decades of market research:

1. Volatility clusters. Quiet tapes stay quiet; wild tapes stay wild. These shifts in volatility change how long trades take to complete.

2. Trend-following works — until it doesn’t. Time-series momentum is a proven edge across assets, but it breaks down after sharp rebounds or high-volatility “panic” phases (so-called “momentum crashes”). In those periods, trends fail faster and holding periods shrink.

Why It Matters Now

When breadth is fragmented and volatility is shifting, multi-week swing trades lose reliability, but shorter-term swings (1–5 days) and quick bursts become more profitable. This compression effect shows up across markets — the tape simply “pays out” faster.

How to Adapt

• Shorten your plan, not your discipline. Take profits into strength sooner; stop grading trades by last month’s trend length.

• Let data guide you. Use your own rolling win-rate, breadth, and ATR% logs to confirm when the regime has shifted — no guessing.

• Codify the change. If your logs show shorter hold times outperforming, make that your rule until the market expands again.

Bottom line: Trade the market in front of you, not the one you wish you had. Timeframe discipline keeps you aligned with the tape — and keeps you out of the regimes that chew up your edge.

FOCUSED STOCK
TSLA: Our Top AI Trade Idea

ADR%: 3.5% | Off 52-week high: -32.5 % | Above 52-week low: +69.3%

In the current chop, leadership is concentrated in large and mega-cap tech/AI names. TSLA stands out with one of the cleanest weekly setups on our screens.

Price has been contracting neatly along the 10, 20, and 50 EMAs — a multi-week base without the parabolic, 40%+ run-ups that have left many peers vulnerable. This rangebound action keeps the structure intact and avoids the whipsaw risk plaguing most of the market.

Why it matters: TSLA isn’t just EV — it’s AI, robotics, and potentially autonomous transport. The stock is holding right at its weekly Point of Control (POC), signalling strong demand absorption at a key level.

If/Then Levels:

• Bull case: Breakout over ~$338 on high relative volume triggers entry under our system, with upside into $354–$360 initial zone.

• Bear case: Failure to push over this levle sees a likely mean reversion down to daily point of control (POC) at $322 which is a -3.91% move (this will not invalidate the set-up).

FOCUSED GROUP
BLOK: Blockchain & Crypto Pushing

The entire cryptocurrency complex is surging — Bitcoin and Ethereum remain in strong uptrends, with secondary names like XRP and SOL catching momentum. BLOK, an ETF focused on blockchain and crypto adoption, is a clean proxy for this move. Its top holdings — HOOD (currently one of the strongest stocks in the equity market), COIN, MSTR, and GLXY — all stand to benefit directly from rising crypto activity.

On Friday, BLOK bounced off its Point of Control (POC) on high relative volume, defending key support and signalling renewed demand. Premarket, price is breaking out from a recent contraction zone — opening room for potential continuation if crypto strength persists.

If/Then Levels:

• Bull case: Sustained move above $58.70 (contracted range high) opens upside toward $62 which is a +5.4% push.

• Bear case: Failure to hold $56.75 POC likely results in a $55.60 retest of the 50 day EMA (-4.42% move from current level).

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

Q: “I can see the divergence between the cap-weighted groups and the equal-weight groups like you mentioned. Does that mean we’re going to break down soon?”

We get why you’d think that and historically, breadth divergences like this often precede weakness. But here’s the truth: no one knows exactly when (or if) the break will happen. The good news? You don’t need to know either.

Our job isn’t to forecast — it’s to execute.

Our Framework:

• Offense Mode → Buy markets and stocks coming out of Stage 1 bases or early Stage 2 uptrends.

• Defense Mode → If leaders crack into Stage 4 or there are no names holding sustained trends, we scale back fast — even to 100% cash.

• Patience Mode → Wait for multi-week consolidation breakouts instead of forcing trades in a low-quality tape.

This logic comes straight from Wyckoff principles and Stan Weinstein’s Stage Analysis which are two frameworks every serious swing trader should master.

Right now, breadth divergences tell us the market is fragile, but leadership is still intact in certain mega-caps. Other styles e.g. quick pullback buys, mean reversion scalps, intraday momentum, are thriving.

That’s not our game. We’re home-run traders. We’ll sit in cash or go defensive in Gold and precious metal miners while equities chop.

The key → Our red flag becomes a sell trigger only when leadership health metrics roll over and breadth fails to recover. That’s our confirmation to step aside, and when we act, we act decisively.

📊 Want the deeper read?
In this weekend’s Swingly PRO Report, we broke down commitment of traders positioning across every major trade type — and uncovered some alarming imbalances in where the market’s crowded.

If you trade around inflection points, this is essential context → see what’s included