OVERVIEW
A Healthy Pullback Is Likely

The past week has been a whirlwind in the markets, fueled by a post-election surge that sent U.S. and global equities to record highs. Large, mid, and small-cap stocks all joined in on the rally, and Bitcoin broke through the $90,000 mark, propelling investor excitement even higher.

As we move forward, the focus shifts to key economic data. On Tuesday, reports on small business sentiment are due, paired with remarks from Federal Reserve officials like Governor Christopher Waller and Minneapolis Fed President Neel Kashkari. These insights will be closely monitored for any hints of policy direction.

Later in the week, market participants will turn to consumer and producer price index readings. This data comes on the heels of last week’s interest rate cut by the Fed and will be pivotal in assessing inflation trends.

For those who managed to position themselves well during the rally, it’s been an exciting ride. However, with emotions beginning to cool and fewer strong set-ups emerging, we’re entering a phase where caution is warranted. It’s during these high-euphoria periods that many traders find themselves chasing missed opportunities, only to suffer setbacks. We've all been there, and it's crucial to stay disciplined.

So, what does this mean for today’s session?

We’re at a critical point in the market right now. In just two days, we saw a staggering 70% increase in the percentage of stocks trading above their 20-day EMA—something that’s almost unheard of. It’s completely normal and expected to experience a pause and digestion period after such a sharp move.

We’ve been running our daily scans, and one of the biggest challenges we’ve encountered is how quickly some of the best setups are breaking out and moving higher. The entries have been choppy, meaning unless you caught the perfect moment to jump into names like Tesla, MicroStrategy, Hims & Hers Health, and Upstart, you’re likely sitting on the sidelines, waiting for the next opportunity.

In reality, we welcome this potential pause in the market. It gives us time to reset and allows the leading stocks to form new setups, ultimately creating more viable entry points for those who stayed disciplined and patient.

Nasdaq

The Nasdaq is currently over 4.4x ATR extended from its daily 50-EMA, a rare occurrence that usually precedes at least a slight pullback or some sideways consolidation. Looking at the historical chart, we typically see a 3-5 day pause in these situations to allow the moving averages to catch up before the market takes its next leg higher.

From the Visible Range Volume Profile (VRVP), we can see we’re over 6% above the point of control (POC) at $487. While buyer aggression has been strong at these new highs around $515, the market is becoming increasingly extended, which lowers the likelihood that new long positions will work effectively from here.

The market still looks incredibly strong—no question about it—with the QQQ hitting new all-time highs, strong participation across sectors, and broad-based rallies. However, from the perspective of initiating new exposure, it’s clear that more digestion is needed. You’ll know the time is right when we start to see solid daily setups once again in the form of bullflags on contracting volume & a narrowing trading range.

S&P Midcap 400

The midcaps look even more extended on their daily chart, currently sitting at a remarkable 5.35x ATR multiple above their 50-SMA. This level is definitely not ideal for looking for new long exposure. While the strength in the chart is undeniable, we did see a breakout from a small trading range built over the last three sessions, with the MDY gapping above $600 for the first time. What's even more impressive is the strong demand that held the index at this level.

However, we're starting to see some of this euphoria cool down in the premarket today, which isn't surprising. We expect the MDY to trade sideways for at least a little while to allow the daily 10-EMA to catch up before continuing its upward move.

Russell 2000

Unsurprisingly, it’s the same story for the Russell 2000 small-cap stocks. As expected, they’re showing more exaggerated volatility after a surprisingly strong breakout yesterday, with follow-through stepping in as they gapped up into $245. However, we’re seeing a pullback in the premarket now.

What we really need to see here is more consolidation, which will allow the clear market leaders—across all market cap groups, but especially in small-cap—to form tangible setups that we can act on. Right now, we believe it’s a bit too late to be introducing new long exposure. Our focus will be on two things:

1. Watching to see if the gaps in the QQQ, MDY, and IWM can hold up through the upcoming inflation reports this week.

2. Looking for flag patterns and additional setups to develop in the leading stocks, as many names are already in uptrends without providing valid entries.

For now, it’s about being patient and waiting for more actionable opportunities to present themselves.

DAILY FOCUS
A Little Self Belief, Goes A Long Way

Things are extended right now, and it's wise to exercise patience. Waiting for some digestion in the market isn’t just smart—it’s essential. The setups you’re looking for will come. We’re at the early stages of a massive bull market, and while it may feel like all the best trades have already passed you by, that’s rarely the case. Hold steady, because opportunities are always on the horizon.

Lately, we’ve received a lot of messages from traders asking how to deal with self-doubt, confidence, and staying the course. It’s a struggle we all face at some point, and it's completely normal. The path to success in trading isn’t always smooth, and the challenges you encounter often test your resolve.

Every trader’s journey is unique. Some find their success in 2 years, others in 10. The timeline isn’t what matters. For some, the path is clearer, while others wrestle with deeper internal struggles. Those driven by relentless ambition might see that fire spill over into their trading—leading to cycles of overtrading, revenge trades, and straying from their plans. If your progress feels slower, it doesn’t mean you’re lacking. In fact, it shows how powerful your perseverance is.

Eventually, that persistent inner critic will quiet, and you’ll discover a strategy that aligns with your strengths. Your mind will start to function like a probability engine, and your drive will turn into disciplined patience because you’ve learned the rules of the game. After cycling through countless mental models, you’ll build a mindset that plays to your strengths—whether that’s sharp pattern recognition, swift data processing, or making quick decisions.

It’s not about how quickly you reach your goal; it’s about maintaining focus. This is your journey. Stay in your lane, set your own pace, keep your eyes forward, and fight your own battles. In the end, with dedication and patience, you’ll earn the success that’s meant for you.

WATCHLIST
Today’s Potential Play

CAMT: Camtek Ltd.

• CAMT is showing signs of an earnings-based episodic pivot in the premarket after posting strong growth in both earnings per share and revenue.

• From a fundamental standpoint, CAMT is one of the more solid growth names in its group. The company develops inspection equipment for the semiconductor industry, which is, of course, a leading theme in the market right now, especially with the rise of Nvidia and the broader AI sector.

• We’ll be watching closely to see if CAMT can break above its 200-EMA at $85. If this happens on high relative volume, we may consider a half-sized position. That said, we are proceeding with caution. Given the number of fake-out breakouts we’ve seen recently, along with the extended market and the fact that CAMT hasn’t been a high-growth leader during this rally, it remains a higher-risk play for now.