OVERVIEW
Manage the Damage, Stay Objective

🟥 Risk-Off: The unwind is here. Thursday brought a wave of breakdowns across all major indices and not just in price, but in character. QQQ posted a high-volume bearish engulfing candle, QQQE lost its short-term EMAs, and IWM is accelerating lower through a vacuum of support. This is defensive territory. No new longs, no bottom-fishing, it’s capital preservation mode.

📊 Broad Market Breakdown: Volume confirms what price is signaling- institutional distribution. QQQ has broken below the EMA cluster after weeks of narrow leadership. The McClellan Volume Summation Index (VSI) dropped -13% in four sessions, confirming internal deterioration. Strong earnings weren’t enough to hold up the market.

MARKET ANALYSIS
Don’t Blame Trump or Powell…

Markets are breaking down and now the headlines need a scapegoat. Some point fingers at Trump’s surprise tariff hike. Others blame Powell for holding off on rate cuts. But let’s be clear: this selloff didn’t start today.

For the past 1–2 weeks, distribution has been quietly unfolding beneath the surface while the indices masked the damage. Internals were already deteriorating. Market leaders were stalling whilst liquidity got sucked into a handful of names. Risk appetite was thinning. Today’s gap down is just the follow-through.

Yes, the latest jobs report came in soft, with major downward revisions to prior months confirming a labor market that’s finally cooling. That puts more pressure on the Fed, but also fuels stagflation concerns given the new round of tariffs (rising from 10% to as high as 41% across key imports, including a hefty 35% rate on Canadian goods).

This is what happens when optimism gets stretched: we’re now seeing reality catch up with the tape.

This isn’t about one speech or one policy. It’s about an overheated market looking for a reason to exhale, and finding it.

Nasdaq

Thursday’s candle was one of the most aggressive bearish engulfing patterns we’ve seen in months and it came on the highest relative volume since May 30th. Back then, that spike coincided with a bullish reversal. This time, it's the opposite: a high-volume rejection at the highs, signaling institutional distribution.

QQQ, as a cap-weighted index, has been held together almost entirely by megacap tech, but that leadership is now faltering. Despite strong earnings from META and MSFT, there simply wasn’t enough fuel to push higher. The tape is telling us that good news is being sold, which marks a stark shift in behavior.

Technically, we’ve now breached the rising short-term EMA cluster and are testing prior breakout zones. If follow-through selling develops, this becomes a clear character shift as the most resilient group is no longer immune.

S&P 400 Midcap

If QQQ breaking down signals the top of the market buckling, then MDY confirms the foundation is cracking too. Thursday’s candle on MDY decisively lost the 10/20EMA cluster and the point of control (POC) from its multi-week range. This is a clear structural failure.

We’re now dropping into a low-volume pocket that stretches down to the rising 50EMA which is a zone that may offer some short-term demand.

But let’s be real: midcaps don’t tend to hold up well when broad indices are unwinding, especially after a three-month vertical rally.

Even if we see an intraday bounce or gap fill attempt, the macro context (tech rolling, breadth failing, capital rotation out of risk) makes it unlikely that MDY can sustain these levels. In fact, any failed bounce could become fuel for deeper downside.

Russell 2000

Small caps are the most vulnerable part of the risk curve and they're now deep into breakdown territory. After losing the point of control (POC) two days ago, IWM has posted back-to-back high-volume sell candles.

Structurally, we’ve now broken the short-term EMAs (10/20) and are sliding into a low-volume pocket toward the rising 50EMA. This is a vulnerability zone as there’s little structural support until that moving average, and the pace of decline suggests sellers are pressing advantage.

With higher short interest and weaker institutional sponsorship, small caps are typically the first to suffer in broad-based liquidations. If the QQQ was the last holdout, IWM was the canary.

Attempting to buy this dip is reckless. When the whole risk curve is unwinding, from megacaps to microcaps and so survival is the only priority.

🧠 Mindset Check: The Cost of Participation

There’s a reason most traders never scale and it’s not because they can’t find winners, it’s because they can’t handle giving any of them back.

But here’s the reality: if you participate in trends, you will surrender unrealized gains. It’s not a mistake. It’s not poor execution. It’s part of the structure.

Every major uptrend ends the same way: with volatility, disorder, and emotional pressure.

And that’s where most give it all back, not because the market took it from them, but because they panicked or clung to the fantasy of precision exits.

What we’re seeing now with the sharp rotation, the broad-based selling, the liquidation is not personal to you. It’s structural and intrinsic to markets.

And this is where mindset is everything. You don’t need to be perfect, you just need to be clear, adaptive, and disciplined.

So today is not about catching bottoms or revenge trading. It’s about process:

• Honor your trailing stops (we use the rising 10 and 20 day EMA’s).

• Let your strongest names attempt recovery before acting emotionally (we use the 5-min opening range low for gap-down stops).

• Don’t panic sell or suddenly start trading a completely different strategy (e.g. going from a swing trader to scalper)

The game hasn’t changed. This is just the part where the cost is due.

Survive with clarity, and you get to participate in the next cycle, stronger, sharper, and better prepared.

FOCUSED STOCK
RDDT: Earnings beat, strong gap, but caution warranted

Reddit exploded +15% in the pre-market following a blowout earnings report. Revenue surged +78% YoY to $500M, easily beating consensus estimates of $425M (per Bloomberg), and EPS came in at $0.92 vs $0.72 expected and marking the platform’s fastest growth rate in three years.

Technically, the stock is gapping above its recent flag structure and reclaiming levels not seen since March. But:

• Broader software and high-beta tech is under pressure.

• Index-level breadth is deteriorating.

• This isn’t a market that rewards chasing, even on strong earnings.

That said, RDDT is showing clear relative strength. If this move holds post-open and a new base forms above the $160–165 zone, this should remain a high-potential candidate for leadership once risk appetite returns.

Today might not be the setup day, but it could be the starting gun for a multi-week base-on-base continuation pattern. Keep it on the radar.

FOCUSED GROUP
GDX:

In a tape where liquidity is fleeing risk, gold miners are quietly holding their ground.

GDX pulled back to its rising 50-day EMA yesterday which is a level that has consistently acted as support since the November 2024 cyclical low. Every test of this moving average in the last 9 months has seen responsive buying, and we’re now at that inflection again.

This matters.
Gold and gold miners historically outperform during periods of volatility, drawdowns in equities, or rising uncertainty. If this pullback extends into a full-blown correction, the rotation into defensive assets could accelerate, and GDX would likely benefit.

Technically:

• Price remains above the point of control (POC) in the $51.50–52.00 zone.

• Structure remains intact as long as the 50 EMA holds.

• No breakdown in volume trends or relative strength yet.

If money starts flowing aggressively into GDX, it could indicate institutional flight to safety is underway.

This isn't just about gold, it’s about where capital runs when fear returns.