OVERVIEW
A Significant Shift In Buyer Aggression

Since Friday’s powerful move higher across the US equities market, it’s evident that buyers are approaching the market with a renewed sense of confidence and aggression. This shift in sentiment is likely driven by the resolution of key economic uncertainties last week, as we navigated through a packed schedule of economic reports. These included crucial inflation data and labor market updates—both significant drivers of the Federal Reserve’s decision-making process.

Currently, the CME FedWatch Tool indicates a 99.50% probability that the Fed will keep interest rates unchanged at their next meeting in just eight days. This near-certainty has likely removed a key overhang for market participants, allowing risk appetite to grow.

Adding to the market's positive tone, another catalyst for relief came with the swearing-in of President Donald Trump. This long-awaited event may have been one of the factors holding the market in a state of hesitation. So far, US equities have responded well to the new administration, with premarket prices pointing higher as optimism builds.

Further bolstering the market's strength, the 10-year Treasury yield—a key metric moving inversely to equity prices—has begun to retreat after an aggressive rally over the past month. As higher yields often pressure stock prices by drawing institutional capital into safer asset classes, this pullback in yields is a welcome development for equities. The decline in yields suggests a reduction in perceived risks, further encouraging investors to shift back into riskier assets.

Nasdaq

The Nasdaq had an exceptionally strong session on Friday, and it’s crucial not to be misled by what appeared to be a “red day.” Despite the initial weakness, the underlying price action tells a much more bullish story.

The QQQ kicked off the session with a significant gap up, breaking above descending resistance on high relative volume—a strong bullish signal. However, this early strength was quickly met with selling pressure as large-cap tech names led the QQQ into a sharp retreat. The index not only filled its premarket gap but also extended its decline to retest key technical levels, including the 10- and 20-day EMAs and its point of control (POC). This entire move unfolded on elevated relative volume, signaling heightened activity and interest from market participants.

What followed was a dramatic shift in tone. A surge of aggressive buying emerged—something we haven’t witnessed in weeks. This marked a significant change in character, breaking the recent trend of passive buyers dominating the action. This wave of demand pushed the QQQ back above all major resistance levels, ultimately closing above a critical supply zone at $520.

Looking ahead, the path of least resistance now points upward. With the QQQ reclaiming these key levels, we anticipate a continuation higher today, as this appears to be the most probable scenario. That said, monitoring relative volume and follow-through during the session will be critical to confirm the strength of this move.

S&P Midcap 400

Midcaps continue to show a divergence in behavior compared to large-cap tech, with average relative volume contracting over the past month all whilst the MDY has been steadily climbing, extending its breakout from three sessions ago. The ETF is now encountering significant overhead resistance and a supply zone around $597, a key level that we anticipate will be tested this week.

Whether midcaps can break decisively through the $600 level—a major psychological and technical resistance—remains uncertain. This level has historically acted as a critical barrier, and a breakout above it would likely signal a strong shift in sentiment and momentum for midcaps. However, it’s worth noting that Friday’s session did not exhibit the same level of strength in the MDY as we saw in the QQQ, highlighting a relative lag in midcap participation during this broader market rally.

Russell 2000

Small caps are painting a similar picture to midcaps, and we need to see more concrete evidence that both groups are ready to climb higher. For the bulls, the ideal scenario would be a decisive breakout in the IWM above the $227 level. This price point has acted as a ceiling, with four rejections over the past month, underscoring its importance as a key resistance level.

Until we see a clean break above $227 on strong relative volume, the IWM remains stuck in the range it has established since mid-December. A breakout here would be a pivotal development, signaling renewed strength in small caps and potentially drawing more attention from institutional buyers.

The Visible Range Volume Profile (VRVP) offers additional insight, highlighting a low-volume cluster between $226 and $228. This suggests a lack of significant supply in this zone, which could pave the way for a swift move higher once $227 is breached. However, failure to break this level could lead to further consolidation within the current range, keeping small caps in a holding pattern for the time being.

DAILY FOCUS
Play the Odds, Protect the Principal Capital

Right now, the market is shaping up to be a high reward-to-risk environment for carefully chosen long entries. After a month of being beaten down, we’re starting to see conditions align favorably for a potential breakout across key areas of the market. The leading relative strength stocks—those that have weathered the recent pullbacks and remained resilient—are coiling tightly around their weekly and daily moving averages. This kind of contraction is often a precursor to explosive moves, as these stocks gather momentum for their next leg higher.

Adding to the appeal of this moment, we finally have some degree of certainty that the market can price in. With President Trump’s inauguration behind us and the Federal Reserve overwhelmingly expected to keep interest rates unchanged at next week’s meeting, two significant overhangs of uncertainty have been resolved. This clarity provides a supportive backdrop for buyers to step in with renewed confidence.

Focus on high-quality setups in the strongest relative strength names, and ensure entries are confirmed by volume and price action. By doing so, you position yourself to capitalize on the market’s potential upside while safeguarding against unnecessary downside exposure.As always, remember: the goal is to participate in the market’s opportunities without jeopardizing long-term capital. We never risk >0.5% net asset value (NAV) on any one trade and never allow ourselves to lose >1% NAV and we are very quick to move our positions to break even after a stock shows a profit. The goal is to keep your losers small and your winners as big as possible, it really is that simple. The majority of your trades will likely be small winners, break evens or small losers, but it really is those 10-20% of trades that turn into big rallies that bring you all of the profits.

WATCHLIST
Focus On These On A Strong Reaction

NVDA: NVIDIA Corporation

• NVDA finds itself in a multi-month base, and after the strong moves we’ve seen in the semiconductor space, it has become our number one play to watch for a long position today.

• From a fundamental perspective, the stock needs little introduction. It’s a leader in the semiconductor sector, and the industry’s strong performance over the past few months only strengthens the case for NVDA. But what really sets this stock apart right now is its technical setup. Over the last 3-4 weeks, NVDA has consistently formed higher lows, showing a steady accumulation of demand. Coupled with declining resistance, the stock is building energy for a potential breakout.

• The market backdrop is also showing positive signs of life, providing a favorable environment for NVDA to make its move. With such a large base in place, NVDA is primed for a potential multi-month Stage 2 rally.

RKLB: Rocket Lab USA, Inc.

• RKLB is in the number 2 spot on our closely watched list today, showing a promising and powerful contraction with declining relative volume and tightening price action. Premarket trading has seen RKLB testing its descending resistance and breakout level at $25.85, making it a key level to watch for potential entry.

• To trigger an entry, we need to see a surge in relative volume on the 60-minute breakout candle, coupled with the 5-minute opening range high being taken out. This would provide the confirmation we’re looking for before entering a position.

• If these conditions align and the broader market continues to show strength, we will be looking to initiate a long position in RKLB today. The stock's contraction and testing of key levels suggest it could be ready for a significant move higher, making it one of our top plays in the current market environment.