OVERVIEW
Inflation Comes In Lower Than Expected

This morning, US stock futures are jumping in pre-market trading as investors react to a better-than-expected inflation report, offering some relief amid growing economic uncertainty. However, with markets in a fragile state, traders are watching closely to see if this rally has real staying power or if it’s just another short-lived bounce.

February’s Consumer Price Index (CPI) report showed inflation rising at a slower pace than expected, signaling that price pressures may be easing. The latest data from the Bureau of Labor Statistics showed consumer prices increased 2.8% year-over-year, down from January’s 3% gain and slightly below economists' expectations of 2.9%.

On a monthly basis, inflation rose 0.2%, cooling from January’s sharp 0.5% jump and beating the forecasted 0.3% increase.

When looking at core inflation, which strips out food and energy prices, February saw a 0.2% monthly gain, slowing from January’s 0.4% rise. Annually, core inflation climbed 3.1%, easing from the 3.3% increase recorded last month.

Why This Matters Right Now

Markets have been in a steep sell-off, with major indices breaking key technical levels and investor sentiment taking a hit. In this environment, any sign of cooling inflation is critical, as it could ease pressure on the Federal Reserve to keep interest rates elevated—a key factor that has been weighing heavily on equities.

However, while pre-market optimism is strong, the real test will come once the market opens. Will buyers step in and sustain this move, or will this just be another failed bounce? Recent intraday rally attempts have been weak and short-lived, making it crucial to see whether today’s strength can hold—or if selling pressure resumes, dragging markets even lower. The answer will set the tone not just for today’s session but for the coming weeks, especially given the historic levels being broken across all key indices.

Adding to the uncertainty, we still have Producer Price Index (PPI) data coming tomorrow—a major event given how concerned investors are that Trump’s new tariffs could push inflation higher. If PPI surprises to the upside, it could renew fears of stubborn inflation, reinforcing the Fed’s need to keep rates high and putting even more pressure on equities.

Nasdaq

In yesterday’s session, the QQQ failed to reclaim its broken 50-week EMA, which we highlighted in our previous report. As it attempted to push higher, it ran into a wall of aggressive selling right at the $480–$482 resistance zone—a level clearly visible on the Volume Profile (VRVP).

Notably, volume continues to rise, signaling that sellers remain firmly in control. While we are seeing some pre-market relief, the sheer amount of overhead supply makes any upside attempt incredibly difficult. With no clear bottoming pattern in place—such as a double bottom or another strong reversal signal—trying to buy a bounce here is high-risk.

From a technical perspective, we’re reaching a zone where historical reversals have occurred. According to David Cox, a leading swing trader and Portfolio Manager at Raymond James Ltd, the last time the QQQ reached such a high percentage of 52-week lows, the market found a bottom and reversed higher.

One key factor aligning with this: only 20% of Nasdaq stocks are currently oversold on an RSI(14) basis—a level that has only been reached three times in the past couple of years, and each time, it coincided with a market rebound.

S&P Midcap 400

Midcaps continue their relentless acceleration lower, showing no real signs of strength from a price action perspective. However, when we shift our focus to volume, there are early indications of a slight decrease in relative volume over the last few sessions.

That said, it’s still too soon to call this a trend or signal a divergence—we need more confirmation before considering it meaningful. Meanwhile, the Visible Range Volume Profile (VRVP) continues to show heavy supply dumping, even at these lower levels. Given the overall market climate, this isn't surprising.

Russell 2000

Small caps remain under intense selling pressure, with no slowdown in downside participation as price action continues to break lower. However, we are now seeing a bear flag potentially forming, with a red doji candle on the daily chart—a classic sign of indecision.

This could lead to a small relief bounce, especially given today’s strong CPI-driven gap up in premarket trading. But let’s be clear: any bounce should be assumed guilty until proven innocent.

We are still trading below all key moving averages, and with PPI data still ahead, a single-day bounce isn't enough to suggest a real shift in trend. The doji does indicate hesitation from sellers, but we need follow-through before considering it meaningful.

DAILY FOCUS
The Breakdown Accelerates—And That’s a Good Thing

For weeks, the market has been grinding lower in a frustrating, choppy decline—bouncing just enough to keep traders second-guessing but never truly committing to direction. That phase is now over.

Yesterday’s session confirmed what we’ve been preparing for: a clear, aggressive breakdown. The Nasdaq (QQQ) has now lost its 50-week EMA for the first time in three years, a critical level that marked the start of the 2022 bear market when it last broke. Not only has QQQ closed below this level, but yesterday’s intraday bounce attempt was once again rejected, reinforcing that sellers remain firmly in control.

Meanwhile, mid-caps and small-caps are getting crushed, and even the previous market strongholds—like consumer defensive stocks—are starting to break down.

📉 Market Breadth is Collapsing

• Percentage of Stocks Above Key Moving Averages:

  • 34.73% of stocks are above their 200-day EMA (long-term trend)

  • 19.91% of stocks are above their 20-day EMA (short-term trend)

These figures confirm that most stocks are stuck in established downtrends, with only a small handful managing to hold above key support levels.

• New Highs vs. New Lows:

  • Mid & small-cap stocks: 35 new highs vs. 434 new lows

  • Large-cap stocks: 10 new highs vs. 30 new lows

Translation? Even the strongest stocks in the market are struggling to build upside momentum, while new lows continue to accelerate at a brutal pace. Right now, institutional capital is rotating out of risk assets and into cash—a classic sign of uncertainty. Until we see real demand return, our job is not to fight momentum but to trade in sync with it.

Why This Is a Positive Development

As momentum traders, we don’t root for one direction—we root for clarity. And the worst market environment isn’t a bear market, it’s a choppy, indecisive one. A clean, accelerated sell-off means we are closer to finding a bottom and can prepare for a true shift in trend when the time comes.

Instead of trying to guess where that bottom is, the real focus should be on preparing for what’s next:
🔹 Let the markdown phase complete – The deeper and faster we sell off, the sooner we reach exhaustion.
🔹 Look for relative strength leaders – The few stocks that refuse to break down now will likely be the first to move higher when sentiment shifts.
🔹 Stay patient – There’s no rush to buy dips. Let institutions show their hand.

This is exactly why we built Swingly—to help traders navigate these moments with deeper insights, broader market analysis (beyond just equities), and a community of traders who don’t panic when conditions get tough.

👉 If you want to stay ahead of these shifts with even more detailed daily breakdowns, plus a suite of powerful trading tools and a community of serious traders, check out Swingly Pro.

WATCHLIST
A Few Of The Relative Strength Leaders

COMP: Compass, Inc.

• COMP has been one of the strongest tech stocks in recent months. Although the earnings-driven pivot move from two weeks ago has now completely faded, COMP is still showing relative strength. It remains above its 10-week EMA at $7.93 on the weekly chart and is actively fighting to reclaim its daily 20-EMA, while also building a three-day streak of higher lows.

• The pullback has been very linear, suggesting orderly profit-taking rather than aggressive distribution. This is an important distinction—while many tech stocks have broken down, COMP is still holding key support levels and attempting to reestablish its uptrend. The next test will be whether it can clear its 20-EMA and sustain momentum.

ACMR: ACM Research, Inc.

• ACMR is one we're watching closely, as it continues to hover just below a massive four-year-long base—a breakout on high relative volume could be a major event.

• Even in a weak market environment, setups like this are hard to ignore. If ACMR can finally clear this base, it could signal that buyers are stepping in despite broader market weakness. This also coincides with the potential for some market relief, making it an even more compelling watch.

• The key now is confirmation—we need to see strong volume and follow-through for this breakout to be legitimate, both on the stock and in the broader market.