OVERVIEW
A Pullback Was Coming Anyway

🟥 Risk-Off:  Moody’s downgrade triggered a risk-off open, but this weakness was already building — the Nasdaq was extended, small-caps hit resistance, and midcaps ran into supply.

🕰️ Context is key: we’re seeing controlled pullbacks into rising support, not distribution. This looks like digestion, not destruction.

⚡️ Utilities: XLU broke out to fresh highs last week on strong volume, making them one of the most technically dominant sectors in the market right now.

MARKET ANALYSIS
Price Action > Headlines: This Is All Noise

Moody’s made headlines Friday by downgrading the U.S. credit rating one notch to Aa1 from Aaa, citing long-term concerns over the federal deficit and refinancing risk in a high-rate environment. This move brings them in line with S&P and Fitch — but the reaction this morning has more to do with fear than fundamentals.

Some are pointing to previous downgrades as evidence that a selloff might follow. We disagree.

The reality is: this isn't new information. The U.S. debt situation didn’t suddenly change Friday at 4pm. The market rallied for weeks knowing full well the fiscal picture — and if this were truly a market-moving event, we wouldn’t need a ratings agency to validate it.

So how do we navigate this? Watch price. When leading stocks pull back to rising 10- or 20-day EMAs, do we see buyers step in? Is volume confirming support? Or are sellers gaining control? The charts will show us what matters — not the headlines.

✅ We broke this down in depth in yesterday’s Weekend Report — including the historical context, market behavior after prior downgrades, and what we’re watching in the charts.

👉 If you missed it, you can catch up here.

Nasdaq

The Nasdaq has been the clear leader in this recent rally — but short-term momentum is starting to wane. QQQ is now testing a dense supply zone, and while the Moody’s downgrade sparked some profit-taking, we want to be clear: this still looks like a healthy pullback, not a concerning reversal.

Price was already extended from key moving averages. As we noted earlier in the week, a pullback was likely — the Moody’s news simply acted as the trigger.

We're now watching for a test of the rising 10-day EMA, possibly as early as today. But unless that level fails on a closing basis, the primary trend remains intact. In fact, this type of reset often creates second- and third-wave entries in previously extended leaders — and nearly all major breakouts from the past month fall into that “extended” category.

S&P 400 Midcap

Midcaps had an impressive week, breaking out on Friday and tagging their overhead Point of Control (POC). As expected, we're now seeing a brief pullback begin.

Given the low-volume pocket on the VRVP just below, a fade toward the rising 10-day EMA is likely. One caveat: Friday’s breakout happened on unimpressive relative volume — not ideal when clearing a major supply zone. Without strong participation, these moves often need a reset before continuation.

Russell 2000

Small caps are still in breakout mode despite a soft premarket (Moody’s downgrade). IWM closed strong Friday, clearing its final descending resistance and entering a low-volume zone on the VRVP — a setup that often resolves quickly toward the next major volume shelf (Point of control at $220) .

Short term, a pullback to retest the breakout zone is likely. But as long as the rising 10-day EMA holds, the trend remains intact. Any dip here should offer a clean reset entry once we rest a little.

🧠 Mindset Check: Understand Your Edge As A Retail Trader

The Moody’s downgrade is a perfect example of why predicting market moves based on news is a losing game. Retail traders don’t have the informational edge to forecast outcomes, so trying to guess whether this downgrade will trigger a sell-off or bounce is a futile exercise.

Instead, your advantage lies in price action, capital flows, and sector rotation. Focus on where the money is moving, not on news headlines. If you've positioned yourself well with a solid entry, such as during a breakout or strong trend, the daily noise — whether from ratings downgrades or anything else — should not shake you.

The key mistake most traders make is thinking they need to forecast the future. They spend too much time developing complex theories on why the market “should” behave in a certain way. Your job is simpler: react when price confirms the market’s direction. Let the charts and capital flows guide you, not the speculation.

FOCUSED STOCK
RIVN: Rivian Automotive, Inc.

Rivian (RIVN) is one of the key names we’re tracking closely. After a challenging period in 2023 and early 2024, the stock is starting to show signs of a major bottoming process. The EV sector, including RIVN, took a substantial hit, but recent price action is suggesting a possible shift in direction.

Over the past few weeks, RIVN has been carving out a series of higher lows, which is a clear sign of a momentum shift. More importantly, the stock has surged aggressively in recent days, pushing it to the top of its Stage 1 base — a significant technical milestone indicating the stock could be preparing for the next phase of its cycle.

What We’re Watching For:
We’re keeping a close eye on a potential breakout above the $16 level in the coming weeks. A clean break above this resistance would trigger an actionable long entry.

However, patience remains essential — we expect RIVN to pull back before breaking through, allowing the recent rally to consolidate before it resumes its upward trajectory.

FOCUSED SECTOR
XLU: Utilities

The utilities sector is currently exhibiting incredible strength, and it may be one of the top-performing groups in the equity market right now. Last week saw a significant breakout on the weekly chart, pushing XLU to new highs. This breakout was accompanied by high relative volume, signaling strong conviction from buyers.

What makes this move even more compelling is the context in which it occurred: XLU recently pulled back to test the rising 10- and 20-week EMAs, along with the weekly Point of Control (POC). This pullback was met with aggressive buying, reversing the dip and driving prices higher — a classic sign of strength.

Q&A
Got a trading question? Vote below and ask!

Q: “How do you know when it’s time to close an open trade and a stock is extended?”

You can’t know with certainty if a stock is "extended." It’s a discretionary decision, and indicators like RSI can stay overbought or oversold for extended periods before a meaningful pullback. So, trying to predict exactly when a stock is extended isn’t the most reliable approach.

When you enter a trade and it moves in your favor, sell a portion of your position into that strength. This allows you to finance your risk and move your stop to break-even — protecting yourself if the stock reverses.

You don’t know if the stock will continue running 100% higher or just move another 5%. This is why trailing stops and active position management are essential. Use tools like the 10-day and 20-day EMAs, or the 10-week EMA, to gauge where support and resistance are forming.

Don’t Get Shaken Out by Intraday Noise:
If price action moves above or below the 10-day or 20-day EMAs, just ignore it unless it’s a meaningful breakout that you can use to add size to your position. Intraday noise is irrelevant when you’re focused on the bigger trend.

Stick to your plan and don’t let the market’s short-term fluctuations shake you out.