MARKET RECAP
Bogus Breakouts

Large Caps

• The QQQ marched steadily towards the weekly 20-EMA, as anticipated in yesterday's report, and decisively breached the daily 50-EMA amidst notable volume.

• Volume has surged exponentially over the past week's trading sessions, signalling a linear sell-off likely attributed to institutional algorithmic reduction of equities exposure.

• Jerome Powell, Chair of the Federal Reserve, indicated that due to a "lack of further progress" on inflation, the central bank is unlikely to reduce interest rates at its upcoming policy meeting.

• Powell stated during a moderated discussion at the Wilson Center that recent data haven't increased confidence in inflation reaching the Fed's 2% target.

• This is likely the cause of the recent sell-off, compounded by the market's overextension following the November 2023 rally.

• We suspect to see the QQQ finding support at it’s weekly 20-EMA level at $423 with a break below that likely causing a flush to roughly the $400 level.

Small Caps

• The Russell 2000 has experienced a pronounced 7% sell-off, piercing through the daily 10, 20, and 50-EMAs on elevated volume, and is currently nearing its daily 200-EMA.

• This marks a crucial level highlighted in our previous analysis, where we anticipate a high likelihood of reaching at least $192 tomorrow, with potential support expected as this level aligns with the weekly 50-EMA.

• It has been a challenging period for the small-cap sector over the past few weeks, with nearly half of the gains from the November 2023 rally now being eroded.

Summary

• Both the QQQ and IWM are currently in official stage 4 downtrends, with a low-volume relief rally or bounce expected soon to alleviate some pressure.

• In our view, now is not the opportune moment to take long or short positions in equities, as volatility remains high and numerous breakdown setups have already materialized.

• We anticipate that this market-wide breakdown will be sharp but not prolonged, and we are actively monitoring for signs of relief stepping in shortly.

PRE MARKET GAMEPLAN
Remember your “Why”

There are moments when sitting in cash feels like the hardest decision to make. Especially during turbulent times, it's natural to question our strategies and wonder if we're on the right path. Yet, it's precisely during these tough times that we need to reconnect with our "why" – the driving force behind our decision to step into the trading arena.

So, why did you choose to become a swing trader in the first place?

Perhaps it was the allure of financial freedom, the desire to escape the confines of a traditional 9-to-5 job, or the thrill of mastering the art of trading. Whatever your reason, it's crucial to keep that motivation front and center, especially when the markets are testing your resolve.

When uncertainty looms large and cash seems like the safest bet, it's easy to lose sight of our goals. But remember, every successful swing trader has weathered storms and faced challenges along the way. It's how we navigate these rough waters that ultimately defines our journey.

One of the key principles of swing trading is adaptability. In times of market turmoil, this quality becomes even more critical. While it may seem counterintuitive to sit on the sidelines, sometimes the best trade is no trade at all. By preserving your capital during volatile periods, you're positioning yourself to capitalize on opportunities when the market regains its footing.

Use this time to sharpen your skills, expand your knowledge, and refine your trading strategies. Study thousands of charts, analyse past trades, and learn from both your successes and failures. Remember, every setback is an opportunity for growth.

Above all, stay disciplined and trust in your process. Emotions can run high during times of uncertainty, but successful traders maintain a cool head and stick to their plan. Remind yourself of your long-term objectives and stay focused on the bigger picture.

While this pullback may seem daunting, it's important to remember that market downturns are often followed by swift recoveries. In fact, it only takes one strong bull run to potentially double or even triple your trading account. So, stay vigilant and be prepared to capitalize on the opportunities that lie ahead.

WATCHLIST
Market Leaders

SMCI: Super Micro Computers, Inc.

• SMCI made a bold attempt to break above its multi-week descending resistance, only to encounter aggressive sellers amid yesterday's volatility. Notably, the volatility contraction resulted in a break above the daily 10 & 20-EMAs.

• This stock remains our primary focus, as we closely monitor it for potential exposure once the market stabilises and resumes its upward trajectory.

• With exceptionally strong relative strength and a history of leading bull cycles within its sector, SMCI stands out as a true market leader.

GCT: GigaCloud Technology Inc

• Despite a failed breakout attempt today, GCT demonstrates considerable strength as it sustains its multi-week base pattern with consistently higher lows.

• The stock maintains positions above all key moving averages, while its trading volume remains constrained.

• With remarkable revenue and EPS growth in recent years, GCT emerges as a standout market leader, showcasing substantial relative strength and exhibiting high volatility.

• Given its strong fundamentals and technical resilience, GCT appears to be the prime candidate poised for significant growth in the upcoming bull cycle.

• Only potential fault with GCT is the stock may be considered “choppy” with some candles having large wicks.

ADCT: ADC Therapeutics SA

• ADCT, a pharmaceutical company, has displayed minimal revenue growth, a common occurrence within the sector. However, it has recently shown compelling momentum, boasting high relative strength and emerging as one of the top performers in the previous market cycle.

• Presently, ADCT maintains its position above all key daily and weekly EMAs (Exponential Moving Averages) and has experienced upward revisions in its price forecasts.

• While our usual recommendation prioritizes growth stocks with revenue/earnings growth, it's worth noting that "story" stocks, driven by future outlooks and potential, often witness explosive price movements. ADCT appears to fit into this category.

• While our conviction in ADCT may be lower compared to stocks like SMCI or GCT, it remains a contender worth considering, especially if it continues to demonstrate high relative strength in the next bull run.