OVERVIEW
The Bull Market Holds Steady

NVDA earnings tonight = single biggest catalyst. The Nasdaq has stalled into $575 resistance and rejected three times — a textbook “waiting for news” setup. No reason to force exposure here until the print clears.

Rotation is clear. Capital continues to flow out of crowded mega-cap tech and into midcaps and small caps. That’s why Nasdaq breadth is weak (~50% >20 EMA) while MDY and IWM are pushing 70–80%.

Midcaps (MDY): Healthy digestion above prior breakout levels with broad participation. Rate-cut tailwinds + institutional flows are supporting continued leadership.

Small caps (IWM): The standout. Breadth is strongest (80% >20 EMA), industrials sector is confirming, and history shows small caps often lead strongly post-rate cuts.

Focused stock (HOOD): A market leader building a high-level base after +500% in 12 months. Tight contraction with volume drying up; $110.50 is the breakout trigger.

Focused group (QTUM): Quantum ETF forming a multi-month base with higher lows and volume contraction. Direct NVDA exposure makes it untouchable today.

MARKET ANALYSIS
The Real Trade Isn’t NVDA, It’s What Follows

The macro tape is calm, with investors clearly in pause mode ahead of tonight’s Nvidia earnings. Everything else is secondary right now.

NVDA has become the bellwether for the AI trade and, by extension, for the broader equity market. With over 10% weight in the Nasdaq-100 and outsized influence across AI-linked software and semiconductor names, its report will set the tone not just for tech, but for risk appetite as a whole.

We’ve already seen smaller AI beneficiaries deliver upside surprises this week, reminding us that demand across the ecosystem is alive and well.

Structurally, the market is holding up better than the headlines suggest. August is typically a weak seasonal month, yet the major indices are all posting gains into month-end while breadth improves in mid- and small-caps.

Nasdaq

% over 20 EMA: 50.49% | % over 50 EMA: 47.52% | % over 200 EMA: 59.40%

The Nasdaq remains in contraction mode, holding right on top of its 10/20 EMA cluster. For the last three sessions, QQQ has pressed into the $575 resistance zone (red box on chart) and been rejected each time.

That kind of repeated failure usually signals the market is simply waiting on a catalyst, in this case, NVDA earnings tonight.

It’s also worth framing why the Nasdaq is the weakest of the three major indices. It isn’t that “tech is breaking,” it’s that capital is rotating.

You can see this clearly when comparing QQQ/XLK vs. RSPT as money has been moving aggressively out of crowded mega-cap tech and into midcaps and small caps. That capital has to come from somewhere, and right now it’s being siphoned off the Nasdaq.

We would be very cautious putting any risk both long or short here today.

S&P 400 Midcap

% over 20 EMA: 75.50% | % over 50 EMA: 70.00% | % over 200 EMA: 61.25%

Midcaps continue to outperform, even as they spend the last two sessions in a low-volume flag contraction. This is exactly the kind of digestion we want to see following last week’s breakout with a controlled, light turnover that allows moving averages to catch up.

From a structural standpoint, the setup here looks far healthier than the Nasdaq. The technical outperformance is obvious when you compare recent price action: while QQQ has stalled into resistance, MDY has been building higher and holding gains.

More importantly, the tailwinds behind this segment are stacking up:

• Rate cuts on deck → lower borrowing costs historically benefit mid- and small-cap balance sheets disproportionately.

• Rotation down the risk curve → institutional flows leaving crowded mega-cap tech have to find a home, and midcaps are absorbing that capital.

• Breadth leadership → participation is broad, with >75% of components above their 20-day EMA vs ~50% for Nasdaq.

Russell 2000

% over 20 EMA: 80.03% | % over 50 EMA: 70.60% | % over 200 EMA: 60.11%

The Russell 2000 is the clearest expression of current market leadership, posting far stronger breadth than both midcaps and the Nasdaq. With 80% of components above their 20-day EMA and 70% above the 50-day, the internal strength here is broad and decisive.

Why this matters historically: Over the long term, U.S. small caps have outperformed large caps in two-thirds of rolling periods since 1927, adding roughly +2.8% annually.

In post-rate-cut cycles, small caps have often led performance, particularly over 6–24 month horizons. When recession risk is low, that outperformance tends to be even stronger.

Structural tailwinds: Small-cap balance sheets typically carry more floating-rate debt, making them more sensitive to borrowing costs. In easing cycles, their interest burden drops faster than that of large caps, providing a built-in performance boost.

The industrials sector (XLI), a heavy component of the Russell, stands to benefit from falling rates, a steepening curve, and renewed infrastructure/cyclical demand, and we are seeing it really showing signs it wants to push higher too (this is a further confirmation that this general group is key to watch).

🧠 Mindset Check: Be Very Careful Predicting NVDA’s Reaction

Earnings on a single mega-cap tempt even disciplined traders to predict. Don’t. NVDA can beat and fall on guidance/positioning, or miss and rip on relief.

The print is binary; the reaction is path-dependent (positioning, expectations, liquidity, options hedging).

Common traps

• FOMO & outcome bias: “If it rips and I’m not in, I’ll be gutted.” You remember the one that ran, forget the many that didn’t.

• Narrative fallacy: Building a story around “AI must go up,” then forcing trades to fit it.

• Loss aversion/chasing: Buying post-gap extension with no plan, then capitulating at the first shake.

The playbook (habits, not heroics)

1. Trade the reaction, not the print. Let the market tell you. Our bias: decisions anchored to the close over the noise of the first hour.

2. If/Then map (pre-commit):

   • If NVDA gaps > ATR and fades on heavy volume, avoid chasing; look for strength elsewhere (mid/small caps).

   • If NVDA gaps and holds gains into the close with semis breadth confirming, only then consider tactical exposure.

3. Size like survival matters. Night-before predictions get zero size. Post-print tactical trades = fractional risk (think ¼–½ normal). Binary events don’t deserve full size.

4. Price > story. No matter the headlines, relative strength, volume, and breadth decide follow-through. If they disagree with the headline, you follow the tape.

5. Two-day test. True leadership usually holds or progresses on Day 2. One strong open proves little; persistence proves a lot.

6. Regret reframing (habit builder): Write the sentence you want to read tomorrow:

   • “I obeyed my rules, sized small, and waited for confirmation.”

   • Not: “I guessed, chased, and donated.”

Why this matters: You’re not trying to “win NVDA.” You’re building a repeatable edge where small risk + many attempts + a few outsized winners compound over time.

Your job is to increase the probability that your desired outcome occurs (e.g., a confirmed trend after a volatility event) and avoid environments where the distribution is unknowable in advance.

FOCUSED STOCK
HOOD: A Leader Resting at Highs

ADR%: 6.12% | Off 52-week high: -7.6% | Above 52-week low: +481.5%

Robinhood (HOOD) has quietly become one of the most powerful stocks in the entire market over the last year, delivering a staggering +500% move in the past 52 weeks. Few names can match that kind of leadership, and importantly, the structure still looks constructive rather than exhausted.

Massive base in progress: HOOD is currently building a well-defined consolidation, with price tightening along the rising 20/50-day EMAs. This is exactly the type of controlled contraction we want to see after such an explosive move.

Volume drying up: The last several sessions have shown steadily declining volume — classic Wyckoff-style absorption, where supply is being worked off before the next directional expansion.

Clear overhead level: The $110.50 zone is a major resistance line. The VRVP (volume profile) confirms this, showing thin supply above. A clean breakout through that zone opens a potential air pocket of low resistance, allowing price to move quickly.

Sector confirmation: Financials (XLF) continue to trend well, pressing off the 10-day EMA with solid breadth. HOOD’s business is also very tightly linked to the ongoing strength in crypto markets.

FOCUSED GROUP
QTUM: The #1 Post-NVDA Setup on Watch

ADR%: 1.52% | Off 52-week high: -1.9% | Above 52-week low: +65.9%

One of the segments we’re optimistic on right now is QTUM, the Defiance Quantum ETF. With NVDA earnings front and center and the broader AI trade still in motion, it’s worth paying close attention to this group.

A quick caveat: QTUM does hold names like NVDA and AMD, so it’s not a “pure play” on smaller quantum names.

If you want exposure specifically to the higher-beta stocks in this space e.g. RGTI, QBTS, IONQ, you’ll need to look directly at those charts.

But QTUM still offers a useful lens on the broader theme, with large-cap anchors alongside more speculative quantum names.

Technically, QTUM looks very constructive:

• The ETF has spent months forming a broad base with a clear series of higher lows riding the 50-day EMA.

• Volume has dried up during the contraction, which is exactly what you want to see before a resolution.

• Price has now pushed above its point of control (POC) around $94, which historically acted as a heavy supply zone. Flipping that level into support would mark a meaningful character shift.

Why we’re not touching it yet:
NVDA reports earnings tonight, and QTUM has direct exposure to that outcome. No matter how clean the setup looks technically, there’s no reason to put risk on into a binary catalyst where one print can blow through stops overnight.

Why it’s our #1 watch tomorrow:
If NVDA clears the event risk positively, QTUM is positioned as one of the highest-quality breakout candidates in the market.

It has the technical structure (tight base + volume contraction + higher lows), the macro tailwind (AI + easing environment), and the thematic strength (quantum + semis).

Q&A
Got a trading question? Hit reply and ask!

Q: “What is more important, fundamentals or technicals?”

This is a question that traders and investors have debated for a century. The honest answer is that it depends on your objective, timeframe, and mandate.

But from the perspective of systematic swing momentum trading, the hierarchy is clear: technicals dictate execution, fundamentals influence probability.

Why technicals dominate execution

Price/volume are the only variables that directly determine P&L. A stock can have flawless fundamentals, but if supply is overwhelming demand in the tape, you will lose money being long.

Timing edge comes from volatility structure. A volatility contraction meaning shrinking ATR% multiples, tightening ranges, and volume dry-ups, statistically precedes expansions. This is a purely technical phenomenon, not a fundamental one.

Relative strength is predictive. When a stock consistently outperforms its group and the market, it tells you institutions are allocating risk there. That footprint shows up in the chart well before it’s obvious in financial statements (whihc are lagging as they don’t factor in thematic moves or story related events).

How fundamentals tilt probability

Earnings and revenue acceleration increase the likelihood of follow-through. O’Neil’s CANSLIM studies showed that the largest market winners of the last 100 years almost always combined technical leadership with accelerating EPS/revenue growth.

Quality raises signal-to-noise ratio. A breakout from a contraction pattern in a company with +40% EPS growth and sector leadership is far more likely to evolve into a Stage 2 trend than the same pattern in a structurally declining business.

Macro alignment matters. In easing cycles, small and midcap growth stocks historically deliver outsized returns because lower borrowing costs amplify earnings leverage. Fundamentals amplify technical signals in the right regime.

The stock as a vehicle for asymmetry

At its core, a stock is just a vehicle for risk/reward asymmetry. Our objective is not to predict; it’s to consistently place bets where:

The downside is capped (tight technical risk via volatility contraction structures).

The upside is uncapped (the potential for 3–5x ATR expansion once supply is cleared).

The probability of resolution in our favor is elevated (technical leadership + fundamental alignment + macro tailwind).

This is why combining technicals and fundamentals increases expectancy. A low-quality breakout might have a 30–35% chance of continuation.

Add accelerating EPS, leading group strength, and Stage 2 confirmation, and that probability may rise into the 45–55% range.

With asymmetric R/R, that shift is the difference between a negative expectancy system and a compounding one.

Research The Greats

Our entire system stands on the work of the giants who have inspired us and we really urge everyone to do a deep dive:

• O’Neil quantified how growth fundamentals enhance breakout durability.

• Wyckoff taught how to map accumulation/distribution in real time.

• Weinstein formalized stage analysis — only allocate risk in Stage 2.

• Darvas proved simplicity (box breakouts + volume) can outperform.

• Kullamägi (Quillamaggie) showed how a low win-rate + asymmetric R/R creates equity curve convexity.

• Jeff Sun sharpened post-entry management and relative strength/relative volume filters for modern markets.