OVERVIEW
The Tape Tells The Tale

Heading into Nvidia’s earnings, the market was stuck in a holding pattern, with the Nasdaq and S&P 500 closing lower for the fourth straight session. Uncertainty kept most traders on the sidelines, waiting to see if the AI chip giant’s report could spark a turnaround or if fear would continue to dominate.

The weakness wasn’t just in the indices—momentum stocks that have led the market’s rally were hit hard. Palantir dropped another 3%, extending its weekly decline to 13%, while Tesla tumbled over 8%, losing its grip on a $1 trillion market cap. Even Meta slipped 1.6%, reflecting broader risk-off sentiment. Meanwhile, consumer confidence dropped for the third straight month, a sign that fear is spreading beyond just the stock market.

Then came Nvidia’s earnings report—and on paper, it was a blowout. Revenue, earnings, and guidance all exceeded expectations, with the company projecting $43 billion in Q1 revenue, slightly above estimates. Yet, despite these strong numbers, the market reaction was underwhelming.

You can see it clearly in Nvidia’s premarket price action—no significant gap higher, no major upside follow-through. On a report that should have been overwhelmingly bullish, the lack of a strong reaction is a warning sign. Has the AI trade peaked?

When a stock fails to rally on great news, it often signals that expectations were already too high and that the upside was fully priced in. Nvidia remains the dominant force in AI chips, but with its stock already having surged over the past year, the market may be questioning just how much higher it can go in the short term.

So what does this mean moving forward? We’re either at peak fear or very close to it. The market has been selling off into major demand levels, and with Nvidia’s earnings out of the way, we could start seeing some form of stabilization or even a relief rally. The key now is watching whether buyers step in or if momentum continues to the downside.

Nasdaq

The QQQ is still sitting at a critical weekly level, holding both its point of control (POC) and its rising 20-EMA. These two zones—areas of high volume and key trend support—are where we’re closely watching to see if demand steps in. Simply put, this level needs to hold, or the next few months could turn significantly more painful for the market.

Looking at the Visible Range Volume Profile (VRVP), this area represents the last major high-volume support before the rising 50-EMA on the weekly, which sits all the way down near sub-$500 levels. To be clear, this is not a call for an imminent breakdown, but rather a reminder of the stakes. The current zone leaves us with two likely outcomes:

1. A relief rally or short-term reversal—which we actually view as the more probable scenario given the extreme bearish sentiment and panic selling.

2. A full breakdown, leading to a much longer correction or bearish phase.

Either way, this is not an area where we want to be paying to find out.

S&P Midcap 400

The midcaps are adding further support to a more bullish stance, as we continue to see demand stepping in at a critical level. The MDY (S&P 400 Midcap ETF) has now officially tested its rising 50-week EMA and managed to hold above its point of control (POC) at $57. Not only are we seeing a bounce forming, but the candlestick pattern—a red doji in a downtrend—suggests a potential reversal is likely, at least in the short term.

Historically, each time the MDY has tested this level, we’ve seen a bounce, reinforcing why this zone is so crucial. The more times a level is tested and demand steps in, the stronger it becomes. This is a key factor in why we see a higher probability of a short-term reversal, rather than a breakdown from here.

Russell 2000

Unsurprisingly, small caps are in a similar position, testing their rising 50-week EMA while forming a red hammer candle—another classic reversal pattern. This suggests that, like midcaps, small caps are also finding demand at this key level.

Notably, weekly volume is shaping up to be relatively high compared to the last few weeks, adding weight to the idea that buyers are stepping in. The ultimate goal here would be a reclaim of the point of control (POC) level overhead, or at the very least, a retest of that resistance zone.

DAILY FOCUS
The Danger of Being Too Bullish or Bearish

Jason Shapiro, one of the most well-known contrarian traders featured in Unknown Market Wizards, has built his success on doing the exact opposite of the crowd. His strategy revolves around identifying extreme sentiment—when the majority is overwhelmingly bullish or bearish—and positioning himself for a reversal. His approach underscores a powerful lesson: the best opportunities often arise when the majority is convinced of one outcome.

Right now, fear is everywhere—the market narrative is dominated by calls for a breakdown and a deeper bear market. There's no doubt that equities have been under pressure since November 2024, with market leaders breaking down and clear signs of distribution. The bond market is rallying—a classic fear signal—and major sentiment indicators are flashing extreme pessimism.

But here’s the key: peak fear is not something that can be precisely measured—there’s no single sentiment indicator that accurately pinpoints it. However, history shows that market reversals often happen when the consensus view is overwhelmingly one-sided. From a technical standpoint, we are at a critical demand zone where a short-term bounce becomes more probable. Whether this turns into a lasting recovery or just a temporary rally remains to be seen, but the conditions for a contrarian opportunity are setting up.

Despite the potential for a short-term bounce, our approach remains risk-off because we follow a system that requires a newly formed or well-established uptrend—and right now, we simply don’t have that.

While contrarian signals and extreme sentiment suggest a possible reversal, we need actual confirmation before shifting our stance. A sustainable uptrend isn’t just about a bounce; it requires consistent strength, improving market breadth, and key levels holding as support. Until we see these signals materialize, capital preservation remains the priority.

WATCHLIST
The Best Case Scenario Momentum Plays

GRAL: GRAIL, Inc.

• GRAL is shaping up as a potential momentum burst play, forming a tight volatility contraction pattern (VCP) on the daily chart. The stock is finding support in a structured manner and reclaiming key short-term levels, particularly the daily 10 & 20-EMAs—a critical sign of strength.

• With an exceptionally high average daily range (ADR), RAL is an ideal momentum play. While the stock has been in a steady uptrend since late January, we are not looking to enter just yet. However, this is a name that can move independently of broader market conditions, often ignoring overall weakness and rallying aggressively—sometimes delivering 100%+ moves in mere hours.

• If the market sees a short-term bounce, RAL could be one of the first stocks to explode higher, making it one to keep on watch for momentum traders who do want to play a relief rally here.

DOMH: Dominari Holdings Inc.

• DOMH falls into the same high-ADR momentum burst category, but this one takes volatility to another level with a +35% ADR, making it extremely risky and not suitable for inexperienced traders. While the upside potential is massive, so is the downside risk, and managing position sizing and risk is absolutely critical when trading a name like this.

• Technically, DOMH has been setting up well, holding its rising 10-EMA on the daily chart as it now contracts on low volume along a descending resistance level and the 10-EMA—a classic tightening pattern that often precedes explosive moves.

• For context, the last time DOMH broke out in early February, it surged +260% in just three days. If it confirms a breakout again, we could see another major momentum run, but traders must be prepared for extreme swings in both directions.