OVERVIEW
Last Line of Defense: Buyers Must Step In

Another day of heightened selling pressure, with bulls likely getting trapped in what was yet another attempt at intraday relief. Overconfident and impulsive traders were lulled into thinking we’d see a bounce, only for the entire market to turn back on its head. The breakdown occurred on high relative volume, confirming the ongoing trend of weakness. We're nearing a critical juncture where the market needs a catalyst to break the pattern or risk further deterioration.

As we move into today, we have several significant events that could drastically impact market sentiment. It’s crucial to stay on top of these developments, as they could provide the clarity needed to gauge the direction ahead.

Key Events to Watch

Non-Farm Payrolls (NFP)
The first key event is the Non-Farm Payrolls (NFP) report, which is expected to come in at 160K, up from the previous 143K. NFP is a critical indicator of the health of the labor market and a key driver for the broader economy. A higher-than-expected NFP would signal strength in the labor market, potentially alleviating concerns about a slowdown and supporting the case for economic resilience. However, any significant deviation from expectations, particularly a miss to the downside, could further weigh on investor sentiment and reinforce the current trend of weakness.

Unemployment Rate
Next, we have the Unemployment Rate, which is expected to remain at 4%. Stability in this number would be seen as a sign that the labor market is holding up, which could support the broader economy. However, if the rate increases, it could signal that the labor market is under more pressure than anticipated, which would likely lead to heightened concerns over economic slowdown and corporate earnings.

Fed Chair Powell's Speech
Lastly, we have Fed Chair Powell’s speech. Powell’s comments on inflation, economic conditions, and the Fed’s stance on interest rates will be under close scrutiny. Should he indicate that the Fed is concerned about rising inflation and could implement a more hawkish stance on monetary policy, it could lead to further volatility, particularly in equities. On the other hand, if Powell signals a more dovish approach, it could provide some relief, although markets may remain cautious given the current macroeconomic environment.

It's essentially just another day adding fuel to the already volatile fire.

Nasdaq

The analysis of the QQQ and QQQE reveals significant concerns, as both have been in a steep freefall for several weeks. The QQQ tracks the Nasdaq-100 Index, which includes 100 of the largest non-financial companies listed on the Nasdaq Stock Exchange, with a heavy emphasis on tech. The QQQE, on the other hand, is an equal-weighted version of the QQQ, offering more balanced exposure to all components of the Nasdaq-100, rather than focusing more on the large-cap stocks.

Yesterday's session was particularly worrying as the crucial daily 200-EMA failed to attract any meaningful demand. This was a critical level that we had highlighted in previous reports, and its failure to hold support led to the expected continuation lower, followed by a deeper breakdown.

The volume seen on both the QQQ and QQQE was notably high, with the QQQE especially seeing its highest volume in months. This increase in volume on the downside is a bearish signal, as it suggests increased selling activity and a lack of confidence among buyers. The absence of demand at such an important technical level indicates that sellers remain in control, and the market may not be ready to stabilize anytime soon.

S&P Midcap 400

The mid-caps are once again showing more of the same weakness, acting incredibly fragile as the volume continues to pick up on their breakdown. The MDY, which tracks the S&P MidCap 400 Index, experienced a strong rejection at Wednesday's highs as it attempted to rally. However, any hope of relief was quickly extinguished, with the index being smacked back down aggressively.

This rejection suggests that the mid-cap stocks are not yet ready to show signs of stabilization, and the increased volume on the breakdown only adds to the bearish sentiment. It’s clear that sellers remain firmly in control, and the continuation of this trend could point to further declines in the near term.

Russell 2000

The small caps are also in a similar position, and there's no need to rehash the same analysis we've seen with the mid-caps and large-caps. The key takeaway here is that volume continues to increase, with the IWM (Russell 2000 ETF) showing the same weakness we’ve observed in the MDY. This is a sign that selling pressure remains strong, and despite the attempts at relief, the small-cap space is still struggling to find any real demand.

At this point, the market as a whole—the IWM, MDY, and QQQ—are all experiencing heightened selling pressure. One has to wonder when we’ll finally see some short-term relief. We’ve had three solid weeks of liquidation, and it’s quite rare to witness such a pronounced breakdown without seeing at least some stabilization or attempt at recovery in the indices.

Daily Focus
Why Do You Trade?

We know it’s frustrating to constantly be given analysis showing weakness, but that’s the reality right now. The market isn’t looking great, and it’s crucial to face that head-on instead of pretending otherwise. The absolute worst thing you can do is jump into trading without a safety net. If you don’t have a second source of income or some savings to fall back on, then you might be setting yourself up for failure. This is not a game where you throw all your chips on the table and hope for the best. If you want to succeed, you need to treat trading like a business.

Remember what Naval Ravikant says: “You need to hunt like a lion.” This means you wait, assess, and strike when the moment is right. You don’t just pounce on every opportunity, especially in a market like this one. And here’s the kicker: you don’t need to spend all day glued to your screen. There’s a life beyond the charts—unless, of course, you work at Swingly (just kidding…).

One of our favorite books is about the life of stock operator Jesse Livermore, probably one of the most successful swing traders ever. And guess what? He spent months just resting during bear markets, waiting for the right moment to strike. That’s a mindset you can apply right now.

This is the beauty of swing trading: You don’t have to put on trades every single day. When the market is weak, like now, the luxury of not risking your capital is a superpower. What goes down will eventually come back up. The aim of the game right now is capital preservation. Don’t feel pressured to act when things are uncertain—this is exactly when you need to take a step back, evaluate, and preserve your capital for when the market truly offers opportunities.

Instead of mindlessly staring at the charts for hours, use your time wisely. Spend just an hour a day analyzing, tracking price action, and refining your strategy. Focus on asking yourself these crucial questions during each session:

• Where is money rotating? Is it moving into or out of the equities market?

• If money is flowing in, which sectors or groups are seeing the most strength? Look for where the inflows are most concentrated.

• How did prior breakout attempts work out? Are the previous attempts for momentum showing positive follow-through or failing?

• Are my daily scans showing more stocks breaking out and forming solid setups, or fewer? This helps gauge market health.

• What are the major levels the market is respecting right now? Where is support holding, and where are breakouts failing?

• What’s the broader market sentiment? Are there signs of risk-off, or is there a shift toward more risk-on behavior?

Now is the perfect time to build the foundation for long-term success. Use this period to create a lifestyle that supports your trading goals without letting it consume you. Prioritize exercise, nurture your relationships, and craft a schedule that balances your love for the market with your life outside of it.

Never let the market dictate your emotions or your mood. Instead, focus on staying grounded, developing a healthy mindset, and committing to continuous learning and practice. Your future self will thank you for the discipline and balance you create now.

WATCHLIST
The Stocks To Keep An Eye On

KLG: WK Kellogg Co

• KLG has been building a long-standing multi-year base, and recently, we're seeing the stock not only establishing a series of higher lows over the past year but also experiencing an intraday range breakout and holding its rising weekly 10 EMA.

• While this isn't a name we're looking to trade immediately, it's worth highlighting because an IPO base is one of the most powerful and explosive types of Stage 1 breakouts once it gets going. The reason for this is that IPOs often come with a lot of pent-up demand and an under-the-radar institutional interest as the stock gains attention, making it prime for strong momentum once it finally breaks out of its base.

• This type of base tends to indicate that the stock has been accumulating and absorbing selling pressure over time, setting the stage for a substantial move higher. The longer the base, the more significant the potential breakout, and given KLG's recent price action, it could be a name worth watching closely for future opportunities.

MSTR: MicroStrategy Incorporated

• MSTR is showing some interesting price action, largely tied to the volatility of Bitcoin (BTCUSD), which has been all over the place recently. As Bitcoin breaks down, it manages to aggressively find demand, despite the high levels of volatility.

• MSTR is demonstrating a similar pattern: it recently tested the critical support level represented by the weekly 50-EMA. This level is a key indicator, and MSTR found significant demand there, bouncing back higher. However, it’s now facing resistance from overhead supply, as it encounters descending moving averages.

• While we don't necessarily expect MSTR to break out immediately, it is showing relative strength compared to the broader equities market. If we see some tightening in its price action, and more importantly, if Bitcoin stabilizes and calms down, MSTR could become an interesting play soon. It's important to monitor how MSTR reacts to its overhead supply and whether it can break through those resistance levels.