MARKET ANALYSIS
Here’s All You Need To Know

• Futures are firmer this morning, but the important point is not the headline green open. The more important shift is that the market is starting to treat the latest U.S.-Iran escalation as contained rather than systemic.

• Oil is the clearest tell. Brent briefly reacted to the U.S. strikes, but it is still trading below $100. That is a major difference versus the prior phase of the war, where every escalation immediately fed into inflation fears, higher yields and pressure on growth equities.

• This does not mean the geopolitical risk has disappeared. It means the market is currently assuming the Strait of Hormuz risk is being managed and that a deal is still possible. If that assumption changes, oil can very quickly become the problem again.

• For now, that oil relief is allowing risk appetite to come back into the market. Semiconductors are stabilizing, high-beta growth is catching bids, and the Nasdaq is leading futures higher.

• The most important signal is the volume coming into quantum computing. Quantum is not a defensive group. It is one of the purest expressions of speculative growth appetite. When that segment rallies hard on expanding volume, it tells us liquidity is willing to move back down the risk curve.

  

  XLV VRVP Daily & Weekly Chart

• Healthcare bouncing is also important, but for a different reason. Healthcare has been one of the weaker and more ignored areas of the market. A bounce there suggests the market is not only rotating back into AI-linked risk, but also starting to broaden into lagging groups (and XLV is not technically extended as per all of the other growth areas).

• That broadening is what we need to see if the rally is going to become healthier. A market led only by mega-cap tech and semiconductors can keep pushing, but it becomes increasingly fragile the longer participation remains narrow.

• The best opportunities are not in chasing everything that gaps up. They are in groups where volume is expanding out of a base, or where prior weakness has reset the technical structure enough to restore asymmetry.

  

  QTUM VRVP Daily & Weekly Chart

• Quantum is one of those areas today. Healthcare may be another if the bounce develops into real relative strength. Semiconductors remain leadership, but many names are already extended and need more disciplined entries.

• The bigger macro risk is still inflation through oil. If Brent reclaims $100 with force, the market will quickly refocus on rates, yields and Fed policy. If Brent stays contained, the market has room to keep rewarding growth and rotation.

S&P 500

57.56%: over 20 EMA | 56.77%: over 50 EMA | 56.37%: over 200 EMA

• PY is still trending higher, but it is now sitting at 6.91 ATR multiples above the 50-day EMA, which is getting too hot for clean breakout entries.

• Last session showed exactly why that matters. Price pushed higher, but faded almost immediately, which is very typical when an index is extended and traders are trying to chase marginal highs late in the move.

• We still suspect SPY can continue to grind higher, but the character of the trade is no longer easy. The higher the extension gets, the more likely we are to see intraday fades, whipsaws and higher stop-out rates on breakout entries.

• The biggest concern for the market remains the technical extension in the leading growth groups. XSD, the semiconductor ETF, is now sitting around 11 ATR multiples above the 50-day EMA, which is aggressive mean reversion territory.

• That does not mean semiconductors are weak. In fact, the opposite is true. We are still seeing major swelling in relative volume, and every pullback has been met with support.

• The problem is not direction but asymmetry and semiconductors can remain leadership and still be a bad place to chase marginal highs. When a group is that extended, the continuation trade usually becomes choppier and less forgiving.

  

  MAGS VRVP Daily & Weekly Chart

• The MAG7 complex is only around 4.85 ATR multiples above its 50-day EMA, which is far healthier than the semiconductor complex.

• The MAG7 has also spent the last two weeks consolidating neatly near highs, pulling back without breaking down and allowing the short-term structure to reset.

• That is important because the MAG7 is still the main engine behind both the Nasdaq and the S&P 500.

• As long as the MAG7 remains intact, we would expect higher highs in the cap-weighted indices.

• The clean read is that SPY is strong, but late breakout entries are low quality here. The better approach is still to wait for pullbacks into rising moving averages rather than chase strength at extended highs.

S&P 400 Midcap

55.25%: over 20 EMA | 59.25%: over 50 EMA | 55.25%: over 200 EMA

• We are extremely bullish on the mid-cap complex here as the MDY has formed a very impressive Adam-style double bottom off the 10-week EMA, with two key tests around $650 on April 29th and again on May 19th to 20th.

• Price is now expanding from that structure, and Friday’s session showed meaningful improvement in participation.

• Relative volume came in at 78%, which may sound low in absolute terms, but it was the highest relative volume session since April 20th.

• That matters because MDY has spent the last five weeks consolidating and cooling off, rather than going vertical like semiconductors or the Nasdaq.

• MDY is only sitting around 2.57 ATR multiples above the 50-day EMA, which gives it significantly better upside asymmetry than the extended mega-cap and semiconductor areas.

• This is exactly the kind of setup we prefer. A strong group, a clean higher-timeframe support test, a multi-week consolidation, and a fresh expansion attempt with improving relative volume.

• From our perspective, mid-caps now offer one of the cleaner long-side opportunities in the market.

Russell 2000

52.47%: over 20 EMA | 62.27%: over 50 EMA | 57.63%: over 200 EMA

• IWM is showing almost the identical Adam-style double bottom structure as MDY.

• The Russell 2000 bounced from its 10-week EMA around $271, just like the mid-caps bounced from their own higher-timeframe support zone.

• The key difference is that IWM is front-running MDY.

• IWM is sitting at around 3.94 ATR multiples above the 50-day EMA, which is still not extended, especially compared with SPY, QQQ or XSD.

• This is important because IWM represents the highest expression of risk appetite inside the major U.S. equity indices.

• When small caps are holding the 10-week EMA, forming a double bottom and expanding before mid-caps, that is a major sign that risk appetite is still alive.

• We would still be cautious chasing gap-up highs. Even though the structure is bullish, gap-ups in extended or fast-moving markets often fade intraday.

• A fade into the close would not surprise us, especially if traders are taking profits after the early move.

• The broader point remains bullish. IWM is not showing risk-off behavior. It is showing a higher-beta reset inside a continuing Stage 2 rally.

• The way to play this market is not by chasing breakout highs. In a continued Stage 2 rally, the higher-quality trade is still pullback longs into rising moving averages.

• For IWM, the preferred setup remains weakness into support, not strength into gap-up highs.

FOCUSED GROUP
XSW: Software Making It’s Recovery

• Our focused group today is software, using XSW as the main proxy.

• XSW is now beginning what looks like a brand new Stage 2 rally, or in Wyckoff terms, the early phase of a new markup structure.

• The reason this matters is that software was one of the hardest-hit growth segments during the 2026 sell-off. While semiconductors, quantum, MAG7 and other growth areas have already moved hard, software still has much cleaner asymmetry from a positioning standpoint.

• The weekly structure is the key here. XSW has now built a very strong three-week candle pattern, with a pullback into the 10-week EMA two weeks ago around $152, which was immediately bought up.

• Last week, XSW expanded higher on 160% weekly relative volume, which is a major sign of sponsorship.

• That expansion also pushed price back above the 10-week, 20-week and 200-week EMAs, which is exactly what we want to see when a group is transitioning out of a base and into a fresh Stage 2 advance.

• The next resistance area is around $168, where XSW is running into the declining 200-day EMA and the 50-week EMA.

• That level may create some short-term hesitation, but from our perspective, the bigger structure is what matters. Software has already gone through a major reset, growth stocks are turning back higher, and XSW is now starting to participate with volume.

• This is the type of group where weekly charts matter more than trying to scalp every daily candle.

• The best opportunity is not necessarily chasing the first breakout candle. It is identifying the higher-timeframe turn and positioning for a larger move as the group transitions into a new markup phase.

  

  NET VRVP Daily & Weekly Chart

• NET is a good example of what we are looking for inside the group given it has built a 245-day base, while holding above its rising 200-day EMA and 50-week EMA.

• It also has an 89 relative strength rating versus the SPX, which tells us it is already behaving like one of the stronger names inside software.

• The caveat is volume. Over the last week, NET has bounced from around $192, but relative volume has been declining.

• That means we would be cautious chasing a breakout blindly unless the stop can be placed tightly around the $195 area, where the 200-day EMA, 10-week EMA and 20-week EMA are clustered.

• The cleaner way to trade NET is through the weekly structure and if the weekly chart continues to hold that moving average cluster and price begins expanding with improving relative volume, NET becomes a much more attractive long setup.

• The broader thesis is simple: software looks like one of the next growth groups that can begin to move.

• Semiconductors and quantum have already shown explosive strength. MAG7 remains intact. Small caps and mid-caps are improving. Now software is beginning to confirm.

• We believe XSW offers strong long-side asymmetry here, especially if price can work through the $168 resistance zone and continue building above the major weekly moving averages.