MARKET ANALYSIS
Here’s What You Need To Know

• U.S. equity futures are marginally higher this morning, but the bounce feels rather mechanical given after another rough session for technology.

• The Dow is holding up better, while S&P 500 and Nasdaq futures are struggling to gain traction, which continues to highlight the same theme we’ve been discussing all week: growth is where the pressure is.

• Amazon’s earnings reaction only added fuel to that narrative, with another former leader failing to attract dip buyers and instead accelerating lower.

• Software remains the epicenter of the sell-off, with the software ETF now down more than 11% this week, on pace for its worst weekly decline since 2008.

• This all a very clear forced unwind, and it’s happening as investors reassess what AI actually means for legacy software business models.

• Yesterday’s session pushed both the S&P 500 and Nasdaq further into the red for the year, while the Dow continues to outperform simply by having less exposure to the areas under the most pressure.

• Bitcoin saw another sharp leg lower overnight, briefly breaking below $61,000, while silver resumed its collapse after what was clearly an overcrowded, speculative run.

• Sentiment remains extremely fragile, and you can feel it in how quickly traders are pulling bids and how little tolerance there is for disappointment.

• European markets are also trading lower, reinforcing the idea that this isn’t a U.S.-only issue, but part of a broader global risk-off move (same with Chinese equities).

• The Magnificent Seven ETF has now closed at its lowest level in nearly four months, breaking a level that previously acted as reliable support.

• Since the October highs, that basket is now down more than 9%, which is exactly what leadership deterioration looks like when it’s no longer contained.

• With nonfarm payrolls delayed until next week, there’s no immediate macro catalyst to reset sentiment, leaving markets to deal with positioning, volatility, and confidence issues on their own.

Nasdaq

40.59%: over 20 EMA | 48.51%: over 50 EMA | 49.50%: over 200 EMA

• The sell-off in the QQQ is accelerating, with three straight sessions of rising relative volume, and yesterday marking the highest of the sequence at ~170% relative volume, confirming aggressive downside pressure.

• In periods like this, the most important thing traders can do is zoom out, because daily volatility is extremely elevated and intraday signals are unreliable.

• On the weekly structure, we are seeing the exact same confirmation: rising relative volume as price breaks down, which strongly validates the trend.

• The QQQ rejected the weekly point of control near 625 and is now trading decisively below the 20-week moving average.

• This is a major regime shift, as this marks the first time the QQQ has broken below its 20-week moving average since the rally began in April 2025, ending a 300-session intermediary uptrend.

• This is an enormously significant event and signals a confirmed trend break, not just a routine pullback.

• When combined with the QQQE also accelerating sharply lower, it reinforces that growth, technology, software, and AI-linked exposure is not being rewarded.

• Market breadth confirms the weakness, with only ~40% of Nasdaq stocks above their 20 EMA and ~49% above the 50 and 200 EMA, and all of these metrics continue to deteriorate.

• Rising relative volume confirms that this move is still in its early stages, as volume always confirms trend.

• Yesterday’s failed attempt to reclaim 605, which aligns with the broken 20-week moving average, reinforces that prior support is now acting as resistance.

S&P 400 Midcap

56.28%: over 20 EMA | 64.57%: over 50 EMA | 67.58%: over 200 EMA

• While mid-caps have been materially stronger than the Nasdaq, cracks are beginning to form.

• We have now seen three consecutive sessions of elevated relative volume (above ~110%) where price attempted to push above the recent 640 resistance zone, and supply has consistently appeared.

• The visible range volume profile shows that at the most recent February high, selling outweighed buying, with roughly 95,000 shares traded red versus 44,000 green, indicating supply is now spreading into mid-caps.

• Mid-cap growth is already weakening, while mid-cap value continues to outperform, but overall supply at highs is increasing.

• From here, a controlled pullback of ~2.2% would not be surprising and would likely bring price down to the 10-week moving average.

• A move to the 10-week would not invalidate the weekly structure, but it would break the short-term trend and reset momentum.

• Importantly, the 10-week moving average shows far more robust demand, with approximately 235,000 shares traded green versus 133,000 red, making it a logical support zone.

• We do not expect MDY to hold the rising 10- and 20-day EMAs, and further weakness is likely before stabilization occurs.

Russell 2000

46.92%: over 20 EMA | 54.73%: over 50 EMA | 62.59%: over 200 EMA

• The Russell 2000 has front-run the weakness we expect to see in mid-caps.

• Yesterday’s session saw ~130% relative volume as IWM sold off directly into its 50-day EMA and rising 10-week moving average.

• Demand responded strongly at that level, with approximately 3 million shares traded green versus 1.2 million red, signaling active buyer defense near 255.

• This price action is precisely the type of pullback structure we expect mid-caps to follow next.

• While short-term stabilization in IWM appears likely due to strong demand, small-caps are not immune to broader market weakness.

• Even the relative leaders should be treated cautiously as volatility continues to expand.

FOCUSED GROUP
KRE: A Rotation Into Banking is Underway

• We are not highlighting a focus stock today, as single-stock risk remains elevated in a volatile tape.

• Instead, the most important development is sector rotation, with banking emerging as the clear relative strength leader.

• Both KRE (regional banks) and KBE (large banks) have broken out over the past week while the broader market has sold off.

• These breakouts are being confirmed by expanding relative volume on both the daily and weekly structures, which is critical.

• This is a textbook example of defensive rotation, where capital moves into financially stable, rate-sensitive groups during risk-off conditions.

• Energy is also showing strength, but it remains choppier and harder to manage, whereas banking offers cleaner structure and better liquidity.

• Traders can either wait for pullbacks into support on KRE/KBE or identify the strongest individual bank stocks for potential exposure.

• There is no obligation to take trades in a falling market, and protecting drawdowns should always be the priority.

• That said, banking and regional banking currently sit at the top of the relative strength leaderboard, and this is where capital is rotating.