OVERVIEW
Major Strength In Equities

The stock market is currently pushing higher this morning as Wall Street began a shortened Thanksgiving trading week, with markets set to close on Thursday for the holiday and finish early on Friday. This comes on the heels of a strong week where the postelection rally regained momentum. All major indices ended the week higher, with nearly every sector and market capitalization group participating in the breakout.

The close of last week showcased exceptional strength, with notable breakouts in leading stocks like Tesla, Carvana, Reddit, and others. This surge in bullish momentum signals a promising setup for a strong year-end rally. That said, the market initially got ahead of itself following Trump's election victory, with overheated sentiment driving a pullback. This recent rebound, however, indicates a healthier consolidation phase, setting the stage for a more sustainable move higher.

Seasonality plays a significant role in market performance, as historical trends often repeat themselves due to consistent behavioral and economic patterns. Over the past five years, the November-to-January period has consistently delivered strong returns, with an average gain of +6% in November and a further +2% in January. This three-month stretch is one of the market's most robust periods, driven by a combination of factors.

One of the key reasons behind this trend is increased consumer spending during the holiday season. November marks the start of the holiday shopping rush, with events like Black Friday and Cyber Monday boosting retail sales. Additionally, businesses typically invest in year-end spending to use up budgets, and institutional investors rebalance portfolios to position for the new year.

From a psychological perspective, positive sentiment often grows during this time due to strong earnings reports, optimism about the new year, and the so-called "Santa Claus Rally" effect, where stocks tend to rise in the final trading days of December and the first days of January. This seasonal trend significantly impacts sectors like consumer discretionary, retail, and technology, which often experience strong tailwinds during the holiday season due to heightened consumer activity.

In particular, retail stocks and e-commerce names tend to outperform as holiday shopping surges, while travel and entertainment sectors also benefit from increased spending during the festive period. Moreover, technology stocks often see a boost from end-of-year sales on electronics and holiday promotions.

So, what does all of this mean for today’s session?

Major breakouts occurred between Wednesday and Friday last week, and as a result, we now hold the highest long exposure we've had all year. This surge in bullish momentum has provided exceptional opportunities, but it also emphasizes an essential trading lesson: entries are the most critical part of profitable trading. Even the best stock can result in losses if entered poorly, while a well-timed entry on a weaker stock can still produce gains.

Unfortunately, many of the market leaders within the top-performing themes have already broken out, leaving limited opportunities for optimal entries in these leading names. For traders still looking to position themselves in these themes, this may mean considering secondary stocks or laggards—something we generally caution against as it weakens your edge dramatically.

We’ll dive deeper into how to navigate this environment and identify actionable opportunities in today’s Daily Focus section in a moment.

Nasdaq

The capitalization-weighted Nasdaq ETF (QQQ) is showing notable resilience, bouncing back strongly after reclaiming key intraday retracement levels on both Wednesday and Friday. This came despite a muted market reaction to NVIDIA's earnings, which, while fundamentally strong, failed to ignite further enthusiasm. Given NVIDIA's significant influence on the index as a $3.5 trillion AI leader, its movement played a large role in recent QQQ price action.

Encouragingly, buyers stepped in aggressively around the $495-$500 level, which aligns with a significant area of demand visible on the Volume Profile chart. This zone acted as a strong floor, preventing further downside and propelling the index higher.

Currently, the QQQ is approaching an overhead gap between $506 and $508, with premarket action suggesting an imminent test of this level. If the index can maintain strength intraday and decisively clear this gap, it would mark a significant breakout and signal further bullish momentum. Keep an eye on volume during this move—sustained higher volume will confirm buyer conviction and increase the likelihood of continued follow-through.

When comparing the capitalization-weighted QQQ to the equal-weighted QQQE, a clear divergence emerges. The megacaps, which dominate the QQQ, have been a drag on the index's overall performance. However, most large-cap tech stocks are outperforming during this same period, signaling improved market breadth. This broader participation beyond the usual mega cap drivers is a constructive sign for the market, suggesting that leadership is diversifying and the rally is gaining a more solid foundation.

The QQQE is currently at the point of control (POC) near the $94 level, which could act as an area of resistance and lead to some intraday consolidation or choppiness. Given that the index has been trending higher for a week straight, a pause here wouldn’t be unexpected. However, the QQQ, being the more heavily traded and capitalized counterpart, may not exhibit the same hesitation if buyers step in strongly today.

If the QQQ manages to break out and sustain momentum, it could negate any resistance observed in the QQQE. This divergence is common due to differences in trading volumes and structure between the capitalization-weighted QQQ and the equal-weighted QQQE.

S&P Midcap 400

The midcaps (MDY) have been experiencing an exceptional rally, especially since breaking above their daily 10-EMA on Wednesday. We've seen strong follow-through, with the MDY reaching new highs and pushing above $615 in premarket trading today. The strength in this segment is truly impressive, and it's an exciting development, as it signals a broader base of participation in the market.

While it's natural to expect that the further the rally progresses without any consolidation or pauses, the more likely a short-term pullback becomes, it’s important to note that this isn’t a forecast of a pullback just yet. The strength in the midcaps is undeniable, and the breadth of this rally is one of the most encouraging signs we've seen in recent years.

For those of us who have been trading for longer, we recall how narrow the market participation has been in the past, largely driven by mega cap tech stocks. Now, we’re seeing more sectors and market segments contributing to the rally, making the current market environment much healthier and more sustainable.

Russell 2000

The small caps are on an impressive rally, having surged nearly +7% in less than a week, a movement that's relatively rare. We are now approaching the prior resistance level from the Trump euphoria rally at $242-$243, which will likely act as a psychological barrier. Breaking through this level would be significant, but given the context, we can expect some short-term resistance here. If we see a bit of red in today’s session, it’s not something to be overly concerned about.

What’s most important is the close, as that’s where the true conviction of market participants is reflected. In trading, we aren’t solely focused on the behavior of the indices themselves, but rather use them as proxies to gauge the overall health of specific groups of stocks. The key takeaway here is that every stock should be evaluated based solely on its own price action. It’s critical to focus on how a stock behaves in relation to its own movements, not relative to any external benchmarks.

DAILY FOCUS
The Golden Principles of Swing Trading

Market Leaders vs. Laggards

Right now, we are witnessing a strong trend in the market, where leaders have broken out and are actively breaking out, signaling that the market is in a strong phase. These leaders, which are stocks with exceptional relative strength, tend to outperform the market overall. As traders, we must hone our ability to identify these stocks early in their moves, especially as they break through key levels of resistance. This is where relative strength becomes crucial. By tracking how stocks perform relative to the overall market, you can spot which ones are outpacing the competition.

During market pullbacks, this is especially important. While many stocks may retreat in sync with the broader market, the true leaders will typically outperform, either holding steady or pulling back less than the rest. By identifying these stocks, we can focus our trades on the ones most likely to continue their upward momentum when the broader market recovers.

We began tracking Carvana (CVNA) in late October as it emerged as a leading stock in the consumer cyclicals sector, which was showing strength. We closely monitored its descending resistance level and waited for a breakout, ensuring we were able to enter a large position at the right time, capitalizing on the stock’s move while managing our risk and keeping it below our max 0.5% of net asset value (NAV).

Understanding Market Direction

It’s equally important to understand market direction. In any successful swing trading strategy, you never want to trade against the trend. If the broader market is in an uptrend, your focus should be on long trades in market-leading stocks. Conversely, in a downtrend, your focus should shift to shorting weaker stocks or taking a defensive posture.

The direction of the market is your guiding force. You want to be aligned with the trend, not fighting it. This is why tracking market sentiment and key indices like the S&P 500, Nasdaq, and Russell 2000 is essential. If the market is trending higher and breaking out, focus on the stocks leading the charge. If the market is pulling back or showing signs of weakness, avoid aggressively buying, and instead look for short opportunities in weaker stocks or defensive plays.

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WATCHLIST
Today’s Breakout Watch

AAPL: Apple Inc

• AAPL is the only megacap technology stock currently showing strong performance, with its price approaching a major breakout above $230. This would mark the start of a Stage 2 uptrend following a multi-month accumulation period that has been building since June. This breakout would align with a potential QQQ breakout as well.

• For us momentum traders, multi-month accumulation bases like this are ideal entry points. This is where the change in character and trend occurs, signaling that the stock is likely to trend upward for weeks or even months.

• However, AAPL is a slow-moving stock (<2% ADR), so using a leveraged product (e.g., AAP3 for us UK traders) makes sense to amplify returns, as the stock's volatility on its own may be too low for optimal gains.

UEC: Uranium Energy Corp.

• UEC is shaping up as a strong breakout candidate, especially given the recent strength in the uranium sector. The stock first broke out on November 17th, although the breakout was a bit choppy. Since then, UEC has been climbing and is now forming a volatility contraction pattern (VCP) along its rising daily 10-EMA.

• The key level to watch is $8.64. A breakout above this price would take out October highs and likely propel UEC into a strong uptrend. The stock has a high ADR (>6%), meaning it can make quick moves, so this is one to keep a close eye on for an entry as early as today.