OVERVIEW
The Market Continues To Show Resiliance

The market has had a choppy start to the year, with investors navigating concerns around trade and inflation. Yet, despite the turbulence, the SPY and QQQ remain near or above all time highs highs, signaling resilience. Now, the big question is—what will be the next catalyst to drive stocks higher?

One key factor is earnings momentum. The majority of S&P 500 companies reporting earnings have not only beaten expectations but have also seen strong post-earnings reactions, gapping up on solid results. This suggests that corporate performance is holding up well, reinforcing bullish sentiment.

Another potential catalyst? Clarity from the Fed. Over the long weekend, Fed officials signaled that interest rates are likely to remain at current levels to combat inflation. While some might view this as restrictive, the market tends to favor certainty over uncertainty. It’s not about whether rates are high or low—it’s about knowing what to expect so investors can properly price in risk. This confidence in the Fed’s stance may be exactly what the market needs to break out of its recent trading range.

At the same time, some of the main pillars of the bearish argument are beginning to break down. Market breadth remains strong, leadership names are holding firm, and the broader risk-on appetite persists. With earnings season in full swing and economic conditions stabilizing, we are watching closely for the next wave of momentum to take shape.

Nasdaq

The Nasdaq is leading the market by a wide margin, and since it primarily tracks large-cap technology stocks, we’re already getting a clear picture of where the highest-probability breakouts with strong follow-through are likely to occur—large and mega-cap technology-related names.

This leadership is capitalization-driven, meaning that recent surges in stocks like META have played a significant role in driving QQQ’s outperformance. While these heavyweights naturally have a greater impact on the index, history shows that when QQQ breaks out and gains momentum, it often triggers a broader bullish sentiment that trickles down to smaller, more sensitive areas of the market.

S&P Midcap 400

Midcaps have been in a prolonged consolidation phase after initially breaking down and bottoming out just before Christmas 2024. However, we are now seeing signs of accumulation in MDY, with a pattern of higher lows and lower highs, signaling tightening price action and contraction—a setup that often precedes a breakout.

At this stage, strength is needed, especially today, as MDY sits at a critical Point of Control (POC) level at $584. On Friday, we saw a rejection, preventing MDY from reclaiming the daily 10, 20, and 50-EMAs. This was largely due to profit-taking and increased seller aggression, which temporarily halted another attempt to push toward the top of its trading range.

For midcaps to confirm a breakout, we need to see buying pressure step in at these key levels, allowing MDY to clear resistance and extend higher. It is more than likely we do see this week close out strong for the MDY, however it is remarkably obvious the real strength is in the large and megacap names.

Russell 2000

The same setup applies to small-caps, as IWM and MDY tend to move in tandem. We’re clearly seeing the distribution phase transition into recovery and accumulation in IWM, which strengthens our confidence that a breakout above $230 is on the horizon. The real question now is how much longer this consolidation phase will last before small-caps make their move.

That being said, IWM has shown resilience, holding key support levels within its supply/demand zone. Each test of the lower end of this range has been met with buying interest, as confirmed by the Visible Range Volume Profile, which highlights strong demand in this area. This suggests that sellers have struggled to push prices lower, increasing the odds of a breakout once momentum shifts in favor of buyers.

For now, we remain patient while monitoring whether small-caps can build enough pressure for a decisive move higher. A confirmed breakout could broaden market strength beyond large-caps.

DAILY FOCUS
Be Selective, Be Decisive

The market is setting up, but that doesn’t mean every trade is worth taking. Patience and precision are key—wait for high-quality setups that meet all the criteria, and when they do, execute with confidence.

Right now, we see accumulation in midcaps and small caps, a clear leadership trend in large-cap tech, and breadth indicators improving. These signals tell us the market is in a constructive phase, but breakouts are happening in waves, not all at once.

One of the most important things you can do as a trader is to be comfortable taking trades—and even more importantly, be comfortable taking losses. We discussed this in depth during our Swingly Pro live weekly meetings, but let’s reinforce the key takeaway: understanding your numbers is everything.

Momentum swing trading is a low win rate, high risk/reward (R/R) system. Even in the best market conditions, a 30% win rate is completely normal. In fact, even if you are trading at peak performance in the strongest possible market, the probability of seeing 11 consecutive losses in a row is still over 50%.

This is exactly why:
✔ You must trade small risk relative to your equity—don’t let one or two losses take you out.
✔ You must let the law of large numbers work in your favor—trust the process.
✔ You cannot hesitate—when your setup aligns, you take the trade.

Losses are part of the game. The key is staying in the game long enough to capitalize when the momentum aligns in your favor. Keep executing, stay disciplined, and let probability do its work.

WATCHLIST
Today’s Potential Trades

WGS: GeneDx Holdings Corp.

• WGS is gapping higher this morning on strong earnings, breaking out above a multi-month sideways base that has been building since late October. This type of high relative volume move signals strong interest, making it a key stock to watch today.

• We’ll be closely monitoring the 5-minute opening range high to see if WGS can deliver follow-through on this episodic pivot (EP) setup. Historically, the best EPs often emerge from extended consolidation periods, as they create the foundation for explosive moves.

• One thing to note—healthcare (XLV) as a sector is lagging. While this is a broader concern, the technical setup on WGS outweighs it, given the strength of the breakout. If momentum sustains, this could be one of the highest-probability trades of the day.

ACHR: Archer Aviation Inc.

• ACHR is another stock we’re watching closely today, as volume is surging and a breakout over long-standing resistance is beginning to take shape. In pre-market trading, the stock has comfortably cleared $10.40, signaling potential momentum into the open.

• For confirmation, we’ll need to see high relative volume in the first 60-minute candle. If that aligns with a 5-minute opening range high (ORH) breakout, we’ll be ready to take long exposure.

• A key reminder: ACHR has earnings approaching, so if this trade gains follow-through before the report, it’s wise to reduce open exposure ahead of the earnings date to manage risk.