OVERVIEW
Relentless Bulls Holding Firm

The market once again brushed off inflation concerns, with bullish sentiment firmly in control. Despite a slightly hotter-than-expected Producer Price Index (PPI) report, stocks continued to rise, showing that traders are growing more confident in the broader inflation picture.

January’s PPI, which measures the prices producers receive for goods and services, increased by 0.4%, slightly above the expected 0.3%. Core PPI, which strips out food and energy costs, came in at 0.3%, matching forecasts. While at first glance this might seem like a reason for concern, investors focused on the bigger picture—both this report and Wednesday’s Consumer Price Index (CPI) suggest that the upcoming PCE Price Index, the Federal Reserve’s preferred inflation gauge, may not be as strong as previously feared. This is key because the PCE report, set to be released later this month, plays a major role in shaping the Fed’s decisions on interest rates.

Another factor supporting the market was a drop in bond yields. The 10-year Treasury yield declined to 4.527%, a move that helped ease financial conditions and provided a tailwind for equities. A key level to watch here is 4.5%—a break below that would be a positive signal for stocks, suggesting further stability in the bond market and less pressure from rising rates.

Adding to the bullish momentum, all 11 S&P 500 sector indexes finished higher, signaling broad-based market strength. Trading volume was also relatively heavy, with 15.3 billion shares changing hands on U.S. exchanges, compared to the 15.0 billion average over the past 20 sessions. This increased participation reinforces the idea that investors are embracing risk rather than hesitating in the face of macroeconomic developments.

Markets also took the latest trade policy developments in stride. During a briefing, President Trump called for "fair and reciprocal" tariffs on all U.S. trading partners, but the measure he signed allows for negotiations until April before any new tariffs take effect. This lack of immediate action reduced the risk of a disruptive market reaction.

Nasdaq

The Nasdaq had what can only be described as an absolutely incredible day. The QQQ broke out aggressively on high relative volume, surging past the descending resistance level that had kept buyers in check for the past two months. With this breakout, the QQQ is now trading just below all-time highs, a level we expect to be surpassed by the end of today as bullish momentum continues to drive the market higher.

It’s clear that sellers are on the back foot, while buyers are showing relentless aggression. This has been evident since Wednesday’s gap-down open, where the Point of Control (POC) acted as a magnet for demand, pulling prices higher and shifting the QQQ into a strong markup phase. With this kind of momentum, the QQQ is well-positioned for the next few weeks to be incredibly positive.

S&P Midcap 400

If you recall our analysis in yesterday’s pre-market report, we emphasized the importance of MDY closing its weekly candle decisively above ascending support, a level that has been respected since mid-December. In yesterday’s session, that’s exactly what we saw, with midcaps experiencing a surge in buying pressure as the MDY rebounded from a breakdown below the weekly 10 & 20-EMAs.

The MDY tested its Point of Control (POC) at $572, where buyers aggressively stepped in, driving prices higher and forming a bullish hammer candle—a clear signal of a trend reversal and strong demand surge. This price action confirms that midcaps are regaining strength, setting the stage for potential continuation to the upside.

Russell 2000

Small caps also had a strong session yesterday, finding support at their Point of Control (POC) and attracting enough buying pressure to reclaim their lost weekly 10 & 20-EMAs. This recovery is a significant step in strengthening the overall market breadth.

Currently, small caps are trading near the top of their range, which has been in place since mid-December. While there is still overhead supply to clear before reaching the key breakout level at $230, the market's resilience suggests this resistance won’t hold for long. Given the strength we’re seeing across the board, a breakout in small caps could be the next major development in the broader market rally.

DAILY FOCUS
Learn To Recognise Character Shift

Right now, it’s crucial to stay in sync with the market’s pulse and understand how conditions are evolving in real-time. Many traders struggle with knowing when to put on risk and when to sit out, but the answer comes from consistent tracking and pattern recognition. The market gives signals every day—whether through sector strength, leadership stocks, or momentum breakouts—and those who pay attention can take full advantage of these shifts.

We are firmly in a risk-on environment today, as evidenced by the high probability of breakouts continuing to work. One of the clearest signs of this is the strong follow-through on earnings-based episodic pivot trades. These setups thrive in markets where fear is low and confidence is high, and the fact that we are seeing such consistent momentum post-earnings is proof that buyers are in control. In weaker markets, these types of breakouts would stall or fail quickly, but right now, they are pushing higher with ease.

Another key confirmation of this risk-on sentiment is the sheer breadth of strong setups across multiple sectors. We’re not just seeing isolated pockets of strength—momentum is expanding across growth stocks, midcaps, small caps, and even lagging areas that are now catching bids. This broad participation reinforces that the market is in a clear markup phase, where buying pressure outweighs selling, and traders are rewarded for taking smart risks.

To stay ahead, focus on the character shifts in price and volume. Look at which stocks are attracting institutional demand, which sectors are leading, and how breakouts are behaving after triggering. In this kind of market, hesitation can be costly—when conditions are this favorable, traders should be leaning in, identifying the best setups, and executing with confidence.

WATCHLIST
The Top Stock On Our Radar

SOUN: SoundHound AI, Inc.

• SOUN is our number one focus today, as we’re eagerly watching to see if it can break through the key $15.50 level. A move above this resistance would likely trigger a highly explosive breakout, given the stock’s momentum and setup.

• SOUN has been a leading momentum stock for months, ever since it broke out of a massive multi-month base in 2024. Right now, we are seeing what can only be described as an A+ setup—volume has been drying up in a controlled manner, price action is contracting while forming a series of higher lows, and all of this is happening as the broader market turns higher and money continues to flow into equities. AI remains one of the strongest market themes, further adding to SOUN’s potential.

• With such a high ADR%, SOUN has the ability to move 100-200% within just a few weeks, making it an extremely attractive trading opportunity. If we see a clean break of the 5-minute opening range high today, we definitely want to be there to capitalize on what could be a major momentum move.

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