OVERVIEW
Fed Stays Put: No Rate Cuts Coming Soon

The Federal Reserve kept interest rates steady at 4.25%–4.5% yesterday, as expected, but the real story was the shift in their statement. The Fed removed previous language about making progress toward its 2% inflation target, now simply saying that "inflation remains somewhat elevated." This slight change in wording caught the market’s attention, as it suggests the central bank isn’t as confident as before that inflation is moving in the right direction.

At the same time, the Fed acknowledged that the job market remains strong, noting that the unemployment rate has stabilized at a low level and that labor market conditions are solid. This signals that the economy is still holding up well, which gives the Fed less urgency to cut rates anytime soon.

While the statement had a slightly hawkish tone, Fed Chair Jerome Powell downplayed the change, calling it “just language cleanup” rather than a shift in policy. His comments helped markets bounce off their lows, but the key takeaway is clear: the Fed is in no rush to cut rates until inflation comes down further.

With no major policy changes expected before the next Fed meeting in March, investors will now focus on economic data in the coming weeks to get clues about the Fed’s next move. Meanwhile, the central bank seems to be stepping into the background—letting the markets, earnings reports, and the political landscape, particularly with President Trump back in the spotlight, take center stage.

One key development is that the 10-year Treasury yield (US10Y) is coming down, breaking below its weekly 10-EMA. This is important for growth and rate-sensitive stocks, which tend to move inversely to Treasury yields. Lower yields increase confidence that we’re in a positive environment where breakouts may actually follow through, rather than failing as they have in previous months.

Nasdaq

The Nasdaq continued its positive momentum yesterday, with the QQQ holding above its daily 10- and 20-EMAs. Earlier in the session, we saw a low-volume pullback to the rising 50-EMA, but buyers quickly stepped in. Notably, QQQ found support at its Point of Control (POC)—a key level where the most trading volume has occurred. This reinforces the idea that demand remains strong at critical technical levels, increasing the odds that breakouts can hold and follow through in the near term.

Right now, we are watching for a potential move higher, with an overhead gap fill up to $528 as the most probable outcome. While there’s still a chance of sideways consolidation—especially with big tech earnings and key economic reports still ahead this week—the strong buying interest seen yesterday suggests this is less likely. The market remains in a favorable position for upside continuation, assuming demand stays steady.

S&P Midcap 400

The midcap sector saw another day of sideways movement, with the MDY continuing to trade within a tight range. Once again, the Point of Control (POC) acted as resistance, while the rising 10- and 20-EMAs provided support on the daily chart.

From a technical standpoint, it's important to see the 20-EMA continue holding as support, especially since it aligns with several key demand zones. The ultimate goal remains a break back above the POC level near $600, which would signal a stronger move higher. For now, MDY remains in consolidation mode, but as long as support holds, the setup remains constructive.

Russell 2000

Small caps remain stuck in consolidation, facing overhead supply at the upper end of their recent 1-2 week trading range. Despite this, they are still holding above their 10- and 20-EMAs, which is a positive sign for now.

However, the picture for IWM is more concerning. There is a notable lack of demand between the current price and the Point of Control (POC) near $220, meaning a breakdown could accelerate selling. Additionally, the general trend over the past week has started to turn lower, raising the risk of further downside. For now, holding above key moving averages is critical, but a break below could open the door for a deeper pullback.

DAILY FOCUS
Stay Vigilant- Plenty Of Set-Ups Emerging

We are currently seeing a high number of promising setups, with strong weekly and monthly bases forming across the market. This is an encouraging sign, especially as we come off the recent pullback from December. If we start to see a solid expansion higher, history suggests we could be heading into a multi-month period of strong trading opportunities.

Notably, many breakouts are continuing to work, particularly in the tech sector, which remains a key area of strength. Yesterday’s market reaction to the Fed’s interest rate decision wasn’t weak, and while a sharp rally would have been ideal, there’s nothing in the current environment that should scare the market.

One of the most important factors right now is the 10-year Treasury yield (US10Y), which continues to decline. This is generally very positive for equities, as growth stocks and rate-sensitive names tend to perform better when yields are moving lower. With strong technical setups forming and macro conditions looking stable, the stage is set for a potentially strong period ahead.

That being said, this doesn’t mean we need to force exposure. While we will continue to look for long positions, we have yet to see anything that truly triggers a clear entry point. Patience remains key, and we have no intention of rushing into positions. We’ll stay vigilant and wait for the right opportunities to materialize.

WATCHLIST
Today’s Top Stocks To Watch

DKNG: DraftKings Inc.

• DraftKings (DKNG) has spent most of 2024 building one of the most impressive multi-month bases we’ve seen in a while. The stock has been in a clear consolidation phase, with higher lows and lower highs forming on the weekly chart, indicating a tightening range. As we approach earnings in 14 days, the setup is looking increasingly likely for a pre-earnings breakout, which is often a strong move in anticipation of better-than-expected results.

• While we never hold a stock into earnings or buy too close to them, we feel confident that the two-week window before earnings gives ample time to capitalize on a potential rally, especially if it breaks out ahead of the earnings report. Selling into strength would be our approach if the move materializes.

• What makes this even more appealing is DKNG's solid fundamentals, with exceptional revenue growth being a standout. This is the type of growth we want to see when considering potential long positions, as strong fundamentals often provide the backing for continued stock price momentum.

NTRA: Natera, Inc.

• Natera (NTRA) is positioned within one of the top-performing industry groups: health technology. This sector has been showing strong relative strength, and NTRA is no exception. On the weekly chart, we’re seeing a clear breakout level forming, with higher lows and lower highs, signaling a potential move higher as volume slowly contracts. This is typical of stocks that are setting up for a breakout after a period of consolidation.

• We particularly like the fact that NTRA has been holding above its weekly 10-EMA, meaning there’s no concern about the stock being overly extended at this point. If we were to see a breakout, it would be coming from a healthy base.

• In fact, in premarket trading, NTRA is already testing that critical $170 level we’ve been watching, and if it manages to break above this resistance, it could set the stage for a strong move upward. This is definitely one to keep an eye on for a potential breakout in the coming days.