OVERVIEW
Moderate Risk On 🟠

QQQ: Cleanest strength in the tape. No price/volume divergence, breakouts holding. Short-term stretched → some derisking into Fed normal. Leaders (TSLA, META, GOOG, AAPL, semis) driving.

QQQE: Stalling at July supply shelf. Heavy overhead supply explains weak breadth vs QQQ. Confirms mega-caps = leadership.

MDY: Yesterday faded back into rising 10EMA on higher RVOL — not ideal. Breadth shows short-term retracement (%>20EMA 48%). Trend intact if $598 demand zone holds.

IWM: Constructive but secondary. Volatility contraction forming on rising 10EMA. Low RVOL = bullish absorption. Small-cap themes (esp. quantum computing) showing strong setups.

Focused Stock (AMD): Textbook setup. Compression under EMAs, RVOL drying, breakout trigger at $163 with thin supply to $172. Leadership tailwind + clean asymmetry → #1 watch today.

Focused Group (XLI): Industrials forming volatility contraction under $152.79 supply shelf. Macro tailwinds (Russell 2000 strength, low-rate environment). Breakout unlocks follow-through.

MARKET ANALYSIS
Don’t Overthink The Rate Decision

The market delivered a strong follow-through day yesterday, confirming that last week’s exhaustion signals were nothing more than noise. Breakouts are sticking, breadth is expanding in growth, and leadership in the AI/Tech complex remains dominant.

Everything else is just distraction. Retail sales, political headlines, Fed appointments, none of it matters right now. All eyes are on tomorrow’s Fed decision and Powell’s press conference.

Here’s the only thing you need to know: when markets behave this well before a major event, it tells you sponsorship is already committed. That doesn’t remove the risk of paper cuts from whipsaw tomorrow, but it does remove the idea of a “sudden rug pull.”

Nasdaq

% over 20 EMA: 43.56% | % over 50 EMA: 44.55% | % over 200 EMA: 58.41%

The QQQ remains the strongest part of the tape, breaking out with no sign of volume/price divergence.

The move has been orderly: volume has expanded on thrusts and contracted on consolidations, which is exactly what you want to see.

Structurally, price is pressing the upper end of the channel, and we’re now stretched short-term, not extreme, but enough that today could warrant a degree of caution.

Heading into tomorrow’s Fed event, it’s normal to see lower relative volume and some derisking as funds trim into strength. That only poses an issue for fresh exposure; anyone in from the bases or the EMA retests should treat this as controlled follow-through.

A pause or shallow consolidation here would actually be constructive given how many breakouts in the complex are working.

Equal-Weight Nasdaq (QQQE)

QQQE is telling the other half of the story. Price is stalling right into the July supply shelf, and the VRVP shows why since there’s a dense block of overhead supply here that needs to be absorbed.

This is exactly where you’d expect resistance. Until that clears, breadth inside Nasdaq will look weaker than the headline QQQ.

The divergence is very clear: mega-cap tech is driving the index. Leaders like TSLA, META, GOOG, AAPL, and the semis are pushing QQQ higher while the average Nasdaq stock is still contending with supply.

For today, respect the strength but recognize positioning risk into tomorrow’s event. Breakouts in the leaders are valid, but new size pressed into stretched tape can be vulnerable if volume fades.

S&P 400 Midcap

% over 20 EMA: 48.12% | % over 50 EMA: 60.40% | % over 200 EMA: 61.90%

Yesterday’s session in MDY wasn’t inspiring. Relative volume picked up slightly, but instead of driving higher it faded back into the rising 10-EMA on the daily.

Breadth confirms it. Only 48% of midcap stocks are above their 20-EMA, compared with 60% above the 50-EMA and 62% above the 200-EMA.

That spread is a classic sign of short-term retracement inside a broader uptrend. Momentum has cooled in the near term, but structurally midcaps are still intact on higher-timeframe trends.

For traders, the key is always relative strength. MDY is lagging while QQQ and the mega-cap complex are breaking out cleanly. That divergence tells you where the sponsorship really is: capital is concentrating in large and mega-cap leaders, not in midcap momentum.

For today, the focus is simple: can MDY hold the rising 10- and 20-EMA cluster? There’s dense demand just under the 10-EMA at ~$598 on the daily volume profile, and a test into that zone wouldn’t be surprising. As long as demand stabilises there, the trend remains intact.

Russell 2000

% over 20 EMA: 55.89% | % over 50 EMA: 64.44% | % over 200 EMA: 60.60%

IWM is holding up better than MDY but still trails far behind QQQ in relative strength. The structure here is constructive: price has been grinding higher, and over the last two sessions we’re starting to see a clear volatility contraction pattern forming right on the rising 10-EMA.

Yesterday’s session printed very low relative volume, which actually works in the bulls’ favor. Low-volume contractions at rising EMAs are classic setups for continuation, and they tilt the probability toward an upside breakout in the very near term.

What’s encouraging is that our daily scans continue to flag strong small-cap setups and particularly in high-growth themes like quantum computing, where a number of names have been breaking out with textbook structure.

That shows the leadership in small caps isn’t random; it’s being driven by thematic strength.

FOCUSED STOCK
AMD: The Cleanest Breakout on the Board

ADR%: 3.27% | Off 52-week high: -13.7% | Above 52-week low: +110.7%

If you want a single name that captures everything about this market’s leadership, it’s AMD.

It sits right in the sweet spot: mega-cap tech, semiconductors, and the large-cap growth bucket that’s been driving cap-weighted indices all year.

The technicals couldn’t be cleaner. Price has been compressing just under the EMA cluster for a week, with relative volume drying up the entire time.

That’s exactly what you want to see in a potential breakout: sellers run out of ammo, demand quietly absorbs, and the tape tightens.

The key level here is $163. Above that, look at the VRVP as there’s basically an air pocket of supply for about 5% until the next real node at $172.

That kind of thin zone is what creates acceleration. When supply is gone, it doesn’t take much buying to push the tape quickly into the next pocket.

From a pure setup perspective, AMD has:

• Leadership tailwind: semis and large-cap tech are the market generals right now.

• Textbook structure: contraction, declining RVOL, EMA support, breakout trigger.

• Defined asymmetry: clear breakout level ($163) with measurable upside to $172.

This should be the #1 watch today. The structure is too good, the context is too strong, and the upside-to-risk skew is one of the cleanest in the market right now.

FOCUSED GROUP
XLI: Industrials With A Volatility Contraction

XLI has been one of the more interesting rotations to watch over the past two weeks. After a sharp volume pickup off the rising 50-day EMA and a reclaim of its POC, the ETF ripped higher on real sponsorship.

That move was backed by institutions leaning in.

Now the character has shifted. The last two sessions have tightened up into what’s basically a volatility contraction. Relative volume has collapsed, which is exactly what you want to see if you’re looking for absorption rather than distribution.

Price is sitting right under the visible supply shelf on VRVP at $152.79, which is the breakout level to watch. If buyers push through, that zone flips from overhead supply into fresh demand.

From a macro lens, Industrials have the wind at their back:

• The Russell 2000 is firming and Industrials tend to track small-cap risk-on moves.

• In a low-rate environment, capital-heavy sectors like Industrials attract sponsorship since financing costs come down and margins improve.

XLI has both technical compression under supply and macro sponsorship lining up. A confirmed push through $152.79 will likely unlock sustained follow-through.

Q&A
Got a trading question? Hit reply and ask!

Q: “What does it actually mean when a stock (or sector) is “extended”? How do I know when to stop buying strength and start thinking about risk?”

Ok, this will be a long one… but it’s important so strap in.

One of the biggest mistakes traders make is thinking “extended” just means “overbought.” It’s not that simple.

Extension is about risk asymmetry and how the math of profit vs. loss flips once a move goes too far.

• Longs at extremes face negative asymmetry. Each new high demands a wider stop just to survive normal volatility, while the upside shrinks because fewer buyers are left to chase. You risk more to make less.

• Shorts at extremes gain positive asymmetry. Stops can sit tight (just above the highs), while downside targets open up because mean reversion kicks harder the further you stretch. You risk less to make more.

That’s why parabolic moves feel amazing but often destroy accounts. You’re right on direction, but wrong on timing and the payoff math crushes you.

How we measure it

The cleanest way is ATR multiples:

Extension Multiple = (Price − 50EMA) ÷ 14-day ATR

• <4× ATR → Totally normal. Longs still viable.

• 6–8× ATR → Elevated risk. Trim size, stop pressing.

• >8× ATR → Game over for fresh longs. Only fades make sense.

This all comes from Jeff Sun and his approach which is where we learnt it so please do check him out!!

Most people learn “Z-scores” in textbooks which is basically measuring how far price is from average in standard deviations. The problem is that markets don’t move in neat bell curves. Real price action is messy, fat-tailed, full of squeezes and air pockets.

That’s why we prefer ATR. ATR is built off actual volatility, not some academic assumption. It already adapts to how wild or quiet the tape has been. If a stock’s been calm, ATR shrinks and your extension readings get tighter. If it’s been ripping, ATR expands and adjusts for that.

The sponsorship problem

Late-stage moves almost always come with declining relative volume. That’s a huge tell. Healthy trends climb on steady or rising volume. Parabolic extensions climb on less and less demand, which means each marginal buyer has to pay more aggressively just to participate.

That’s when you start seeing “air pockets” which are sharp, ugly reversals because:

• Stops are clustered at the same obvious levels (EMAs, prior lows).

• Liquidity thins out.

• Algos sniff the volume-price divergence and accelerate selling.

The trap for longs

You get boxed into an impossible choice:

• Tight stops → you’ll get whipsawed by normal volatility.

• Logical stops (20EMA) → you’re risking 8–15% downside for maybe 2–4% upside. Terrible math.

Why shorts suddenly work

• Clear invalidation: 1–3% above highs and you’re out.

• Multiple downside magnets: first support, gap fill, rising EMAs.

• Risk-reward often >4:1.

The volatility kicker

Late parabolic runs also lull people into complacency: implied vol drops while realized vol spikes on reversals. Stops sized off the “calm” period suddenly aren’t big enough, and traders take outsized losses even when they “did everything right.”

What to do when trailing an extended move:

• If long: Tighten stops, reduce size, don’t add. Take profits into strength.

• If flat: Wait for a reversion to the rising 20EMA where you can define risk. Don’t chase highs.

• If short: Wait for sponsorship to fail (volume drying on new highs). Place stops just above closes, not wicks. First support is your base target.

📩 Final Note: We know this stuff can sound complicated the first time you read it… ATR multiples, extension, mean reversion, asymmetry- it’s a lot.

But it’s also the difference between getting chopped up in parabolas and actually managing risk.

If any of this feels unclear, or if you want us to break down how we’d apply it to a specific ticker you’re watching, just reply to this email.

We read every single one and we’ll either answer you directly or cover it in the next report.

In Swingly Pro, we talk about how to build these exact systems so no member has to guess. We all know exactly when the market is ours to attack, and when it’s time to step aside and raise cash

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