OVERVIEW
The Bull Market Is Alive & Well

🟢  Risk-On: Small & Midcaps

• MDY ripped through POC at $583 on +212% relative volume

• Russell 2000 breadth exploding: 82% above 20 EMA, 74% above 50 EMA

• Our momentum scans show the cleanest setups in small–microcaps

🟥 Risk-Off: Large & Mega-Cap Tech

• Nasdaq stuck in a bearish broadening wedge with fading relative strength

• Rising sell-volume confirms pressure

• NVDA earnings Wednesday = binary event keeping QQQ on hold

MARKET ANALYSIS
Follow The Strength

The market’s tone flipped Friday after Powell’s Jackson Hole comments, where he all but confirmed the Fed is preparing to cut rates in September. Futures now price an 84% chance of a quarter-point cut, up from 75% earlier in the week.

That matters because lower rates = lower borrowing costs, which benefit smaller and higher-beta companies far more than mega-caps. When money is cheap, capital naturally flows into areas with higher growth potential and higher volatility. That’s why we’re seeing small caps, midcaps, financials, and cyclicals finally come alive while mega-cap tech stalls (we also expect industrias to follow suit).

This is exactly the rotation we’ve been flagging: institutions unwinding crowded positions in big tech and reallocating down the risk curve into under-owned areas of the market.

But there’s another reason the Nasdaq isn’t leading right now: NVDA earnings on Wednesday. With the index so heavily dependent on one name, traders are reluctant to press until they see how the market digests that report.

In short: the Nasdaq is on hold, but the rest of the market is starting to run (go here).

Nasdaq

% over 20 EMA: 59.40% | % over 50 EMA: 55.44% | % over 200 EMA: 66.33%

The QQQ continues to track inside an ascending broadening wedge — a pattern most common in bull markets that often resolves downward. Bulkowski’s data backs this up:

• Break-even failure rates: 15% up / 31% down

• Average move: +41% up / –12% down

• Targets met: 61% up / 71% down

In other words, while breakouts from this pattern can be powerful, downside resolutions are more reliable.

From our lens, the Nasdaq looks vulnerable here. Relative momentum has been fading for weeks, and the index is now effectively being held hostage by a single stock: NVDA, with earnings due Wednesday.

Until that catalyst passes, any long exposure here is a low-probability bet.

Volume confirms the caution. Last week saw relative volume rising as QQQ pushed lower, a sign that selling pressure is real rather than passive. Combine that with the wedge structure and NVDA risk, and the odds skew against chasing upside in this group right now.

🔒 Every Sunday in Swingly PRO, we break down the Commitment of Traders (COT) report — showing exactly who is buying and selling futures across indices like the Nasdaq.

PRO members spotted this weakness weeks ago through positioning shifts long before it showed up in price. Free readers see the warning. PRO members see it early.

S&P 400 Midcap

% over 20 EMA: 80.75% | % over 50 EMA: 72.50% | % over 200 EMA: 64.50%

Friday was a watershed session for midcaps. MDY exploded higher on +212% relative volume vs. its 20-day average, breaking decisively through the point of control (POC) at $583. You don’t need indicators to see it as the character change is obvious just by looking at the tape.

From a breadth perspective, midcaps are dramatically outperforming the Nasdaq right now:

• % of stocks above 20 EMA: 80.75% (vs. Nasdaq 59.40%)

• % above 50 EMA: 72.50% (vs. Nasdaq 55.44%)

• % above 200 EMA: 64.50% (vs. Nasdaq 66.33%)

That’s what leadership rotation looks like in real time. Participation is broad, volume is confirming, and the structure has shifted firmly back in favor of midcaps.

Russell 2000

% over 20 EMA: 82.17% | % over 50 EMA: 74.17% | % over 200 EMA: 61.18%

The setup here couldn’t be cleaner. During Fed easing cycles, small-cap stocks often outperform.

One clear statistic: after the final rate cut of past cycles, the Russell 2000 achieved an average 36% return over the next 12 months, and 42% over 24 months—far above its long-term average of roughly 9% annually.

What we’re seeing in real time: Even just scanning our daily momentum screens, it’s clear the cleanest technical setups are clustering in the small–microcap complex.

Tight bases, fresh breakouts, and abnormal volume surges are appearing here with far greater frequency than in mega-cap tech. That tells you where institutional money is rotating (and shorts are being closed here too…).

The small-cap complex is where real alpha is hiding right now. Don’t ignore this.

FOCUSED STOCK
DFDV: The Stars Are Aligning…

ADR%: 14.45% | Off 52-week high: -62.5% | Above 52-week low: +4048%

DFDV ($450M market cap) sits at a fascinating crossroads being part high-beta momentum play, part crypto proxy. Technically, the stock has been carving out a series of higher lows for weeks, with a breakout level looming near $22.

What makes it stand out is the fundamental kicker: the company just raised $125M to accumulate Solana, tying its narrative directly to the broader crypto ecosystem.

Combine that with the fact DFDV has already delivered a staggering +4000% move in the last 52 weeks, and you have a stock that consistently demonstrates its ability to produce outsized runs.

The volatility is extreme. With an ADR% of 14.45%, DFDV can move double-digit percentages in a single session.

Context matters here: when the stock broke out of a small contraction in mid-May 2025, it ripped +250% in just four sessions.

Moves like that demand smaller position sizing, but they also illustrate the kind of asymmetric payoff potential in play if this setup transitions into a new markup phase.

From a thematic angle, the crypto + financials + small/micro-cap strength adds huge tailwind.

FOCUSED GROUP
GXC: Chinese Equities Gaining Momentum

Friday delivered a decisive breakout in GXC, blasting through a dense volume cluster around $96 after weeks of tight volatility contraction. This move pushed Chinese equities straight to the top of our thematic group rankings, with clear relative momentum leadership vs. U.S. equities right now.

That said, the playbook for Chinese names is different. These stocks are notorious for choppy follow-through and overnight gap-down risk. While the momentum is undeniable, chasing breakouts in Chinese ADRs is dangerous, the better risk/reward comes from waiting for weakness or pullbacks after the initial thrust.

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

Q: “How do you know when a breakout is likely to work vs likely to fail?”

You don’t. If anyone tells you they know , run the other way. Trading isn’t about certainty, it’s about stacking probabilities until the edge tilts in your favor, and then sizing your risk so that even when you’re wrong (which you will be, often), you live to play the next hand.

1. Market first.
Breakouts rarely succeed against a weak tape. If the S&P is rolling over or the Nasdaq is chopping sideways, even perfect patterns fail. You need the tide with you. That’s your first filter.

2. Leaders only.
The biggest winners come from the strongest stocks. The ones already up 30–50% in the past quarter are usually the ones institutions keep pressing. That’s momentum. Fundamentals add weight, but price leadership is the sharper edge.

3. Sector confirmation.
Breakouts are pack animals. If software, semis, or biotech are leading, trade the leaders inside those groups. Group strength compounds your probability.

4. Volume tells the truth.
A breakout on weak volume is just a blip. A breakout on abnormal relative volume means institutions are buying, and that’s when levels hold.

Even with all of this, our 12-month win rate sits below 40%. That means the majority of breakouts don’t follow through, even when the filters align.

This is where risk management really is key. If you risk 1–2% of your entire equity per trade with a sub-40% win rate, you’ll almost certainly blow up.

Suppose you risk 2% of equity per trade with a 40% win rate. After just 10 losing trades, you’re down nearly 20% of your account. Add variance (losing streaks happen), and the math compounds against you fast.

At a 40% win rate, it’s common to hit 5–7 losers in a row. Risking 2% each time wipes 10–15% of capital in a week. Most traders can’t recover from that both psychologically but also mathematically

The goal isn’t to “win big every time.” The goal is to survive the inevitable streaks of failure long enough to catch the handful of breakouts that become 100%+ runners.

Align market, stock, group, and volume, size small enough to survive the losers, and let the handful of real runners carry your year.

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

This is the power of trading alongside a team →   see what’s included