MARKET ANALYSIS
Here’s What You Need To Know

• Markets are effectively in holding pattern mode ahead of the delayed January nonfarm payrolls report, with futures slightly softer because positioning has already adjusted lower expectations.

• This is all about whether the data confirms a slowing but still-stable labor market, or introduces genuine downside uncertainty.

• The key nuance here is that a weak jobs print is no longer automatically bearish. At this stage of the cycle, a softer number would likely reinforce rate-cut expectations and support risk assets if it does not imply labor market instability.

• A miss that signals structural weakness, however, would reintroduce volatility rather than fuel upside.

• Macro data is now interacting directly with crowded positioning and the defensive sectors and value have become increasingly stretched, while growth and technology have already absorbed heavy selling pressure. This sets up a regime where “in-line” data may still catalyze rotation, even if index-level moves remain muted.

• Currency and rates markets are quietly confirming this setup. The dollar rolling over and renewed easing expectations suggest traders are leaning toward a slowdown narrative, not a recession narrative.

• The most important takeaway is that macro risk this week is about reaction and the volatility compression into high-impact data tends to resolve quickly, and the real signal will come from how price and volume behave after the release, particularly around key acceptance or rejection levels.

Nasdaq

47.52%: over 20 EMA | 49.50%: over 50 EMA | 51.48%: over 200 EMA

• The Nasdaq rejected its declining 10- and 20-day moving averages, most importantly failing at the declining 10-week EMA at 616.85, confirming this level as active supply.

• The rejection occurred on roughly 100% relative volume, which is not capitulatory, but still reinforces the idea that upside acceptance is not yet present after the 3.6% rebound from the February 5th capitulation low.

• The key level now is 607, which aligns with the flat 20-week EMA; this level held on Monday and must continue to hold, as the Nasdaq has not closed below the 20-week EMA in nearly a year, with the last confirmed close below it leading to a 22% drawdown.

• Our base case remains a controlled pullback toward 605, with a secondary risk scenario of a double bottom near 594.50 if weakness accelerates, particularly as inflation data later this week is likely to reintroduce volatility and force repricing.

S&P 400 Midcap

65.82%: over 20 EMA | 71.10%: over 50 EMA | 71.10%: over 200 EMA

• Mid-caps continue to show clear demand at highs, with strong accumulation visible between 646 and 654, where buying volume materially outweighs selling, confirming institutional support beneath price.

• While relative volume has begun to decline, this is occurring during contraction at highs, not during a breakdown, which reduces immediate downside risk and keeps the trend intact for now.

• The major risk level sits at the 10-day EMA near 643, which would represent a ~2% downside move; a decisive break there would materially damage the long-side asymmetry and signal exhaustion.

• Breadth remains elevated at 66–71% of stocks above key moving averages, which raises mean-reversion risk, but until price fails, fading mid-caps remains a low-probability trade.

Russell 2000

56.90%: over 20 EMA | 60.57%: over 50 EMA | 65.39%: over 200 EMA

• Small caps have rallied roughly 5% since Thursday, but with declining relative volume, suggesting a recovery driven more by short covering than sustained accumulation.

• That said, last week produced a valid Morning Star reversal, a pattern with a ~78% bullish resolution rate across large historical samples, ranking among the top 12 of 103 candlestick formations by expectancy.

• Unlike mid-caps, small-cap breadth is not extended, leaving more upside room if risk rotates down the capitalization spectrum.

• While overnight exposure remains unattractive ahead of inflation data, intraday opportunities in IWM remain viable, particularly given the still-favorable breadth asymmetry.

FOCUSED GROUP
XPH: A 64 Day Pharma Base Breaking Out

• Pharmaceuticals remain one of the cleanest risk-adjusted trends in the market, holding a 64-day base within a mature Stage 2 advance that began in August 2025.

• Price continues to defend the rising 10-week EMA, with expanding relative volume on advances, signaling institutional participation rather than late-stage speculation.

• Yesterday’s move back above the point of control suggests early breakout pressure is building, despite some residual overhead supply.

  

  XPH Top 10 holdings (22.77% of total assets)

• For traders looking to reduce single-stock risk while maintaining exposure, XPH offers an unusually balanced, egalitarian structure and remains one of the most attractive defensive allocations in the current regime.