OVERVIEW
Conditions Continue To Improve

Tape shift confirmed: Six weeks of chop gave way to real follow-through — breakouts are sticking, breadth is expanding, and expectancy is improving.

Nasdaq (QQQ): Demand at $577 defended perfectly, $580 supply cleared. Path of least resistance is higher unless CPI is a major upside shock.

Midcaps (MDY): Evening star reversal played out, now testing $597 demand. Constructive above this zone but not leadership.

Small caps (IWM): Hammer reversal off the 10EMA / Aug 27 pivot on rising relative volume. Constructive, but could lag if QQQ accelerates further.

Focused Stock – IONQ: +600% in 52 weeks, now forming a mature cup-and-handle. Top 3 setup in the entire market.

Focused Group – Semiconductors (SMH): Broad base with MU, ALAB, TSMC breaking out and holding. Core to the AI trade, critical support for Nasdaq leadership.

MARKET ANALYSIS
An Extremely Impressive Day

We won’t bore you with ancestry macro commentary, yesterday’s tape marked a clear shift.

Six weeks of chop and failed breakouts have given way to cleaner follow-through. Leadership is extending, breadth is broadening, and expectancy has improved materially. This is the first real signal that the consolidation phase may be ending.

The PPI downside surprise added fuel, but the tape was already turning. Price is always the leading indicator and not forecasts. Charts look very healthy, risk appetite is broadening, and the character of the market is improving.

CPI tomorrow is the next headline test. Street sits at +0.3% MoM on headline and core, which keeps the Fed’s September cut firmly in play.

Only a substantially hotter number threatens that path. But for traders, the macro debate is secondary: the tape has started to pay risk again.

Nasdaq

% over 20 EMA: 47.52% | % over 50 EMA: 43.56% | % over 200 EMA: 58.41%

You’ll recall from yesterday’s note that our bull case hinged on QQQ defending its demand zone at $577. That level aligned perfectly with an hourly 20EMA retest, creating a high-probability confluence. The tape respected it: demand stepped in, the retest was absorbed, and we saw a hammer reversal candle confirm buyers were in control.

From there, QQQ drifted back into the $580 supply zone on rising relative volume. Instead of stalling, yesterday’s PPI print provided the catalyst to gap through this supply band which was the key validation of our thesis that the market was primed for the next leg higher.

As it stands, QQQ has emerged as the relative strength leader over the past week. Breakouts are holding, demand is active at every test, and the character of price action has flipped from distribution to accumulation.

Our read: the supply overhang at $580 has been cleared. With demand confirmed at $577 and buyers willing to chase strength, the path of least resistance is higher.

Unless tomorrow’s CPI delivers a true upside shock, the technicals argue strongly for continuation.

S&P 400 Midcap

% over 20 EMA: 56.00% | % over 50 EMA: 61.50% | % over 200 EMA: 59.50%

You’ll recall from earlier this week we highlighted the evening star pattern on MDY as a likely bearish reversal. That signal has played out cleanly as price has retraced into the daily 10EMA, now coinciding with a dense VRVP demand zone at $597.

So far, the tape has respected that level. Buyers have stepped in, and we’re watching closely to see if this demand band continues to hold.

A defense here keeps the structure constructive, with upside scope back toward $605+. A break below $597 would shift risk lower toward $585.

Unlike Nasdaq, which has emerged as the clear relative strength leader, MDY is consolidating and the strength is fading. It can still perform well off this support, but the momentum trade is elsewhere.

You always want to be concentrated in the strongest groups, and right now that’s QQQ.

Russell 2000

% over 20 EMA: 60.06% | % over 50 EMA: 66.76% | % over 200 EMA: 60.01%

IWM has been showing clear relative strength compared with MDY (and compared to the QQQ over the last few weeks, although this has broken in the last 3 session).

Yesterday we saw a red hammer reversal on elevated relative volume, which coincided with the daily 10EMA and the August 27th breakout highs. That’s the character shift we’ve been highlighting- prior resistance now acting as support.

Equally important, there’s been a steady pickup in relative volume over the past few weeks as IWM has ground along its 10EMA. That’s constructive tape with demand consistently absorbing supply, confirming accumulation rather than distribution.

We appreciate that while IWM looks strong on its own, it’s important to note the dynamics of leadership. As QQQ continues to gain momentum, there’s a good chance we see relative lag develop in IWM.

That doesn’t negate the bull case, but it simply reinforces the rule that capital should always be concentrated in the strongest groups first.

FOCUSED STOCK
IONQ: Why Is No-One Talking About This?

ADR%: 5.70% | Off 52-week high: -19.6% | Above 52-week low: +572.8%

Quantum computing is a theme very few are talking about, but inside that space IONQ is our clear leader. The stock has delivered an almost +600% move over the past 52 weeks, and importantly, it hasn’t given those gains back.

Since May 2025, IONQ has been building a tight, constructive base, allowing for the development of a cup-and-handle formation anchored against the deeper base established in late 2024.

This is exactly what you want to see after a parabolic run: volume tapering during the base build, higher lows forming week over week, and volatility compressing into the apex of the handle.

That’s what institutional accumulation looks like with patient positioning before the next expansion.

Statistically, the cup-with-handle is one of the most reliable continuation patterns in bull markets. According to Bulkowski’s testing:

• Average rise: ~54% after breakout

• Failure rate: just 5%

• Performance rank: 3rd best out of 39 major patterns

Applied to IONQ, the measured move points toward material upside well above the $50–55 range once the handle breaks (likely much higher given this is part of the general AI trade).

FOCUSED GROUP
SMH: Semiconductors Should be Top Watch

SMH has spent the last several months building a broad base. While we haven’t seen the kind of tightness we typically like before a clean breakout, this is where deeper work matters.

Beneath the surface, a large number of individual semis have started to show relative outperformance over the past week.

Names like MU, ALAB, and TSMC have all pushed through supply and are holding their breakouts. That’s critical confirmation because it tells you these moves aren’t fading 1-3 days out, there is actually continued demand to hold them afloat.

And also context matters. Semiconductors aren’t just another sector… they are the core of the AI trade, and the single largest market leader globally (NVDA) sits inside this group.

If semis are firm, it provides the structural support the Nasdaq needs to sustain upside momentum.