OVERVIEW
Institutions Continue To Push Exposure

We’re coming off a strong continuation day yesterday, with the broad market pushing higher to kick off a big week for major tech earnings. Speculative areas of the market are surging, and these sectors typically outperform during strong phases when taking aggressive long positions makes sense. Notably, Bitcoin has broken above $71,000, and cryptocurrency-related names, represented by the GBTC ETF, are responding with significant strength. Stocks like MicroStrategy (MSTR) and other companies tied to this theme are seeing solid gains.

Consumer discretionary (XLY) is also moving higher, which aligns well with the seasonal trend toward increased spending as we approach the holidays. It’s worth highlighting, though, that this kind of strength in speculative areas typically only happens in the strongest periods. With the election approaching and the volatility index (VIX) holding above 20, this level of momentum isn’t what we’d usually expect.

There's a huge focus on how big tech companies, heavily invested in AI and semiconductors, will report earnings. The main question everyone’s watching is whether their massive investments in AI are translating into actual profits.

Why is this so important?

First, if Big Tech’s AI spending proves profitable, it could benefit companies beyond just the tech giants. For example, as tech companies ramp up their AI projects, they buy AI chips from companies like Nvidia (NVDA). And as their AI operations grow, they also need more power, which boosts spending in the Utilities (XLU) and Energy (XLE) sectors. So, the ripple effect of profitable AI investments will mean gains across multiple sectors and therefore will strongly the market as a whole. We've already seen companies like NuScale Power (SMR) rally over 200% due to their work on small modular nuclear reactor technology. This innovation is one way big AI companies are looking to power their AI systems indefinitely, addressing the enormous energy demands required to keep these systems running smoothly and sustainably.

There’s another key point here: AI will make companies more efficient, cutting simple tasks and reducing costs, which ultimately boosts profit margins. It’s crucial that this quarter’s reports from the largest players in AI show strong spending on AI because leading companies in this space—like Nvidia, which designs the chips powering AI—are massive.

Nvidia alone is worth more than the entire economies of countries like Germany, France, Italy, and the United Kingdom, underscoring the scale and importance of AI’s impact on the market but even more so on the entire US economy.

Nasdaq

The Nasdaq is still holding above its descending resistance level, which it managed to break through during Friday's gap up. Yesterday, however, we saw a red close as the QQQ opened with another gap up, reaching just below $500 before pulling back to a major demand level around $495—where it held in Friday’s session as well.

Seeing a pullback after a gap up isn’t surprising. Ideally, we want to see strong follow-through, but the Nasdaq will likely remain in a holding pattern until major players like GOOG, MSFT, and AAPL report earnings and the market has time to digest the results. Yesterday’s low volume suggests there isn’t much buying pressure on big tech yet, signaling that the majority of the market is just still too hesitant to get aggressive ahead of these key reports.

S&P Midcap 400

Midcaps had a surprisingly strong session yesterday, with the point of control (POC) level around $568—where they’d been bouncing since last Wednesday—attracting strong buying interest. This buying pressure allowed the MDY to make a solid attempt to push through its declining 10- and 20-day EMAs.

Volume on this move was high, and although the 10-day EMA still hasn’t been fully broken, the significant demand at this POC level suggests strong confidence. For now, this level of support makes it unlikely that midcaps will see any major breakdown in the near term.

Russell 2000

Small caps had an even stronger session than midcaps, with the Russell 2000 (IWM) not only gapping up and opening above its 10- and 20-day EMAs but also posting a strong green candle that pushed it to week-long highs. This rally allowed the IWM to break through a dense cluster of supply.

The big goal for the IWM now is to hold this level and ideally break above $223. With relatively low supply between this point and recent highs above $227, the next few months look promising. From a macro perspective, the Fed’s rate-cutting period is a supportive factor, as small-cap companies are typically the most sensitive to interest rate changes.

DAILY FOCUS
Follow The Price Action & Ignore The Noise

With the upcoming election and all the noise surrounding it, it’s easy to feel uneasy about staying "risk on." This kind of environment can make anyone question their trades and start doubting. But remember, our only job as traders is not to trade opinions or emotions—it's to trade the price action we see right in front of us.

Right now, we aren’t seeing any real signs of market weakness. In fact, the high levels of speculative money in play tell us that traders are quite comfortable taking on risk. This week, with big tech earnings on the horizon, we’re gearing up to be very aggressive in buying long exposure in the top tech names. The price action is strong, and that’s our signal to stay focused and trade with confidence.

Trust your analysis, and trust your stop losses—they’re there for a reason. If you’re managing your risk effectively, sticking to no more than a 30% position size in any overnight trade and risking no more than 1% of your account per trade, there’s no need to worry. Your strategy is built to protect you from outsized losses, so lean into your trades with confidence.

Our focus heading into today’s session remains aggressive. We’ve seen strong performance across many stocks in our focus list and portfolio—you can access it here—and this is our main indicator for determining whether to stay long. With these setups showing solid strength, we’re in a prime position to keep pushing forward with our long positions, capitalizing on the current momentum.

WATCHLIST
Today’s Top Trades

VFC: V.F. Corporation

• VFC is currently experiencing a significant gap up following a strong earnings report, beating revenue expectations by 1.46% and achieving a remarkable 58.58% beat in earnings per share (EPS). This performance marks a notable turning point in the company’s fundamentals.

• Since the reversal at $21.33, VFC has faced considerable selling pressure, retracing down but managing to hold just above its rising daily 200-day EMA.

• We’re closely monitoring whether today’s gap can sustain itself, particularly watching for a break of the 5-minute opening range high (ORH) on high relative volume. If that occurs, we will consider triggering a half-sized long position. We're opting for a half-sized entry because we’re still waiting for the big tech names, which remain our priority..

LX: LexinFintech Holdings Ltd.

• LX is a China-related finance and real estate name that has formed one of the most textbook multi-month bull flags we've seen in the market so far.

• This setup is a perfect example of what to look for in a high-probability trade that appears poised for upward movement. Breakouts from these well-defined patterns, where both the trading range and volume decline as the stock approaches a major contraction point, tend to be incredibly explosive.

• We’re keen on finding an entry point for LX today and will be looking to take a full-sized position, given the strong technical setup.