OVERVIEW
Nasdaq Is Slipping Into A Bear Market

Stocks continued to slide on Monday, adding to the recent losing streak. The Nasdaq saw its worst drop since September 2022, while the S&P 500 extended its decline for a fourth week. This isn’t just about economic fears—what we’re seeing is investors pulling back from high-risk areas, especially tech and momentum stocks, as big funds unwind their previous bets.

Right now, Wall Street isn’t sure which sectors will hold up, so institutions are playing it safe by moving to cash. This is a common reaction when uncertainty is high—rather than guessing which stocks will recover first, big money managers prefer to step back, wait for clarity, and then re-enter when the market stabilizes.

Let’s get stuck into what actually matters and that is what the charts are telling us:

Nasdaq

The QQQ is at a critical juncture, and while last week already raised concerns, things have taken a clear turn for the worse. We’re not here to fearmonger, but we also won’t ignore major technical developments—right now, the QQQ has done something it hasn’t in three years: break decisively below its rising 50-week EMA.

This is a significant shift. The weekly chart has now officially broken down, and instead of reclaiming that key moving average, the QQQ was rejected at $482, reinforcing the growing selling pressure. What we’re seeing is an acceleration of liquidations, particularly in growth-heavy areas of the market, as large- and mega-cap tech stocks—the backbone of the Nasdaq—continue to struggle.

The last time the QQQ broke its 50-week EMA was in January 2022—right before the Nasdaq entered a bear market that lasted over a year. That breakdown led to an additional 31% decline before the cycle finally ended in March 2023.

Now, we’re not necessarily saying history will repeat itself in the exact same way, but it’s hard to ignore the clear warning signs in the tape. When key levels like this fail, it often signals a deeper shift in market conditions, and right now, the weight of selling pressure suggests this breakdown shouldn’t be taken lightly.

For any kind of quick recovery in the QQQ, we need to see a strong move back above $482, ideally with a decisive weekly close reclaiming the breakdown level. However, the odds of this happening are slim—especially when we look at how the "Magnificent Seven" (MGAS) are performing. These stocks essentially dictate the movement of the QQQ, and right now, they’re showing clear signs of continued weakness. Without strength from these market leaders, any attempt at a rebound will very likely struggle to gain any traction.

S&P Midcap 400

Mid-cap stocks are taking a beating as expected, with the head and shoulders pattern we’ve been tracking for weeks now fully confirming and playing out. This pattern is one of the most reliable reversal signals, and the MDY (S&P MidCap 400 ETF) is showing no real attempt at recovery on the weekly chart. That’s not surprising—if traders don’t have confidence in mega-cap names like MSFT or NVDA bouncing, they certainly won’t bet on the more volatile mid-cap space.

There is some demand at $530, as seen on the Visible Range Volume Profile (VRVP) to the right of the chart, and we did get a brief bounce yesterday. But right now, this market is in price discovery mode—nobody truly knows how deep this correction will go. Trying to call short-term bottoms here is a fool’s game, especially when momentum is still firmly to the downside.

Russell 2000

Small caps are in the same boat as mid-caps, currently sitting on dense demand zones where past downtrends have found support. However, the key distinction here is that we are now trading below the average price of the last 50-week period, which is a major shift in sentiment. When markets break below these long-term averages, it signals that the trend has officially turned bearish. In these conditions, small caps become one of the least attractive places to allocate capital—investors prioritize safety, and the last thing they want is exposure to volatile, lower-liquidity names.

There’s been a lot of chatter online about buying the dip, but it’s important to recognize that this isn’t 2020. Back then, relentless stimulus and easy money fueled sharp rebounds. Right now, we are in a very different environment, where momentum is firmly to the downside. Buying weakness in a confirmed downtrend is not how momentum trading works. Instead of looking for a bottom, us traders should be focused on risk management and patience—waiting for the market to prove it’s ready to turn before stepping in.

DAILY FOCUS
Things Are Actually Getting Quite Ugly…

If there’s one thing worse than a weak market, it’s a slow, choppy one. For months, we’ve been stuck in an environment of indecision—grinding lower without real conviction, punishing both bulls and bears. That’s finally changed.

This breakdown is decisive, aggressive, and high-volume—exactly what we want to see if we’re ever going to get through this markdown phase and set up for real opportunities later. The worst outcome would’ve been another drawn-out, low-volatility bleed where we just drift lower for months. Instead, we’re seeing real momentum, and the sooner we get capitulation, the sooner we can move forward.

What’s Actually Happening?

1️⃣ We’ve moved from a small correction into a full-blown markdown phase. Many traders are still treating this as a pullback, but institutional behavior suggests it’s something deeper. The 10-month EMA breaking down on the S&P 500 & the 50 Week EMA being lost on the Nasdaq isn’t just a random technical event—it confirmed a change in market structure.

2️⃣ Liquidity is getting sucked out fast. We track several proprietary indicators, including volume acceleration relative to past sell-offs. What’s clear is that this isn’t rotational—it’s a full-scale de-risking event. The market isn’t finding a “safe spot” in equities; money is leaving stocks altogether.

3️⃣ We finally have momentum to the downside. Choppy, slow downtrends force bad habits—FOMO bounces, overtrading, and getting chopped up. A sharp trend is easier to trade (even if it’s painful in the short term). The best setups will emerge only after we flush weak hands, and we’re finally in that stage.

So, What Now?

Welcome the sell-off. This is necessary if we want real opportunities later. A true markdown phase needs to finish fast, not drag on.

Watch for exhaustion signals. Capitulation isn’t here yet. One thing we’re watching is how different asset classes respond—right now, Treasuries and volatility are flashing key signals, but it’s not “buy time” just yet.

Be patient, but be ready. Most traders get shaken out at the worst moment—either getting too bearish too late or jumping in too early. We’re not there yet, but when we are, we’ll be positioned ahead of time, not reacting after the fact. You really do need to stay diligent even if you aren’t looking to open risk, scanning for relative strength and seeing where money is flowing everyday to stay on top of the market’s pulse.

If you want deeper, no-nonsense analysis on the market and a clear game plan for navigating it, consider joining Swingly Pro. We don’t just track equities—we break down institutional flows, macro shifts, and the real forces driving price action. Plus, you’ll be part of a community of serious swing traders who share research, support each other, and stay accountable—especially when conditions are at their toughest.

WATCHLIST
Some Relative Strength Leaders

LMND: Lemonade, Inc.

• LMND stands out as a relative strength leader, continuing to hold its ascending support on the weekly timeframe. However, it's now approaching a critical point after losing the 20-week EMA in yesterday’s session. The key focus today is whether this level can reclaim support and bounce.

• This setup reflects the general model we use when scanning for relative strength stocks. The goal is to identify names that consistently outperform the market—holding steady during weak periods and rallying aggressively when conditions improve. These stocks signal where real demand exists, making them prime candidates for leadership when momentum returns.

BE: Bloom Energy Corporation

• BE is another notable relative strength name, consistently finding demand at a key level—its 20-week EMA. Multiple retracements to this level have been met with buyers stepping in, reinforcing its support. Additionally, relative volume has generally been declining, which initially signaled controlled selling.

• However, we're now starting to see early signs that sellers are beginning to mount more pressure. This makes BE a name to watch closely—if demand continues to hold, it could remain a leader, but any decisive breakdown could shift the narrative quickly.