OVERVIEW
The Market Currently Holds Key Levels

The market finds itself at yet another critical juncture, with yesterday’s session continuing to highlight broad weakness across the major indices. Market-leading stocks remain under pressure, extending their breakdowns and showing little relief. Adding to the uncertainty, a weaker-than-expected consumer confidence reading weighed on stocks Tuesday, following a string of disappointing economic reports—including sluggish retail sales and declining consumer sentiment. These factors have fueled growing concerns about the economy, and the major averages have reflected that unease.

However, as always, the most important thing is not these economic reports themselves. They are often lagging indicators, while the market operates as a forward-looking mechanism, pricing in future events 6 to 9 months ahead. This is known as the discounting principle—the idea that stock prices reflect expectations of future developments well before they actually occur.

For example, if a recession is widely expected, the market will typically sell off in advance, long before economic data confirms a slowdown. Conversely, if the economy is set to recover, the market often begins rallying well before economic numbers improve. This is why reacting to economic reports can often be misleading—the real driver of market movement is not the news itself but how the market interprets and responds to it.

At the end of the day, price action is what matters most. The tape—volume and price movement—tells the real story of market participants' collective behavior. Instead of reacting to headlines, we remain focused on what truly dictates future trends: the action unfolding in real time.

With that in mind, looking at the price action itself, we can see that the Magnificent Seven (MAGS)—which consist of Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Nvidia (NVDA), Meta (META), and Tesla (TSLA)—are officially breaking down.

These seven stocks have been the strongest and most influential names in the market, driving much of the recent rally due to their high growth potential and dominance in their respective industries. However, they are now losing key support levels, breaking down not only below their weekly 10-EMA but also their 20-EMA.

This is a major shift in momentum—these moving averages have served as strong support during their uptrends, and their breakdown suggests that selling pressure is accelerating. When the very stocks that have led the market begin to roll over, it reinforces broader weakness and signals a potential shift in market dynamics.

While short-term relief bounces can happen, this type of technical deterioration should not be ignored. It’s a clear indication to remain defensive and selective, as the market may not be done with its correction just yet.

Nasdaq

The QQQ, a capitalization-weighted Nasdaq ETF that tracks large and mega-cap tech names, remains one of the strongest major indices in the market. Despite the ongoing weakness, it managed to find support at its rising weekly 20-EMA in yesterday’s session and ultimately closed the day above this key ascending support level.

However, we are still trading below the Point of Control (POC)—a key volume-based level that represents the price zone where the most trading activity has occurred. This suggests that seller aggression is in control, as this area failed to attract strong demand. If this pullback or correction is going to see any kind of relief, this is a spot where it could happen.

The reasoning is simple: historically, the rising weekly 20-EMA has acted as a strong support level, often reversing short-term pullbacks. Additionally, QQQ has been trending sideways for months, consolidating since late November/early December.

We also have Nvidia (NVDA) earnings today after hours, which will have a major influence on the short-term direction of QQQ. As one of the largest-weighted stocks in the ETF, NVDA plays a critical role in shaping its movement. With a market cap of over $3 trillion, any significant reaction—positive or negative—could drive a major move in the broader tech sector and, by extension, QQQ itself.

S&P Midcap 400

The midcaps (MDY) are currently sitting at a key level of support, testing their weekly 50-EMA and Point of Control (POC) after losing their now-declining 10 & 20-EMAs last week. This area aligns with a historical supply/demand zone—previously acting as resistance in early-to-mid 2024 before being reclaimed and turning into a demand zone.

We emphasize the importance of MDY holding this level, as a breakdown below both the rising weekly 50-EMA and this demand zone would raise serious concerns about the duration and depth of the midcap correction. If support fails, the next likely downside target sits at $530, a level made apparent by the low-volume pocket between current prices and $530 on the Visible Range Volume Profile (VRVP) to the right of the chart.

This is a must-hold area for midcaps—if buyers do not step in here, the path of least resistance remains lower.

Russell 2000

The small caps are in a very similar position to midcaps, so there’s no need to go into too much detail. Just like MDY, they are sitting at a critical demand zone, aligning with their weekly 50-EMA and POC after losing their declining 10 & 20-EMAs.

What makes this level even more significant is how clear it is on the Visible Range Volume Profile (VRVP). The volume structure reinforces that this zone has been a major area of interest for buyers in the past. If small caps fail to hold here, the next meaningful support level is notably lower.

DAILY FOCUS
Process > Profit

Over the past few weeks, we’ve been reading Steven Goldstein’s recent book, and his insights on high performance and mindset have been incredibly valuable. His work reinforces a core belief that we’ve built our trading framework around: Process comes before profits—always.

The best traders don’t chase gains; they execute a structured, repeatable process that puts them in the right trades at the right time. The profits are simply a byproduct of consistency and discipline.

Our Process – How We Stay Aligned with Market Conditions

We don’t trade randomly. We don’t chase moves. We don’t force setups. We only trade when the conditions align with our system.

1. We Only Trade to the Long Side

• We focus exclusively on going long because, over time, businesses tend to create value for shareholders. Stocks that appreciate do so in sustained trends, which is where our edge lies.

• Short trades, while high in magnitude, are typically short in duration, making it difficult to establish and ride a long-term trend. This lack of consistency in short setups makes them outside our preferred strategy.

2. We Only Trade When the Market Confirms Strength

• We only trade when the market is coming out of a correction or in an established uptrend.

• Our key indicators for market health:

  • The daily 10-EMA and 20-EMA – Stocks and indices need to be holding above these moving averages.

  • Market Breadth & Leadership – We want to see strong participation from leading stocks and key industry groups.

3. We Use a Top-Down & Bottom-Up Approach

• Top-Down: We always start with the weekly chart to identify major trends and market structure. Then, we drill down to the daily chart to pinpoint setups and use the 5-minute chart for precise trade execution.

• Bottom-Up: Instead of guessing which sectors will lead, we let the leading stocks show us the leading sectors. The strongest stocks naturally emerge, helping us identify which industry groups are outperforming.

4. We Accept the Realities of Our System

• We run an asymmetric system—a low win rate, high risk-reward approach.

• This means that for the vast majority of the time, our system will underperform—but when we do win, our gains significantly outweigh our losses.

• Understanding this asymmetry keeps us focused. We don’t judge success by individual trades but by consistent execution over a large sample size.

5. We Stay Present & Trust the Process

• We don’t let fear, greed, or ego dictate our trades.

• If a trade doesn’t fit our criteria, we simply don’t take it. No FOMO, no overtrading, no forcing setups.

• If we take a loss, we move on. The next high-probability setup will come.

If intelligence were the defining factor in trading success, far more people would be highly profitable. But the reality? Most traders fail because they lack a process.

You don’t need to be the smartest person in the room—you need discipline, patience, and a structured system you can execute without hesitation.

The best traders don’t let market noise, emotions, or short-term results shake them. They stick to their process. We’re not here to chase profits—we’re here to execute with consistency and let the results follow.

💡 Ask yourself: Are you truly following a process, or are you just hoping for profits? 

If you don’t have a structured system, you don’t have an edge. If you don’t have an edge, you’re gambling. Choose process over randomness—that’s how you win long-term.

WATCHLIST
Today’s Potential Play

COMM: CommScope Holding Company, Inc.

• COMM is establishing itself as a key player in the telecommunications industry (XTL) and has built one of the most well-defined bases in the market. The stock has been consolidating in a steady and controlled manner, showing strong technical structure.

• In its Q4 2024 earnings report, COMM reported $1.17 billion in sales, a 26.6% increase from last year. The company also cut its losses significantly, reporting a $65.2 million loss, compared to $414 million in Q4 2023. Its profitability improved, with adjusted EBITDA (a key measure of earnings) rising 86.9% to $223.1 million. However, for the full year, total sales declined 7.9% to $4.21 billion, though profitability still improved slightly, with EBITDA growing 5.4% over 2023.

• Technically, COMM’s weekly base remains strong, but today’s gap-up failed to clear the 200-EMA, which is a key resistance level. Given the overall market weakness, the risk of failure is higher than usual. While the earnings beat is a positive sign, the stock needs to show more strength by reclaiming key levels before becoming a high-confidence trade.

• However, if you're comfortable taking on more risk, there is an opportunity to size in earlier—but with the understanding that the failure rate is elevated. Remember to consider the opening range high before making any entry decision to ensure the stock is holding key intraday levels.