OVERVIEW
A Shockingly Strong Day

Yesterday's market session was surprisingly strong, especially given the backdrop of the latest GDP data. The US economy grew by 2.3% in the last quarter of 2024, which marks a slowdown from the 3.1% growth seen in the previous quarter. Normally, a decrease in GDP growth would trigger a negative response in the equity markets. A reduction in economic output, as measured by GDP, typically signals slower business activity, lower corporate earnings, and potential headwinds for stocks. However, the market reacted positively, and the reason behind this unexpected response lies in a deeper understanding of what’s actually driving the economy right now.

While GDP growth has cooled, it's important to recognize that consumer spending has been consistently on the rise, providing strong support to the economy. Over the past year, we've seen a steady increase in consumer spending, which has now reached a 4.2% growth rate in Q4 2024. This continued strength in consumer demand is playing a critical role in propping up the economy, and ultimately, the market.

Today’s economic data will provide crucial insight into the state of consumer activity and inflation, particularly with the release of the Core PCE, Personal Income, and Personal Spending reports. These metrics will help shape expectations for future interest rate moves and influence the broader market outlook.

Core PCE (Personal Consumption Expenditures) MoM is forecasted to come in at 0.2%, slightly higher than the prior month’s 0.1%. This is important because the Core PCE is the Federal Reserve's preferred inflation gauge, and it measures the change in prices for goods and services excluding food and energy. A higher-than-expected reading here could signal inflationary pressures remaining persistent, which may prompt the Fed to maintain a hawkish stance on interest rates.

Personal Income MoM is expected to increase by 0.4%, up from 0.3% previously. A rise in personal income suggests that consumers are still earning more, which could support future spending. This uptick may point to wage growth and the ability of consumers to maintain their purchasing power, even in the face of inflationary pressures.

Personal Spending MoM is projected to grow by 0.5%, up from 0.4% in the prior month. The increase in personal spending is a positive sign for the economy, indicating that consumers continue to spend despite higher interest rates and inflation. This aligns with the earlier data showing a steady increase in consumer spending over the last year. If this figure comes in as expected or even stronger, it would reinforce the narrative that consumer demand is resilient, providing key support to economic growth.

Nasdaq

The Nasdaq saw another rejection at the critical $525 supply level yesterday, a level that has been a consistent point of resistance over the past few weeks. Initially, the QQQ opened the session on a positive note, but the rally faltered as it approached this resistance zone. Despite this, the QQQ continues to hold the Point of Control (POC) on the daily chart, finding support just above the critical $523 level, which has proven to be a key demand zone.

Periods like this can be quite challenging as we’re likely to see numerous failed breakout attempts. The market is clearly in a choppy phase, with the QQQ fluctuating between support and resistance without establishing a clear trend. For today, the focus remains on the $525-$527 resistance zone, which continues to define the upper bounds of the range.

In premarket trading today, the QQQ is once again testing this area, bolstered by a strong premarket move in AAPL following its earnings report. AAPL’s gap higher is pulling the QQQ along with it, providing some short-term strength, but the larger question remains whether the Nasdaq can break through this resistance or if we’ll see another rejection at these levels.

S&P Midcap 400

The midcaps are currently sitting just below a significant level near their Point of Control (POC) at $597, where we’ve seen increasing selling pressure, especially toward the end of yesterday’s session. The MDY is essentially sandwiched between two key levels: robust demand from the rising 10- and 20-EMAs on the daily chart, and the POC zone, which has been acting as resistance for the past two weeks.

Russell 2000

The small caps, represented by the IWM, are in a similar position to the midcaps, with both ETFs consolidating at dense supply levels. What we're seeing now is setting up both the IWM and MDY for a potential big move, though the question remains: in which direction will that move come?

On both charts, we can clearly see a tightening price range, with volume generally decreasing as the consolidation continues. However, over the past three sessions, we've started to see volume pick up, which suggests that there’s increasing activity behind the scenes. This increase in volume, combined with the tightening range, indicates that a breakout—or breakdown—could be on the horizon.

DAILY FOCUS
Why You Are Likely Overtrading

A lot of traders blow up their hard-earned gains during periods when the market is choppy. It’s all too common to have great success in a trending market, but once the market enters a consolidation phase or a period of uncertainty, the overtrading begins. You’re constantly trying to catch moves, but more often than not, these are “false flags”—signals that seem promising at first but ultimately lead to nothing. This is exactly when most traders make the biggest mistakes.

Why does this happen? The truth is, during periods of volatility or chop, the temptation to trade can be overwhelming. You feel like you “have to” be in the market every day because you identify as a trader, and you feel compelled to make moves just for the sake of staying active. But here’s the thing: trading isn’t about showing up every day and placing a trade. You’re not meant to be on the clock 24/7, trying to force opportunities. That mindset will quickly lead you to blowing up your account.

Think of yourself less as a trader and more like a performer or an athlete. Your job is to execute at your best, not just to trade for the sake of it. This means that sometimes, it’s okay to sit back, stay out of the market, and wait for the right moment to make a move. You don’t need to take 100 small trades that slowly chip away at your gains. One well-timed, high-conviction trade can give you a return of 50% or more, while a dozen poorly executed trades might cost you that and more.

One of the best ways to reduce overtrading is to step back and look at the bigger picture. Using the weekly charts instead of focusing solely on the daily or intraday timeframes gives you a much clearer perspective. It allows you to filter out a lot of the noise and drastically reduces the number of false signals you’re likely to react to. Instead of getting caught up in every little wiggle on the daily chart, the weekly view helps you focus on major trends and true breakout levels.

When in doubt, always ask yourself: "What is the bigger picture telling me?" If the weekly chart still looks clean, constructive, and trending higher, you don’t need to panic over a single rough daily session. On the flip side, if the weekly trend is choppy or unclear, that’s a huge warning sign that the market isn’t in an ideal spot for aggressive trading.

WATCHLIST
Today’s Focused Stocks

AAPL: Apple Inc.

• AAPL is today’s main focus after releasing what can only be described as lackluster earnings. The numbers came in just slightly above estimates, with: earnings per share: $2.40 vs. $2.35 expected and revenue: $124.30 billion vs. $124.12 billion expected.

• On the surface, these numbers don’t scream strength. In fact, Apple has shown very little fundamental growth over the last five years, yet the stock has still climbed 150% in that same period. That makes today’s reaction even more surprising—not only is AAPL gapping up after earnings, but it’s also breaking out from a key technical level on the weekly chart.

• This type of reaction highlights the power of market psychology. Sometimes, it’s not about whether earnings were good or bad—it’s about how the market chooses to react. When a stock rallies despite weak fundamentals, it often signals that buyers are simply using earnings as a liquidity event to step in.

• That being said, conviction isn’t extremely high here, so we’re not looking to be overly aggressive. However, if we do see a clean 5-minute opening range high break, we’ll be ready to react accordingly.

SOFI: SoFi Technologies, Inc.

• SOFI is another name on our focus list after posting strong earnings on Monday. Since then, the stock has been steadily climbing, reclaiming its 10- and 20-day EMAs and continuing to trade within the multi-month range it has been building since early December.

• What’s particularly interesting here is the volatility contraction—not just in price action, but in average volume as well. This is often a precursor to a larger move, as the stock coils tighter and tighter before breaking in one direction.