OVERVIEW
Selling Pressure Continues To Increase

The market continues to be stuck in a range-bound, choppy environment, plagued by uncertainty as traders await policy clarity. This indecision has been reflected in price action, with another extremely weak session yesterday, adding to what has been a brutal week for U.S. equities.

The selloff has been fueled by a steady stream of weaker-than-expected economic data, further clouding the outlook for growth. Jobless claims for the week ending Feb. 22 came in at 242,000—22,000 higher than the previous week and well above expectations of 225,000. This increase has subdued sentiment further, reinforcing concerns that the labor market, a key pillar of economic strength, may be softening.

This report follows a string of disappointing economic releases, including:

• A weaker-than-expected consumer confidence reading

• Sluggish retail sales numbers

• A drop in consumer sentiment

Each of these signals has amplified concerns about economic resilience, raising doubts about whether the market can sustain previous optimism. Not to mention the very poor technical action we see in the charts themselves.

Nasdaq

The Nasdaq has been hit with heavy selling pressure, dropping -7.5% in the last two weeks after briefly reaching all-time highs. This week alone, the index is down -5.5%, highlighting the intensity of the selloff. To put this into perspective, QQQ’s average weekly move is 3.6%, meaning this week’s drop is nearly 53% larger than its typical range, signaling an abnormally volatile period.

Adding to the significance of this move, weekly volume has surged, exceeding all levels from the past four months. This spike in participation suggests strong distribution, with sellers firmly in control.

Technically, QQQ is now on track to close not just below its declining 10- and 20-week EMAs and its Point of Control (POC) but is also approaching a critical test of its rising 50-week EMA, currently sitting around $485-$480. A break of this level could trigger another -3.78% retracement, further extending the market’s pain.

Hopes for relief in the Nasdaq were pinned on NVIDIA (NVDA), which delivered yet another strong earnings report, reaffirming its explosive growth and solidifying its dominance in the AI sector. The company comfortably exceeded expectations, reinforcing that its valuation is backed by real performance rather than speculation.

However, despite NVDA’s impressive results, the broader market remains too uncertain and fragile to capitalize on the news. The current selloff is driven by macroeconomic concerns, rising volatility, and risk-off sentiment, overshadowing individual stock performances—even from market leaders.

S&P Midcap 400

The midcap sector (MDY) has officially validated a head and shoulders formation, breaking below its neckline, which coincides with its Point of Control (POC). This breakdown signals a shift in momentum, increasing the likelihood of further downside.

Now, MDY is approaching a critical test of its 50-week EMA, a level of major technical importance. Below this point, volume pockets are thin, meaning there’s minimal historical trading activity to provide support. If MDY breaks this level decisively, the lack of liquidity could accelerate selling pressure, increasing the risk of a sharp leg down.

Russell 2000

One of the clearest warning signs for midcaps losing their 50-week EMA is the continued weakness in small caps (Russell 2000, IWM). The Russell has already broken below both its Point of Control (POC) and 50-week EMA, signaling a significant shift in market structure. Historically, when the 50-week EMA is lost, it often marks the transition from a range-bound or uptrending market to a more prolonged downtrend or correction phase.

The last time IWM lost its 50-week EMA—back in December 2021—it triggered nearly two years of distribution (2021–2023), during which small caps struggled to regain momentum. This highlights the critical importance of seeing strength now, as small caps are by far the most sensitive group in the equity market and often serve as an early risk indicator.

For a sustainable recovery, we would need to see clear signs of demand stepping in at these levels. However, given the current market weakness and lack of strong buyers, a repeat of the previous breakdown looks increasingly likely.

DAILY FOCUS
How Will You Best Use This Downtime?

Markets are pulling back—this is the perfect time to audit your trading process. Instead of focusing on what’s happening today, ask yourself: What got me here? and How do I improve from here?

Use this time to dig into your data and find patterns in your own trading. Start by answering these key questions:

🔍 1. Are You Operating with a Risk-to-Equity Model That Aligns with Your Win Rate?

• What is your actual win rate over the last 50-100 trades? (Not what you think it is—what the numbers say.)

• Given that win rate, does your current risk-per-trade make sense?

  • Example: If your win rate is 30%, risking 2% of your account per trade will lead to severe drawdowns.

  • What is the maximum drawdown your strategy has experienced? Could you realistically withstand it again?

📊 2. What Patterns Exist in Your Highest-Performing Setups?

• What was the average consolidation/base length before your most successful breakouts?

• Did your best setups work in specific market conditions (trend vs. chop, high vs. low volatility)?

• How often did price retest key levels before confirming the move?

⏳ 3. Are You Holding Your Winners Long Enough?

• What percentage of the total move are you capturing on average?

• Are you consistently exiting too early?

• What would happen if you used a different exit strategy—like trailing stops or scaling out instead of selling all at once?

❌ 4. Are You Taking Too Many Trades That Don't Fit Your Edge?

• What percentage of your trades actually follow your best setups?

• How many trades could you have skipped that had poor risk-reward?

• Are you trading out of boredom or emotional reaction?

📉 5. If You're in a Drawdown, What Got You Here?

• Were your biggest losses from poor execution or from setups that naturally have variance?

• Did you size too aggressively in a cold streak?

• Did you trade outside your plan to “make back” losses?

The amazing thing about trading is that we’re not guessing—we have decades of historical data at our fingertips. Every edge can be tested, refined, and proven before you risk another dollar.

If you’re in a drawdown or feeling uncertain, the solution isn’t to trade more—it’s to go back and test. What happens if you tweak your entry criteria? Adjust your risk-to-reward? Only trade in specific market conditions? The answers are already there, waiting in your own data.

The traders who take this time to refine, optimize, and validate their strategy will be the ones ready to capitalize when conditions shift.

WATCHLIST
Is This Really The Time To Look For Entries?