OVERVIEW
Friday’s Bounce Is Yet To Be Confirmed

The market is officially in a full correction, as we’ve covered in previous reports. However, Friday’s sharp relief rally saw nearly every stock in the market close green, adding an eye-popping $1 trillion to U.S. equities in a single day. Naturally, this has traders asking: Is this the bottom? Should we start piling into long exposure?

While no one can answer that with certainty, context is everything. Despite Friday’s move, the S&P 500 and Nasdaq remain down over 10% from their recent highs and are still trading below all key moving averages across both daily and weekly timeframes. This means that, structurally, the market is still in a downtrend, and one strong bounce doesn’t erase weeks of selling pressure.

But beyond just the technical picture—which we’ll break down in more detail shortly—this week is stacked with major economic events that could inject even more volatility. The biggest of them? The Federal Reserve’s two-day meeting starting Tuesday, where interest rates are widely expected to remain unchanged. However, it’s not just the decision itself that matters—investors will be watching closely for any shift in the Fed’s outlook.

One of the key areas of focus? Whether recent policy shifts, including those from the Trump administration, are influencing the Fed’s economic expectations. Any hint of a change in tone—whether more hawkish or dovish—could have a major impact on market direction.

Even if this is the start of a bottoming process, there’s no need to rush into full risk-on mode just yet. Economic uncertainty remains high, and markets will be looking for confirmation, not just speculation. If this truly is a shift in trend, there will be plenty of opportunities to position properly—you won’t be late by waiting for actual confirmation.

Nasdaq

The Nasdaq daily chart above makes one thing clear—there’s no rush. If you’re hesitant to open any long exposure right now, that’s completely reasonable. Friday’s bounce, while sharp, lacked volume and did not signal any structural change in the overall downtrend.

This is a key point that many traders overlook: When markets truly reverse, there is always time to build exposure. We intentionally zoomed out on the chart for a reason—to highlight that we’re currently sitting at a major Point of Control (POC) level. This means it's not surprising to see the QQQ finding some relief here, but that alone doesn’t guarantee this level will hold. We could just as easily chop sideways or even see another leg lower before any meaningful recovery takes shape.

The low volume on Friday is another red flag. For those unfamiliar with volume-by-price profiling, volume is the fuel that drives price direction. Without strong volume backing the bounce, it’s difficult to trust that this is anything more than a temporary reprieve within a broader downtrend.

S&P Midcap 400

The midcaps, much like the QQQ, bounced on Friday right at a major demand level, coinciding with their Point of Control (POC). This increases the likelihood of some short-term relief, just as we see in the Nasdaq, meaning we could experience a brief bounce over the next few sessions.

However, the big question is whether this turns into anything more meaningful than just a 1-2 week relief rally. So far, volume remains notably low, which doesn’t inspire much confidence in a sustained move higher.

It’s also important to remember that midcaps, like small caps, are highly sensitive to interest rates. Given that we have a major Fed decision coming up this Wednesday, the reaction in these riskier areas of the market could be particularly volatile.

Russell 2000

Small caps have been hit the hardest among the major indices, which isn’t surprising—they’re the most speculative group and the first to see institutional outflows when risk appetite fades. However, what’s important right now is context:

All three indices—small caps, midcaps, and large caps—are sitting on historic demand zones. These are levels where buyers have historically stepped in with size, and we’re seeing early signs of that again. But here’s the key—a bounce off demand doesn’t confirm a bottom.

What we need to see now:

• Follow-through buying. One green day means nothing unless it’s met with continued strength.

• Breakouts holding. If stocks that recently broke out start failing en masse, it signals that buyers lack conviction.

• Volume confirmation. Low-volume rallies are weak rallies. If institutions aren’t stepping in aggressively, the risk remains high.

For now, small-sized exposure makes sense if you’re looking to participate, but the real opportunity will come when confirmation arrives. Rushing in too early exposes you to unnecessary risk, especially with key macro events ahead that could trigger another round of volatility and more of your account getting cut up.

DAILY FOCUS
Progressive Exposure Is Key

Right now, gradually increasing long exposure isn’t a bad idea—especially as a hedge for the possibility that the most beaten-down market leaders break higher on continued relief. We've already seen some strong moves in select names, and if momentum builds, early positioning can be valuable.

However, don’t forget that we are still trending below all key moving averages across every capitalization group. If you zoom out, this market remains in a clear correction, and short-lived, low-volume rallies are normal within broader downtrends—something those familiar with market structure will recognize.

Adding to the uncertainty, we have the interest rate decision on Wednesday, alongside several other volatility-inducing events throughout the week. These macro catalysts alone have the potential to shake up price action significantly.

How to Approach This Market

✔ Lean into relative strength—focus on names and sectors showing early leadership. You should be scanning for these daily, regardless of your exposure status—this is 99% of what a trader’s day consists of. Staying in tune with sector rotation and relative performance keeps you ready to act when conditions align.

✔ Use smaller position sizes to manage risk while still participating in potential upside. If you typically risk 0.5% per trade in an ideal market, but see setups you want to test, why not risk 0.25% of your equity right now? Adjusting your sizing allows you to take calculated shots without overcommitting.

✔ Avoid overexposure—until confirmation arrives, this remains a very fragile market environment. Assume all bounces are guilty until proven innocent. A failed breakout or reversal is more likely than a sustained move higher until broader conditions shift.

✔ You won’t be late if you wait—there’s no need to chase. If this is the start of a real trend change, opportunities will keep emerging. Proper positioning with actual confirmation will always outweigh FOMO-driven entries.

WATCHLIST
The Relative Strength Leaders

VNET: VNET Group, Inc.

• VNET is positioned within one of the strongest groups in the market as a China-based name. Over the past few weeks, it has been building a solid consolidation phase along its rising 50-day EMA, demonstrating resilience. Friday’s session was particularly notable, as the stock reclaimed its lost 10-day and 20-day EMAs, bringing it just below a key breakout level.

• Given the strength of its sector and, more specifically, VNET’s own strong performance, the recent surge in relative volume suggests strong participation in this rally. This is a stock that is clearly demonstrating accumulation and showing real signs that it wants to continue higher.

INOD: Innodata Inc.

• INOD is another name we’re closely tracking, as it has been in a consolidation phase since November 2024, steadily forming higher lows since early February. The stock attempted to break higher following earnings, but the weak market climate held it back from making a sustained move.

• Friday’s session saw a slight reclaim of key moving averages, and now we’re seeing INOD pushing in premarket—a potential sign of renewed momentum. Given its recent price contraction and sector positioning, this is one to watch closely for signs of follow-through and increasing participation.