OVERVIEW
Don’t Let the Headlines Distract You

🟩 Risk-On: Moody's downgrade? Market shrugged it off. The S&P 500 has jumped nearly 20% in the past 27 days, and momentum is strong. Large-cap tech, small caps, and mid-caps are all showing solid gains, signaling that the rally is far from over.

📈 What’s Happening?: Despite concerns, we’re seeing aggressive accumulation, rising volume, and a clear uptrend across major sectors. The pullback after the downgrade was minimal and quickly reversed—proving appetite for risk remains intact.

🔑 Key Takeaway: Don’t get distracted by the headlines. The charts are telling us the market is in full risk-on mode. Stay focused on the leaders, watch for pullbacks to add, and don’t chase.

MARKET ANALYSIS
Moody’s Who?

 Late Friday, Moody’s downgraded the U.S. credit outlook—again. Historically, that kind of headline has triggered steep selloffs (think -8% to -10%). This time? The S&P 500 barely flinched. We dipped a single percent… and buyers piled in hard.

This is the kind of market action that matters. All the macro concerns are real. We’re not ignoring them. But we don’t trade headlines—we trade price. And right now, price is saying something different.

In the last 27 sessions, the S&P 500 is up nearly +20%. That’s not a bear market rally. That’s not just short covering. That’s institutions stepping back in.

Over 70% of stocks are now trading above their 20EMAs. That’s not what “unsustainable” looks like. That’s what broad-based momentum looks like.

The Moody’s downgrade was a gift to anyone paying attention. You got a shallow dip right into support… and immediate confirmation via aggressive accumulation.

Nasdaq

Large and mega-cap tech names continue to grind higher, consistently setting new relative highs — and here’s what matters most: they’re doing it on rising relative volume. If you’ve been following our prior discussions, you’ll know this is a key tell. When volume expands in an uptrend, it’s a sign of increasing participation — and that means the move is gaining fuel, not running out of steam.

Right now, QQQ is sitting right on top of its Point of Control (POC) after yesterday’s pullback, which was aggressively bought — flipping a deep red morning into green by the close. That kind of reversal doesn’t happen in a weak tape.

Yes, we still believe there’s potential for a cup-and-handle structure to form here. Whether we get a full handle — i.e., a pullback into the rising 10EMA followed by consolidation — remains to be seen. But the strength is undeniable. Especially when you consider the market went green yesterday despite all the geopolitical “uncertainty” headlines.

Reminder: the market doesn’t care about the narrative. It cares about flows. And right now, they’re still pressing into tech.

S&P 400 Midcap

Midcaps (MDY) were completely unfazed by the Moody’s downgrade — not even a dent. We’re still seeing that key overhead Point of Control (POC) act as a magnet for price, with yesterday’s intraday recovery tagging it yet again.

Now we’ve got something else developing: the rising 10EMA is about to cross above the 200-day EMA for the first time in this base. That’s a classic sign of trend transition — momentum catching up with structure — and it’s happening inside a very tight range.

We continue to believe MDY is positioning for a breakout. Confidence is high that we’ll see price firmly above this POC by week’s end. While further consolidation would be healthy, the sheer level of risk appetite out there makes it unclear whether sellers will even get the chance. Yesterday’s intraday pullback was met with aggressive accumulation — that’s the kind of strength that doesn’t hide.

Russell 2000

Small caps (IWM) are now coiling tightly just beneath a key breakout zone that’s been in play since December 2024. Price is compressing in a very linear fashion right on top of the 200-day EMA — a clear sign of controlled digestion, not weakness.

Even more critical: this consolidation is happening just below a low-volume node on the Visible Range Volume Profile (VRVP). If price clears this range, there’s very little overhead resistance — meaning any breakout could be explosive.

Yesterday’s gap down? Bought aggressively — same story we saw in QQQ and MDY. That confirms buyers are still stepping in, and appetite for small caps isn’t going away.

🧠 From a risk appetite perspective, this setup really matters. When small caps lead or even hold steady under pressure, it signals broad market participation and expanding risk tolerance — a major green light for long traders.

We’re seeing a historic exodus from small-caps: according to the latest BofA flow data, nearly $70 billion has left the Russell 2000—its largest outflow in over a decade. Yet on the charts, IWM has held its rising 10-EMA and 20-EMA, digesting on low volume and finding bids right at key demand levels on the visible range volume profile (VRVP).

Why it matters: When major institutions have largely sold out, the stage is set for a powerful squeeze if that capital reverses. And we’re already starting to see signs of rotation back in: multiple small-cap names have ignited explosive breakouts in recent sessions.

Key takeaway: A flush of outflows can clear out weak hands—and if just a fraction of that $70 billion starts flowing back, small caps are poised for a sharp, momentum-driven rally. Watch for IWM to reclaim yesterday’s high on a surge in volume—confirmation that the squeeze is on.

🧠 Mindset Check: Stop Waiting For “Confirmation”

One of the most common traps in swing trading is waiting for “confirmation” — that perfect, all-clear signal that tells you it’s finally safe to enter.

Here’s the problem: by the time you get that confirmation, the move is often halfway done. Momentum has already shifted, the stock has extended, and your risk-to-reward has tilted out of your favor. You’re no longer early. You’re chasing.

Strong markets don’t reward hesitation. That moment of doubt — the pullback that doesn’t feel quite right, the test of the 10EMA that looks fragile — that’s often the entry. The market rarely gives you comfort and edge at the same time.

This is literally why you must risk so little per trade. Think of it as opportunity cost. You already know your system works — you’ve tested it, stress-tested it, even run Monte Carlo analysis. You’re holding a winning lottery ticket. You just don’t know which day the numbers come up.

So your job? Show up. Take the next entry when your setup appears. Risk small so you can keep playing long enough to catch the outlier — the one that pays for the last five.

If you want to lead in this game, stop waiting. Trust your prep. Execute when others hesitate.

FOCUSED STOCK
RGTI: Rigetti Computing

The Quantum Computing sector (QTUM) as a whole has demonstrated strength, although the short-term price action has been choppy, making it difficult to pinpoint solid entry points. However, RGTI is currently attempting to break above multi-month resistance after reclaiming its last Point of Control (POC), following some choppy price action around earnings. Demand has stepped in as seen in yesterday's initial retracement, suggesting support at these levels.

RGTI remains a strong upside candidate due to its ascending higher lows, a surge in relative volume in recent weeks, and—most notably—the aggressive breakout rally it had last year, which saw the stock surge from $1 to over $20 in a matter of 2 weeks.

FOCUSED SECTOR
XLI: Industrials

The Industrials sector (XLI) has quietly been one of the strongest areas of the market since the broader market bottomed about five weeks ago. Despite limited attention, XLI has surged +28% from its early April lows with virtually no meaningful pullbacks. Now, XLI is sitting at all-time highs, showcasing remarkable strength.

Given the sector's strong performance, it’s critical to identify the leading stocks within XLI. While it’s tempting to chase entries, now is not the time—the sector is extended in the short term, and entering at these levels carries increased risk.

Instead, focus on tracking the leaders. To find them, look at the stocks with the highest percentage weightings in XLI; these names are likely driving the sector's performance. Monitor these stocks daily for pullback opportunities.

💡 A key strategy is to wait for a retracement to critical moving averages—such as the 10-day or 20-day EMAs—and then look for long entries on these tests.

Q&A
Got a trading question? Hit reply and ask!

Q: "I entered HOOD on April 25th at $49.44 and got stopped out. Now, the stock is up over $64. What did I do wrong?"

A: The issue lies with the timing of your entry. There was no edge at $49.44 because the breakout already occurred on April 24th. The correct entry would have been closer to the $45-$46 range. Remember, your job is to enter just as momentum is shifting and a major breakout is taking place—not after the fact.

Think of the market as an auction. Someone has to follow you in and aggressively hit the ask to drive prices higher. The probability of that happening after the stock has already surged is lower, especially when earnings are approaching.

There were also two subsequent entries after this initial one. The second opportunity was the breakout on May 8th, which showed clear relative volume surge. The third was yesterday, when HOOD pulled back to the rising 10-EMA and was met with strength. At that point, HOOD was sitting right at all-time highs—this would have been a great pullback entry or an excellent time to add to your open position. (We actually own a position in HOOD and added to it ourselves!)

Key takeaway: To avoid chasing a breakout, use the Average Daily Range (ADR) to gauge if the stock is extended. For example, if HOOD’s ADR is 5%, and it’s up more than 0.75 ADR (i.e., over 75% of its average range for the day), the likelihood of follow-through after your entry decreases. A better entry would have been when the stock moved 25%-50% of its ADR, which gives you a higher probability for success.

Remember: Never chase a breakout. If you missed it, you missed it—just move on. Wait for a pullback, and whatever you do, do not chase. Swing trading with a momentum trend-following style is a very low-win-rate system, and chasing breakouts only increases the probability of getting stopped out. Either buy the stock correctly, or don’t buy it at all.

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