OVERVIEW
Mid-Cap Surge & Nasdaq Dominance

🟢 Risk-On: Despite mixed inflation data, the market is embracing a "gravitational pull higher," confirming we're in a bull market where breakouts are working.

🚀 Broad Based Strength: Nasdaq (QQQ) leads at all-time highs driven by relentless megacap tech. Crucially, mid-caps (MDY) are finally joining the party with a high-volume breakout, showing healthy rotation.

💡 Watch for Sector & Stock-Specific Catalysts: Keep an eye on quantum plays like IONQ for potential breakouts, and discretionary names (XLY) as a new leadership group in this risk-on environment.

MARKET ANALYSIS
A Broad Based & Healthy Rally

The latest inflation data for May presented a somewhat mixed picture, with the Core PCE Price Index ticking up slightly more than anticipated on a month-over-month basis, while other measures met expectations. However, this didn't deter market momentum.

The prevailing sentiment in the market right now can be described as a period of calmness. There's a significant amount of capital on the sidelines, eager to find a home in the equities market.

Ultimately, there's little need to overanalyze every single data point or nuance in the current environment. What's clear is that breakouts are working, and the market is consistently rewarding those moves. We are firmly entrenched in a bull market, where positive momentum tends to build on itself.

As long as the broader economic landscape remains stable and no major headwinds emerge, the path of least resistance for asset prices appears to be upward.

Nasdaq

The Nasdaq continues to lead the market higher, thanks in large part to the relentless rally in its mega cap constituents like NVIDIA (NVDA) and Microsoft (MSFT). The QQQ is also now firmly trading above all-time highs, marking what is essentially a full week of uninterrupted uptrend.

While this powerful thrust higher is undoubtedly impressive, we want to issue a word of caution. It's rare to see such a sustained, rapid ascent without at least some small period of digestion or a minor pullback.

This isn't to say that the leading stocks are on the verge of collapse, but rather a reminder to be careful if you are chasing here for long exposure. The risk-reward for new long positions becomes less favorable after such a significant, uninterrupted run.

This very well might coincide with some internal rotation taking place.

S&P 400 Midcap

The mid-caps (MDY) are finally stepping into the spotlight, having broken out and pushed definitively past the right shoulder of a multi-month inverse head and shoulders pattern. This decisive move comes with a high relative volume breakout, confirming the conviction behind the rally and propelling MDY into multi-month highs.

Premarket action is showing strong follow-through into a low volume pocket up to $585. Things look very healthy here and we don’t see a reason to overthink the strength in the market.

Russell 2000

IWM continues to grind higher, with yesterday’s session showing a late-day thrust that nudged the index just above multi-month highs around $215. While relative volume has been steadily declining, that’s not necessarily a red flag as this looks a lot like a volatility contraction forming beneath resistance.

This morning’s premarket action is confirming strength. While small caps have underperformed relative to large caps and megacaps for most of the year, this is the deepest part of the risk curve. And when money rotates down the curve, small caps are where you’ll find the highest beta and fastest-moving stocks.

Don’t ignore this group. Many high-ADR stocks live here, and if this breakout starts to follow through, they can become explosive quickly.

FOCUSED STOCK
IONQ: Quantum Setup Tightening

IONQ, which is a leader in quantum computing, has spent the past few weeks forming a tight volatility contraction pattern after its explosive move in late May. Price is coiling directly on its Point of Control (POC), and this type of setup with it’s low volume, narrowing range, constructive behavior, often resolves with a sharp expansion move, especially in a risk-on tape.

Remember the context: the dominant market narrative is still AI. We’re seeing relentless strength from semiconductor names like NVDA, MU, AVGO, and ARM. IONQ may not be in the exact same group, but it’s part of the broader high-growth, high-speculation basket benefiting from AI tailwinds.

With IONQ now trading higher in premarket toward the $42.80 level (the top of the overhanging supply on the VRVP), this could ignite a breakout. It's a high-ADR name, so manage size accordingly — but it’s the kind of name that can move 15 to 20 percent in a matter of a few hours.

FOCUSED SECTOR
XLY: Quiet Coil, Big Upside?

XLY is building tension and it’s constructive. We’re seeing a tight, linear volatility contraction just beneath the $217 resistance zone. When you bring in the Visible Range Volume Profile (VRVP), the read becomes more compelling: above $217, there’s almost no meaningful supply until $224, creating a clear “volume air pocket” where price could accelerate quickly on a breakout.

Technically, this also resembles a textbook cup-and-handle pattern forming just below new highs and the kind of structure we love to see in bullish tape.

🟢 Context matters: This is happening while the broader market is clearly in early-stage bull mode. If that continues, discretionary stocks, which tend to outperform in risk-on environments, could emerge as the new leadership group.

Q&A
Got a Question? Get It Answered.

Q: “What are the different phases of the stock market and what trading strategies work best during each phase?”

Most traders focus too much on setups and not enough on context. But in reality, the same setup (a breakout, a pullback, a flag) behaves completely differently depending on the phase of the market.

The market moves in four primary phases, call them stages or cycles, mapped out clearly by Stan Weinstein and Wyckoff. But theory is one thing. The real edge comes from knowing how to adjust your execution and risk depending on which phase you're in.

🧱 Stage 1 / Accumulation

• What’s happening: The asset is bottoming after a downtrend. Rangebound. Quiet. Volatility compresses.

• Who's active: Smart money. Institutions are building size while nobody's watching.

• Price action: Choppy base, failed breakdowns, reclaim of key MAs (e.g., 50-day or 10-week).

• Volume: Often declining overall, but spikes start showing up on up days.

• What works:

  • Tracking RS leaders building bases

  • Starter positions on failed breakdowns or range reclaim

  • You scale small—it's about getting in before Stage 2 triggers

You’re very early here. Your size should be small or non existent as the asset is still rangebound. You’re managing boredom and waiting for confirmation.

🚀 Stage 2 / Markup (Trend)

• What’s happening: The breakout triggers. The trend is live. Funds rotate in. Retail wakes up.

• Price action: Higher highs/lows, breakout from base. Price obeys moving averages.

• Volume: Expands on up days. Consolidations tighten.

• What works:

  • Breakout trading from contraction (flags, shelves, tight ranges)

  • Pullbacks to rising MAs—10d/21d/50d

  • Pyramiding—add to strength on the positions that follow through.

  • Focus: speed of follow-through. Strong names with the highest RS in their stage 1 base will move first and very fast.

This is where us trend followers get paid. High conviction. Bigger size. Clean execution.

Pro tip⚡: One way to stay accountable to the market phase you're in is by reviewing your own trades in that context. Tools like TradeZella can help you log trades by market phase, analyze what setups work best in each stage, and eliminate recurring mistakes. It automates journaling and backtesting, saving you time and sharpening your strategy.

You can use code SWING for 10% off if you're interested in giving it a try.

🧊 Stage 3 / Distribution

• What’s happening: The trend stalls. Chop begins. Smart money is unloading. Retail is still buying.

• Price action: Failed breakouts. Lower highs. Range behavior. Bearish reversals.

• Volume: Selling starts showing up. Distribution days.

• What works:

  • No trades at all & size out of open positions on weak closes below 10/20 EMAs.

  • Man-reversion in clearly defined ranges work well here (parabolic shorts).

  • Begin watching laggards for short setups.

If you're still playing Stage 2 breakout rules here, you're bleeding.

🔻 Stage 4 / Markdown (Downtrend)

• What’s happening: Breakdown from the range. Lower highs and lower lows. No bid under the market.

• Price action: Clean failures on any strength. Relentless pressure.

• Volume: Expands on red days. Weak bounces get faded.

• What works:

  • Shorting weakness on breakdowns, bear flags, failed rallies

  • Staying in cash if you’re long-only (you still earn interest on uninvested cash)

  • Rotating capital to relative strength groups or other inversely correlated classes to growth/risk segments (e.g. gold miners)

This is the Survival phase. Your #1 job is preservation. Fast money gets out. Smart money watches.

You will not be profitable until you understand this

Every chart exists inside a phase. Your job isn’t to memorize patterns, it’s to understand which environment you’re in and which rules apply.

Every morning, we handpick one question to feature inside the Daily Report.

If there’s anything you’re stuck on, whether it’s trade management, psychology, chart setups, sector rotation, you name it - now’s the time to ask.

This is your chance to get real feedback from real traders.

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