OVERVIEW
What You Need To Know

Macro

• Markets opened steady as earnings drive sentiment; several large caps (GM, Coca-Cola, 3M) beat estimates, improving confidence.

• Macro backdrop mixed: Fed cut expectations rising, yields easing slightly, traders watching Friday’s CPI for disinflation confirmation.

• Easing trade tensions and progress on the shutdown offer short-term support, but participation remains narrow.

Nasdaq (QQQ)

• Gapped up on just 87% relative volume, lowest in nearly three weeks — weak conviction breakout.

• Rising volume within a tight range signals distribution, not accumulation; head-and-shoulders risk still active.

• Breadth remains narrow with large caps leading; likely to fade without strong tech earnings catalyst.

Nasdaq Equal Weight (QQQE)

• Relative volume just 70% of average — participation continues to weaken.

• Premarket action erases prior gains, reinforcing the bear trap risk flagged earlier.

S&P 400 Midcap (MDY)

• Trading within Wyckoff Distribution Phase D; last week’s breakdown had >2× volume, rebound only 0.84×.

• Historical data: low-volume rebounds after heavy selloffs produce negative 10-day returns 68% of the time.

• $595 POC acts as key supply zone; pattern aligns with “Last Point of Supply” before likely markdown below $580.

Russell 2000 (IWM)

• Monday’s move came on 86% volume, mirroring Nasdaq and Midcap low-volume rallies.

• Structure aligns with Wyckoff distribution; $243 POC continues to cap rebounds as smart money distributes.

Focused Stock: SOFI

• Strongest RS name in financials (RS Rating 98/99), up +233% from lows and only 5% off highs.

• Volume confirmation at 105% of average while most of market saw declines — clear leadership signal.

• 10-week EMA acting as reliable support since July; earnings approaching, so no new longs until after results.

Focused Group: XLP (Defensive Sector)

• Both XLP and equal-weight RSPS rallying into POCs with synchronized strength — sign of broad defensive inflows.

• Reclaimed 10- and 20-day EMAs on strong volume, indicating institutional accumulation.

• Rotation suggests shift toward late-cycle defensives as growth and cyclicals weaken.

MARKET ANALYSIS
We Are Still Urging Caution

• Markets look steady this morning as traders digest a fresh round of corporate earnings following Monday’s rally. Sentiment remains cautiously optimistic, with several major companies posting better-than-expected results to start the week.

• Earnings continue to drive sentiment. General Motors led early gains after raising its outlook and downplaying tariff impacts, while Coca-Cola and 3M also topped estimates. These results have helped stabilize investor confidence after last week’s turbulence.

• Macro conditions remain mixed. The market is pricing in another Fed rate cut at the end of October as inflation pressures ease but remain sticky. Treasury yields have pulled back slightly, offering some relief to growth sectors, while investors look ahead to Friday’s CPI data for confirmation of the disinflation trend.

• Geopolitics still loom large. Reports that the U.S. may ease tariffs on select Chinese goods have improved risk appetite, but traders remain wary of renewed trade tensions. Meanwhile, progress toward ending the government shutdown is being viewed as a short-term sentiment boost heading into a pivotal earnings week.

Nasdaq

% over 20 EMA: 67.32% | % over 50 EMA: 59.40% | % over 200 EMA: 56.43%

• Gap-Up on Weak Volume: QQQ opened higher Monday but did so on just 87% of its 20-day average volume, the lowest relative participation in nearly three weeks.

• Low-Conviction Breakout: This is occurring at a technically significant area on a week-long consolidation zone defined by the 10- and 20-day EMA cluster.

• Rising Volume on Contracting Price: Volume has been climbing during this consolidation phase, which typically signals distribution is taking place rather than accumulation.

• Head & Shoulders Risk: The potential head-and-shoulders formation we flagged last week remains intact; and this weak-volume push only increases the risk of a bull trap occuring

• Breadth Context: While large caps (and especially large cap technology) continue to carry the index, broader participation remains thin, suggesting any breakout attempt is very likely to fade quickly without real follow-through (which the big tech earnings may act as this catalyst to spark fresh inflow).

We will compare the breadth of the Nasdaq vs S&P 400 Midcap & Russell 2000 below.

QQQE (Invesco Nasdaq Equal Weight ETF)

• Uneven Participation: The equal-weight Nasdaq saw a modest uptick in relative volume, but it still came in at only 70% of its 20-day average which is yet another sign of fading enthusiasm.

• Reversal Pressure: The entire move is already being unwound premarket, with QQQE set to gap below Friday’s open at $102.50, erasing the prior session’s advance (this is the bear trap risk we flagged in QQQ).

• For now, both the QQQ and QQQE are showing low-conviction rallies in a potential distribution phase, they appear strong on optics, weak under the surface when you actually evaluate the volume.

S&P 400 Midcap

% over 20 EMA: 47.38% | % over 50 EMA: 41.64% | % over 200 EMA: 56.35%

• Contextual Structure: MDY continues to trade within what increasingly resembles a Wyckoff Distribution Phase D, following a clear “Break the Ice” event last week with the sharp, high-volume selloff through short-term support that marked the start of markdown.

• Volume Analysis: Yesterday’s rebound occurred on 84% relative volume, well below the 20-day mean and less than half the intensity of last Friday’s distribution spike (which registered ~149% of average).

• This is statistically significant: From our backtests, we find that MDY data since 2010, rallies following >2× average-volume breakdowns but <1× volume rebounds have produced negative 10-day forward returns 68% of the time.

• Supply-Demand Imbalance: The visible range volume profile (VRVP) shows the Point of Control (POC) near $595 still acting as a supply magnet with every rebound into this zone since early October has been met with visible absorption and subsequent rejection.

• That aligns with Wyckoff’s “Last Point of Supply (LPSY)” concept which outlines short-lived rallies that attract trapped longs exiting positions while professionals distribute inventory quietly.

• Wyckoff Mapping:

  • Phase B: July–September congestion zone, heavy churn at resistance.

  • Phase C: October’s “false breakout” above $600, now reversed.

  • Phase D: Current low-volume rally back into resistance (LPSY).

  • Phase E: Next phase likely involves a decisive markdown below $580, validating distribution completion (the next most dense demand level on the visible range volume profile).

We really recommend everyone reading spend some time research Wyckoff Logic and Stan Weinstein’s Stage Analysis (built on the same principles as Wyckoff).

Both of these concepts are truly exceptional to assist you in understanding market structure.

Russell 2000

% over 20 EMA: 48.13% | % over 50 EMA: 45.43% | % over 200 EMA: 57.72%

• Same Setup, Different Index: You’ll notice the exact same low-volume rally behavior unfolding in IWM as we’ve now seen in both the Nasdaq (QQQ) and Midcaps (MDY). Monday’s session printed just 86% of its 20-day average volume, confirming this move lacks any real sponsorship.

• Structural Parallels: The Russell’s price structure mirrors the “low-volume rally after a breakdown” phase of the Wyckoff distribution schematic which is the market equivalent of a dead-cat bounce.

• POC & Demand Dynamics: The Point of Control (POC) around $243 continues to act as the supply/demand battle zone where we do see short-term demand emerge at this level, but every rally above it meets immediate absorption.

• To us, this indicates that smart money is likely distributing into reactive dip-buying, not adding new exposure.

FOCUSED STOCK
SOFI: The Relative Strength Leader In XLF

ADR%: 6.08% | Off 52-week high: -5.3% | Above 52-week low: +233.5%

• Relative Strength Leadership: SOFI remains one of the highest relative strength names in the entire market (RS Rating: 98/99), and it’s outperforming both its sector (XLF) and the broader indices decisively.

• Volume Confirmation: Yesterday’s bounce came on 105% of its 20-day average volume, confirming active support while most of the market saw participation decay. That’s a rare divergence of strength in the current tape.

• Weekly Trend Context: The 10-week EMA has acted as dynamic demand for several months, catching every corrective attempt since July. This keeps the intermediate trend intact while the broader financial sector remains mixed.

• Caution Ahead of Earnings: With earnings approaching, we’re not advocating new long exposure, but the name remains a top-tier relative strength tracker for post-earnings continuation setups.

FOCUSED GROUP
XLP: Defensives On The Rise

• Dual Confirmation Across Weighting Structures: Both the market-cap weighted XLP and the equal-weighted RSPS are climbing materially and in tandem into their Points of Control (POCs), signaling that defensive capital flows are broad-based, not concentrated in a few large or mega caps.

• Technical Context: Each ETF has rallied sharply off early-October lows, reclaiming their 10- and 20-day EMAs with strong follow-through volume.

• The alignment of the two (weighted and equal-weighted) moving in unison is rare and notable, as it reflects sector-wide institutional accumulation rather than a passive ETF drift.

• Rotation Implication:
  This development carries significant weight in today’s tape:

  • Cyclicals are rolling over, alongside midcaps and small caps showing clear signs of weakness.

  • Growth sectors are all cooling off, particularly tech and discretionary.

  • Meanwhile, defensives like staples are seeing inflows, often the early sign of a late-cycle transition or short-term risk aversion phase.