OVERVIEW
What You Need To Know

• Macro: Futures higher on earnings optimism and possible U.S.–China tariff relief, but technicals remain decisively bearish despite the bullish tone.

• Nasdaq (QQQ): Still forming a head-and-shoulders pattern; demand at $595 holds for now, but rising volume signals distribution.

• S&P 400 Midcap (MDY): Heavy rejection at $593 on huge volume, weak bounce after — structure turning clearly distributive.

• Russell 2000 (IWM): Choppy, volatile, and non-directional — an account-killing tape; defense mode remains priority.

• Focused Stock: MDGL: Tight VCP base with higher lows and drying volume; breakout over $450 could confirm leadership in the strongest sector.

• Focused Group: XLRE: Real estate showing accumulation with a V-shaped recovery off the 200 EMA; rate easing is the key tailwind to watch.

MARKET ANALYSIS
The Definition of a Choppy Tape

• Futures are higher this morning as traders brace for a packed week of earnings and inflation data.

• Trade sentiment improved after reports that the U.S. may ease tariffs on certain Chinese goods, helping unwind some of last week’s risk-off pressure.

• Volatility remains high, with continued swings in regional banks and AI stocks, though early signs of risk appetite are reappearing.

• Big week for earnings: Tesla, Netflix, Intel, and Coca-Cola headline — each carrying heavy weight for market psychology and sector leadership.

• Macro backdrop: The market still expects a Fed rate cut later this month, even as the government shutdown continues to muddy near-term economic clarity.

Our Take:
It’s a strange mix out there as the tone feels bullish, with traders eager to buy dips and anticipate good earnings, but the technical structure remains decisively bearish.

Breadth is deteriorating, key indices are failing to trend cleanly, and leadership is narrowing and all typical late-stage warning signs.

Nasdaq

% over 20 EMA: 44.55% | % over 50 EMA: 52.47% | % over 200 EMA: 54.45%

• The head and shoulders pattern remains the dominant structure on QQQ, but it’s important to stress: it is not yet validated.

• The neckline sits roughly around $595, and until that level breaks on decisive volume, the formation is only potential, not actionable.

• Friday’s session saw a firm bounce off the Point of Control (POC) at the most traded price zone of the recent range (since june 2025) showing visible demand at that level.

• Despite that rebound, volume has been rising throughout this consolidation, which typically suggests distribution rather than accumulation.

• Ideally, we’d want to see contracting volume as price tightens, not expanding activity as that usually precedes volatility, not stability.

• Tech remains the core capital concentration group in this market, and even amid chop, its relative strength persists and it will likely hold up the best.

S&P 400 Midcap

% over 20 EMA: 38.65% | % over 50 EMA: 36.90% | % over 200 EMA: 52.86%

• The MDY had a very poor week last week, capped by a high-volume rejection at the Point of Control (POC) around $593 on Thursday.

• That rejection came on 217% of the 20-day average volume and thus signaling heavy supply absorption right where prior distribution occurred.

• Friday’s rebound attempt was muted and unconvincing, printing just 76% of average volume, a clear sign of no meaningful demand follow-through.

• The ETF remains stuck below key moving averages, with the daily structure rolling over beneath the 20- and 50-day EMAs.

• Price action has shifted from a basing pattern into distribution and what we believe will be a mark down phase, with lower highs forming and a flattening 50-day EMA.

• There’s no clear edge on either side as the upside lacks sponsorship, downside lacks velocity and so making this a high-risk, low-reward environment.

Russell 2000

% over 20 EMA: 32.51% | % over 50 EMA: 38.83% | % over 200 EMA: 53.21%

• IWM had a complete reversal last week, confirming how erratic and dangerous this environment has become for traders.

• Friday’s session gapped lower and was rejected cleanly at the declining 10-day EMA, showing sellers are still in control short-term.

• Despite that, we did see demand step in near the Point of Control (POC) at $243, keeping price from breaking down further - a micro tug-of-war between trapped longs and value buyers.

• The key takeaway isn’t direction, it’s structure with rising volume with a choppy, trendless price pattern.

• That’s usually how Wyckoff-style distribution behaves, where smart money distributes inventory into reactive buying.

• There’s no clean trend, no structural setup, and no clear confirmation bias - exactly the kind of tape that kills trading accounts.

• The past two reports have highlighted this repeatedly as we are in a volatility regime that is non-directional, and that’s the worst kind for swing traders.

• Volatility in itself isn’t the problem; non-directional volatility is. You need volatility to make money, but it has to be linear, not erratic.

• Right now, price is oscillating violently around key moving averages rather than trending cleanly through them.

FOCUSED STOCK
MDGL: Leading Sector, Leading Stock

ADR%: 3.75 % | Off 52-week high: -5.3% | Above 52-week low: +118.8%

• MDGL has been moving sideways above the 10 and 20-day EMAs, forming a tight multi-week base after its August run.

• Price is contracting on declining volume, a typical VCP (Volatility Contraction Pattern) hallmark, suggesting supply is being absorbed.

• The series of higher lows within the base indicates quiet accumulation beneath the surface and is often the precursor before an explosive move higher.

• When volatility contracts this tightly while volume dries up, one side is running out of ammunition, usually the sellers when the relative strength is this high

• If MDGL can break decisively above $445–$450, accompanied by volume expansion, it would signal Phase 2 continuation and confirm it as a sector leader.

Sector Context — Healthcare Leadership

• Healthcare has also quietly become the strongest-performing sector in the market, with XLV (Health Care ETF) confirming a new Stage 2 uptrend.

• Within that, pharmaceuticals make up over 30% of XLV, and the dedicated XPH ETF (Pharmaceuticals) is coiling in a tight volatility contraction pattern, mirroring the setup seen in MDGL itself.

• This multi-layer alignment with sector, subgroup, and stock, is precisely the kind of top-down confirmation that precedes leadership emergence in early bull phases.

FOCUSED GROUP
XLRE: A +1 Year Long Base

• Real estate is one of the most interest-rate-sensitive sectors in the entire market.

• When rates fall, borrowing costs decline, credit becomes more available, and property valuations rise because discounted future cash flows become more valuable.

• In other words, cheap money fuels higher asset prices, and that includes REITs, commercial real estate, and housing-related equities.

• The recent moderation in yields and growing expectations of a more dovish Fed stance have created the first tailwind this sector has seen for a long time.

Technical Picture: A Very Constructive Shift in Structure

• XLRE has quietly built a multi-month base and is now starting to show higher lows, a critical sign of demand absorption.

• Last week’s action was particularly important with a V-shaped recovery off the 200-day EMA on surging volume, signaling institutional re-entry rather than a dead-cat bounce.

  The volume pattern as we see it increasing on rallies, contracting on pullbacks, is exactly what you want to see when a sector transitions out of a bottom.

• Real estate’s behavior often leads rate expectations, not lags them.

• If yields continue easing (as they are expected), XLRE will become a defensive rotation play with both income stability and capital appreciation potential.

• Technically and macro-wise, this is the first credible sign of accumulation in the space since mid-year, and it deserves close monitoring for continuation targeting a breakout over $42.25 being a long trigger.