MARKET ANALYSIS
Here’s What You Need To Know

• Yesterday was a messy session overall, with a lot of conflicting signals and noisy price action, particularly early in the day.

• Large and mega-cap technology continued to act as a drag, pulling the NASDAQ lower and creating the impression that the broader market was weaker than it actually was.

• That index-level weakness was largely a function of concentration risk rather than genuine risk-off behavior across the tape.

• Under the surface, buyers continued to show up on weakness, and many areas of the market absorbed selling pressure relatively well.

• Despite the intraday volatility and headline-driven uncertainty, the market managed a fairly constructive close, which matters more than the early-session damage.

• We continue to see rotation rather than liquidation, with capital moving away from crowded mega-cap leadership instead of exiting equities altogether.

• This remains a difficult environment if you are focused solely on the indices, as they are increasingly masking what is happening internally.

• The opportunity set is still there, but it is highly selective and requires looking beyond SPY and QQQ into specific groups and individual names.

Nasdaq

52.94%: over 20 EMA | 53.92%: over 50 EMA | 57.84%: over 200 EMA

• The NASDAQ had a high-volume failure yesterday, struggling to hold above its 10-day EMA. We saw a 132% relative volume push to the downside, with the index gapping roughly 0.6% below Tuesday’s close.

• At the lows, the NASDAQ was down close to 1.8% before finding demand at the rising 50-day EMA. That level remains important, as it also aligns with the rising 10-week EMA which is a zone we’ve been chopping around since reclaiming it in late November, with the notable undercut back on December 17.

• Yesterday’s session was a classic shakeout. Selling pressure was aggressive early, but buyers responded decisively at a well-defined structural level. This morning we are seeing a gap higher, though we would be cautious chasing that strength.

• A growing number of NASDAQ components, particularly within the Magnificent Seven complex, are breaking down, and gap-up continuation has been a low-quality strategy in this environment. The index remains choppy and indecisive, despite holding longer-term structure.

S&P 400 Midcap

69.92%: over 20 EMA | 75.68%: over 50 EMA | 69.17%: over 200 EMA

• MDY saw relative volume expand to 127% of its 20-day average, continuing to reaffirm its leadership from a capitalization-weight perspective.

• The breadth divergence remains stark: roughly 70% of mid-cap stocks are above their 20-day EMA versus just 53% in the NASDAQ, and 76% are above the 50-day EMA compared to only 53% in the NASDAQ.

• From a price-action standpoint, the mid-caps continue to display strong linearity which is one of the most important traits for tradability.

• Since the breakout week of November 24, price has respected pullbacks cleanly, including the retracement to the 10-week EMA at the end of December, which resolved higher on expanding volume. This is exactly the type of structure traders want to see when deploying risk.

Russell 2000

64.52%: over 20 EMA | 70.54%: over 50 EMA | 67.35%: over 200 EMA

• Small caps are showing a very similar profile. Relative volume has been expanding again over the past several sessions, and yesterday they pushed to fresh all-time highs, now holding roughly 0.6% above that breakout level.

• Pre-market action is also constructive. When you compare IWM and MDY directly to QQQ, the contrast is obvious as the NASDAQ remains erratic and choppy, while small and mid-caps continue to trend with clarity.

• From a trader’s perspective, the takeaway is unchanged. Capital should be allocated where price action is cleanest and easiest to manage.

• Right now, that remains firmly in the small and mid-cap complex, not in large or mega-cap technology.

FOCUSED STOCK
IONQ: Quantum Computing Is Getting Hot

ADR%: 7.19% | Off 52-week high: -39.9% | Above 52-week low: +184.6%

• Our primary focus stock today is IONQ, one of the leading names in the quantum computing space. The stock is now entering a very tight contraction, with price compressing over the past six trading sessions dating back to January 6.

• Throughout this period, support has been consistently found at the point of control near 48.17, with every test of that level attracting demand and producing a bounce.

• Structurally, IONQ continues to build a series of higher lows that began in the week of November 17. Price is compressing toward a well-defined breakout zone near 53, and the tightening range suggests the stock is approaching a decision point.

• From a stage analysis perspective, IONQ appears to have completed its Stage 1 base following the November lows and is now setting up for a potential transition back into a Stage 2 advance if price resolves higher.

• The current pattern resembles a clean bull flag following the impulsive move higher on January 2.

• Average true range has continued to contract, and volume has dried up meaningfully which is exactly what we want to see ahead of a potential expansion.

• Importantly, this tightening is not isolated to IONQ alone; several names within the quantum computing group are displaying similar contraction behavior, reinforcing the idea that this is a group-level setup rather than a single-stock anomaly.

• From a relative strength standpoint, IONQ remains a clear leader. The stock is currently sitting at 96 relative strength versus the SPX, placing it firmly among the strongest names in the market.

• While many large-cap technology stocks remain choppy and directionless, IONQ has instead opted for time-based consolidation, allowing its moving averages and structure to catch up.