MARKET ANALYSIS
Here’s What You Need To Know

• Yesterday’s session delivered a sharp shakeout, particularly in Big Tech, but the market ultimately closed materially stronger than the intraday lows. That’s an important distinction as the panic was absorbed, and buyers stepped back in.

• This is exactly the type of event-driven volatility we’ve been flagging. Mega-cap earnings, Fed leadership uncertainty, and macro cross-currents create unstable liquidity conditions, where intraday swings can be violent even if the broader trend remains intact.

• Microsoft’s post-earnings selloff weighed heavily on software and growth stocks, reinforcing a key market theme: AI capex is no longer blindly rewarded and investors want monetisation, not just spend.

• Apple’s results were solid and helped stabilise sentiment, but futures are softer this morning as markets digest the mixed Big Tech tape and wait for Trump’s Fed chair pick, which adds another layer of policy uncertainty.

• Despite the volatility, major indexes remain positive for the week and for January, which tells you this is still a digestion phase within an uptrend rather than a confirmed regime shift.

• The key takeaway is to always remember volatility is the tax you pay during earnings season. Sharp drawdowns and fast recoveries are normal when positioning is crowded and information flow is dense.

• Our focus remains on price and volume behavior, and the shakeout did not break intermediate trend structure which is always the most important thing to track.

• Remember: when in doubt, always zoom out (to the weekly/monthly charts)

Nasdaq

48.51%: over 20 EMA | 54.45%: over 50 EMA | 55.44%: over 200 EMA

• The NASDAQ experienced an extremely aggressive shakeout yesterday, with an intraday range of roughly 2.44%, which is more than 2× its average daily range of ~1.2%.

• That magnitude of range expansion is characteristic of liquidation-style volatility rather than routine pullback behavior.

• Price flushed directly into the 50-day EMA, the 10-week EMA, and the weekly point of control, which is a structurally critical confluence zone.

• Demand stepped in precisely at that level, producing a clear red hammer reversal candle, confirming that higher timeframe buyers are still active.

• This session is a great example of why buying breakout highs in a low-volume environment is structurally inferior to buying pullbacks into higher timeframe support.

• The bull trap that we flagged earlier in the week materialised exactly as expected once price expanded without volume confirmation.

• On the weekly timeframe, the broader structure remains constructive. When zooming out, the NASDAQ is still contracting at highs within an intermediate volatility contraction pattern, rather than breaking down.

• The daily noise over recent months obscures this unless you explicitly anchor analysis to the weekly structure.

• With Big Tech earnings still ongoing, additional volatility is highly likely over the next several sessions. Earnings remain unpriceable ex-ante, which structurally increases tail risk and intraday range expansion.

• Our near-term base case is continued contraction around the rising structure, with a likely test of the 10-day EMA near ~625.7, which would represent only a modest ~0.6% downside move and is well within routine mean reversion behavior.

• The prior demand zone around 620 remains the key structural floor, marking the bottom of the multi-month green-box demand region that transitioned from supply in October.

• Yesterday’s response materially reduced the probability of a deeper breakdown through the 50-day / 10-week confluence.

• From a trend perspective, it is unlikely that the NASDAQ decisively breaks below the 50-day EMA without a broader macro catalyst, particularly given that higher timeframe demand was confirmed during the shakeout.

S&P 400 Midcap

48.49%: over 20 EMA | 67.58%: over 50 EMA | 64.07%: over 200 EMA

• Mid-caps also participated in the shakeout but closed back above the point of control (~633) after briefly undercutting the 20-day EMA, which aligned with our base-case scenario outlined earlier in the week.

• The session produced a red hammer reversal on ~101% relative volume, suggesting passive absorption as the selling pressure was present but not capitulatory.

• On the weekly structure, mid-caps remain in a volatility contraction pattern at highs, with four weeks of declining relative volume, consistent with healthy consolidation rather than distribution.

• Breadth deterioration is visible, with roughly ~48% of stocks above the 20-day EMA, but ~70% remain above the 50-day EMA, which confirms this is still a mean reversion regime within a Stage 2 uptrend.

Russell 2000

55.01%: over 20 EMA | 62.71%: over 50 EMA | 64.47%: over 200 EMA

• Small caps exhibited similar price action, briefly undercutting the 20-day EMA near ~260, before reclaiming the daily structure and closing near ~264 on ~110% relative volume.

• Breadth remains comparatively stronger, with ~55% of stocks above the 20-day EMA and ~63% above the 50-day EMA, indicating the group is earlier in its intermediate cycle than mid-caps.

• As long as yesterday’s lows hold, the contraction remains constructive. A decisive break below that low would open a path toward ~255, aligning with the 50-day EMA and 10-week MA, which historically act as primary reaction levels for IWM.

FOCUSED STOCK
ARWR: Pharma Still Looks Very Strong

ADR%: 5.51% | Off 52-week high: -10% | Above 52-week low: +622.3%

• ARWR remains one of the cleanest contraction structures in the market, with a ~49-day volatility contraction accompanied by declining relative volume, which is textbook pre-expansion behavior.

• The stock printed a bullish engulfing candle during the market-wide shakeout, signalling relative strength and active demand despite systemic volatility.

• Relative strength vs SPX is ~99, and the stock is up ~600% over the past 52 weeks, with prior expansions confirmed by expanding relative volume, which materially increases the probability that this contraction resolves higher.

• The stock is approaching supply near ~70.2, so chasing is not optimal. Pullbacks into the contraction base remain the structurally superior entry.

• Earnings are scheduled for 5 February, which introduces binary risk. Any exposure should be sized accordingly or structured to avoid earnings event risk.

  

  XPH VRVP Daily & Weekly Chart

• The pharmaceutical sector (XPH) continues to flag tightly above the 10-week EMA in a Stage 2 trend, reinforcing that ARWR is operating within a supportive sector regime rather than idiosyncratic strength.