OVERVIEW
Market Resilience Amidst Short-Term Noise

🟧 Moderate Risk – The market remains strong despite recent geopolitical noise. Short-term pullbacks and consolidations across major indices (SPY, QQQ, MDY) should be seen as opportunities, not signs of weakness.

📈 Tech & Quantum Computing Leading – Tech stocks, especially in quantum computing and Bitcoin-related equities (e.g., MSTR), continue to show strong momentum. Breakout opportunities are on the horizon.

⚡ Stay Focused on Leadership – Key leadership stocks are seeing accumulation on pullbacks, particularly in tech and growth sectors. Ignore short-term headlines and focus on trends and price action.

MARKET ANALYSIS
Focus Only On The Charts…

The U.S. and China are back at odds over chip-related issues, with the Trump administration's stance on Huawei AI chips once again stirring up trade tensions. These disputes have raised concerns about the sustainability of the recent trade deal and revived fears of economic consequences.

However, when we zoom out and look at the broader picture—especially the charts—it's clear that the strength of the U.S. equity market is not being significantly affected by this noise. Yesterday's pullback was a natural and expected pause in an otherwise strong market. We're still seeing robust price action, with dips being met with buying pressure, indicating that the underlying trend remains upward.

In our view, this noise is just that—temporary and unlikely to have a lasting impact. The market’s momentum remains intact, and as long as the technicals continue to support it, we are confident in its continued strength.

🔑 Key Takeaway: Ignore the noise; focus on the charts. The U.S. equity market remains strong, and short-term pullbacks should be viewed as healthy consolidations within a bullish trend.

Nasdaq

• The QQQ remains incredibly strong and continues its consolidation on the Point of Control (POC), which we had anticipated as the momentum began to slow and things got a bit overheated to the upside. We are currently in a cup and handle formation, and if this pattern materializes, we should expect further tests of the rising 10-EMA in the next few sessions.

• However, so far, all intraday dips have been met with strength, showcasing the undeniable power of the market. That said, we expect new long exposure in growth segments to have a slightly higher failure rate until this consolidation phase resolves and the range around $525 is broken. We've already seen sellers stepping in during attempts to break higher, and many tech names are now extended.

S&P 400 Midcap

• MDY continues to build a consolidation below its Point of Control (POC) level, which is exactly what we want to see. A large base needs to be established before we can springboard higher. These types of pauses allow stocks that have been extended but already broken out to rebase, offering fresh entry points when the time is right.

• While we do expect some near-term volatility, we believe MDY is likely to remain rangebound between the POC and the ascending support levels on the rising 10-day and 200-day EMAs. This setup suggests consolidation is still in play, but the potential for a breakout in the medium term remains on the horizon.

Russell 2000

• IWM is still contracting around its 200-day EMA, sitting just below its breakout level on the declining resistance from December 2024. The volume is declining as well, forming a volatility contraction pattern that often precedes a significant breakout higher.

• We see strong demand and support below at the rising 10-EMA, and there’s a dense pocket shown on the Visible Range Volume Profile (VRVP). Given these factors, we believe IWM is very likely to break higher soon, but don’t be surprised by more consolidation or choppy action before this happens.

• Keep in mind, all dips so far in the market have proven to be buying opportunities, signaling demand is still strong.

🔑 Key Takeaway: IWM is contracting in a high-probability setup for a breakout, but patience is key—don't be alarmed by potential consolidation in the meantime.

FOCUSED STOCK
MSTR: MicroStrategy Incorporated

Unless you've been living under a rock, Bitcoin and the entire cryptocurrency market have been the leading assets, continuing to show major upside in BTCUSD. One of the most efficient ways to gain exposure to BTCUSD is through Bitcoin-related equities, with MSTR leading the pack.

After a significant Stage 1 breakout in April, MSTR has been consolidating, forming a secondary volatility contraction pattern, and it's holding above its rising 10- and 20-day EMAs. This setup is a prime opportunity to position yourself ahead of a potential breakout. Whether you're already exposed or looking to take on new risk, this is a great time to consider adding to your position.

🔑 Key Takeaway: MSTR is consolidating above key moving averages, and if it breaks out, the potential for significant upside in line with Bitcoin's strength makes it a very strong candidate for long exposure.

FOCUSED GROUP
QTUM: Quantum Computing

One of the standout growth sectors in U.S. equities right now is quantum computing, where the potential for innovation and breakthrough technologies is enormous. A breakout in any of these stocks could lead to virtually limitless upside. The sector is not only generating macro-level excitement, but the technical setup is also enticing — characterized by volatility and substantial average daily ranges (ADR%).

QTUM is leading the charge in this area. After breaking out in late April, the stock has been consistently pushing higher, with recent moves backed by a surge in relative volume, signaling strong momentum. Yesterday’s session marked the highest relative volume breakout in months, propelling QTUM past its Point of Control (POC).

Q&A
Got a trading question? Hit reply and ask!

Q: “How do you know when a stock is under or overvalued? I’m seeing UNH which looks oversold and im thinking of going long here.”

A: This is an excellent question, and it's something that can trip up a lot of newer traders. The concept of "undervalued" or "overvalued" doesn’t really apply the way most people think — especially for swing traders. The only thing that truly matters is momentum.

People love talking about things like P/E ratios and saying that buying stocks with a high P/E ratio is a bad idea. But the truth is, price and volume are the only things that move the market. Stocks with high P/E ratios often do well because there’s heavy demand for them. So, momentum takes over.

P/E Ratio (Price-to-Earnings Ratio)

The P/E ratio is a measure that compares a company’s stock price to its earnings per share (EPS). It’s calculated like this:

What Does It Tell You?

• High P/E Ratio: A high P/E ratio means investors are willing to pay more for each dollar of earnings, indicating they expect the company to grow quickly in the future. It also indicates high demand.

• Low P/E Ratio: A low P/E ratio suggests that investors don’t expect much future growth. It also indicates low demand.

Why It Matters:

• Growth vs. Value: Growth stocks often have a high P/E ratio because investors expect rapid earnings growth, while value stocks usually have a low P/E because they’re seen as undervalued based on earnings.

Take UNH, for example. It’s dropped 50% recently after their CEO left. I get why you’d think about going long since it looks “oversold,” but here’s the thing: how do we know it's really oversold? On May 15th, we saw a huge sell-off followed by a reversal candle — that’s a sign the stock is starting to mean revert (this is known as a parabolic long set-up). But just because it’s dropped doesn’t mean it’s time to jump in.

Think of it like this: why buy something that’s still trending lower, when you can find stocks that are trending higher? Plus, there’s no "tightening" here — and that's a key signal. A volatility contraction happens when buyers and sellers are both fighting for control, and that’s when you can get the best risk-to-reward setup.

So, while UNH might look oversold, from a momentum perspective, it’s not the best entry. Instead, focus on stocks that are showing clear signs of upward momentum and are now seeing a volatility contraction (e.g. a bull flag) forming.

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