OVERVIEW
Some Short Term Caution Warranted

Macro: Tuesday’s pullback looked like profit-taking, not panic. Powell flagged valuations as “fairly high,” keeping focus on Friday’s PCE inflation data for confirmation on the Fed’s next move. AI remains the backbone of this rally, with Micron’s blowout results and Alibaba’s $50B+ AI push fueling momentum.

Nasdaq (QQQ): First real supply signal in weeks as $600 triggered a full reversal on 135% relative volume. History suggests digestion into the rising 10EMA (~$592) is likely, not trend failure. Weekly chart shows resistance from the April 2025 wedge line — $600 is natural profit-taking territory.

Midcaps (MDY): Still trapped between $597–$605 with sellers leaning hard on supply above $605. Lack of volume shows buyers aren’t lifting the ask. Remains a range-bound, secondary index vs Nasdaq leadership.

Small Caps (IWM): Inverted red hammer erased prior gains, raising odds of a retest of the 10EMA near $241. Bigger picture: contraction + falling relative volume = volatility buildup. A breakout could broaden leadership beyond megacap tech.

Focused Stock (AMD): Tightening bull flag post-Sept 18 demand defense. Still lagging AVGO/MU, but risk/reward is compelling if $163 breaks on volume. Laggard now, potential catch-up play later.

Focused Group (XLE): High-volume breakout continuation from its August downtrend break (stretching back to Dec 2024). Yesterday’s strength despite weak tape shows real demand. A move >$90 would confirm sector leadership — scan energy names for setups.

MARKET ANALYSIS
A Very Eventful Tuesday Session

Markets are stabilizing midweek after Tuesday’s pullback, with tech once again taking center stage. Micron’s stronger-than-expected results—powered by a 46% revenue jump from AI demand—gave the sector a lift, while Alibaba surprised with plans to push AI spending beyond its already massive $50 billion target.

That pledge helped its stock jump over 9% and fueled a broader sense that global AI investment, now estimated at $4 trillion, is still accelerating.

Tuesday’s fade looked more like profit-taking than panic, with valuations and Powell’s comments about “fairly highly valued” stocks adding to the pause.

The bigger question remains how the Fed handles its next moves: Powell kept the door open to more cuts but stressed caution. With two more reductions still expected this year, the upcoming PCE inflation report on Friday will be key in shaping the path.

For now, the AI trade continues to underpin the rally—but markets are moving with one eye on Washington and one eye on the data.

Nasdaq

% over 20 EMA: 52.47% | % over 50 EMA: 49.50% | % over 200 EMA: 57.42%

Yesterday marked the first decisive sign of supply in this rally. QQQ ran into the psychological $600 level, and what followed was a full daily reversal on 135% relative volume. That matters as distribution at highs, especially after a straight-up move, is rarely random

The past month has been a near-unbroken advance. Historically, these vertical runs (think July 2023 or March 2024) tend to resolve with brief, high-volume pauses rather than immediate trend failure. The first pullback often retraces into the rising 10EMA (now ~$592).

What stood out wasn’t just the red bar, but the synchronized weakness across megacaps (AMZN, META, NVDA, etc).

With the 10EMA aligned with a heavy volume pocket, the logical digestion zone is -1 to -1.5% lower. That’s not trend-breaking in itself especially given its inside an otherwise very strong tape.

The weekly chart shows QQQ pressing against the upper boundary of an ascending wedge, a resistance trendline that has capped upside moves since April 2025. This confluence just further reinforces $600 as a natural profit-taking zone and raises mean reversion risk.

S&P 400 Midcap

% over 20 EMA: 38.34% | % over 50 EMA: 53.88% | % over 200 EMA: 60.65%

MDY continues to chop inside its supply/demand range between roughly $597 and $605. Yesterday really highlighted the lack of buyer intent above $605 as every attempt higher was met with sellers leaning on the offer, and there simply wasn’t enough fresh bid to lift price through. This is where order flow matters.

At the most basic level, price only moves when aggressive buyers lift the ask or aggressive sellers hit the bid. In MDY, you can clearly see what’s happening: bids show up at the $597 shelf (buyers defending), but each time we get near $605 the ask side takes control. Sellers are happy to offload inventory there, and the absence of conviction on the bid side shows up as low relative volume.

The message is simple: this isn’t trend leadership, it’s a range tape. Until we see buyers get aggressive enough to clear $605 with volume, MDY will remain secondary compared to QQQ and the megacap tech complex.

That doesn’t mean the group is bearish as plenty of individual midcap momentum names (like the quantum tech plays) are working but the index itself tells you capital flows are hesitant here and this raises churn risk.

This is a group to watch for rotation if the QQQ starts to dip (to track for flow back down the risk curve).

Russell 2000

% over 20 EMA: 49.41% | % over 50 EMA: 65.60% | % over 200 EMA: 62.37%

IWM suffered visible selling pressure yesterday, giving back its entire prior advance and closing with an inverted red hammer. That’s not an outright breakdown, but it does raise the probability of a short-term retest of the rising daily 10EMA near $241.

Rather than overanalyzing each candlestick, the bigger picture is more important: IWM is consolidating after its September run, and the relative volume profile has been steadily declining during that contraction.

Declining relative volume during sideways trade is often the precursor to volatility expansion, in other words, a larger move is brewing under the surface.

On a candle-by-candle basis, small caps look messy. But structurally, price remains above rising short-term averages and demand shelves are being respected. That tells us the bull trend is intact and just resting.

Traders should view IWM less as a trade vehicle and more as a proxy for risk appetite in small caps: if the next expansion resolves higher, leadership could broaden once again and second order breakouts are likely to occur.

FOCUSED STOCK
AMD: A Big Move Is Brewing

ADR%: 3.22% | Off 52-week high: -13.8% | Above 52-week low: +110.4%

AMD continues to contract inside a large bull flag, a structure that’s now been tightening for weeks.

The key moment was the Sept 18 gap down, which was immediately absorbed and bid back up with a very strong signal that demand was waiting underneath.

That action reduced the probability of a major breakdown, especially given the backdrop of sector strength across semiconductors.

That said, AMD has been a clear laggard relative to leaders like AVGO or MU. We’ve seen relative volume decline as AMD pushed into the $163 zone, right at the dense POC cluster, suggesting buyers are hesitant to press until fresh momentum shows up.

What This Means

• Structurally: The flag contraction remains bullish; volatility compression = energy build.

• Relative positioning: AMD hasn’t been the leader, but that doesn’t disqualify it. Laggards can often play strong catch-up moves once the structure resolves.

• Risk/reward: If AMD fires above $163 on rising relative volume, the upside expansion could be fast and sharp. Meanwhile, risk remains well-defined under the flag base.

FOCUSED GROUP
XLE: Energy Is Heating Up

Energy quietly put in one of the most important moves on the board yesterday.

After spending the past 3–4 weeks consolidating just above its point of control at $87.70, XLE pushed higher on very high relative volume, pushing itself back into motion even on a day when the broader equity tape was softer.

What makes this significant isn’t just the short-term pop, it’s the context of the breakout. In late August, XLE cleared a declining resistance trendline that stretched all the way back to December 2024, breaking a long phase of distribution.

That shift marked a major trend change for the sector, and the current push looks like the continuation leg that confirms it.

Yesterday’s session further validated that view: supply was tested during consolidation, absorbed, and now buyers are stepping back in.

Momentum traders should have energy names on scan, not every setup will be clean, but the leaders in this group will likely offer high R/R opportunities if the $90 breakout confirms.

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

Q: “I find it really hard to deal with when my stock goes up and then pulls back. I hate watching open profit disappear… I often override my stop, sell too early, and then watch the stock go back up without me. What do I do?”

A: Every trader knows this pain. We feel it all the time. The frustration isn’t about the pullback, it’s about the psychology of seeing something you “had” slip away. It feels like losing control.

The truth is you don’t need control over outcomes to succeed. You only control three levers in trading:

• When you trade (your setups and timing)

• What you trade (leaders, laggards, sectors)

• How much you trade (position size and risk to equity)

That’s it. Everything else e.g. the dips, the intraday noise, the green that turns red - is distribution.

Why This Happens

Most traders bail early because they lack two things:

1. Confidence in the system (not yet enough data to trust it).

2. Screen time (not enough lived experience to know what’s “normal”).

Early in your career, every pullback looks like danger. Later, you realize: most breakouts pull back before they trend. They aren’t bugs of the system, they are features (some traders even use these pullbacks to size up).

The Fix: System > Emotion

You solve this problem by making decisions before you trade, not while you’re in it. That means defining your rules in black and white so there’s no judgment left in the heat of the moment.

What does that look like?

Every system, no matter how simple or complex, should spell out at least:

• Setup criteria — the exact conditions that must be present before you enter.

• Risk sizing — how much of your account you’re willing to put at risk per trade.

• Exit logic — both for taking profits and for cutting losses.

• Invalidation points — what specific price action or level proves the idea wrong.

Once that framework is written down, you don’t improvise.

If your stock dips, either it triggers your stop or it doesn’t. Either it hits your profit-taking criteria or it doesn’t.

There’s no more negotiating with yourself mid-trade.

Expectancy and Distribution

Think in terms of buckets. Every trade ends in one of five outcomes (we discussed this recently, but it’s valid here too):

1. Big loss (unacceptable - avoided with small risk).

2. Small loss (the baseline).

3. Breakeven.

4. Small win.

5. Big win (the fat tail).

The edge doesn’t come from protecting small profits. It comes from surviving long enough to capture #5.

Here’s the math: most breakouts fail or chop (small losses, scratches). A minority trend cleanly. And a tiny handful deliver outlier returns that make your year. One 20R trade cancels 20 losers. One 50R trade changes your equity curve forever.

When you sell early because you’re scared of giving back profits, you cut yourself off from the only outcome that actually matters.

How to Train This

Do the work outside live trading. Study 100 past breakouts. Log what you see: how often they dip back to entry, how often they recover, what volume looks like, how the group was behaving. Build your own evidence.

That repetition rewires your expectation. Instead of panic, you’ll look at a dip and think: “Yeah, I’ve seen this 100 times before. This is normal system behavior.”

Remember

Your job isn’t to guard every little green number. Your job is to:

• Risk tiny.

• Let the losers be small.

• Sit through the noise.

• Stay alive until the fat tail shows up.

That’s the expectancy game. Once you see it this way, the urge to override fades.

👥 This is exactly the kind of stuff we work through every week inside Swingly PRO with the team, not just “where to buy,” but how to actually hold, how to size, and how to trust your rules when the noise kicks in.

If you’ve been nodding along because this is the part you struggle with, PRO is where we sharpen those edges together.