MARKET ANALYSIS
Here’s All You Need To Know

• Markets are opening with a broad, market-wide gap down following renewed tariff rhetoric and geopolitical escalation, and this time the weakness is not isolated to mega-cap technology.

• Unlike recent risk events where small and mid-caps acted as shock absorbers, early price action shows pressure across all cap segments, including the prior leadership areas.

• This matters because the market has been held together by rotation rather than true breadth expansion, making it more vulnerable when correlations rise.

• Volatility is expanding meaningfully, and in environments like this, downside can accelerate quickly if sellers remain in control into the close.

• Given how extended and choppy equities have been, this type of gap down has the potential to transition from noise into a short-term liquidation phase if dip buyers fail to show up.

• That said, the close is far more important than the open; many headline-driven sell-offs this cycle have reversed intraday once emotion is absorbed.

• If price stabilizes and recovers meaningfully into the close, this likely resolves as another rotational reset rather than a trend break.

• If weakness persists into the afternoon with expanding volume, risk should be reduced aggressively, as the market has shown very little tolerance for prolonged holding periods.

Nasdaq

53.92%: over 20 EMA | 51.96%: over 50 EMA | 57.84%: over 200 EMA

• The NASDAQ is in a structurally vulnerable position after a high-volume rejection at the 630 breakout attempt.

• Last week printed 112% relative volume on the weekly chart, followed by another 111% relative volume sell-off on Friday, confirming supply rather than demand.

• Volume profile shows clear distribution above 627.75, with materially more shares traded to the downside than the upside in that range.

• Price is now below the point of control on both the daily and weekly timeframe, signaling a loss of intermediary trend control.

• Current price is sitting near the December 19 lows, with the next logical downside magnet being the rising 20-week EMA near 603.

• A failure to hold the 20-week EMA would be a material technical break and would invalidate the entire rally structure that has held since early May.

• Mega-cap technology is broadly failing, which means the NASDAQ is likely to remain the weakest index in any continued downside pressure.

• The close is critical; without a strong intraday recovery, downside risk remains elevated and could accelerate quickly.

S&P 400 Midcap

71.42%: over 20 EMA | 75.43%: over 50 EMA | 69.17%: over 200 EMA

• Mid-caps remain structurally stronger than the NASDAQ, supported by meaningfully better internal breadth.

• That said, they are also gapping down today and mean-reverting toward the 10-day EMA, which was a logical and overdue move given short-term extension.

• A clean reclaim of the 10-day EMA would be a constructive signal and suggest relative strength is still intact.

• Failure to reclaim that level opens the door to a move toward the 20-day EMA near 621, which would represent further downside without breaking the broader trend.

• Given rising volatility and elevated correlations, mid-caps should not be treated as immune, only relatively stronger.

• Any trades taken must be very low duration, quick, and size-adjusted, with strict invalidation levels and overnight holds are still very risky.

Russell 2000

67.37%: over 20 EMA | 69.94%: over 50 EMA | 67.88%: over 200 EMA

• Small caps are exhibiting the same technical structure as mid-caps, with today’s gap down landing directly into fair value near 260, which aligns with the rising 10-day EMA.

• The volume profile shows a meaningful demand shelf at this level, with more shares transacted on the bid than the ask, suggesting this area can act as short-term support.

• Given the strong intermediary trend and the breakout from 249 on January 5th, it is unlikely this move is invalidated in a single session.

• That said, the move has been extremely extended, with roughly a 9% rally in about 10 sessions off the 50-day EMA, so near-term weakness and digestion are expected.

• The highest-quality outcome would be a gap fill to the upside, which would signal continued relative strength and confirm demand is still in control.

• If looking for pullback trades or gap-fill setups, small caps and mid-caps remain the preferred areas over large-cap technology.

FOCUSED STOCK
KGC: Miners Still The Strongest Trend Trades

ADR%: 3.31% | Off 52-week high: -1.1% | Above 52-week low: +229.9%

• KGC continues to exhibit exceptional relative strength, sitting near a 99 RS rating versus the SPX, within the strongest segment in the market: precious metals.

• The stock has maintained a clean intermediary uptrend since early April and has not broken below its 20-week EMA since reclaiming it late last year.

• Importantly, KGC is now materially extended, trading at a large ATR multiple above its moving averages, which makes chasing gap-up strength a poor risk-reward proposition.

• Commodity-linked equities are especially vulnerable to gap risk, as the underlying assets trade 24 hours while the equity does not.

• The optimal entries in names like KGC consistently occur on pullbacks into longer-term moving averages, not on momentum extensions.

• The early January pullback into the 10-week EMA is a textbook example of where risk was defined and upside was asymmetric.