Full Steam Ahead

Swingly Exposure Status: Risk On

OVERVIEW
Weak Open, Strong Close

The market witnessed another robust session, posting an almost +5% gain in just one week. The underlying tone regarding the fundamental macroeconomic trends influencing US equities has notably shifted to decisively dovish after a period of uncertainty lasting two months.

Deutsche Bank analyst Henry Allen highlighted in a research note this morning that the next upcoming challenge will be the US inflation figures for April next week. Nevertheless, investors have currently adjusted their expectations towards a more accommodative monetary policy stance for the month, contrary to earlier anticipations.

If you've been following our morning reports for some time, you'll know that at Swingly, we aim to steer clear of overanalyzing the reasons behind market movements. Instead, our focus remains on what truly matters: the price action. 

Economic Data

It is important to note that shortly after market open in today’s session, there will be a release of the Michigan Consumer Sentiment Index. This index gauges US consumer confidence by surveying individuals' views on personal finances, economic conditions, and future expectations.

USD10Y (candle) vs IXIC (yellow line)

We don't anticipate the data release to trigger significant shifts in volatility, particularly considering the bullish case for equities indicated by fundamental trends in critical indicators like the 10-Year Treasury Yield. Nonetheless, it's still a factor worth considering.

The chart above compares the Nasdaq composite (IXIC) against the 10-Year Treasury (USD10Y). Over the past month, coinciding with the deepest part of the recent equities pullback, we observed the USD10Y peaking at close to 5%. Additionally, we can discern an inverse correlation between the two securities over the past week, prompting the breakout for the IXIC from its pullback base, while the USD10Y has started to decline.

This development served as another significant factor for our team to begin initiating long exposure and shift our exposure status to risk-on.

Nasdaq

QQQ Daily Chart

The large caps persist in their ascent to multi-month highs, surpassing the volatility contraction pattern (VCP) break from last week. The QQQ is currently surging higher pre-market, edging closer to a notable supply level around $443, which could potentially lead to a short-term rejection against this zone.

This isn't a cause for concern as there's still a possibility for the Nasdaq to break above $443 if more buyers join the rally. Now, let's turn to volume analysis. Volume has been low for weeks and continues to decline with each trading session. Whether this is bearish or bullish depends on the direction of price action. Despite the upward trend, low market participation suggests sellers are passive, not resisting the rising share price but still reluctant to shift their bias to join buyers.

While this isn't a major concern, we're mindful that a sudden surge in selling pressure could lead to a downside flush. Conversely, the opposite holds true. We prioritise early identification, and with individual stocks showing signs of strength and follow-through, we're feeling confident.

S&P Midcap 400

MDY VRVP Daily Chart

The midcaps witnessed a substantial breakout in yesterday’s session, as prices surged over +1% through a notable volume pocket identified by the Visible Range Volume Profile (VRVP). This surge propelled the MDY into an extremely low cluster of supply/demand, reaching up to $560, which we anticipate should pose no obstacle to overcome in the coming week.

Russell 2000

IWM VRVP Daily Chart

With very little overhead supply up to $211, our confidence is bolstered that the recent pullback is over. The IWM has minimal obstacles hindering its momentum, making it likely to continue pushing to new highs going into next week.

While there's a possibility of seeing the Russell 2000 chop sideways today at the current heavy supply/demand zone, we remain confident that the index will be trading higher by the end of next week.

DAILY FOCUS
Riding The Momentum

The market is reaching new relative highs, and numerous earnings-based episodic pivots (EP) and range breakouts (BO) have proven successful. We've increased our exposure and are experiencing following through, which boosts our confidence in buying when we encounter valid setups that meet all our criteria.

Our focus for today remains on identifying stocks that are breaking higher, whether through an episodic pivot (EP) or a range breakout (BO), and initiating positions accordingly. However, we won't be forcing any trades; rather, we'll be initiating positions with our maximum 1R position size, reflecting our professional approach to trading that is very aware of the realities of engaging in short term speculation.

WATCHLIST
Watch These Closely

SMCI: Super Micro Computer, Inc

SMCI Daily Chart

  • SMCI, a market favourite, is nearing the conclusion of its multi-month volatility contraction.

  • Despite somewhat underwhelming earnings compared to previous surprises, there is still potential for SMCI to move higher.

  • We will closely monitor for a potential entry into a long position once the stock breaks above $849. This level has the significance of propelling the stock above all its key EMAs and the declining resistance line.

CLSK: CleanSpark, Inc.

CLSK Daily Chart

  • Bitcoin mining stock Cleanspark reported a significant beat with earnings up by +737% and revenue surpassing estimates by 5%.

  • CLSK is nearing the end of its multi-month sideways Volatility Contraction Pattern (VCP), which could potentially break out in today's session following its substantial fundamental improvement.

  • We are slightly cautious about the correlation CLSK has with BTCUSD and thus may require Bitcoin to move higher before significant follow-through occurs.

This newsletter does not provide financial advice. It is intended solely for educational purposes and does not constitute investment advice or a recommendation to trade assets or make financial decisions. Please exercise caution and conduct your own research.

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