OVERVIEW
The Future Looks Bright

Last Friday saw an absolute surge of buying pressure heading into the close, with all the major indices either breaking out above multi-week sideways movement or showing strong follow-through on previous, hesitant breakout attempts.

The big news last week, as we discussed in yesterday's weekend report, was the mixed inflation data—CPI came in hotter than expected, while PPI was cooler than forecast. In hindsight, the market handled this mixed bag extremely well. What’s particularly interesting is the remarkable resilience stocks have shown over the last two weeks, despite significant economic uncertainty both globally and domestically, which had initially pushed the VIX (volatility index) higher. This resilience could be a sign of underlying market strength that’s worth keeping a close eye on.

Despite the market climbing to new heights, there’s a clear sense of heightened anxiety. This is largely due to a combination of factors: a closely contested presidential election just three weeks away, suddenly rising Treasury yields, uncertainty surrounding the pace of Federal Reserve policy easing, and escalating geopolitical risks in the Middle East. Each of these factors adds a layer of complexity to the market, making it crucial for traders to stay nimble and aware of potential volatility ahead.

So, what does all of this mean for today’s session?

As for today’s session, we’re in an interesting spot. From a technical standpoint, the price and volume profiles of the major indices show exceptional strength. The S&P 500 continues hitting new all-time highs, with strong market breadth indicating broad participation in this uptrend.

Last Thursday and Friday, we took a risk-off approach due to the inflation data, wanting to step back and assess where the market was headed. Now, seeing the high efficacy rate of breakouts and follow-through, it’s clear that the market is a lot stronger than it “should” be from a macroeconomic perspective. This suggests that despite the external risks, momentum is on the side of the bulls for now and ignoring this is simply just wasted profit.

Nasdaq

The Nasdaq has been bumping up against overhead resistance at $495 for three straight sessions, with trading volume noticeably drying up over the past week. After initially breaking out of its multi-month consolidation flag, the QQQ is now poised and waiting for that next surge of buying pressure to push it into all-time highs.

We’re confident that a breakout in the QQQ is on the horizon. This isn’t just due to the strong bullish momentum we’ve seen in the Nasdaq, but also thanks to the outperformance of the big tech names—particularly Nvidia last week—which is a major driving force behind the QQQ’s direction.

From a technical perspective, the Visible Range Volume Profile (VRVP) shows the Point of Control (POC) firmly below the current trading price, with solid support beneath the QQQ’s current range. It’s also sitting comfortably above its daily 10-EMA, which has been acting as a cushion. This contraction in volatility within a bullish environment is a sign that a big move is brewing, and it looks like we’re just waiting for the spark to ignite the next leg up.

S&P Midcap 400

The midcaps stole the spotlight with a huge breakout on Friday, fueled by very high relative volume, which pushed the MDY to all-time highs. This breakout signals a promising future, at least in the short to medium term, for the rate-sensitive, growth-oriented stocks that midcaps typically represent.

This move is significant and shouldn't be understated. If you look back over the last few years, we haven’t seen such a high-quality, A+ breakout in the midcap space. The clean, linear price action here tells us something crucial: there’s major institutional support accumulating shares in these higher-risk areas of the equities market.

For swing traders, this is exactly the type of setup that gets us excited. The best opportunities for compound growth often come from the smaller and midcap stocks, and seeing this level of institutional backing is a strong signal that momentum is on our side. Keep an eye on this space—there's a lot of potential brewing here!

Russell 2000

The small caps followed in the footsteps of the midcaps' major breakout, with the IWM also breaking out above its multi-week bull flag. Not only did the Russell 2000 break through its descending resistance and key daily EMAs, but most importantly, it surpassed its point of control (POC) at $219, which had been acting as a strong resistance for quite some time.

This breakthrough of the POC is a critical moment, signaling a clear shift in character for the index. The fact that the highest density of supply is gradually decreasing as the IWM pushes higher reduces the chances of choppy or difficult trading conditions, giving us more clarity and confidence.

The surge in both the IWM and MDY tells us one thing: big institutions are bullish on growth stocks. By adding exposure to the most volatile and unpredictable areas of the U.S. equities market, institutions are signaling that they’re very optimistic about the future for stocks—even those within the Russell 2000, which houses some of the most volatile companies. When you see this kind of institutional support in the riskiest segments, it’s a strong vote of confidence in the overall market’s direction and at least for us signals firm risk on status.

DAILY FOCUS
Where Is The Money Flowing?

We're in a clear expansion phase in the market right now, with incredible resilience being shown across the board. This is the time to step up, take calculated risks, and be aggressive in your trading. If you’ve been playing it safe, it might be a good moment to push your position sizes to the upper limit of what your risk tolerance allows. If you’re already holding winners, now is also a great opportunity to add to those positions—whether through intraday opportunities or daily setups presenting themselves.

The key focus in times like this is where the money is flowing. We’re seeing strong leadership across certain industries, and that’s where your focus should be. But with so many setups forming in a bullish environment, it can feel overwhelming. How do you decide which stocks to focus on?

Here’s a list of questions to ask yourself as you evaluate your watchlist:

1. Which industry or theme is leading right now?
   You want to focus on stocks in the hottest sectors, whether it’s technology, consumer discretionary, healthcare, or another standout. This is where the money is flowing.

2. Which stock has the biggest, most A looking base?
   Look for stocks showing both volume and price range contraction. Ideally, you want to see a stock that’s tightened up over the last 1, 3, or 6 months with strong momentum building.

3. Is this stock a leader or a laggard?
   Leaders break out first. Laggards follow. In a bullish phase, you want to be buying the leaders as they push into new highs, not waiting for laggards to catch up. Leadership stocks in leading sectors are where you’ll find the best opportunities.

4. What is the overall market sentiment?
   Are we seeing expansion in multiple sectors or is leadership narrow? If it’s broad, it might be time to increase exposure across various setups. If narrow, concentrate on the strongest plays.

5. Does this stock have high relative volume during breakout moments?
   Volume is critical. Make sure the stock isn’t just breaking out on a price move but has the volume to back it up. High relative volume tells you there’s institutional support behind the move.

6. Is the stock showing a consistent pattern of higher highs and higher lows?
   Momentum stocks usually follow this trend. A strong uptrend with higher highs and higher lows is a healthy sign that the stock has room to run.

7. Are there buyable pullbacks or breakouts happening?
   During an aggressive uptrend, adding to winners is crucial. Look for stocks offering buyable opportunities either on intraday pullbacks to key moving averages or breakouts from strong bases.

This is a time to be proactive. Don’t be afraid to go in with conviction, especially when the market is showing this much strength.

Keep scanning, stay focused on where the money is flowing, and make sure you’re in the right setups to take advantage of this bullish momentum.

WATCHLIST
Today’s Breakout Watch

RKLB: Rocket Lab USA, Inc.

• RKLB has been one of the strongest stocks in recent months, showing a powerful move since late summer. Over the past several weeks, it has formed a solid price contraction, all while holding its rising 10-EMA, a key sign of strength and respect for the trend.

• On Friday, we saw an initial breakout attempt, which could be the start of a momentum burst higher. If this continues today, keep an eye on RKLB for a strong move backed by high relative volume, particularly in the first 5-60 minutes of the session.

• One of the most compelling aspects of RKLB is its high average daily range (ADR) of 7.22%, giving it excellent potential for large intraday moves. As a midcap stock in the strongest capitalization-weighted group right now, coupled with its placement in the technology sector, RKLB is positioned at the top of the list for a breakout this session.

AAPL: Apple Inc

• Whenever a company like AAPL, with its massive institutional ownership, looks ready to break out of a multi-month base, it’s crucial to pay attention.

• AAPL had a strong move higher on Wednesday, which presented the initial intrarange breakout opportunity. Since then, it’s been holding steady above its 10-EMA, trending sideways with decreasing volume, tightening up beneath its overhead resistance level at $230. If AAPL breaks through that resistance on high relative volume, this sets up a full-sized entry opportunity.

• Given that AAPL has a relatively low average daily range (ADR) of 1.67%, making notable gains can take a while unless you're trading it with significant capital. This is why we prefer to buy AAPL using leveraged ETFs, which can amplify returns for larger accounts.

• However, if you miss the AAPL entry or have a smaller account, there are other setups with higher ADRs that might offer better returns relative to risk. In such cases, focusing on stocks with greater volatility can be more rewarding.