OVERVIEW
Don’t Get Fooled

Yesterday's market didn't see the rally we were hoping for, even though the CPI data was positive and slightly better than expected. Consumer prices rose by 2.9% over the past year, down from a 3% increase in June, marking the smallest annual rise since March 2021. Month-to-month, prices edged up by 0.2%.

While the CPI report wasn't as encouraging as Tuesday's PPI, it matched expectations, so it’s unlikely to shake up the market much. The big question now is whether the Fed will cut rates by 25 or 50 basis points next month.

Even though there are growing concerns about economic growth, especially with recent hiccups in the labor market and a slight uptick in unemployment that spooked the market, we think the reaction is a bit overblown. It's more about a few weak data points than a real shift in the overall economic outlook.

If the data keeps pointing to a slowing economy over the next five weeks, the Fed might be more aggressive in cutting rates, which could be a big boost for the stock market.

On an individual stock level, we have seen breakouts start to work and follow through coming through in a number of growth stocks.

If you were part of Swingly Pro on Sunday, you would have seen how we caught these and seen exactly how we’ve positioned ourselves to trade them.

Nasdaq

The Nasdaq is currently in a short-term uptrend, maintaining its momentum and moving solidly above its daily 10 and 20-day EMAs (Exponential Moving Averages).

We had anticipated more buying interest in the QQQ following yesterday's CPI report, expecting a strong trading day with high volume that could push large-cap stocks above the 50-day EMA. This level is a key resistance zone, as shown by the visible range volume profile (VRVP).

Despite not reaching that target, yesterday’s session still ended on a positive note. The day closed with a hammer candle, indicating that buyers stepped in when the price touched the daily 20-EMA, pushing it back up and closing near the top of the intraday range.

S&P Midcap 400

Midcaps have managed to stay above their daily 10-EMA but faced challenges pushing through the more significant 20 and 50-day EMAs, leaving the MDY stuck between these levels.

From a strictly technical standpoint, we might see some sideways action as the MDY tries to gather the strength to break above the 50-EMA. However, with the CPI data suggesting imminent rate cuts and the recent market sell-off appearing increasingly like an overreaction, we are optimistic that a breakout higher is more likely.

The visible range volume profile (VRVP) shows minimal trading volume above the $544 level, so if the price breaks through this, we could see a sharp and volatile move up to $557 within the next week.

Russell 2000

Small caps have been hit hardest. Yesterday was particularly challenging, with a clear rejection at the declining 10-EMA causing the IWM to fall back to the $205 resistance level it had broken through after Tuesday’s strong PPI report.

The Russell 2000 is known for its volatility, so this reaction isn't entirely surprising. However, we did expect the 10-EMA to be reclaimed yesterday, which is not a promising sign.

Today will be crucial. We’ll see if the pullback to the previous resistance level, which has now become support, will help push the IWM higher to fill the gap above. Alternatively, if the IWM breaks below this level, it could form a bear flag pattern.

DAILY FOCUS
Consider Dipping Your Toes In

Right now, we might not be in the strongest uptrend or the most favorable market climate, but the best breakouts and entry opportunities typically come at the start of a recovery from a correction, not after three months into one.

We’ve seen several successful breakouts and key pivots recently, including stocks like CVNA, PSNL, CLOV, RKT, and SEZL, which we’ve highlighted in our Swingly Pro report.

From a technical standpoint, it’s favorable to start introducing some risk with setups on high-quality growth stocks that have shown the greatest relative strength. However, we might be early, and there’s a possibility of a reversal. This is why we’ve maintained a moderate risk approach. Despite this, we remain optimistic that the market is poised to push higher and that this correction may very well be coming to an end.

Today, we will be seeing whether the stocks we outline below in our watchlist form breakouts higher and whether our current open positions can see follow through.

WATCHLIST
Watch These Today

REAX: The Real Brokerage

• REAX continues to hold its multi-week flag pattern, with its trading range tightening as volatility contracts.

• The stock boasts strong fundamentals and has a high Average Daily Range (ADR%), which has historically led to sharp rallies of over 100% when it breaks through its range.

• We’ll be closely watching to see if the $6 level gets broken on high volume, which could signal a significant move.

EVGO: EVgo Inc

• EVGO is another fast-moving small cap with impressive revenue growth, showing over 194% annual sales growth compared to last year. The daily chart is setting up nicely from a technical perspective.

• Since mid-July, both volatility and price have been contracting, which typically indicates that the stock might be gearing up for a significant move, ideally to the upside.

• That declning level of resistance at around $3.80 will need to be broken through on high volume for us to look for a long entry.

it goes without saying that we will only be looking for entries if the market also continues to trend higher and these stocks breakout. It is a tricky period right now as false breakouts are more likely and this is why we also use the first 5 min candle which takes out the 5 min opening range high whenever we do look for entries