OVERVIEW
Surprising Strength in the US Economy

Yesterday’s session started off on a rough note. All the major indices opened strong but quickly reversed course, selling off intraday and testing key support levels. We saw multiple breakouts fail, sharp reversals across the board, and what initially felt like a potential major turning point for the worse as we head into Q4 and October.

In his prepared speech on Monday, Fed Chair Jerome Powell stated that the Federal Reserve intends to keep lowering interest rates, though he didn’t provide a set timeline. He indicated there’s no immediate urgency, as the market is still “adjusting.” Despite Powell's reassurances that the economy is "in good shape," the markets reacted negatively, with all three major U.S. indices dropping both before and shortly after his remarks.

At that point, it felt like the market might finally be topping out, with Powell’s comments serving as the catalyst we were expecting during this consolidation/distribution phase we’ve seen over the past week. It seemed like the market was bracing for a potentially large downside move.

But just when things looked gloomy, the last half-hour of trading flipped the script entirely. We saw a massive wave of buying pressure sweep across the market, driving all the major indices firmly into the green and pushing everything higher. What started as a discouraging session ended with a surprising surge, reminding us once again how quickly things can turn around in the market.

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

The surge in demand late in yesterday’s session isn’t enough to convince us to fully embrace risk just yet. Even though the indices are still in an uptrend and market breadth remains solid, our daily scans are showing a significant number of breakdowns. While that’s normal and expected during a healthy uptrend, as some stocks rotate out and experience profit-taking, we need more evidence of buying pressure to push the broader market out of this choppy sideways action.

Another big catalyst to watch today is the Job Openings data. This report has become pretty important since the focus has shifted away from inflation, especially with interest rates being cut. Now, the real concern is how the labor market is holding up, and that could impact the market’s direction in the near term.

Job openings data is a report that shows how many jobs are available but haven't been filled yet. It’s a snapshot of how many companies are looking for workers. When the number of job openings is high, it usually means businesses are growing and need more help, which can be a good sign for the economy.

Nasdaq

The Nasdaq saw a nice bounce yesterday, as we mentioned earlier, thanks to the support from its rising daily 10-EMA and the point of control (POC). Plus, the move came on high volume, which is definitely a positive sign.

It's completely normal to experience consolidation and some choppiness or distribution after a strong uptrend. In fact, this kind of pullback is healthy, as it allows setups to form in the stocks that make up the QQQ.

We’re also seeing major players like META, AAPL, and GOOG breaking out, which is crucial for pushing the Nasdaq higher. If we’re looking for a breakout, whether today or later this week in the QQQ, it’s essential that these breakouts hold and gain momentum.

S&P Midcap 400

The midcaps have been consolidating for eight sessions now, ever since the announcement of the first interest rate cut. So far, they’ve been showing healthy signs. They’ve found support at the rising 10-EMA and have been trading sideways around their point of control (POC) level, with no major rejections or signs of a breakdown from the 10-EMA.

This is a significant development that has unfolded, especially since yesterday afternoon's surge in demand. In fact, during intraday trading, it looked like the MDY was on the verge of breaking down as it dipped slightly below the 10-EMA. However, it’s encouraging to see that the overall trend remains intact.

Russell 2000

The small caps are also in a consolidation phase, showing a series of higher lows as they maintain their position above the daily 10-EMA. They are now wedged between this support and their point of control (POC) overhead at $222. This level aligns perfectly with the resistance the Russell 2000 needs to break above for the next leg up to begin.

DAILY FOCUS
Go with the Trend, But Stay Cautious…

We’re at a point right now where it’s wise to start accumulating shares if good opportunities begin to present themselves. During consolidation phases like the one we're currently experiencing, it's essential to buy positions in the stocks that will lead us out of this choppy sideways market. These are the leading stocks. Often, buying when we’re already halfway into a Stage 2 uptrend can be too late for taking on naked long exposure.

That said, we will only be putting on half-sized risk until we see greater confirmation in the form of a clear trend in the leading themes and stocks. Without a defined trend in these market leaders, it can be tough to navigate these conditions. We did make some decent profits in crypto stocks like MSTR, but that trend lasted only about 3-4 days, which is unusually short. The same goes for the recent rally in China stocks, which also surged but has now reached a level of overextension in a very brief period.

This lack of trend can be detrimental for traders who accumulate too many positions without solid direction. It might be better to wait for quality breakouts to materialize before jumping in. When you do see those breakouts, pyramiding into those positions is a smart strategy.

WATCHLIST
Focus On These On A Strong Reaction

GOOG: Alphabet Inc

• GOOG had a notable move yesterday, but it still remained within the range established on Friday, unable to push above that resistance. However, we’re seeing a significant gap up in premarket trading, suggesting that GOOG wants to lead the technology stocks higher.

• This is an intriguing development because tech has been lagging behind recently. A rally and sustained breakout in GOOG would signal that the tech sector is making a comeback.

• We’ll be looking to make a half-sized entry in GOOG through a 3x leveraged ETF if we see a breakout above the 5-minute opening range high (ORH) after the stock opens with a gap up.

TEM: Tempus AI, Inc.

• TEM is another tech/AI stock that has been trending sideways, and as a recent IPO, it holds a lot of upside potential. Initially, we were hesitant when we saw yesterday's upward move, which seemed like it might be breaking out, but it ultimately failed to close above the overhead range.

• We’ll be keeping a close eye on TEM today. If it can break above the overhead resistance on high relative volume, we’ll look for an entry.

• Much like Google, if TEM breaks out and holds that level, it could become a leader in what might be the start of a tech rally. Given how the QQQ bounced yesterday off its 10-EMA, it’s clear there’s some demand in the market.