OVERVIEW
We Actually Want Bad Payroll Data

First, let’s address any stress you might be feeling from yesterday’s market drop. Remember, the market had been rising steadily for 10 days straight after its initial recovery. It’s perfectly normal to experience a pullback after such a strong upward trend. These retracements are a healthy part of the market cycle, so try not to worry too much.

Secondly, today’s pullback is partly influenced by the effects of Friday’s meeting and the Nonfarm Payrolls report we’re watching closely today.

Here’s a bit more on the Nonfarm Payrolls (NFP) report: It’s a key economic update released every month that shows how many new jobs were created in the U.S., excluding jobs in farming, government, and a few other sectors. This report is important because it provides a snapshot of the job market and can give us clues about the overall economy.

The NFP report often moves the market because it affects expectations about future economic growth and interest rates. If the report shows stronger job growth than expected, it indicates a robust labor market and suggests the economy is heading in the right direction.

However, remember the recent job report from a few weeks ago, which caused a market sell-off due to fears that prolonged tight monetary policy was hurting economic growth? Today’s report might trend similarly, with Goldman Sachs predicting a potential reduction of up to a million jobs from previous payroll growth estimates. This could prompt the Fed to consider lowering interest rates.

While a rate cut might be positive by making borrowing cheaper, it also signals that people are struggling to find work. It’s important to remember that the reports we analyze and the decisions we make as traders have real-world impacts on people's lives.

Nasdaq

Yesterday, the QQQ had a strong session, even though we ended up in the red. We hit the expected resistance at $481 (the Point of Control or POC) and saw some false breakouts, which might have caused small losses in your trades.

Volume picked up compared to the day before, but instead of a large red candle, we got a red doji candle. This isn’t a strong signal by itself, but it shows that while sellers took profits at the POC resistance level, there was still enough buying interest to keep the price from dropping further.

Today’s direction for the QQQ is hard to predict since doji candles often suggest indecision and possible trend changes. We might see the QQQ move sideways for a day or two before ultimately breaking above the POC and aiming for $500 next week which seems inevitable.

S&P Midcap 400

Yesterday, the midcaps were strongly rejected at the key resistance level of $556, causing the MDY to drop back below Monday’s lows to $549.

The low volume during this drop suggests that what we’re seeing is mainly profit-taking rather than the start of a major downtrend. It looks like the MDY just needed to pull back after an extended rise.

We expect the MDY to trade sideways for a while to let the 10-day exponential moving average (EMA) catch up. After this consolidation period, it should have the opportunity to move higher and potentially test $570 next week.

Russell 2000

The small caps had their own rejection yesterday, following a similar pattern to the midcaps, but with higher volume.

The Russell 2000 is still trending above its 10-day EMA and looks healthier than the midcaps. It doesn’t have much distance before it hits the daily 10 or 20 EMAs, which could attract a lot of buying interest as traders look to capitalize on the pullback.

We expect a few days of sideways movement, which is actually a good sign. This pause will give time for some stocks that have recently broken out to set up new, low-risk opportunities. As we approach the end of the week, this could help us add to our winning positions in the portfolio.

DAILY FOCUS
Down Days Happen, Breakouts Fail- It’s Ok

It’s easy to get complacent when the market is rallying and assume that every day will be a straight-up ride. But in reality, the market moves in bursts of momentum, often lasting a few days before it needs to consolidate and trend sideways. This is completely normal and just part of how the market behaves.

If you get stopped out of any positions you took recently, whether last week or yesterday, take a moment to review whether you followed your entry criteria correctly:

• Was your trade idea clear and logical on the daily chart?

• Does the stock still look promising, and is it setting up for another move?

• Did you risk the right amount, and was your stop loss appropriately placed?

If you can answer "yes" to these questions, there’s no need to worry. A small loss of 0.5-1R is normal and just a part of trading expenses.

For today, avoid jumping into trades before the payroll data is released, as this could create some volatility. There are many setups to consider, so let’s not rush and risk eroding the profits from our winning positions.

Remember, the stock should give you a reason to trade it, not the other way around. Be very selective and patient.

Stock To Watch
This Will Explode Soon

SERV: Serve Robotics Inc.

• SERV is shaping up to be an incredible opportunity right now. With a 28% Average Daily Range (ADR), this stock has a history of impressive moves. On its last big run, SERV surged by +920% in just a few weeks.

• This is the kind of stock that top swing traders, like Kristjan Kullamaggie, have used to rapidly grow their accounts. With solid fundamental growth, outstanding relative momentum, and a perfect daily flag pattern, SERV is one of our top picks right now.

• We’re keeping a close eye on SERV to see if it can break through $12.75. If it does, we’ll be looking to take a long position.