OVERVIEW
A Big Week Of Earnings Reports

The past few weeks have been an exciting ride for the U.S. market. We’ve seen nearly two months of straight gains, with no red weeks in sight. Ever since the Fed hinted at the first interest rate change back in September, the market has been steadily climbing. Market breadth is expanding, with rallies across sectors, from energy stocks to AI-driven tech names.

But whether this momentum continues largely depends on corporate earnings. With over 100 S&P 500 companies reporting this week, it’s crunch time. So far, about 80% of third-quarter reports have beaten expectations, which is a strong sign.

Earnings season is always a crucial period for us as traders. It's the time to stay sharp, especially in the premarket when stocks that posted strong earnings start to move. You’ll often see the kind of volume that matches or exceeds the 30-day average in just the first hour, which can be a strong signal of a major turning point. If the earnings-based Episodic Pivot (EP) holds up, we typically see a bullish trend that can last around 30-40 days—offering a great low-risk buy opportunity if timed right.

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

Simply put, hold steady today. There’s no major economic event scheduled that should cause any significant volatility. In fact, the entire week looks quiet on the economic data front.

Take the day as it comes, and most importantly, avoid forcing trades—especially considering how the market has been running straight up for several months. Now, let’s quickly dive into the evaluation of the three major capitalization groups.

Nasdaq

The Nasdaq has been trending sideways since the big sell-off in major AI names. This drop was triggered by the Biden administration’s announcement about tightening export controls on AI-related components to countries like China. If you look at Nvidia, the largest AI name, almost half of its yearly revenue comes from China and Taiwan, with about one-third from China alone. Naturally, this news sent Nvidia down, which dragged the QQQ along with it.

Despite this, the QQQ held up at its 10-day EMA during Wednesday’s undercut—a promising sign, especially given how aggressively buyers stepped in to prevent a sharper sell-off. That’s a key indicator of strength.

Currently, the QQQ is in a sideways phase, forming a mini volatility contraction pattern (VCP) over the last 4-5 sessions. We’ll likely need to see more tightness before the descending resistance just below $500 is broken, allowing the QQQ to finally push firmly above the $500 level.

S&P Midcap 400

The midcaps are also in a mini volatility contraction (VCP) after a sharp rally that began on October 11th, when the MDY broke out of a larger base. Over the last three sessions, we’ve seen some selling just below the $585 level.

We’re in a tricky spot because while the uptrend is still intact and would take a lot to break, the volume has dropped off significantly. The 10-day EMA is quite far from the current price, which often signals that we might need to see a pause for the 10-EMA to catch up before the MDY can move higher again.

It wouldn’t be surprising to see a slow week for midcaps, possibly even a test of the rising 10-EMA before they continue their march upward.

Russell 2000

The small caps have been holding steady, finding support at the previous major resistance level of $225 (as shown in the red box on the chart). This level has previously pushed the IWM lower, so it’s crucial to see it hold now and for buyers to step in during intraday tests, which would indicate a significant change in character.

It's common to see some choppiness when former resistance levels get retested, but what's important here is that this change of character attracts buyers. When the market becomes comfortable with the IWM trading at this higher price, it signals that both buyers and sellers are content with the new level, allowing price discovery to continue upward.

DAILY FOCUS
A Bull Market Doesn’t Mean Trading Every Day

Right now, it looks like the market may be cooling off a bit. The QQQ is in a clear consolidation phase, and both small and midcaps have rallied hard in recent weeks. Naturally, as we inch closer to the upcoming Trump vs. Harris U.S. election, we might see some profit-taking as investors lock in gains.

We’re still firmly in a bull market, and the strength is evident not just at the individual stock level but across sectors. As we touched on in yesterday’s report, the broad-based rally shows that large institutions are feeling confident, even buying into high-risk assets like small-cap stocks, which is a bullish signal for equities overall.

Misunderstanding Bull Markets

One common misconception people have when they hear "bull market" is thinking everything is going to keep going up—that’s simply not true. Profitable trading doesn’t come from constantly entering the market. You only really get a handful of great buying opportunities a year, and these come in bursts. Sure, we might see some excellent earnings-based Episodic Pivots (EPs) this week, which could offer some great setups, but many of the best entries have already passed. A lot of stocks are either moving higher or starting to break down after consolidation.

Patience Over Trading Every Day

You don’t need to be in the market every day to succeed. The market moves in windows of opportunity, and the real challenge isn’t spotting them—it’s having the patience to wait for them. The urge to trade constantly is more about managing boredom than following any real strategy. Sitting out can be tough, but patience is a skill. It takes discipline to recognize that doing nothing is sometimes the most profitable move.

The hardest part of trading isn’t finding the next trade—it’s resisting the emotional pull to act when the odds aren’t in your favor. In the end, trading is a mental game. Success comes from aligning your actions with the market’s rhythm. Those who wait for the right moment, instead of forcing trades, are the ones who win in the long run.

WATCHLIST
Today’s Main Stock on Breakout Watch

MIRM: Mirum Pharmaceuticals, Inc.

• MIRM is a pharmaceutical stock, and its industry group has shown strong relative strength, especially compared to the broader healthcare sector, which has struggled recently.

• MIRM has been building a multi-month base since June 2024, with the stock moving sideways during this period. Recently, it has begun to tighten up along its 10, 20, and 50-day EMAs and is now testing a descending resistance level around $41.

• We’re watching MIRM closely to see if a high relative volume breakout can push it past this $41 level. If that happens, we'll be looking at the 5-minute Opening Range High (ORH) as confirmation for a half-sized entry. We’re going in with half-size due to the general market consolidation and the increased risk of a failed breakout.