PRIOR DAY ANALYSIS
A Change In Direction?

We’re not convinced

In yesterday's session, we observed the NASDAQ forming an inside day green doji candle, marking the first positive day in almost a week. This may have misled some traders into thinking it signifies the end of the pullback, but we remain skeptical.

Red volume has consistently outweighed green volume since the NASDAQ began deteriorating from its stage 3 top earlier this month, with yesterday's session recording almost half the volume of the prior sessions.

On the QQQ weekly chart, we note that the QQQ found support without testing any significant key support levels. Additionally, the key daily EMAs are distant, and the weekly 20-EMA acted as resistance during today's attempt to surpass $421.

While we acknowledge that large caps appear oversold and could experience a low-volume relief bounce, we caution against interpreting this as the end of the downturn.

There's still potential for further downside until we reach substantial support levels. We're closely monitoring the daily 200-EMA at $399, and if breached, the next significant support lies at the weekly 50-EMA around $393.

Russell 2000

The small caps are showing signs of stability as they find support on their ascending daily 200-EMA. They've also made strides by testing their declining daily 10-EMA, reclaiming lost ground from the past four trading sessions.

The IWM is currently holding its rising weekly 50-EMA at $191, a level we identified several days ago as a likely bounce point.

We suspect to see sideways action this week likely forming a bear flag to mark, what we hope, will be the final leg lower.

Cash is still a position

Despite these positive developments, volume remains low, suggesting there's ample room for improvement in the small caps. Consequently, we advocate exercising caution and refraining from initiating any long or short positions at the current level, given the heightened volatility and increased uncertainty in the market.

It's essential to recognise that attempting to time the exact bottom or bounce will likely be destructive. Instead of fighting the market's momentum, it's wiser to navigate with prudence and foresight.

By exercising caution and focusing on waiting for the market to settle down and begin it’s next leg higher, traders can better weather the uncertainties of the market and avoid unnecessary losses.

Timing the market precisely is challenging, and it's often more beneficial to prioritise preserving capital over chasing elusive opportunities.

LOOKING AHEAD
Preparation Is Opportunity

Today presents an opportune moment for us to engage in thorough investigation, aiming to discern whether the current market conditions will usher in a relief rally or if we're merely witnessing a deceptive bull trap preceding another downward move.

As seasoned traders, we remain agile and prepared to capitalize on whichever scenario unfolds. Flexibility and adaptability are key attributes in navigating the dynamic landscape of the financial markets.

It's crucial to emphasise a fundamental principle often overlooked by amateur traders: the significance of maintaining liquidity and avoiding constant exposure. We've previously delved into the intricacies of market asymmetries, with a central tenet being the non-linear relationship between time invested and trading productivity.

To truly excel in the realm of trading, it's imperative to dispel the misconception that inputs directly correlate with outputs. Understanding and embracing the inherent non-linearity in trading dynamics is pivotal for achieving sustained profitability. This understanding empowers us to navigate the market's fluctuations more effectively, positioning ourselves for success regardless of prevailing conditions.

By conserving capital and refraining from engaging in uncertain, low-probability trades during challenging market conditions, we not only preserve our rhythm within the market but also accumulate the firepower necessary to significantly amplify our returns when opportune moments arise. This disciplined approach ensures that we're well-equipped to capitalize on favorable market movements, maximising our potential for success while mitigating unnecessary risks.

FOCUS LIST
Our Relative Strength Leaders

GCT: GigaCloud Technology Inc

• GCT is still showing remarkable strength as it continues to defend it’s multi-week support base, consistently maintaining its stance above critical moving averages.

• Backed by impressive revenue and EPS growth in recent years and

  Its compelling performance positions it as a strong contender for potential inclusion in the upcoming bullish market cycle.

DAVE: Dave Inc

• DAVE continues to look strong with it even breaking out today above a several week descending range.

• We didn’t take a position today given the overall climate however this highly volatile growth name is one we will likely be looking to accumulate in the coming bull run.

ADCT: ADC Therapeutics SA

• ADCT forming what now is a 3-month base with higher lows and volume contracting.

• Again, this stock’s fundamental story may lack slightly and deviates from our usual focus on revenue growth, however, given the sector and the incredible recent performance we are making an exception.