OVERVIEW
A Solid Expansion To The Upside

Yesterday was quite a dynamic day for the markets! Initially, we saw a significant boost as China announced its largest stimulus package since the pandemic. This news sent U.S. stocks tied to Chinese e-commerce soaring, with companies like BABA, ZK, and NIO experiencing strong rallies in the opening hour.

However, the excitement was short-lived. The market took a sharp turn into negative territory following the release of the Consumer Confidence Index, which came in at 98.7 for September—well below the 105.6 from August and the 104 that analysts had anticipated. This lower-than-expected reading raised concerns about consumer sentiment, leading to what appeared to be a breakdown in the hourly charts of major indices.

Despite this initial dip, the market quickly recovered, and this rebound is particularly noteworthy.

Let’s unpack the implications of China's stimulus package. The Chinese central bank is taking decisive steps to address deflationary pressures and support its growth targets through increased funding and interest rate cuts. This is a critical move aimed at restoring confidence in China’s economy, which has been grappling with disappointing data in recent months.

The relationship between this stimulus and U.S. stocks is significant. As the world’s largest consumer of metals, China's economic actions directly impact commodity markets. For example, increased demand from China can drive up prices for iron ore and copper, benefiting U.S. companies in these sectors. Higher commodity prices can enhance profit margins for manufacturers and energy producers, creating a positive ripple effect across the stock market.

Moreover, the fact that both the U.S. and China—the two largest economies—are focused on growth is bullish for the global equities market. When these economic powerhouses invest in their growth, it typically enhances global trade, boosts investor confidence, and supports stock price increases worldwide. The interconnectedness of our economies means that efforts to stimulate growth in one can significantly benefit the other, creating a favorable environment for global investment.

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

Nothing has changed in our outlook. We saw several impressive breakouts yesterday, with standout performances from stocks like Nvidia and NIO, among others. Right now, it’s still a fantastic time to be long and to seek out as much exposure as possible.

While we do have important events coming up, including a Federal Reserve speech tomorrow and the GDP Growth Rate QoQ report, the Fed’s recent cut is behind us. It’s clear how the Fed intends to act moving forward, so there’s no need to be overly defensive at this point- stay focused on the opportunities ahead.

Nasdaq

The Nasdaq has seen several stocks it tracks break out recently, even as it continues to trade sideways for the fourth session in a row between its rising 10-EMA at $477 and the $485 supply zone. This $485 level has acted as resistance multiple times, indicating that we need a significant influx of buying pressure to break through.

Here’s the good news: we genuinely believe it’s going to happen this week. With so many stocks moving higher and breakouts showing strong follow-through, coupled with favorable macroeconomic indicators, there’s little reason to bet against a major rally.

While volume has been low recently, the long tails on recent attempts to approach the daily 10-EMA or the Point of Control (POC) level at $475 suggest strong demand at that point. This indicates that buyers are eager to step in, reinforcing the potential for a breakout which only adds to the confidence we’re gain from individual stocks in the Nasdaq that are rallying as we speak.

S&P Midcap 400

The midcaps are currently in a very low-volume holding pattern within a dense supply zone and the Point of Control (POC) at $569. You can clearly see the low volume from yesterday, especially after a surge of green volume on Monday, which helped prop up the MDY during its attempt to retrace down to the rising daily 10-EMA.

We view this as a major contraction in volatility, similar to what we’re observing with the QQQ. We believe there’s a significantly higher probability of rising prices in the upcoming week, leading to a major rally rather than a downturn.

The number of stocks pushing higher, combined with the growing optimism surrounding a low-rate environment and the high efficacy of breakouts, cannot be ignored. This sets the stage for potential gains in the midcap sector as we move forward.

We are particularly bullish on small and midcaps, as we've discussed several times. These stocks have the potential to rally by several hundreds of percent, especially given their ability to achieve triple-digit earnings and revenue growth.

In a low-rate environment—something we haven’t experienced in four years—small and midcap companies stand to benefit the most. Their agility allows them to capitalize on new opportunities more effectively than their larger counterparts, making them well-positioned for substantial gains as market conditions improve.

Russell 2000

The small caps experienced a significant bounce yesterday as they attempted to break down below their Point of Control (POC) at $220. Demand stepped in, pushing the IWM up and above that supply-demand zone, effectively preventing a close near the daily 10-EMA or POC.

This marks a very bullish day, and the resulting candlestick is particularly encouraging. A steep intraday push higher, resulting in a red hammer candle after a sell-off, typically signifies a reversal in trend. This action suggests that buyers are gaining strength and could lead to further upward momentum in the small cap sector.

While the volume was low, the positive price action yesterday is shaping up for a big green candle by the end of the week. If this momentum continues, we could see a strong rally in small caps, reaffirming our bullish outlook for this segment of the market.

DAILY FOCUS
Go With The Flow: Trust Your Analysis

As we step into today’s trading session, the prevailing trends are unmistakably positive, signaling a prime opportunity for aggressive long exposure. With small and midcaps showing renewed strength, now is the time to capitalize on this momentum. We’re not just passively watching; we’re actively looking to add to our existing positions and seize every high-potential opportunity that comes our way.

In this environment, it’s crucial to trust your analysis and instincts. Fear can be a significant barrier to success, but remember: every successful trader has faced uncertainty. Embrace the knowledge and research you’ve put in—this is your foundation. When you identify quality setups, don’t hold back. The market is rewarding those who are willing to take calculated risks.

Entering into high-volume breakouts can be intimidating, but with effective risk management, you can navigate these waters with confidence. Before you enter a trade, ensure you’ve conducted thorough analysis, know how much you’re willing to invest, and establish your entry and exit levels.

Stay motivated and focused. This is your moment to shine. Trust in your abilities, seize the opportunities, and let’s make the most of this rally. You only need one bullmarket to completely change your account size and your success as a trader.

WATCHLIST
Great Looking Stocks In Leading Themes

MARA: MARA Holdings, Inc.

• MARA is a stock that’s currently on our radar as it builds a series of higher lows and contracts just below its declining 50-EMA. While we typically look for stocks that are rallying with a contraction, MARA may have established a near-term bottom.

• With Bitcoin experiencing significant moves and a surge in positive sentiment, cryptocurrency stocks are gaining traction.

• We’ll be closely monitoring MARA for relative volume as it approaches the 50-EMA. A breakout above this level, supported by strong volume, could signal a bullish shift and present a solid trading opportunity on the 5 minute opening range high.

ARM: ARM Holdings plc.

• ARM is a semiconductor stock we already have a small position in, and it’s showing promising signs as it builds a series of higher lows while riding its rising daily 10-EMA. With volume contracting and the stock approaching a key breakout level around $145, the setup looks increasingly favorable.

• Recently, we’ve witnessed several semiconductor names, including AAOI, NVDA, TSM, and AMSC, make significant moves and break out. Given the current momentum in the semiconductor sector, there’s every reason to believe ARM could be next in line for a breakout.

• The stock has incredible earnings and revenue growth which is the cherry on top of the good looking technical make-up.