OVERVIEW
Patience Pays, Hope Disappoints

The market is in a bit of a frenzy right now after taking a sharp downturn earlier this week due to the escalating Israel-Iran conflict. This situation pushed oil prices up, which in turn caused energy stocks to start outperforming. On top of that, the market is gearing up for a pretty significant report tomorrow. Investors are anxiously awaiting the September jobs report, especially after we saw an unexpected increase in private payrolls, alongside hints that the labor market might be cooling off.

The big question everyone’s asking is whether the jobs data will confirm this gradual cooling trend or reveal deeper issues within the economy. We’re in a situation where a cooling labor market is actually anticipated and the market has priced this in. The Fed's goal has always been to slow down the economy just enough to bring inflation under control, and a softer job market is a part of that plan. So, if the jobs data shows a slight slowdown, the market won’t be too surprised—it's what many are expecting.

However, the recent unexpected jump in private payrolls throws a bit of a curveball. This increase could mean that the labor market isn’t cooling as smoothly or steadily as the Fed hoped. If businesses are still hiring at a strong pace, it might suggest that inflationary pressures are still lingering. That complicates things for the Fed because it could mean they have to keep rates higher for longer but mainly because it will scare the market in to thinking the Fed is not in control of the situation and could spread panic.

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

All of this makes Friday’s jobs report especially important, as it could either calm investors' nerves or signal that more economic turbulence is on the way. However, as swing traders, we don’t focus too heavily on the underlying message or the economic story itself. We’re trend traders, and our primary focus is on how the market reacts to the data, not what the data means in the broader economic context.

Our job is to trade based on price action and trends. Whether the report shows strength or weakness, we’ll respond to the momentum that follows. It's less about predicting what the numbers will say and more about being ready to act when the market makes its move. That’s where we thrive as traders—navigating the market’s response, not its reasoning.

This is where thematic analysis comes in and becomes one of the most powerful tools in your trading toolbox. It’s all about identifying the key themes driving the market and positioning yourself accordingly. When running your market scans, this type of analysis helps you determine exactly where to put your exposure based on market leadership.

Ask yourself:

• Which are the leading sectors or sub-market groups? For example, in times of rising oil prices, energy stocks tend to lead. But are there other sectors showing strength despite broader market weakness?

• Which stocks within those sectors have the highest relative strength? Even in choppy markets, some stocks manage to outperform. These are often the early movers or leaders that tend to perform well once the broader market begins trending again.

• Is there a clear theme driving the market? Whether it's rising interest rates, inflation, or geopolitical events, understanding these themes helps you zero in on the right sectors to focus on.

By answering these questions, you can systematically narrow down your watchlist to stocks and sectors that are most likely to thrive when the market turns. This helps you stay ahead of the curve and focus on areas with the best potential for strong, profitable trends.

Nasdaq

The Nasdaq has been on a downward trend since its gap-up fade on September 26th, which was the first sign that trouble might be brewing. On Tuesday, we saw a high-volume selloff that not only broke below the rising daily 20-EMA but also lost the point of control (POC) at $482. That level has now flipped into resistance, stopping the QQQ’s attempt to reclaim it yesterday.

What we need to see now is some sideways action to stabilize things. If the 20-EMA continues to fail as support, it’s likely the QQQ will test the rising 50-EMA. In a multi-week pullback, it’s this level of support that could ultimately stop the decline and help bring the market out of its downturn.

The Nasdaq, heavily driven by large-cap tech stocks like NVDA, AAPL, GOOGL, and META, will largely follow the movement of these key names. Right now, however, we’re seeing signs of weakness. NVDA has retraced its breakout and is chopping sideways, while AAPL is in a similar pattern. Since these two stocks are among the biggest market movers, and they belong to the tech sector, the QQQ is unlikely to make any significant moves higher until we see some serious buying pressure return to these names.

S&P Midcap 400

The midcaps are facing their own battle, stuck in a distributive phase. We've seen the point of control (POC) and the 10-EMA slip, and those areas that once acted as support are now acting as resistance—this shift is a classic sign of a market transitioning away from an uptrend. The volume tells an important story too: on the relief attempt, we saw low relative volume, while the prior session’s sell-off came on high volume, highlighting the selling pressure.

At this point, it’s clear that unless the MDY can break above the POC at $568 on strong volume, it's going to continue to struggle. The best-case scenario here is that the midcaps consolidate a bit longer, allowing the 20-EMA to hold as support. If this happens, it could be a bullish signal that would indicate some underlying strength in the midcaps.

Russell 2000

The small caps are currently showing the most weakness in the market, having not only lost their daily 10 and 20 EMAs but also the point of control (POC) level at $222. The IWM is now making a move towards its rising daily 50-EMA at $215, which is a critical support level.

One concerning factor is the decreasing volume as prices continue to drop; this typically indicates a lack of buying interest, which isn’t a good sign. If the 10 and 20 EMAs continue to act as resistance—as they are right now—and the 50-EMA fails to hold, we could be facing a challenging decline down to around $212. There’s even a possibility of testing the rising 200-EMA if the selling pressure persists. It’s essential to keep an eye on these levels to gauge where the market might head next.

DAILY FOCUS
Keep Running Your Scans: Stay Active

The reality is that the current trend in the broad market isn't characterized by growth and optimism; instead, it’s marked by uncertainty. The volatility index (VIX) has climbed back above its rising 50-EMA, as well as its 10 and 20 EMAs, which isn’t a promising sign for equities. We're facing a number of uncertain events ahead—not only the ongoing Iran-Israel situation but also upcoming elections. Plus, we have to consider that the market had been on a hot streak for over a month, so it's entirely reasonable to expect some pullback after such an extended uptrend.

In this environment, it’s a stock picker's market. If you're methodical about choosing the right sectors and themes to trade, you can still find solid opportunities. However, if you're not diligent in your thematic analysis, you might find yourself struggling.

We remain extremely cautious about where we look for exposure, and we always make sure to trade in alignment with the leading market themes. Right now, our focus is clear: we have several promising setups emerging within the leading themes we've identified. We continue to run our daily market scans meticulously, keeping an updated list of stocks with the highest relative strength. As we always say, the stocks that hold up the best when everything else is selling off are the ones that will help us navigate a pullback and lead the way when the market rallies again.

WATCHLIST
The Ones Outperforming

SOC: Sable Offshore Corp.

• SOC is one of the standout names in the current leading theme of oil, and it's developing a setup that's hard to ignore. This is a high Average Daily Range (ADR) stock with strong relative strength (RS), meaning it has the potential to break out and follow through if market conditions align.

• Today, we’ll be closely monitoring whether SOC can break above the $25 level. It tried to do this yesterday but fell short. If we see a breakout accompanied by high relative volume, we’ll consider taking a long position. However, given the overall weakness in the market, we’ll likely enter with half-sized risk. This way, we can reassess and increase our position size if the stock continues to show strong momentum after the breakout.

CLMT: Calumet, Inc

• CLMT is another strong candidate in the oil theme, showcasing an even more appealing setup. It’s been building a multi-week base while holding its rising 10 and 20-day Exponential Moving Averages (EMAs), and the price has been contracting as it moves sideways. This price action, combined with diminishing volume, suggests a potential breakout could be on the horizon.

• We're looking to target a long position if CLMT breaks above $18 on high relative volume. Given the attractive flag pattern and the fact that this stock is part of a leading sector, we feel confident initiating this position, albeit with half-sized risk. This approach allows us to take advantage of the bullish setup while still managing our exposure in a somewhat uncertain market environment.

In Swingly Circle, we always share our complete focus list along with a daily breakdown of market internals, including:

• Overall market breadth

• Leading sectors and themes

• Key stocks to watch

• Daily report card

If you’d like to access this information, plus join our two weekly seminars, dive into the swing trading school, and get a more detailed weekend report, just click here!