OVERVIEW
A Series Of Key Economic Releases

This week, both institutional and retail investors are intensely focused on getting a clearer view of the economy, especially after recent concerns about a potential slowdown in the job market led to significant market turbulence over the past two weeks.

On Tuesday, we'll be looking at the July producer price index (PPI) report. The PPI measures the average change over time in the selling prices received by domestic producers for their goods and services. Essentially, it tracks how much producers are charging for their products. If this data shows stable or decreasing inflation, it could help ease worries that the Federal Reserve might be losing control over inflation.

Then, on Wednesday, we’ll shift our attention to the consumer price index (CPI), which gauges the average change over time in the prices paid by consumers for goods and services. This helps us understand whether consumer prices are rising, falling, or staying steady.

Finally, we’ll get July’s retail sales numbers on Thursday. This data reveals how much consumers are spending at stores and online, which can give us insight into the health of the consumer sector and overall economic activity.

If the PPI and CPI data are positive, it should help calm fears about the Fed's handling of inflation and since traders have been very quick to jump to conclusions about the economy, this series of new data will determine if the recent market decline was truly justified.

The reality is that the recent market reaction was likely an overreaction, but we're not here to judge that. Our main focus as swing traders is to profit when stocks are rising and to protect our gains when they’re not.

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

Today is not the best time to take on new positions. We covered this in detail in yesterday’s Swingly Pro report, where we analyzed the current macroeconomic and sector trends. As of now, there’s no solid confirmation that the market will bounce back soon.

Given the recent selling pressure and the upcoming inflation data, adding new risk right now could be a recipe for disaster, especially when the market is this sensitive. It's better to be patient.

We know it’s been frustrating to stay in cash, but if you’ve followed our analysis, you should be enjoying solid gains from the recent bull run. Making money in a bull market is one thing; the real test is holding onto those profits through the ups and downs.

Nasdaq

From a strictly technical perspective, the QQQ is set to make a significant move this week. It could push up past its daily 10-EMA at $452 and potentially reach $460, where it might face resistance as it encounters its declining 20-EMA.

This optimistic scenario hinges largely on how the CPI and PPI data impact the market this week. Technically speaking, volume has been decreasing as the QQQ approaches a significant volume gap, as shown by the Visible Range Volume Profile (VRVP) on the chart. This profile indicates the volume at different price levels.

What dampens our confidence in this bullish scenario is the divergence between volume and price. The QQQ has been climbing on low volume, which typically suggests a technical bounce rather than a strong move driven by substantial buying pressure.

This situation often precedes a deeper decline in the stock or security, which is not going to bode well for a sharp recovery.

S&P Midcap 400

The midcaps are also poised for a significant move, but they appear even more fatigued after their recent low-volume relief rally. This rally has brought them up to their point of control (POC) at $534 and their declining daily 10-EMA, which has acted as resistance at the $536 level, with four prior touchpoints.

That said, there is still a bullish case to consider. The MDY (S&P MidCap 400 ETF) managed to find support intraday at its POC and drew in some stronger buying pressure heading into the close. It ended Friday’s session with a hammer candle, which could signal potential strength despite the current exhaustion.

Once again, the direction of the MDY will largely depend on the economic data released over the next two days. If the data is favorable, we could see several stocks starting to set up for gains, and this recent sell-off might come to an end.

We’ll go over a few set-ups we’ve been watching in a moment.

Russell 2000

The small caps' recent bounce seems to be fading. With volume drying up and the price starting to curl sideways after initially bouncing off the weekly 20-EMA and pushing past the IWM’s point of control (POC) at $201, it’s looking like the IWM might be on the verge of breaking down towards its POC. This setup suggests we could be seeing the early stages of a flag formation.

This flag, which may resemble a bear flag or pennant, typically signals a continuation of the downtrend, as the prevailing momentum and trend are negative. However, there are instances where such a flag pattern can lead to a W-bottom and a subsequent recovery.

DAILY FOCUS
Don’t Get Cute—Stay Safe and Be Patient

Right now, taking on new risks is particularly dangerous—not just because of the charts but mainly due to the upcoming economic data that billions of people are eagerly awaiting. The uncertainty is high, as good data can sometimes lead to a negative market reaction, while bad data might result in a positive one. This unpredictability makes buying exposure for such an event, especially during a global market downturn, a risky move.

The only reason to take this approach would be to chase profits and try to outsmart prevailing trends. From experience, trying to be too clever during these events can backfire.

Set-ups and uptrends will eventually come, and remember, the market trends upward about 67% of the time. Don’t let the fear of missing out push you into making hasty decisions. Patience and strategic planning will be more rewarding in the long run.

For today, the best move is to keep running your market scans and updating your watchlists. Ask yourself:

• Which stocks have held up the best during the sell-off?

• Which stocks are forming flags on the daily chart?

Add these to your watchlist and closely watch them for entries when the market’s turn up.

You can get more information, with our complete downloadable TradingView watchlist with detailed entry & exit criteria, market scans & indicators here.

WATCHLIST
Some Of Our Favourite RS Leaders

CVNA: Carvana Co.

• CVNA continues to build a solid base on its daily chart, with both price and volume showing signs of contraction.

• While we’re not planning to enter a position until after the economic data is released, CVNA will be a key stock to watch for a potential entry if the market reacts strongly to the data.

• We suspect the stock does need to go sideways for a lot longer before a viable entry is presented.

AEYE: AudioEye, Inc

• One of our top growth picks, AEYE, has been establishing a substantial multi-month base since its impressive rally earlier this year.

• With outstanding revenue growth, a high ADR percentage, and the formation of a strong Stage 1 base, AEYE stands out as an excellent growth stock to keep on your radar.

For more details on our holdings, including a comprehensive TradingView watchlist with detailed entry and exit criteria, market scans, and indicators, you can download it here.