Regime Check — Where Are We Now?
Regime is holding bullish on the surface but breadth is thinning fast — short-term participation contracted sharply into the afternoon.
- Breadth contracting: % Above 20 SMA collapsed from 126% to 83% (-43pp), while % Above 40 SMA held nearly flat at 60.52% vs 60.66%. Fast money is coming off, structural trend intact.
- Sector rotation: Communication Services (RSPC) leads at +1.47, 100th percentile and rising; Health Care (RSPH) cooled to 2.10 from 3.17, and Financials (RSPF) bounced to 1.44. Utilities (RSPU) still red at -0.81.
- Character: A choppy, narrowing session — Sentiment 4% still Bullish (212 bull / 110 bear 4%) but the 20-SMA flush signals a consolidation, not a breakout day.
Strategy Signals — Continuation, Reversal & SIP
- Strongest continuation (2LYNCH): MDB at $466.08, up 6.5% on RVOL 1.2 — the only continuation name with above-1 relative volume and INST tag. Software theme confirmed by ADBE +3.8% and NOW +3.5%.
- Strongest reversal setup: NBIZ at $5.58, +5.1% on RVOL 4.8, and PSBD at $10.45 with RVOL 5.3 — heavy volume reversals, but small caps; watch SKYH -6.0% as a failed one.
- SIP leaders: USIO $2.38 popped +6.7% from open on raised FY26 guidance (RVOL 12.79); ISSC and KURA holding green post-earnings. Fading: APP $303.76 (-4.77% from open, PT lowered) and SCOR $7.18 on a guidance miss.
- Most relevant code — PLASTICS (Sector Winners): Software/Comm Services leadership plus MDB‘s volume breakout favor riding sector winners over chasing broad beta.
Closing Playbook — What To Do Now
- Close/trim: Exit weak reactions into the bell — APP (-4.77% from open, PT cut) and SCOR (weak guidance) show no buyers; don’t hold hoping for a bounce.
- Enter on confirmation: MDB above $466 with volume is the cleanest CRT continuation; use a tight stop given 110.8% risk reading. USIO only on a hold above open on that guidance raise.
- Key level: SPY data is unavailable today — do not trade off an assumed index level. Let the breadth tell the story: a further drop below the 60% mark on the 40 SMA would flip caution to defense.
Tomorrow’s Early Look
- Catalyst watch: Digest the wave of small-cap earnings reactions (USIO, ISSC, KURA up; SCOR, OTLK down) and any follow-through in software leaders ADBE, NOW, MDB.
- Setup forming: MDB is the T3A name — a hold above today’s $466 zone sets a continuation base into tomorrow; GWRE ($179.25, +3.6%) is a secondary software watch.
- Regime outlook: The 43-point drop in the 20 SMA warns of near-term consolidation. Stay selective, respect stops, and lean on sector winners rather than broad exposure until breadth re-expands.