Cracks appearing in the rally? Unpacking the good & bad of this market.

Bitcoin finally launched this week! (long)

Key take-away: Pay very close attention to your focus list. When setups break the wrong way — caution.

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A strong week in the markets saw all three major indexes continue to ride their rising 5-day SMAs— but my guard is up here.

Why? Because indexes are clearly masking some destructive action under the hood. Just look at cyber stocks.

The big story?

Bitcoin’s massive weekly base breakout—and yes, I still believe it's one of the best ideas in the market right now.

We were positioned long weeks before the move, and now we’re seeing it start to pay off. The early entry helps avoid volatility around major pivots.

* Real-time entries are always shared in The Trading Room, along with great community discussion

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Despite the strength in the indices, under the surface things have been tricky. It’s been a week full of landmines—failed breakouts, fakeouts around key pivot levels, and sharp intraday volatility. 

That’s why we’ve kept our trading activity deliberately quiet.

I continue to believe that until the market pulls back and digests, it’s going to be much harder to generate meaningful alpha.

A quick scan of the watchlist shows just how choppy and deceptive this tape has been.

You can either respect the environment, or fight it—and bleed slowly.

Having the discipline to wait for the right conditions is what separates professionals from amateurs in this game.

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Tonight, I’ll be breaking down:

• The good, bad, ugly of this market

• What sectors are shining? Breaking down?

• Actionable ideas to watch if we see strength

• Portfolio review / Index review with levels

• Market Breadth, internals

• Refreshed watchlist

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QQQ

QQQ largely digested this week but continues to act very well.

We are seeing it extended, and I believe that is certainly one of the culprits in the highly volatile price action we have been seeing in the market this week.

It appears possible resistance is building around the 558 level, so that may be an area for us to keep focused on.

I would be more than okay to see a pullback to the 21 EMA to give this market a healthy rest or stress test.

We are trading above rising moving averages, so there's no need to be bearish, but we must respect the extension of this market and how that will negatively skew risk/reward away from us.

The 65-minute chart: Beautifully riding the moving averages'

SPY

SPY is consolidating very nicely here and building out under the 627 level.

This market has had a phenomenal run, and rest is certainly welcome here, which will likely help create the next wave of setups.

I am preparing for the possibility of some sort of shakeout or test below the 10 EMA; hence I am currently keeping trade activity very low.

My studies have clearly shown that trading after market pullbacks is the way to go with aggressive exposure—not when markets are extended.

It would be perfectly fine if we were to continue to trade above the 10 EMA and just go sideways also, allowing the 21 EMA to catch up to the 10 EMA.

IWM

The IWM continues to perform very well as it looks to make up ground with its peers.

It looks to be charging towards the 230 resistance area with no sign of slowing down yet.

I'm expecting pullbacks to probably be buyable as the trend is firmly up.

Small caps participating has meant a clean broadening out with lots of new sectors showing signs of strength.

I think rotation is an asset to a bull market, and as long as we keep our focus on the setups, we will always be in a position to act on the next set of moving stocks.

ARKK

ARKK had a strong week as it pushed off the rising 10 EMA and made new highs on this rally.

The weekly chart of this ETF is quite extended here, but I’ll be certainly looking at it on a pullback to the moving averages.

The ETF is currently filled with plenty of quality names. It is still currently extended here, so nothing to do except wait for a setup to develop.

Gold

After being quiet for much of the week, we saw gold perk up on Friday and actually push back above all moving averages.

This is very interesting as we saw an explosive move take place in silver as well. Is the market sniffing something out?

We have also seen lots of strength in Bitcoin also, so there are a few questions to ask here.

Bitcoin (long)

Bitcoin was the clear star of the show this week as it performed a beautiful breakout to all-time highs.

We have been sitting comfortably in our position since June 25 and now have a nice cushion to sit calmly.

It is currently extended, and you do not want to be a rookie who is chasing due to FOMO. Simply wait for the chart to set up again—because they always do if a real trend is to occur.

This is a pretty significant weekly breakout, and I'm excited about the potential of this trade. 

Despite that, we will stick to our strict process and treat it like any other situation—because it simply is just another trade.

USD

The dollar finally made it above the 21 EMA for the first time since mid-May. It was a very strong week as it was able to climb back up through the moving averages.

TNX

After shaking the tree during the week, the 10-year yield is back above all moving averages and looks like it wants to follow through on its breakout.

We do not want to see a big trend take place here.

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Our market indicator

Remains on a GREEN signal.

I will not fade this move of course, but we are seeing a few signs of trouble. We must keep an our on how net highs develop next week.

Qullamaggie indicator

Our Qullamaggie indicator remains RISK ON.

We continue to remain risk-on here, but we can certainly feel that the market is getting a little heavier.

We always check our opinions at the door and follow price, but it feels to me like we could see a shake of the 10 EMA soon.

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