The Nightly Trigger - August 19

What’s Likely Next After a Red Close & Leader Weakness?

Market Recap — August 19

Open:
QQQ showed relative weakness compared to the other indexes, selling off immediately from the open and trending lower into the afternoon. SPY, DIA, and IWM followed about an hour later around 10:30am EST, confirming broader market weakness.

Crypto Impact:
Bitcoin and Ethereum extended their losing streak with another red day, adding pressure to risk assets.

Midday:
Selling pressure persisted as tech and growth leaders failed to bounce, while defensive sectors (healthcare, utilities) showed relative strength.

Close:
The indexes closed near session lows, with QQQ leading to the downside. Market breadth remained negative, and leaders across semis, software, and mega-cap tech broke key support levels.

Takeaway:
Today’s action signals potential exhaustion in both the indexes and crypto, setting a more bearish tone going into tomorrow. The key trigger will be whether sellers press advantage on follow-through, or if oversold conditions spark a short-covering bounce.

Market Breadth Outlook

• The QQQ is currently facing resistance at its 127.2% Fibonacci extension level near 578.46, leading to a short-term rejection at that technical point.

• Despite this resistance, internal market indicators remain positive: the market breadth at 63.22 indicates healthy participation by a broad range of stocks, and market elasticity at 2.28 suggests resilience and flexibility in price action.

• Together, these indicators imply that while the price is pausing or hesitating at resistance, the underlying market strength is intact.

• This setup points to a potential consolidation or pause before either a renewed breakout attempt or a pullback, with no immediate signs of a strong reversal. Continued monitoring of price and internal indicators will be key to gauging the next move.

Let’s take a closer look at the indexes.

Indexes

• QQQ pulled back to its daily 21 EMA

• SPY pulled back to its daily 10 SMA.

• DIA made new all-time highs but failed at the highs to close flat for the day.

• IWM continues to lack momentum.

Key Takeaway

Cracks lie beneath the surface, so it’s important to tread carefully going forward.

No new long-term buys until we see cleaner price action suited for swings.

Bitcoin: Mean Reversion to 50 SMA as Weakness Persists

BTC continues to show relative weakness, with a pullback into its daily 50 SMA today.

Ethereum: Mean Reversion to 21 EMA on the Cards

After a sustained month-long rally on ETH, it is currently facing resistance just under all-time highs. Looks set for a 21 EMA pullback and then, we’ll reassess its reaction going forward.

Sector Rotation: Where Relative Strength is Building Right Now

Today’s weakness in the indexes led to rotation of funds into defensive sectors, which held up really well.

These were the most notable:

1. Homebuilders (ITB, XHB)

2. Consumer Staples (XLP)

3. Utilities (XLU)

4. Healthcare (XLV)

We spotted weakness in semiconductors (SMH), as NVDA’s earnings next week approaches.

Chances are that if NVDA fails to hold above its daily 21 EMA, we could see markets selloff going into NVDA’s earnings next week.

This would be bullish for the defensive sectors mentioned above.

🔥 Top 3 Squeeze + Relative Strength Setups and Sectors to Watch Tomorrow