Powell Cuts and High Beta RIPS
The S&P 500 closed the week up another 0.6% after just a few hours of FOMC volatility.
Note that the cash market did not make a new all time high on Friday due to dividend payout, however the /ES futures did.
Although it might feel like markets are getting extended here, there is nothing in the totality of the data that is overwhelmingly bearish.
Trend, momentum, risk appetite, breadth and volatility metrics still align with buyers being in control.
The Fed Cuts Rates
On Wednesday, the FOMC lowered its target interest rate by 25 basis points, moving the range from 4.50–4.25% to 4.25–4.00%. Powell highlighted that the “balance of risks” has shifted toward the labor side of the dual mandate.
Stephen Miran, the Fed’s newest board member, dissented in favor of a 50-basis-point cut.
His vote effectively lowered the median year-end target range, implying two cuts are now expected instead of just one.
The updated SEP showed risks to unemployment skewed to the upside, outweighing risks to PCE inflation. Powell reinforced this by noting the nearly 1 million downward revisions to non-farm payrolls were in line with Fed expectations.
If the Fed already anticipated labor weakness and still chose just a quarter-point cut, the move can be seen as slightly hawkish. The FOMC appears cautious of inflation, even as labor softens.
Recent CPI and PPI data show the one time inflation shock from tariffs may be fading. But with mortgage demand already surging 7% week over week on lower-rate expectations, Powell must avoid over-stimulating the housing market next.
The Fed’s challenge now is pacing cuts without undermining inflation progress. Threading that needle will define the months ahead.
The AI Chip Race
This week brought fresh signs of escalating China trade tensions. Regulators in Beijing advised domestic firms against purchasing Nvidia’s newly released RTX Pro 6000D.
The message was clear, that China doesn’t want watered-down chips and will back local suppliers to fill the gap. Nvidia shares fell further after reports that Alibaba secured its first major customer for its own AI chips.
Nvidia “countered” with news of a $5B investment in Intel, aimed at pulling them deeper into the AI race. Add in the U.S. government’s 10% stake, and it’s evident this has become a global contest for AI dominance.
The key theme to watch is any sign of China reopening to Nvidia products. While Nvidia’s forecasts show strong growth without China, the “unlock” of that market would be a major upside catalyst.
(H20 was the available China chip prior to the 6000D)
AI Adjacent Themes BOOM
The grand finale this week was the BOOM in nuclear and quantum names.
They are offering great trading opportunities and will likely continue to do so. However its worth asking where we are in the cycle when these blow off top style moves happen. Is this sustainable?
The point isn’t to call a top, but use this to help understand the level of euphoria in markets. As traders we make hay while the sun shines, but as investors, we should be cautious not to get drunk on massive gainers.
Be ready to shift to defending positions when and if the music stops or even just slows.
Trade Brigade Live Squawk
Make the most of the final trading quarter with live intra-day commentary on breaking opportunities.
Check out this recording for a taste of what each morning session is like: 07/09 Live Squawk
Onboarding support will be available through the evening and Monday morning starting at 6:30am EST before the 8am premarket-prep kick-off.
Broad Market Analysis
SPY – Weekly
Markets continue the uptrend closing a new all time high, which is inherently the highest high of a trend count. Thus if a pullback were to emerge, a higher low could be easily found at either reference.
SPY – Weekly
Mind you, there is no pullback indication on the weekly. In uptrends, the “hanging man” bar does not lead to reversal. Notice its more effective in neutral trends.
We take bars at face value anyways. Long lower wick implies buyers stepped up as sellers failed.
SPY – Daily
The trend here clearly remains up. Friday is technically an inside bar due to dividend, but futures made a new ATH. If there is a pullback ideally, the daily comes back to the 20 SMA for a higher low. FOMC low is soft, and thus can be retested in a 1h downtrend.
SPY – Daily
If you’ve followed the TB methodology, you know that we’re almost NEVER in the business of calling things too extended. This simply illustrates price historically doesn’t like to get much further than 13 points from the 20. Doesn’t mean short, means caution new longs.
Price can pullback to the 20 or price can go sideways and let the 20 catch up. Either works.
SPY – Hourly
Between 664.5 and 658.5 is choppy. Its likely bullish consolidation, but not a place where I would have highly directional intentions.
Over 664.5 can seek blue sky with caution for new money longs. As noted on the daily, pullback risk is high. Under 658.5 can seek some kind of pullback in the context of daily bullish uptrend.
Market Internals
Clearly a bearish underpinning on Friday when the market made the advance to new highs in the futures. Cash market was inside, and even still there was a bearish divergence at the exchange level. OpEx may have something to do with this. Remaining open minded to not chasing longs at the highs.
Market Profile
Value was not breakaway on the end of day rally. PoC was slightly higher, but nothing of major significance. Spike rules are also in play given M period excess. If price opens under 6726.5 late to the party longs will feel trapped Monday.
XLF – Daily
This chart being the second heaviest weight sector by market cap is the one that has me on edge the most. Failing to accelerate over the ATH breakout level 54.1 now three days in a row. Not bearish, but the payment processors are really acting as a drag here. Think MA and V. JPM, MS, GS all look great at ATHs.
If you want the full take, including all of the nuance of breadth, risk appetite and much, much more, check out the weekend episode here:
Economic & Earnings Calendar
Join us for a Powell live stream Tuesday: Live Stream
PCE should not be market moving as the CPI and PPI news has already been released.
Top watches: MU, COST
Swing Stock Scans
AFL – Daily
Bull flag after multi month base started to break out. Over 109.25 looking for the pre tariff high at 112.5.
CRWV – Daily
Likely needs a better daily bar setup, however starting to breakout of the downtrend from the ATH. Worth watching this through the week.
FSLY – Daily
Starting to breakout of the weekly inverted head and shoulders base. Holds over 8.30 should keep this in play, and acceleration into the gap above over the 9 round number targeting the 9.70. Beyond that pivot high at 10.85.
MTCH – Weekly
Weekly base forming with breakout level at 39. Longer term idea, need to give it time to develop. Not a huge amount of short interest here at only 4%.
SYF – Daily
Ascending triangle headed straight into all time highs. So long as we hold the trendline and daily 20, bulls are in control.
ZETA – Daily
Range breakout starting into the end of the week. Over 21.80 should seek continuation towards the pivot high pre tariffs at 24.65 area. Back in the balance range under 20.80 and we have to defend against look above and fail.