J Hole Paves The Way For Cuts
It was a volatile week, but after all was said and done, the market closed up a measly 0.38% over the Monday opening print.
More impressively said, the market rallied from the intraweek low 2.12%, completely erasing the pullback from the all time high.
The market rally was of course brought to us by Powell’s Jackson Hole speech, so lets dive into what exactly is going on here.
The J-Hole Debate
The million dollar question as to if Powell is telegraphing a rate cut from the Jackson Hole speech hangs on this line right here:
“Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.” (Jackson Hole 2025 Transcript)
My personal opinion is that Powell has left the door open for a possible cut in September, without committing to it directly.
I do not interpret this as hawkish where Powell would suddenly raise rates should the September CPI print come in hot. He has the lee way to leave rates unchanged based on his careful use of “may.”
Let’s look back at what was said last Jackson Hole, the speech that actually proceeded the jumbo 50bps cut in September of 2024.
“The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” (Jackson Hole 2024 Transcript)
And more important than my subjective opinion, is the objective opinion of the market where dollars are being committed to a certain viewpoint.
Remember what Benjamin Graham told us about the market – “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
The Fed watch tool had gone from nearly 92% odds of a cut on August 14th, to 73% odds of a cut on August 21st.
And as of Friday’s close odds are back up to 84.7% for a potential cut.
Small caps being quite sensitive to monetary policy also responded in a big way on Friday making a new pivot high. Generally this would align with the market interpreting the commentary as doveish.
Note the outperformance of the S&P by nearly 2% in tradable range.
So then what does the forward looking picture look like for inflation and labor?
We’ll look no further than Thursday morning’s earnings commentary from Walmart CEO, noting that cost increases will continue through the third and fourth quarter.
On the labor front, the latest talk is of the massive downward revisions to the non-farm number over the last few months.
And while there are certainly some weakening datapoints on the labor front that point to being past the cycle high, there has not been a widespread acceleration in layoffs which would show up in jobless claims.
Thus, the base case on labor might be an inline print, shifting the balance of risks back to the re-acceleration of inflation or lack thereof.
The most complicated situation for the Fed would be a weaker than expected labor report, paired with a hotter than expected inflation report.
This week is quiet on the economic data front, but boy oh boy will the September 5th labor report hold LOTS of information.
NVDA Has The Chance To SHOCK The World
Nvidia has consistently exceeded revenue expectations by ~$2 billion and raised guidance by ~$2 billion for the past seven quarters, barring last due to the China restrictions.
Wall Street is already estimating that NVDA is going to pick up where they left off, now that some China related exceptions have been made. The current high estimate for revenue is ~$52.6 billion.
That would imply a guidance coming in ~$10 billion higher than last quarter to actually produce an upside surprise in line with trend.
The math works out roughly like: ((~$52.6B est.) – ( ~$45B last quarter)) + $~2B expected beat = ~$10B required.
How much of a unicorn is this company? We’ll see.
Trade Brigade Live Squawk is here!
This is the final trading week of August. Make it count.
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
S&P weekly chart – Even with the sell side pressure early in the week, does this look – at all – like an attempted trend reversal?
S&P daily chart – Trends are simple. They are higher highs, higher lows, equal highs, equal lows, lower highs, lower lows.
This daily chart fits the characteristics of an uptrend, and will remain that way even if a pull back tests a possible higher low at 638.15. If 634 is broken, a lower low is introduced and the trend changes.
The massive rally from Friday going straight to the ATH means that a higher high to blue sky does nothing more than continue the trend.
S&P hourly chart – If the base case is looking for daily trend continuation, how might we participate on the hourly?
Consolidation over 642.75 is likely not enough to change the hourly trend to down, and thus, this would constitute a soft higher low, and if we breakout a simple bull flag break.
A break under 642.75 an hourly lower high may result, and thin structure retracement is attractive to short through down towards 638.15 where we seek a potential daily higher low, and hourly trend reversal back to up.
A break and hold under 638.15 is undoubtably bearish consolidation, and I would think a break of 634 is imminent. This would break the daily higher low, and of course trigger the double top neckline break to change trend.
Market internals –
Very impressive exchange level activity on the Friday rally. The thing I would read into here is the over correlated state we finished things off on. With EVERYTHING catching a bid Friday, some retracement would seem reasonable as rotation picks back up.
Market profile – What a ridiculous profile shape on Friday… but its what we have. P shaped, value and PoC higher. Tons of “0 prints” below us where little to no volume transacted. Wouldn’t be unreasonable to retest.
Worst offended price level: 6427.25 with 6 contracts.
XLK Sector Spotlight – It would be irresponsible to not talk about the tech sector not making it back to the ATH on the rally. This now poses the threat of a head and shoulders. However, as we say, its not a full trend reversal until the neckline breaks… 256.5 is your key. For now its a range.
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:
(Trying Again…) Trade Brigade Fall Merch?
Last week, our form was instantly shut down due to a technical glitch… So lets try this again.
If you’d be interested in some merch being released this fall, please submit feedback on items here: TB Fall 2025 Merch Form
Economic & Earnings Calendar
- GDP – Powell made note of the slowdown at J-Hole, lets see if there are any major revisions
- PCE – Market should be honed into the expectation here due to CPI / PPI
Top watches: NVDA, NVDA, NVDA
Swing Stock Scans
CMA – Daily
Daily bull flag with flat top breakout level at 70. Looking for a move to double the flag range into the prior pivot around 73.5. In play so long as Thursday low holds.
CNM – Daily
Revisiting an old setup from the channel consolidation over prior all time high (pATH). Looking for a flat top break now over 66 to target the upper bound of the trend channel over time. In play as long as pATH holds.
COP – Daily
Ascending triangle forming with breakout base high at 97.5. Looking for a move to test the gap above at 101.4 to 104.15 if it is a successful breakout. Not interested if the trend line breaks.
FIVN – Daily
Mind the horrible weekly downtrend, but looking for a inverted head and shoulders neckline retest and go. Supporting over 26.6 keeps this in play to 29.7 area. Any signs of weakness should be taken seriously given higher timeframe trends.
PM – Daily
This is exactly what we want to see FIVN do… holds of the breakout level post breakout at 170.75 on PM setup continuation to close the gap to 177.5 and then retarget the swing highs at 185. Not in play if the trend line breaks.
VSAT – Daily
Huge change in tone out of this post earnings. High and tight consolidation could get interesting on a break of 28.5 for another squeeze higher. Overhead target is a long lost gap at 33.6 area. Gap fill is all the way to 42.75… manage expectations about getting all the way there. Interested as long as 25 holds.