OVERVIEW
Confusion Breeds Volatility

Investors are all laser-focused on the earnings reports from the 'Magnificent Seven' tech giants this week. Microsoft (MSFT) kicked things off after the market closed on Tuesday, with Apple (AAPL), Meta (META), and Amazon (AMZN) set to report later in the week. Everyone’s on edge, especially after last week’s disappointing results from Alphabet (GOOGL) and Tesla (TSLA), which really hit people’s confidence in AI and tech stocks.

To make matters more complex, this critical earnings week coincides with the Fed’s upcoming interest rate decision, set to be released later today, just before the end of the trading session. This timing puts traders and major institutions in a tough position. On one hand, we've seen strong earnings from stocks like POWL, leading to significant gap ups driven by positive earnings news. But on the other hand, the uncertainty and potential volatility are causing many to hold back, unsure of where the market might head next.

Meanwhile, all eyes are on the Fed’s two-day policy meeting, which kicked off yesterday. There’s growing anticipation that rate cuts could be on the table for September. While the Fed is expected to keep rates steady this week, given that it’s still considered “too early” based on their previous guidelines, everyone is eagerly looking for signs that the recent strong inflation data and robust job market might prompt the central bank to consider cutting rates next month.

So, what does all of this mean for today’s session?

Simply put, everything is on pause until the end of the day. The market will very likely see lower trade volume and very limited movement throughout the day, as everyone braces for the news that will set the tone for the coming weeks.

Once the Fed’s decision is announced which will happen 2 hours before market close, we can expect some volatility as the market digests the news and reacts. Depending on the Fed’s stance, we could see a surge in either direction, with everyone jumping in quickly adjusting their strategies based on the central bank’s outlook.

Nasdaq

The Nasdaq continues to struggle, breaking down further within its bearish channel. Yesterday, the QQQ dropped to new recent lows, slicing right through the $462 supply/demand zone—a critical level we had discussed as needing to hold to avoid a deeper decline. While the weekly 20-EMA is still providing some support, there's a risk of the QQQ sliding further down to the daily 200-EMA, which sits at around $432.

It's clear that the QQQ is showing significant weakness, and even with the major earnings reports coming out this week, it hasn’t been enough to spark a recovery in the Nasdaq. Unfortunately, the focus is shifting toward smaller, more speculative groups in the market, as they continue to offer higher potential returns, especially with anticipated interest rate cuts on the horizon.

S&P Midcap 400

The midcaps are still showing an upward trend, though it's occurring on relatively low volume. The MDY appears strong, but yesterday’s session brought some indecision as the midcaps seem to be stalling ahead of the crucial interest rate decision later today.

We anticipate some intraday weakness, as the MDY is currently gapping up in pre-market trading. Given the likely low trading volume today, we expect this gap to be filled once the market opens. The MDY might then test its daily 10-EMA at around $556.

It looks like the MDY is forming a flag pattern with volatility contraction (VCP), as indicated by the decreasing volume and the tightening range over the last two candles. A retest of the 10-EMA would be ideal for solidifying a tighter trading range and confirming the flag pattern on the daily chart.

Russell 2000

The small caps are clearly setting up a secondary VCP (volatility contraction pattern) bull flag. We’re seeing characteristic signs of this pattern: volume is drying up, the range of the candles is tightening, and there’s significant trading activity around the $222 point of control (POC).

We expect the IWM to potentially break out above its range at $225, either later today in response to the Fed’s interest rate decision or by the end of the week.

The case for growth stocks leading the market is strengthening daily, with both the technical charts and the macroeconomic backdrop aligning perfectly. This is the beginning of a major bull run for the smallest growth stocks in the market.

DAILY FOCUS
Don’t Try To Outsmart The Market

Right now, there are several positions showing strong potential, both from breakout patterns and earnings-based episodic pivots (EP). The small and midcaps, in particular, are looking very strong, which is generating a lot of buzz in these segments.

The market has largely factored in the expectation that Jerome Powell will hint at an interest rate cut next month, which is generating excitement. However, it’s important to remember that big interest rate decisions can be highly volatile. Even if a positive reaction is widely anticipated, it doesn’t guarantee that it will materialize.

Today’s objective isn’t to speculate on a market rally for tomorrow. Instead, it’s about observing how the market reacts and positioning ourselves accordingly. We personally prefer to avoid buying before a major event. So, our strategy is to wait until this afternoon to assess the market’s response and determine whether we have a clear signal to look for long opportunities in growth stocks for the coming month.

WATCHLIST
Focus On These On A Strong Reaction

RIVN: Rivian Automotive, Inc

• RIVN is maintaining its bull flag pattern, with volatility narrowing to a tight range. This suggests that the consolidation phase is nearing its climax within the next few days.

• Although RIVN has faced significant declines in the past, it’s in a more favorable position compared to Tesla, the sector leader. RIVN’s capitalization group shows a strong long bias, and the stock appears undervalued, especially considering its fundamental growth over recent years.

• We don’t plan to trade RIVN today or in the coming days as we approach its earnings report. However, if the market reacts positively to the Fed’s meeting and RIVN breaks above $16.80, we might consider taking a substantial long position. We would then trim this position before RIVN’s early August earnings report.

URGN: UroGen Pharma Ltd

• URGN, a biopharmaceutical company, has shown impressive revenue growth and robust bullish momentum, forming a textbook range over the past few weeks.

• Today, we’ll be watching to see if URGN holds its daily 50-EMA and bounces back, as it has successfully done the last two times this level was tested. If it does hold, we believe the stock has the volatility and fundamental strength to potentially rally by over 50%, returning to the $24 level it was trading at a few months ago.

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