OVERVIEW
Great Response

US stocks hit new all-time highs again on Wednesday. Jerome Powell’s comments in Congress boosted hopes for interest rate cuts, and Big Tech stocks saw big gains.

The S&P 500 went up 1%, setting a new record for the 37th time this year, breaking 5,600 for the first time. The Dow Jones increased by 1.1%, and the Nasdaq, which is heavy on tech stocks, rose by 1.2%. Both the S&P and Nasdaq have been up for seven straight days.

Big Tech stocks led the charge. Nvidia went up over 2%, and Apple, Microsoft, and Google all gained over 1%.

People are betting on interest rate cuts, which has kept the stock market booming, even as there are signs that the US economy is slowing down.

There was also some optimism from Washington. During his semi-annual testimony to Congress, Powell hinted that they might lower interest rates soon, noting that inflation and the job market are cooling off. He also warned that keeping rates too high for too long could hurt the economy, which gave hope to those wanting rate cuts.

However, there’s an important test coming up with the consumer inflation report out one hour before market open today. If the report shows that inflation is cooling, it’ll likely confirm that the Fed will change its policy in September. But if it cools too much, there could be worries about a recession and the job market.

Nasdaq

The QQQ continues its upward trajectory, closing at $502.96 following yesterday's news. The trading session saw significantly high buying volume compared to selling volume, indicating strong optimism among traders. This bullish sentiment has kept the QQQ in a solid uptrend, comfortably above all of its daily EMAs (Exponential Moving Averages). The sustained position above these EMAs suggests that the momentum is still strong and the trend is likely to continue in the near term.

However, the market's response to today's Consumer Price Index (CPI) data release will be pivotal. Scheduled to come out one hour before the market opens, this data will provide critical insights into inflation trends. If the CPI indicates that inflation is cooling, it could reinforce expectations for potential interest rate cuts, which may further propel the QQQ and the broader market. On the other hand, if the data shows a sharper than expected cooling, it could raise concerns about a possible recession and its impact on the job market, potentially triggering a sell-off.

Given these factors, we are cautiously waiting to see how the QQQ reacts to the CPI data before making any trading moves. This data will not only influence short-term market sentiment but also provide clues about the Federal Reserve's next steps in monetary policy. For now, the QQQ's strong technical position and trader optimism are positive signs, but the upcoming economic data will be the key determinant of our strategy going forward.

S&P Midcap 400

The MDY had a robust green day yesterday, signalling a market-wide positive reaction to the news. It successfully broke above its 10 and 20 daily EMAs, indicating a shift in momentum and renewed investor confidence. This upward movement suggests that the mid-cap sector is gaining strength, with traders showing increased interest and buying activity.

Currently, the MDY is forming a volatility contraction pattern, a technical setup that often precedes significant price movements. As we monitor its behaviour, today's inflation data release will be critical. This data will provide essential insights into inflationary trends and economic conditions. If the inflation data shows signs of cooling, it could further boost the MDY and potentially trigger a breakout from its current pattern. However, if the data indicates a sharper than expected decrease, it might raise concerns about economic slowdown and impact the market negatively. We will be watching closely to see how the MDY reacts, ready to act on a potential breakout opportunity.

Russell 2000

The IWM had a strong green day, closing at $203.37 after four consecutive red days. This reversal in trend indicates renewed buying interest and optimism among traders. The IWM broke above its 50 daily EMA, which is a positive sign for the small-cap sector, suggesting that it might be poised for further gains.

The upcoming inflation data will be crucial in determining the next steps for the IWM. We will be closely monitoring how the small-cap stocks react to today's inflation data, as it could present a significant trading opportunity.

DAILY FOCUS
More Big News Awaits

Yesterday's news brought a wave of positive reactions across the market, lifting investor sentiment and boosting stock prices. However, today's developments are even more critical. We are eagerly awaiting the release of the inflation data, which will provide essential insights into the current economic climate. This data is crucial because it will influence the Federal Reserve's decisions on interest rates, which in turn impact market dynamics.

Our primary focus is not just on the inflation numbers themselves but on how the market reacts to them. A positive market reaction could signal continued optimism and stability, prompting us to adopt a risk-on approach. In this scenario, we would look to take positions in setups that appear valid, capitalizing on the bullish sentiment.

Conversely, if the market reacts poorly to the inflation data, it could indicate underlying concerns about economic health, such as a potential slowdown or recession. In such a case, we will adopt a more cautious stance, holding our current positions and avoiding additional exposure until there is more clarity.

WATCHLIST
Potential To Go Higher

WGS: GeneDx Holdings Corp

• GeneDx specializes in providing advanced genetic testing and diagnostic services, focusing on rare and inherited diseases.

• GeneDx continued its uptrend, breaking out of its volatility contraction pattern. The breakout was accompanied by a notably high level of volume, indicating strong buying interest.

• We are closely monitoring how GeneDx responds to today's key data release. The stock's reaction to the data will be crucial in determining if the uptrend will continue.

• Positive market response to the data could reinforce the bullish momentum in GeneDx.

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