OVERVIEW
The YOYO Effect

Yesterday was a rollercoaster for the market. The Federal Reserve delivered exactly what investors had been hoping for—a big 50 basis point rate cut. But despite the initial excitement, the rally was short-lived. Stocks briefly jumped after the announcement but quickly lost steam, and by the end of the day, all three major U.S. indexes were down. Even with Fed Chair Jerome Powell assuring everyone that this move reflected confidence in the economy and job market, the market kept selling off.

So, why the drop when the Fed gave the market what it wanted? It seems that some investors believe the Fed is playing catch-up, acting a little too late in making these cuts. Plus, Powell’s comment about near-zero interest rates being a thing of the past likely didn’t help ease concerns. Many investors are adjusting to the reality that we might not see those ultra-low rates again anytime soon.

It’s also important to realize that the market had already priced in a lot of good news after seven straight days of gains. So, when the rate cut came, it wasn’t the massive boost some might have expected. With the cut now behind us, the market seems to be pausing, waiting for fresh catalysts or a clearer direction before making its next move. Are we heading for more upside, or is it time for a breather?

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

Looking at today’s session, pre-market action is showing a +2% rally across the major indices, which suggests a rebound after yesterday’s late-session sell-off. But don’t get too comfortable—if the market is due for another leg lower, we’ll start seeing breakout attempts fail over the next few sessions.

It’s also a good reminder that major economic events like yesterday’s Fed decision aren’t easy to trade around. Going "all in" before a big announcement can be risky, no matter how confident you are in the outcome. The market is a discounting machine—it prices in expectations ahead of time, and when uncertainty enters the mix, things can get unpredictable fast. We saw some promising breakouts fail last week as traders awaited the Fed’s decision, proving just how cautious you need to be.

Even though the rough start to September might seem like a distant memory, the major indexes are still in the negative for the month. Both $SPY and $QQQ are at the top of their triangle patterns, but they've struggled to break out the last couple of days. Meanwhile, $BTCUSD is approaching its upper trend channel resistance, which also lines up with its 200-day moving average. $IWM faced some selling pressure in the last hour yesterday as it tried to hit a 52-week high.

Right now, index futures are looking positive, which could mean a gap-up at the open. However, with options expiration coming up tomorrow, it’s wise to stay cautious.

But for today, with the Fed news behind us, there’s no reason not to keep looking for good opportunities and just take the market action as it comes. The market might have more upside in store, and being prepared for whatever comes next whether it really is a push higher or a leg lower.

Nasdaq

The Nasdaq has been struggling with several failed breakout attempts recently, finding some support yesterday on the rising daily 10-EMA. Unfortunately, it couldn't hold the crucial level at $473.

Pre-market trading is looking positive right now, with the QQQ gapping up above previous highs and setting up to test the $480-$481 supply zone. If it manages to push through this zone, it could be a major boost for the bulls. The visible range volume profile (VRVP) indicates a low volume area up to around $495, suggesting that if the QQQ breaks through this supply zone, it could rally quickly through the gap.

While the gap-up is encouraging, it’s important to wait for confirmation that it will hold, especially given how the day ended yesterday. Keeping an eye on major stocks within the QQQ, like NVIDIA and AAPL, will be key. Their performance will likely impact the QQQ’s movement, so watching whether they are rallying or struggling can provide insight into whether this gap-up will stick.

S&P Midcap 400

The midcaps experienced a more pronounced fade compared to the QQQ yesterday. The day ended with a long shooting star candle, showing a retracement of over 1.7% from the peak, closing near breakeven at the point of control (POC) level of $562 for the second consecutive day.

This indicates a strong level of selling pressure that is preventing the MDY from breaking above the $575 mark. With the index gapping up today into that zone, it’s wise to wait and see if there’s follow-through or if the resistance holds.

Russell 2000

The small caps are in the same boat, with not much new to add about their charts. The last couple of sessions have been pretty indecisive, with sellers stepping in to keep things from breaking above $225. Even though volume is up and the IWM is trending higher, today’s action will be key. We need to see if small caps can hold above this busy volume zone around $225. If they can, this level might start acting as support and keep the gap from fading throughout the day.

If the Russell 2000 manages to hold its ground and push higher, it could be a big deal. We might see a lot of small-cap stocks breaking out over the next few sessions.

DAILY FOCUS
Today Is A Confirmation Day

Today’s session is all about piecing together the market’s direction. We’re facing significant selling pressure, but there’s also strong market breadth, promising setups, and a historic rate cut that should, in theory, boost asset prices.

Keep a close eye on how the major indexes and the key stocks on your watchlist perform. Are they managing to keep up their momentum and push through resistance levels? Are they holding their gains, and is the volume rising in sync with price movements?

The first 15-30 minutes will be crucial, as this will likely reveal whether the market will fill its gap or maintain its gains. We can’t predict with certainty what will happen, so it’s all about trading what we observe. One thing is for sure: we’ll avoid standing in the way of momentum. Instead, we’ll use the 5-minute opening range highs to guide any new positions, only jumping in when we’re confident the trend is bullish. Stay alert and adapt as the day unfolds.

WATCHLIST
The A+ Setups We Love

RDW: Redwire Corporation

• RDW is a stock we’ve been following closely, especially after its impressive +100% rally from May to July. Since then, it's been forming a large multi-month flag pattern and consistently building higher lows.

• This setup is one of the best we’ve seen technically, with a textbook base and strong internals, including impressive annual revenue growth.

• We’re excited about this setup, and it’s at the top of our list. A breakout above $6.63 on high volume, especially if it occurs on the 5-minute opening range high (ORH), will trigger a long position for us.

NVDA: NVIDIA Corporation

• NVDA is definitely one to keep on your radar, especially if it looks like it’s gearing up for another big rally. After trading sideways for months, NVDA recently lost its key daily EMAs, but with the unexpected gap-up in the QQQ and SPY yesterday, it has managed to reclaim those levels.

• Now, it’s dangerously close to the top of its trading range and on the verge of potentially breaking out above $119.40, which is a key zone we’re watching closely for a possible entry.

• NVDA might need a few more days of consolidation, but it’s a stock we don’t want to miss. Also, keep an eye on NVDA for hints about the broader market direction—if NVDA starts to sell off, it’s likely that SPY and QQQ will follow suit.