OVERVIEW
The Green Light For Equities

The long wait is finally over. The Federal Reserve made it crystal clear in their Jackson Hole speech on Friday that interest rates are going to come down (as you probably noticed from the market's reaction).

The chairman announced that he's ready to lower interest rates, pointing to a slowing job market and inflation getting closer to the Fed's 2% goal. Powell is confident that the Fed can guide the economy to a "soft landing," meaning avoiding a recession—a rare achievement that hasn't happened since the 1990s. To do this, Powell said, the Fed will need to start easing today's high interest rates.

It's clear now that the focus is shifting away from inflation, which seems to be under control, and moving toward the labor market. This is crucial to remember, as it means that every economic report related to jobs will cause market volatility, so keep an eye on those.

Powell emphasized labor conditions 27 times in his speech, signaling a change in the Federal Open Market Committee's priorities, which had been heavily focused on inflation for the past two years.

Even though recent data revisions showed weaker job growth earlier this year than initially reported, Powell's speech suggested that Fed officials aren't too worried about an impending recession or mass job losses. Instead, the concern is more about making sure that high wage growth doesn't push inflation back up.

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

As you saw on Friday, the equities market had an absolutely massive rally in response to the Fed's dovish stance. The rally was so strong because of the clear relationship between equities and interest rates. When interest rates are expected to go down, borrowing costs decrease, which tends to boost corporate profits and make stocks more attractive.

Today, we can expect more of the same as the market continues to digest and react to the Fed’s signals and this will likely take a few days for this upward momentum to die down.

Nasdaq

The Nasdaq finished the day in the green, up by 1%, but the daily candle closed with a doji. Now, let's talk about this doji candle because many people might see it as a sign of "weakness," but that couldn’t be further from the truth.

A doji indicates that the market experienced indecision, with neither buyers nor sellers taking full control. However, in the context of a strong uptrend like the one we saw today, combined with significant economic news, a doji can actually suggest that the market is shifting its trend after the previous day's steep decline before potentially moving higher.

In the next few sessions, and likely today, we expect to see the point of control (POC) at $482 get broken through on high volume. This week is crucial for large-cap tech stocks, which the QQQ tracks, especially with NVIDIA (NVDA) set to report its earnings soon. Given this, it's not surprising to see the QQQ moving sideways until the Wednesday earnings report, which is expected to trigger significant market moves.

S&P Midcap 400

The midcaps are doing what higher-risk growth assets typically do in a low-inflation environment—rally hard and outperform their larger counterparts.

On Friday, we saw the MDY respond extremely well, with heavy bullish volume pushing it past its point of control (POC) and positioning it to make new 2-year relative highs as it targets $575.

There’s no real evidence to suggest that the MDY will slow down today, given that it’s only one day into its breakout. With the very high relative volume we saw on Friday, this move likely has more momentum behind it and will continue for a few days before any consolidation or digestion is needed.

Russell 2000

The small caps are poised to test their point of control (POC) at $222, and this will be an interesting move to watch. Typically, when approaching such a significant supply zone, we would expect at least some sideways consolidation. Therefore, it’s possible that we could see the IWM face a bit of a struggle, at least intraday, as buyers decide whether to aggressively push through the POC or not.

We remain very bullish overall, and given the favorable macroeconomic climate, we don’t anticipate any major rejection or issues. However, from a purely technical perspective, the $222 level might require some intraday chop before it’s fully taken over.

DAILY FOCUS
You Cannot Waste Time

Right now is probably the absolute worst time not to be actively holding a portfolio of volatile growth stocks that have broken out of their bases.

Honestly, you should probably be fully invested at this point. While it’s not too late to start accumulating positions now, you may have already missed out on some great trades if you haven't been following the price action closely.

The market typically only offers 2-3 solid opportunities a year to buy stocks, and the rest of the time, you need to be patient—either waiting for the market to top off and rotate or holding on as your positions move higher.

This week, be confident and enter your long positions. We’re adding to our winners (we’re fully invested), and this is something you absolutely must do, especially if you’re using a low win rate, high risk/reward strategy like swing trading.

Stock To Watch
Focus On These On A Strong Reaction

TSLA: Tesla, Inc

• TSLA is gearing up for a significant move in the next two sessions, with volatility starting to contract into a narrow range.

• While we've seen AI-related names and the QQQ lag slightly behind their small-cap counterparts, large tech is still poised to make massive gains in this new low-inflation rally, and TSLA is likely to be one of the leaders.

• As a top AI-related stock and a major player in the automotive industry, TSLA has taken a beating over the last year. However, the base it's currently forming could position it to test the $300 level in the coming weeks. This setup suggests that TSLA might be ready to break out as part of the broader tech rally.

• We’re looking to see a break above $227 with high rel. volume on the breakout candle get held on the 5-min opening range high to trigger a long position for us.