OVERVIEW
Powell Hints At Interest Rates Cut

Yesterday went just as we hoped, with Fed Chair Powell hinting that rate cuts could be on the table as soon as September. While he didn’t explicitly say rates will drop then, he did suggest that a reduction could be considered if certain conditions are met.

The Federal Open Market Committee also sounded more positive, noting that progress is being made in getting inflation closer to their 2% target.

This optimism led to a surge in investment in major tech stocks. For instance, Nvidia jumped +12%, helping the Nasdaq (QQQ) inch closer to breaking out of its recent downward trend.

Powell also made some intriguing comments that fueled the market rally, saying the economy is “historically unusual” and a “welcome outcome for the people we serve.”

While the exact meaning of this evaluation is up for debate, the key takeaway is that the Fed’s optimism should also make us feel positive about the economic outlook.

What does this all mean for the market?

The actions of the Federal Reserve are the primary driver of the equities market. Historically, whenever the Fed signals a potential shift in monetary policy, such as introducing rate cuts, it always sees the stock market rallying since borrowing costs decrease and money becomes “cheaper”.

This should mean that we would likely see a much better years ahead as the economy is no longer being restricted in its growth by high interest rates and instead business, small and big are going to flourish.

For the last two years only very large and established companies have been able to grow as the Fed has been restricted in it’s policy. This is now flipped on its head and although we all already know this from looking at the charts, this was a huge Fed decision as it shows that everyone’s expectations were met and we really are going into a macro period of growth that will last a long time.

Nasdaq

The Nasdaq was in need of yesterday’s optimism, and the bullish momentum pouring into the equities market helped the QQQ break above its mini 4-day range, bouncing off $456—the weekly 20-EMA. We also saw the daily 10-EMA being breached on some refreshing high green volume, driven by strong performance from big tech stocks.

For today, examining the visible range volume profile (VRVP) on the right side of the chart, we notice a significant low-volume area between $470-$474 that is being filled in pre-market trading.

If the QQQ can maintain its position above this level and buyers continue to push prices up, we will see a sharp move towards filling the gap up to the point of control at $480 by the end of the week.

We aren’t out of the woods yet however and the daily 20-EMA at $476 is going to probably cause some chop, but going off the reaction to the Fed talk yesterday we don’t think it’s going to last for very long.

This is a very happy sight with the Nasdaq very clearly showing completely different behaviour yesterday as it has been for the last 2 weeks.

S&P Midcap 400

The midcaps saw some exhaustion at the end of the day as they rallied all the way up to $575 as everyone started getting excited over the upcoming September rate cut and the very strong macro environment for growth stocks that the Fed is setting the stage for.

However, the high volume and the weak candle at the end of the day show that sellers stepped in, dialing back some of that enthusiasm. Given how quickly things moved, a bit of a breather wouldn’t be surprising. As we head into today’s session, it’s possible the MDY might trade sideways for a bit before making another push towards the $575-$580 range later this week.

Russell 2000

The IWM experienced a 3% trading range yesterday. It initially pulled back to test its daily 10-EMA, which held up well and led the small caps to slice through their daily range at the $224 supply/demand zone, nearly breaking through $230.

However, the day ended on a weak note with an exhaustion candle on very high volume, similar to the MDY. Sellers stepped in, cooling off the excitement around the potential rate cuts.

For today, we expect the IWM to likely trade sideways for at least another day, maintaining its position above the daily 10-EMA. Ultimately, we anticipate it will break out of the recent multi-week volatility contraction pattern and could climb into the mid-high $200s over the next few weeks.

DAILY FOCUS
You Better Be Looking For Longs

There’s no better time to be a swing trader than right now—period.

Money is flowing into the stock market like never before, and big institutional investors are eagerly picking up positions in small-cap stocks that have been under pressure during the past two years of tight economic policies. Plus, the Fed has just given a thumbs-up to the economy, signaling that they’re feeling optimistic.

Your mission today and for the foreseeable future is to identify the best growth stocks with strong relative and absolute momentum, especially those forming bull flags on the daily charts. Be proactive and ready to take calculated risks now—don’t wait until everything is overextended in a few weeks when the market might need to cool off and rebase.

We’ll be exploring several stocks, including those that might not have the perfect fundamentals, as long as their technical setups look promising.

WATCHLIST
The Big Momentum Leaders

CVNA: Carvana Co.

• CVNA just crushed its earnings expectations with an incredible +400% beat on EPS and a +5% revenue beat.

• The stock has been building a solid base for the past month and is now gapping up on high pre-market volume thanks to this stellar earnings report.

• Today, we're targeting a long position on this episodic pivot (EP). Our plan is to enter a 1-1.5R position when it breaks the 5-minute opening range high.

KOSS: Koss Corporation

• KOSS is tightening up more each day, consolidating around its 10 and 20 EMAs for about a month now.

• With the current macro climate, we're leaning towards a potential long trade. KOSS is known for its volatility, having surged over +150% in a single session before, so expect some wild swings.

• If you're jumping in, get in early and be ready for a bumpy ride. Make sure to set your stops at the day’s lows. We’re looking at this as a short-term play—think 2-3 days of momentum.