Situation Awareness: Cautious. Tech-led melt-up meets a policy checkpoint — Thursday’s tape was a narrow, semiconductor-and-software affair (Nasdaq +1.6%, S&P 500 +0.7%, DJIA +0.2%) with info tech the ONLY S&P sector to close green (+3.4%), and now futures are giving some of it back ahead of the day’s marquee event. S&P futures sit roughly 6-13 points below fair value with Nasdaq futures off 71-108 points as the market waits on Fed Chair Kevin Warsh’s 10:00 ET Jackson Hole keynote — his first major address outside an FOMC presser. Trade mode: selective and watchful, respect the event risk and let the 10:00 speech clear before committing size. The dominant force is rates, not earnings: the CME FedWatch tool assigns a 36% probability to a 25-bp HIKE at September’s FOMC, a stunning reversal from January when two cuts were priced. Regime context — 52.61% of stocks trade above their 40-day SMA, and the 4% Bull/Bear gauge shows 259 bulls vs. 112 bears. The 5-day trend is mixed: short-term breadth turned up sharply (20-SMA participation +9pp to 46%) while the 40-SMA reading slipped -2.7pp, signaling a bounce riding on narrow leadership rather than broad conviction.
SIP: GAP AFRM
- What’s working: Continuation/2LYNCH scan is rich with 21 signals — healthy breadth of individual setups even as the index tape narrows. Reversal scan is thin at 4 names; Delayed 9M produced no fresh signals despite 34 names on the Bull 9M list.
- Leading sectors (live market closed — using signal concentration): ENERGY (CHRD, OBE) and BUSINESS SERVICES (RDVT, FDS) dominate the continuation tape; AEROSPACE/DEFENSE (AVAV, RKLB) shows repeat presence across both continuation and reversal scans.
- Key event: Fed Chair Warsh’s 10:00 ET Jackson Hole keynote is the single biggest catalyst on the calendar — with a September hike near one-in-three, any hawkish tilt hits duration and richly-valued tech hardest.
- Market read: Thursday’s advance was almost entirely tech-driven — the S&P 500 Equal Weighted Index fell 0.3% even as the cap-weighted index rose. That divergence is a warning: breadth is thin, and a hawkish Warsh could pull the rug from the only sector holding the tape up.
- DEP watchlist: No fresh Delayed 9M signals today — stand down on episodic-pivot entries and wait for the scan to reload.
- SIPS: CHRD ($145.99, +4.2%), AVAV ($152.28, +3.7%), RDVT ($72.00, +3.6%) lead the continuation swing candidates.
Today’s Market Narrative
The bulls that ran hard Thursday are catching their breath this morning. After NVIDIA’s blowout quarter and monster software reactions from Salesforce and CrowdStrike propelled all three major averages back into positive territory for the week, futures are pointing to a modestly lower open. S&P futures trade about six points below fair value on the latest read (down as much as 13 earlier), and Nasdaq futures are the softer of the pair, off 71-108 points. Headlines are quiet by design — the market is holding its fire until Fed Chair Warsh takes the podium at 10:00 ET.
Thursday’s session was a masterclass in narrow leadership. The information technology sector surged 3.4% and was the ONLY S&P 500 sector to finish higher. NVIDIA closed at 227.91, up 8.70%, after guiding its AI-infrastructure buildout commitment up to $279 billion from $119 billion and expanding its AWS partnership — putting real distance between the stock and its 50-day moving average following a recent seven-session losing streak. Software did even more of the heavy lifting: Salesforce (CRM) rocketed 22.60% to 252.10 and CrowdStrike (CRWD) jumped 20.50% to 227.96. But underneath, the S&P 500 Equal Weighted Index fell 0.3%. That is the tell for today — the rally is standing on a very small number of legs.
The rotational damage was visible everywhere outside tech. Consumer staples dropped 1.5% (Hormel cratered 10.27% on earnings), health care fell 1.1% (Moderna -4.60%), and retail stayed under pressure as Best Buy (-4.41%) and Burlington (-7.68%) disappointed. This morning’s premarket earnings crop kept the mixed theme going: Autodesk (ADSK) is indicated down 3.9% on soft Q3 EPS guidance, and Marvell (MRVL) is off 8.4% on merely in-line guidance despite a small beat. On the flip side, Gap (GAP) and Affirm (AFRM) both beat and raised, our two highest-conviction Stocks in Play this morning.
Overseas provided little to lean on. Asia finished mixed with South Korea’s Kospi the notable laggard (-1.8%); Japan’s Nikkei added 0.4%. Europe is grinding higher into the weekend (CAC 40 +1.0%, DAX +0.6%) even as France’s Q2 GDP was revised to flat with a nonfarm payroll contraction, and Spanish inflation ran hotter than expected. Crude is the other crosscurrent — WTI is down $0.76 (-0.9%) to $82.77 after settling up 1.7% Thursday on reports the White House won’t return to the June Iran memorandum of understanding.
Macro & Policy
This is a rates story, full stop. Monetary-policy expectations have whipsawed all year — from two cuts priced in January to at least one HIKE now, driven by oil-fueled inflation. The CME FedWatch tool currently pegs a 36% chance of a 25-bp hike at September’s FOMC. Warsh’s 10:00 ET Jackson Hole keynote, themed “Financial Innovation: Implications for Payments and Policy,” is his first major address outside of an FOMC press conference, and the market is desperate for color on whether that hike probability should rise or fade. A hawkish lean pressures duration and the priciest tech multiples; a dovish tilt would be rocket fuel for the same names that led Thursday.
Treasuries are set for a slightly lower start with the long end leading the weakness after a couple days of losses. The 2-year yield sits at 4.23% (unchanged), the 5-year is up a basis point to 4.41%, the 10-year is up two basis points to 4.69%, and the 30-year is up two to 5.21% — a steepening bias that reflects sticky inflation concerns and building rate-hike bets. Overnight, JGBs slipped on a weak 2-year auction and building Bank of Japan hike expectations, while European debt softened on the France/Spain inflation mix. The Dollar Index is flat at 99.18, gold is off 0.4% to $4,646/oz, and copper is firm (+0.7% to $5.638/lb).
The Big Picture backdrop underscores the fragility on display: information technology now accounts for 37.9% of the entire S&P 500, up sharply since March and far outpacing every other sector. That concentration is exactly why Thursday’s narrow rally and this morning’s Warsh anxiety matter so much — a lot of capital and a lot of good news are parked in one place. If money starts leaving tech, financials (12.2% of the index) and the beaten-down defensives are the natural destinations, but a rotation of that scale would drag the cap-weighted index while it happens.
Economic Calendar Today
- 9:45 ET — August Chicago PMI: Expected 57.0 | Prior 57.6. A soft print feeds the slowdown narrative; a hot one hardens hike fears just before Warsh speaks.
- 10:00 ET — Fed Chair Warsh Jackson Hole keynote: The main event. First major address outside FOMC. Watch for any signal on September’s 36%-priced hike.
- 10:00 ET — Final August University of Michigan Consumer Sentiment: Expected 51.0 | Prior 51.0. Depressed sentiment already; the inflation-expectations subcomponent matters more than the headline.
- Premarket earnings reactions: GAP (beat, raised — indicated ~$20.83), AFRM (beat Q4, raised — ~$77.49), ADSK (-3.9% on light Q3 guide), MRVL (-8.4% on in-line guide), ULTA (-1.5% despite raise).
Earnings & Corporate News
The earnings tape is doing what it’s done all week — rewarding clean beat-and-raises and punishing anything merely in-line. Gap is the clearest premarket winner: EPS beat with raised guidance, and it’s our top-sentiment Stock in Play at $20.83 on 4x relative volume. Affirm follows closely, beating Q4 and raising guidance with a blistering 33.75% year-over-year sales acceleration and a triple-digit EPS surprise, trading around $77.49 on 3.4x RVOL. Both fit the market’s current appetite for demonstrated forward momentum.
The losers show the flip side of a demanding tape. Marvell beat by a penny with in-line revenue and in-line Q3 guidance and is being marked down 8.4% to 221.30 — a reminder that “in-line” is a sin when NVIDIA just guided its buildout to $279 billion. Autodesk beat by $0.18 and topped revenue but guided Q3 EPS below consensus, and it’s off 3.9%. Ulta Beauty beat by $0.35 and raised full-year EPS, revenue, and comps, yet still ticks down 1.5% — evidence of a consumer the market is nervous about.
That consumer nervousness is the through-line from Thursday. Best Buy delivered a clean beat-and-raise (FY27 EPS lifted to $6.70-$6.90) yet fell 4.41% as investors questioned second-half momentum, and Burlington slid 7.68% after management turned more cautious on lower- and moderate-income households despite strong underlying profitability. The message: value-oriented retail is signaling a stretched consumer, and elevated gas prices aren’t helping. Keep that in mind if crude’s Iran-driven bid returns.
WaveFinder Signal Summary
The scan environment is constructive on individual names even as the index tape narrows. The Continuation/2LYNCH scan produced 21 signals — a rich reading that tells us plenty of individual stocks are still trending higher despite the concentration at the index level. Energy is well-represented (CHRD +4.2%, OBE +7.1%), as are business services (RDVT +3.6%, FDS +3.0%) and defense (AVAV +3.7%). The Reversal scan is thin at four names (RKLB, SE, CMG, FIGR), and the Delayed 9M scan produced no fresh signals — so episodic-pivot buyers should sit on their hands today.
Breadth is genuinely mixed and worth watching closely. The percentage of stocks above their 20-day SMA jumped to 46% from 37% (+9pp) — a real short-term thrust — but the 40-day reading eased to 52.61% from 55.3% (-2.7pp). Translation: the recent bounce is improving near-term participation while the intermediate trend quietly softens. That divergence, plus 259 bulls against 112 bears on the 4% gauge, keeps us squarely in cautious territory — enough individual opportunity to trade, not enough conviction to press.
Today’s Watchlist
- GAP — Beat-and-raise, top SIP at $20.83 on 4x RVOL; watch for follow-through above the open but respect the -1.84% gap-down starting point.
- AFRM — Beat Q4 and raised, 33.75% sales acceleration; $77.49 with fund ownership rising, a MAGNA53-adjacent momentum name.
- CHRD — 2LYNCH continuation, $145.99 +4.2%; energy strength has legs while crude’s Iran premium lingers.
- AVAV — 2LYNCH setup, $152.28 +3.7% on 1.1 RVOL; defense trend intact and independent of the Warsh trade.
- NVDA — 227.91 after +8.70%; the whole tape’s tell — hold above the 50-day and the melt-up survives Warsh; lose it and rotation accelerates.
- MRVL — 221.30 -8.4% on in-line guidance; watch for a washout-and-reclaim reversal, but no rush ahead of 10:00.
Action Codes of the Day
- T3A (Think 3 Days Ahead) — Warsh’s 10:00 ET keynote with a 36% September-hike probability is the definitive catalyst; position around the event, not into it.
- CRT (Controlled Risk Taking) — With 52.61% above the 40-SMA and the equal-weight index down while the cap-weight rose, take calculated risks only in confirmed leaders like CHRD (+4.2%) and AVAV (+3.7%).