To The Moon

In his first keynote address at the Jackson Hole Economic Policy Symposium, Federal Reserve Chairman Kevin Warsh delivered a hawkish tone centered heavily on price stability:

• Inflation Focus: Warsh stated that with the Fed’s preferred inflation gauge sitting at 3.7%, prices are running too far above the 2% target. He warned, “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.”

• Monetary Tool Reaffirmation: He clarified that short-term interest rates remain the Fed’s principal tool to combat price pressures, and noted he would be “hard pressed” to describe current financial conditions as restrictive.

• Limiting Forward Guidance: Warsh advocated for a “quieter” central bank that avoids overcommitting to future decisions, stating that excessive forward guidance “risks creating ambiguity in the name of clarity.”

Following the speech, the markets adjusted to the likelihood of higher-for-longer monetary policy, just yesterday, the probability for a rate hike in September was 36%, today the number sits at 57%. Short-term Treasuries sold off sharply, sending the 2-year Treasury yield up 11 basis points to 4.34%.

Meanwhile, major stock indices and risk assets like Bitcoin pulled back as profit-taking emerged: The $S&P 500(.SPX)$ reached the weekly level of 7,763 and the confluence with the daily of 7,772 set enough resistance until 11:30AM, and the index fell straight to 7,700, a daily level posted yesterday in my daily SPX and $E-mini S&P 500 - main 2609(ESmain)$ levels.

During these days I have emphasized on patience, and the high risks of chasing price action when major gaps are being printed, last night I noted how $NVIDIA(NVDA)$ rallied while other semiconductor darlings like $Advanced Micro Devices(AMD)$ and $Micron Technology(MU)$ fell in the red, today the daily level for NVDA (226.4) and for AMD (476.4) worked well as early warnings for a reversal since both stocks fell -4.6% and -2.3% respectively.

Probability of Rate Hike in September during FED Meeting:

Despite of the market reaction, the SPX fell marginally today, -0.25%, and $Invesco QQQ(QQQ)$ dropped -0.65%. However, $iShares Russell 2000 ETF(IWM)$ lost -1.35%, and semiconductors $VanEck Semiconductor ETF(SMH)$ cratered -3.5%.

Last Saturday in the Weekly Compass, I anticipated how critical this week was for semiconductors, and not only because of the NVDA earnings, but because some megacaps were in a make-or-break position. AMD, for example, lost its 20WMA for the first time since September 2025. I noted last week that the trendline was important, but price action suggested bearish continuation. Once again, price action and the conviction in the candle told the truth. The same case applied to SMH. For NVDA, the net weekly move was just +1.3%, printing a large weekly indecisive candle that contains an internal gap at 213.

In choppy tapes like the one observed this week, the support and resistance levels modeled every week work as a reliable frame for upcoming price action and validate or invalidate directional theses coming from technical indicators. The examples below are for IWM and SMH using the 4-hour timeframe. Notice how the CWL modeled the Friday ahead of each week worked as a bullish-above and bearish-below reference, while the support lines below acted as targets and bouncing references. This week, the rally on Thursday failed to make it above the CWL for either IWM or SMH. The indecisive candles added probabilities for a bearish reversal, which proved to be the case today.