GAME PLAN REVEALED: S&P Levels, Powell Preview & Defensive Plays

The financial markets are holding their collective breath, balanced on a technical knife's edge as they await tomorrow's pivotal speech from Federal Reserve Chairman Jerome Powell at the Jackson Hole economic symposium. In this morning's GAME PLAN show, Gareth Soloway, Chief Market Strategist at Verified Investing, cut through the noise and narratives to deliver a masterclass in data-driven analysis. He revealed the precarious state of the major indices, uncovered subtle inflationary warnings from the retail sector, and reinforced the core principles of probability-based trading that separate the pros from the crowd.

The S&P and Nasdaq: Hanging by a Thread

While the market's attention is fixed on tomorrow's macro events, the current price action tells a story of immense technical pressure. The daily charts of the S&P 500 and the Nasdaq 100 are flashing critical warning signs that disciplined traders cannot ignore. For weeks, a dominant downward-sloping trendline has acted as a ceiling for the S&P 500, rejecting multiple rally attempts with precision.

Yesterday's trading session, however, introduced a new, equally important trendline. As Gareth demonstrated, connecting the lows from May 23rd and June 23rd provided the exact support level for yesterday's intraday bottom, sparking a significant bounce. The perfection of this technical touch is a testament to the power of charting.

"Even after 26 years of trading and using charts, this stuff still blows my mind how again, charts tag these levels... For some reason, these trend lines map out human psychology."

This psychological map, however, is now showing signs of stress. The repeated tests of key levels are not a sign of strength but of weakening resolve. Gareth provided a crucial lesson on the mechanics of trendlines, explaining that each successive "hit" increases the probability of a breakdown.

First & Second Hits: Very unlikely to break.
Third Hit: Still unlikely to break.
Fourth Hit: Becomes a 50/50 probability.
Fifth Hit: The odds shift to favor a breakdown, approximately 60/40.
Sixth Hit: The probability of a break increases to around 70%.

This framework is essential for understanding the current market. The S&P 500 has now bounced off its lower support, but if it revisits that line, it will be the fifth test of the broader pattern, where the odds favor a break. The Nasdaq 100 (QQQ) is in an even more immediate predicament. It is set to open at or near its parallel channel support today, potentially marking its fifth hit. A break below this line would open the door to significant downside, with an initial target at the $553.50 gap fill and a more substantial move toward $531.

The Tariff Telltale: Inflation's Slow Creep

While the market waits for Jerome Powell's official word on inflation and monetary policy, recent earnings reports from major retailers are providing a real-world look at emerging price pressures. Gareth highlighted crucial commentary from Home Depot and Walmart that the Federal Reserve cannot afford to ignore.

After previously promising to absorb tariff-related costs, Home Depot signaled in its latest conference call that it would have to begin passing some of those costs on to consumers. Walmart's report provided an even clearer picture. The retail giant missed slightly on earnings but beat on revenue. Gareth explained the significance of this divergence:

"What does that tell us?... It means prices went up... their wholesale prices because of tariffs, but they missed on earnings because they didn't pass those costs fully along to the consumer... The reason they beat on revenue is because people had to pay those higher prices that were passed along."

This is the slow, grinding reality of inflation. Companies are now accepting that tariffs are "set in stone" and are beginning the process of raising prices. They may not do it all at once, preferring a gradual approach akin to "shrinkflation," but the inflationary impact is undeniable. This presents a major challenge for the Federal Reserve.

"Is this going to be impacting the CPI in the coming months? Does this still allow us to cut rates as aggressively as we other might otherwise might have done? And that is going to be a hindrance."

This under-the-radar data point could mean the market's hopes for aggressive rate cuts are misplaced, adding another layer of risk to an already fragile market.

Defensive Rotations: Finding Shelter in a Turbulent Market

The recent weakness in high-flying tech stocks, exemplified by Palantir's 25% drop in just a handful of trading days, signals a potential shift in market leadership. As money rotates out of big-cap tech, savvy investors begin to look for defensive positioning. Gareth pointed to the "non-sexy, not flashy" names that offer stability and value in uncertain times.

A prime example is Campbell Soup Company (CPB). The stock has been beaten down significantly compared to the tech darlings, but its chart is showing signs of life with a potential breakout from a bull flag pattern. More importantly, its business model is recession-resistant.

"During recessions, are people, is Campbell's going to be really impacted?... people still have to eat, right?... But again, can they make the determination to not buy that latest iPhone as soon as it comes out? They sure can."

This same logic extends to beaten-down agricultural commodities. Charts for Wheat and Corn, which have suffered massive declines, are now showing potential bottoms. In an economic slowdown, consumers shift their spending habits toward cheaper food staples. This fundamental reality, combined with deeply oversold technical charts, makes these commodities an interesting area to watch for a defensive trade.

A Crypto Crossroads: Bitcoin vs. The Alts

The cryptocurrency market is also at a critical juncture, with fascinating divergences appearing between Bitcoin and the broader altcoin market. Bitcoin's chart is flashing several near-term bearish signals: a double top at the all-time high, a powerful bearish reversal candle, and a confirmed break of its key up-sloping trendline. It now appears to be forming a bear flag, which could lead to another leg down, with support targets at $110,000 and then $100,000.

Gareth was quick to put this in perspective, reminding viewers of the difference between short-term trading and long-term investing. "I'm a trader, so don't get your panties in a bunch that I'm talking about near term. Like near term is just near term. Doesn't mean long term. I still love Bitcoin long term."

Interestingly, while Bitcoin looks weak, some major altcoins are showing relative strength. Ethereum (ETH) bounced perfectly off its $4,070 support level, and Solana (SOL) is holding its critical $170 support. The most compelling evidence of this divergence comes from the Bitcoin Dominance chart, which measures Bitcoin's market cap relative to the entire crypto market. It has decisively broken a multi-year parallel channel to the downside. This doesn't necessarily mean Bitcoin will collapse, but it strongly suggests that altcoins are poised to outperform, creating a potential "catch-up trade" in that segment of the market.

The Trader's Edge: Thinking in Probabilities

Underpinning all of this analysis is a core philosophy that is the foundation of long-term trading success: thinking in probabilities. The market is not a place for certainty or emotional conviction. It is a dynamic environment governed by odds and statistics. By using technical analysis, traders can identify setups where the probabilities are stacked in their favor.

The lesson on trendline "hits" is a perfect example of this mindset in action. It transforms a simple line on a chart into a quantifiable measure of risk and probability.

"If you start trading off of probability, all of a sudden, you become the casino, right? Yeah, you're not going to win every time... But the kicker is, can I win 70, 75, 80% of the time? And the answer is yes, when you learn how to chart properly."

This approach requires discipline, experience, and the humility to accept that losses are part of the game. By focusing on high-probability setups and managing risk, traders can build a sustainable edge over time, regardless of market direction.

Conclusion: A Market on the Brink

As we head into Jerome Powell's speech, the market is a coiled spring. The technical structures on the S&P 500 and Nasdaq are at a breaking point, with probabilities now favoring a downside resolution on the next test of support. Underlying this technical tension are nascent inflationary pressures from the retail sector that could tie the Federal Reserve's hands.

In this environment, the path forward requires a clear-eyed, data-driven strategy. It means recognizing the potential for a defensive rotation into overlooked sectors, understanding the nuanced divergences within the crypto market, and above all, approaching every decision with a probabilistic mindset. Whether Powell saves the day or punishes the market, the charts have provided a clear roadmap of the key levels and risks ahead.