TRADING GAME PLAN REVEALED: Fed Day Showdown & Pivotal Market Levels

Today is a monumental day for the markets. All eyes are on the Federal Reserve, with a 25-basis-point interest rate cut widely expected at 2:00 PM ET. However, as Gareth Soloway, Chief Market Strategist at VerifiedInvesting.com, detailed in this morning’s TRADING GAME PLAN REVEALED, the real fireworks won’t come from the announcement itself, but from the press conference that follows. The market is coiled like a spring, with the S&P 500, Nasdaq 100, and Dow Jones Industrial Average all sitting at pivotal technical inflection points, perfectly choreographed for a major move. This article will delve deeper into these critical chart setups, the economic data flashing warning signs, and the disciplined trading psychology required to navigate the volatility ahead.

The Fed's Fork in the Road

While the market has fully priced in a quarter-point rate cut, the true catalyst for the next major trend will be the tone and language used by Fed Chair Jerome Powell. The market is hanging on a single question: will he be hawkish or dovish?

A hawkish Powell would emphasize that inflation remains stubbornly above the Fed’s 2% target and is, in fact, ticking higher. This stance would signal that future rate cuts are not guaranteed and that the fight against inflation is far from over. A dovish Powell, on the other hand, would pivot to focus on the weakening labor market and slowing economy, suggesting that inflation is a secondary concern and that more aggressive rate cuts are necessary to support growth.

As Gareth noted, this decision has profound implications for everyday citizens: “My personal preference is to deal with inflation, as it is an insidious thing that eats away at our buying power as citizens. But nonetheless, that’s going to be the kicker, right? So, it’s all about what Jerome Powell says, not the cut itself.”

This fundamental conflict—taming inflation versus stimulating a slowing economy—places the Fed in a precarious position. The market’s reaction will not be to the known (the rate cut) but to the unknown (the forward guidance), which is why traders are largely on the sidelines, awaiting the signal that will either ignite a breakout or trigger a breakdown.

A Perfect Technical Storm: Three Indices at a Crossroads

It’s a rare and fascinating phenomenon when the market’s most important indices arrive at critical decision points simultaneously, just hours before a major catalyst. It’s as if the collective psychology of the market has priced in the impending event, creating a perfect technical setup for a volatile resolution.

The S&P 500 Wedge: The S&P 500 is trading within a classic wedge pattern, where ascending support and descending resistance lines are converging. On Monday, the index managed a single daily close above the upper trendline, a move that often traps eager breakout traders. However, it failed to achieve a confirmation signal yesterday, and today it finds itself sitting directly on that pivotal trendline, awaiting its marching orders from the Fed.

The Nasdaq 100 Parallel: The tech-heavy QQQ is battling a parallel channel that has defined its price action for nearly a year. After gapping above the upper boundary yesterday, it ultimately closed back below the line. This rejection keeps the index in a precarious position. As Gareth highlighted, “Yesterday’s close was below this parallel... QQQ pivotal day today. Is it going to get above and close above, or is it going to get rejected and start heading down to the low end of the parallel?”

The Dow Jones Breakdown Watch: Perhaps the most urgent of the three, the Dow Jones Industrial Average has been consolidating in one of the tightest wedge patterns imaginable. It recently posted a close below the lower trendline, putting it on official watch for a confirmed breakdown. A close today below 45,660 would provide that confirmation, potentially signaling a broader risk-off move across the market.

The fact that all three major indices are at these make-or-break levels underscores the significance of today’s Fed meeting. The charts have set the stage for a decisive move, one way or the other.

The Confirmation Signal: Your Shield Against Market Fakeouts

One of the most valuable lessons for any trader is understanding the difference between a simple price move and a confirmed one. As Gareth shared from his decades of experience, relying on a single close above or below a key level is a recipe for getting caught in a "fakeout."

“It’s not about a close above or below a trend line that creates a breakout or a breakdown, because I have been countlessly caught off guard, especially early in my career, till I figured out the confirmation signal on the wrong side.”

A fakeout occurs when price briefly pierces a key level, luring in traders, only to violently reverse, trapping them in a losing position. The confirmation signal is a simple yet powerful filter designed to increase the probability that a move is genuine.

For a Breakout: After a daily close above a resistance trendline, confirmation occurs when the next day’s price closes higher than the high of the breakout day.
For a Breakdown: After a daily close below a support trendline, confirmation occurs when the next day’s price closes lower than the low of the breakdown day.

While no signal is foolproof, waiting for confirmation dramatically shifts the odds in your favor. As Gareth explains, it can increase the probability of a real move to around 80%. This disciplined patience is what separates professionals who trade on probabilities from amateurs who gamble on possibilities.

Economic Cracks: The Housing Market's Warning

Beneath the surface of the pre-Fed anticipation, troubling economic data is emerging. Today’s housing starts and permits figures painted a grim picture, with housing starts plummeting by 8.5% month-over-month, a significant decline that missed expectations.

This data point is not an isolated incident. Gareth shared concerning anecdotal evidence: “I’ve literally talked to multiple brokers in the southern states... these brokers have told me that it’s as bad as 2008 right now, like literally crickets out there.”

This weakness in the housing sector, a key driver of the U.S. economy, provides critical context for the Fed's decision. It echoes the patterns seen in 2007, just before the Great Financial Crisis, where housing was the canary in the coal mine. While a collapse in home prices hasn't materialized yet—partly due to a lack of new inventory, as confirmed by the falling housing starts—the swelling inventory of existing homes and lack of buyer demand is a story that cannot be ignored. This economic reality may force Powell’s hand toward a more dovish stance, regardless of the inflation data.

The Supermarket Analogy: The Psychology of Patient Investing

In a market environment filled with hype and fear of missing out (FOMO), the most powerful edge a trader can possess is psychological discipline. Gareth illustrated this perfectly with a simple, yet profound, analogy, referencing past successful calls on Chinese stocks like Baidu and the KWEB ETF, which have seen explosive gains of 48% and are now trading at $42.40, respectively.

“If you weren’t in prior, it’s too late to get in now... I use the old adage, like, when I go to the supermarket, am I super excited and, like, holy cow, I gotta buy five dozen packs of eggs because price is tripled? Or am I, like, you know what? I don’t even need eggs this week... I’ll wait for prices to come down. And that’s the same mentality.”

This mindset shift is transformative. Most retail investors are conditioned to buy when prices are high and excitement is peaking, and to sell when prices are low and fear is rampant. A professional does the exact opposite. They are a bargain hunter, patiently waiting for assets to become undervalued or for a high-probability setup to emerge. Chasing a stock after it has already run 48% is the equivalent of paying a premium for eggs just because they are popular. The risk is high, and the potential reward is diminished. The disciplined investor knows that missing one trade is meaningless in a career of thousands.

Fading the Frenzy: General Electric's Ominous All-Time High

While some charts are setting up for potential breakouts, others are showing signs of exhaustion. General Electric (GE) is a prime example. The stock just achieved a remarkable milestone, piercing its all-time high from the dot-com bubble peak in the year 2000—an incredible feat, especially considering it has since spun off its healthcare and energy divisions.

For many, this would be a signal to FOMO in. For a seasoned chart technician, it’s a massive warning sign. This move represents a classic double top, and such pierces are often "look above and fail" patterns that precede significant pullbacks. The technical evidence supporting this thesis is compelling, particularly the pronounced negative divergence on the Relative Strength Index (RSI).

Across multiple timeframes—monthly, weekly, and daily—the story is the same: as GE’s price has pushed to new highs, the RSI has been making a series of lower highs. This divergence indicates that the momentum behind the rally is waning significantly. It suggests that while the price is still climbing, the buying power is weakening, a classic precursor to a trend reversal. This is the chart equivalent of an engine sputtering just as a car reaches its top speed.

Conclusion: Discipline in the Face of Uncertainty

As the market holds its breath for the Federal Reserve's verdict, the technical charts have provided a clear and unbiased roadmap. The S&P 500, Nasdaq 100, and Dow Jones are all balanced on a knife’s edge, ready to react to the words of Jerome Powell. Whether the outcome is a hawkish hold that sends markets tumbling or a dovish pivot that ignites a year-end rally, the key levels are defined.

Navigating this environment requires more than just reading charts; it demands a professional mindset. It means waiting for confirmation to avoid market fakeouts, having the discipline to not chase extended moves, and understanding the economic crosscurrents that influence policy. By approaching the market as a game of probabilities, not predictions, and by exercising the patience of a bargain hunter, traders can position themselves to capitalize on the volatility ahead, no matter which way the market breaks.