TRADING GAME PLAN REVEALED: Fed Firing, Stagflation & NVIDIA Earnings

The markets were jolted overnight by the unprecedented news of the President firing Federal Reserve Governor Lisa Cook, sending futures tumbling before a partial recovery. This politically charged event adds a new layer of uncertainty to a market already grappling with mixed economic signals and bracing for pivotal earnings from NVIDIA. In this morning's TRADING GAME PLAN REVEALED, Gareth Soloway, Chief Market Strategist at Verified Investing, cut through the noise to analyze the long-term implications of this move, expose suspicious trading activity, and pinpoint the critical technical levels that will define the market's next direction.

The Fed Under Fire: De-Dollarization and Long-Term Risks

The overnight dismissal of a Federal Reserve governor is a significant event that strikes at the core of the central bank's perceived independence. While the market's immediate reaction was a sharp drop followed by a bounce, the more profound consequences may unfold over months and years. Gareth highlighted the primary long-term concern: the erosion of global confidence in the U.S. financial system.

"My concern over this is more for the longer term, does it continue the slow dedollarization that we've been seeing where these other countries are slowly diversifying away their US assets and being a little bit more shy on buying the long-term debt of the United States."

For decades, the U.S. dollar has been the world's undisputed reserve currency, and U.S. debt has been considered the safest asset globally. This status is built on a foundation of political stability and trust in U.S. institutions, particularly an independent Federal Reserve that makes monetary policy decisions based on economic data, not political pressure.

Actions that politicize the Fed can cause foreign nations and central banks to question the long-term stability and value of their U.S. dollar and debt holdings. This could accelerate the "de-dollarization" trend, where countries gradually reduce their exposure to U.S. assets. The potential fallout is significant: if major players become hesitant to buy long-term U.S. bonds, the U.S. government would have to offer higher interest rates to attract buyers. This means the market, not the Fed, would drive long-term rates higher, increasing borrowing costs for the government, corporations, and consumers, even if the Fed is cutting short-term rates.

Following the Clues: A Case of Insider Trading?

Beyond the macro implications, Gareth pointed out a highly suspicious and telling pattern in the market action just before the news broke. On Monday, the final 10-minute candle of the trading day in the S&P futures saw a massive spike in selling volume, pushing the index down over 10 points right before the 4:00 PM EST close. The news of the Fed governor's firing was then released at 8:00 PM EST, precisely when after-hours trading halts.

"You can't tell me that someone didn't get the news that this was going to be announced overnight ahead of time and take advantage by shorting the heck out of the S&P futures and then getting paid out on this dip here in the overnight."

This is a classic example of how astute traders can read the charts for clues that go beyond typical technical patterns. Such an anomalous surge in selling pressure right at the close, immediately preceding major market-moving news, strongly suggests that certain entities with advance information were positioning themselves to profit. For the average investor, this serves as a stark reminder that the market is not always a level playing field. However, it also reinforces the value of paying close attention to volume and price action, as these can be the "footprints" of informed capital, offering hints about what might be coming next.

Decoding Powell's Message: The Specter of Stagflation

The market's current fragility is compounded by the underlying economic message delivered by Fed Chair Jerome Powell last Friday. While the market initially rallied on the dovish prospect of rate cuts, Gareth provided a more sobering translation of Powell's comments, arguing they paint a picture of the worst-case economic scenario: stagflation.

"I did speculate that I thought the markets would give back these gains because what Jerome Powell actually said was not positive... he basically said, inflation is likely going higher. The jobs market shows us that it's going to continue to weaken, which is literally the definition of stagflation, which is the worst scenario of all."

Stagflation—the toxic combination of high inflation and stagnant economic growth (with rising unemployment)—is notoriously difficult for policymakers to combat. The traditional tool for fighting inflation is raising interest rates, which slows the economy. The tool for stimulating a weak economy is cutting rates, which fuels inflation. To be facing both problems simultaneously leaves the Fed in a precarious position. Powell's admission that they may have to cut rates despite these conditions suggests the economy is weakening more rapidly than acknowledged, forcing their hand even if it risks reigniting inflation.

The Fifth Hit: S&P 500 and Nasdaq at a Technical Tipping Point

With this volatile macro backdrop, the technical picture for the major indices has become critically important. Both the S&P 500 and the Nasdaq 100 are testing well-defined, multi-touch uptrend lines that have supported the market for months. Gareth explained a key probabilistic rule that traders must understand now.

"You've hit four times on both trend lines on the S&P and the NASDAQ. What do we know that means? It means the fifth hit has a 60% chance of breaking... the fifth hit is the first time that a breakdown is now probability-wise favored."

This is a crucial concept. While a trendline gets stronger with each successful test up to the fourth hit, the probabilities begin to shift on the fifth touch. It doesn't guarantee a breakdown, but it signals that the support is weakening and should be watched with extreme prejudice.

S&P 500: The key trendline support currently sits around the 6385 level. A close below this line would be an initial warning, and a confirmed breakdown would signal a much larger correction is likely underway.
Nasdaq 100 (QQQ): The tech index is in a similar position, testing the lower bound of a parallel channel. The catalyst for the next major move—either a bounce or a breakdown—will almost certainly be NVIDIA's earnings report, due after the bell on Wednesday.

Key Setups: NVIDIA, Eli Lilly, and a New Global Opportunity

NVIDIA (NVDA): As the market's bellwether, NVIDIA's chart offers clues for its post-earnings potential. The stock recently broke a key multi-touch uptrend line. It is now rallying back towards that broken line in what technical analysts call a "retrace to the scene of the crime." This former support has now flipped to resistance.

Upside Potential: A positive earnings reaction could push the stock to this trendline resistance, currently around the $189 to $190 USD level.
Downside Risk: A negative reaction would likely see the stock target its previous lows and a significant unfilled gap lower at approximately $163 USD.

Eli Lilly (LLY): The pharmaceutical giant is showing technical strength following news it is filing for approval of a weight-loss pill. The chart previously bounced perfectly off a key long-term trendline and is now targeting a large, unfilled gap. The upside target is the gap fill at $746 USD, after which the stock is likely to stall.

Brazil ETF (EWZ): Gareth unveiled a new potential breakout trade in emerging markets. The iShares MSCI Brazil ETF (EWZ) is consolidating in a massive wedge pattern, capped by a downtrend line that extends back to January 2020. A confirmed breakout above $29 USD would signal a major long-term trend change and could trigger a significant move higher.

Crypto and Commodities: The Discipline of a Trader

Bitcoin (BTC): The leading cryptocurrency has shown technical weakness, breaking and confirming below a key upsloping trendline. After failing a retest, it has now fallen below the $112,000 USD pivot level. While it's finding minor support, the chart suggests a larger move is likely. Gareth's analysis points to a major confluence of support at the psychologically significant $100,000 USD level, which aligns with two different key trendlines.

Solana (SOL): Solana is currently consolidating within a tightening wedge pattern defined by support around $175 USD and resistance at $215 USD. The direction of its next major move will be determined by which of these boundaries it breaks first.

Gold, Silver, and Oil: The analysis of commodities provided a masterclass in trading discipline.

Gold: Has a slight near-term negative bias but remains incredibly bullish on a 6-12 month timeframe.
Silver: Is currently stuck between support and resistance, making it a "no trade." As Gareth explained, the majority of charts are not actionable at any given time.
Oil: Nearly reached Gareth's ideal short-entry level at a "retrace to the scene of the crime" but missed by a fraction. Instead of chasing the trade, the disciplined approach is to step aside and wait for the next high-probability setup.

"Our job is to be disciplined as traders and investors, only waiting to take those trades when those probabilities flash, let's say 70 or 80%. Once they do that, okay, game on... But if it's like 50/50, 60/40, 40/60, it's not worth it."

Conclusion: Navigating a Market at a Crossroads

This is a market at a critical juncture. The political bombshell of a Fed governor's firing has introduced long-term risks to the dollar's stability. Suspicious trading activity suggests informed players are making big bets. The Fed's own language points towards a stagflationary environment. And technically, the major indices are testing weakening trendlines with a 60% probability of breaking, all hinging on NVIDIA's earnings.

In this environment, discipline, patience, and a focus on high-probability setups are paramount. By understanding the macro risks, reading the clues in the charts, and respecting key technical levels, traders can position themselves to navigate the volatility and capitalize on the opportunities that arise, whether the market breaks up or down.