TRADING GAME PLAN REVEALED: Fed Policy vs. GDP, NVIDIA Earnings, & Key Setups

In a market environment that seems to defy traditional logic, investors are grappling with a fascinating paradox: economic data is coming in strong, yet the Federal Reserve is widely expected to cut interest rates in a matter of weeks. In this morning’s TRADING GAME PLAN REVEALED, Gareth Soloway, Chief Market Strategist at Verified Investing, dissected this complex dynamic, analyzed the muted aftermath of NVIDIA’s highly anticipated earnings, and revealed critical technical levels across a spectrum of assets.

Today’s analysis provides a masterclass in navigating a market where sentiment and technicals may be telling a different story than the economic headlines. We’ll explore the "cake and eat it too" economy, the psychology behind NVIDIA’s non-event, and the patient, disciplined approach required to find high-probability trades amidst the noise.

The "Cake and Eat It Too" Economy

This morning, the market received two key pieces of economic data that, in a normal cycle, would suggest a robust and healthy economy. Jobless claims came in at a historically low 229,000, a figure that shows no signs of a labor market slowdown. More significantly, the second reading for second-quarter GDP was revised upward to 3.3%, beating the 3% estimate. This led Gareth to pose a critical question to investors: “Should the Fed be cutting with the economy as strong as it is?”

Despite this strength, the market’s conviction remains unshaken. According to the CME FedWatch Tool, there is an 85.3% probability of a rate cut at the September 17th meeting. This creates a "cake and eat it too" scenario, where investors believe they can enjoy the benefits of a strong economy (and strong corporate earnings) while also receiving the stimulus of lower interest rates. This narrative has been a powerful tailwind for equities, but it also introduces a significant risk. If the Fed hesitates, or if upcoming inflation data like tomorrow’s PCE Price Index comes in hot, this bullish consensus could be violently unwound. For now, the market is content to believe the best of both worlds is possible, a sentiment that is fueling the persistent "buy the dip" mentality.

NVIDIA's Earnings Fizzle: A Sign of Market Exhaustion?

All eyes were on NVIDIA yesterday, the $4.5 trillion behemoth that has single-handedly carried market sentiment for months. The earnings report was decent, but not spectacular, with a slight miss on data center revenue. The market’s reaction was telling: an initial after-hours plunge was quickly bought up, and the stock is now trading near the flatline. As Gareth aptly noted, “When you have a stock that is at all-time highs, that's $4.5 trillion that has led the market up, okay doesn't cut it, okay?”

This muted reaction is a significant event in itself. The biggest losers were options traders who paid massive premiums expecting a volatile move in either direction. When a stock fails to move after earnings, that premium evaporates, a phenomenon known as "volatility crush." More broadly, the price action speaks to an "insatiable buy the dip mentality" that often characterizes the latter stages of a bull run.

Gareth is watching for a potential short trade at the market open, speculating that institutions may use the early morning strength to sell into retail enthusiasm. From a technical standpoint, NVIDIA remains vulnerable as long as it trades below its former upsloping trend line, which has now flipped from support to resistance. The lack of a decisive post-earnings breakout suggests the stock, and perhaps the broader market, may be losing momentum.

Markets in Suspension: Wedge and Channel Patterns Dominate

The indecision seen in NVIDIA is reflected in the technical patterns of the major indices. The S&P 500 remains tightly coiled within a wedge pattern, a formation where price action becomes increasingly compressed between two converging trend lines. The market is now at a decision point: will it push to the top of the wedge around 6,540, or will it break down and test the lower trend line for a fifth time? As Gareth reminds us, a fifth hit on a trend line carries a 60% probability of a break—not overwhelming odds, but enough to warrant caution.

Similarly, the NASDAQ 100 continues to trade within a well-defined parallel channel. Like the S&P 500, it is essentially in neutral territory, awaiting a catalyst to trigger its next directional move. These consolidation patterns highlight a market in a state of suspension, having priced in the "cake and eat it too" narrative but now waiting for confirmation from either the Fed or upcoming economic data.

The Bond Market's Verdict: A Divergent Signal

While the equity market waits, the bond and currency markets may already be signaling the next move. The 10-year Treasury yield, despite a small pop on today’s strong GDP data, is telling a bearish story. It has already confirmed a breakdown from its own wedge pattern, completed a classic "retrace to the scene of the crime" by testing its former support as new resistance, and now appears poised to head lower. This price action suggests the bond market is firmly convinced that rate cuts are coming, regardless of the headline economic strength.

Meanwhile, the US Dollar Index (DXY) is testing a critical trend line of its own. A breakdown here could add further fuel to risk assets. However, Gareth emphasized the importance of his proprietary "confirmation" signal, a tactic he developed to avoid false breakdowns or "fake outs." He explained, “Confirmation is a tactic that I came up with probably now, it's about 15 years ago, and it has literally changed the way I trade because it tells you again if the probabilities tell you it is a real breakout or a fake out.” A daily close below the trend line is not enough; a second day of confirmation is needed to validate the signal and increase the probability of a sustained move lower.

The Anatomy of an Earnings Trade: Snowflake, CrowdStrike, and the Power of Patience

Earnings season provides a fertile ground for technical traders, and this morning offered several powerful case studies. Snowflake (SNOW) delivered a masterclass in trading resistance. After posting remarkably good earnings, the stock surged in pre-market trading directly into a major resistance zone between $230 and $238 USD. This area was significant because it contained a major gap fill from a previous plunge. As predicted by technical analysis, sellers emerged precisely at the $230 USD gap fill, and the stock has already pulled back significantly to $225 USD.

This is the essence of counter-trend day trading. As Gareth explained, traders are looking for “crazy moves... where price gets so out of whack that it creates panic or greed.” This emotion pushes a stock beyond its fair value, creating a rubber band effect that technical traders can exploit. Contrast this with Hewlett Packard (HPQ), which was virtually unchanged on its earnings. With no emotional extension, the odds of a successful trade are greatly reduced.

Patience was the lesson from CrowdStrike (CRWD). After a volatile post-earnings session, the stock is trading in a range with no clear edge. Instead of forcing a trade, Gareth identified a high-probability swing trade setup far below the current price, at a confluence of support around $362-$363 USD, where a gap fill aligns with a long-term ascending trend line. This disciplined approach—identifying the ideal level and waiting for the market to come to you—is a hallmark of professional trading.

A Trader's Morning Routine: Finding Opportunity in a Sea of Noise

In a valuable "behind the curtain" segment, Gareth answered a viewer's question about how he finds stocks to trade each day. His process is a simple yet effective routine, honed over 26 years, that does not rely on complex scanners.

The Curated Watchlist: Over the years, Gareth has built a personal watchlist of highly liquid stocks, generally with market caps of $5-$10 billion or more. Liquidity is crucial for entering and exiting large positions without significantly impacting the price.
The Morning Scan: The process begins before even getting out of bed. A quick glance at his phone reveals any major movers. Then, he turns on CNBC—not for the commentary, but for the ticker scrolling at the bottom of the screen. This ticker is an unfiltered source of what is moving with volume in the pre-market.
Mental Shortlisting: Seeing a name like Snowflake up dramatically immediately places it on his mental watchlist for a potential short at a key resistance level. Seeing NVIDIA trading flat means it’s a lower priority.
The Power of Community: Once at his desk, the process is amplified by the community in the Verified Investing live day trading room. With hundreds of experienced traders all watching the market, potential setups are identified and shared collectively, creating a powerful collaborative environment.

This routine is a testament to the idea that successful trading is about developing a consistent process, not reinventing the wheel each day.

Conclusion: Navigating the Disconnect

The market is currently defined by a significant disconnect. Strong economic data is at odds with dovish Fed expectations. The bond market is pricing in rate cuts, while the equity market consolidates near all-time highs. NVIDIA’s muted earnings reaction suggests the "buy everything" momentum may be waning.

In this environment, a disciplined, technical-based approach is paramount. The roadmap is clear: watch for resolutions from the wedge and channel patterns in the major indices, respect key levels defined by gap fills and trend lines, and exercise the patience to wait for emotional extremes that create high-probability setups. With the pivotal PCE inflation report due tomorrow, the market’s "cake and eat it too" narrative is about to face its next major test.