TRADING GAME PLAN REVEALED: Goldilocks Jobs Data Fuels S&P All-Time High

This morning, the markets received the highly anticipated jobs report, and the numbers delivered a "Goldilocks" scenario that has ignited a rally and solidified expectations for a series of Federal Reserve rate cuts. In this morning's TRADING GAME PLAN REVEALED show, Gareth Soloway, Chief Market Strategist at Verified Investing, broke down the perfect storm of data that is propelling the S&P 500 to new all-time highs, while also highlighting critical divergences and key resistance levels that traders must watch. From a major shake-up in the AI chip sector to a stunning collapse in a retail giant, today’s market is a complex tapestry of bullish momentum and underlying warnings.

The "Goldilocks" Jobs Report

The pre-market was electrified by the latest employment data, which came in perfectly tailored to what the market wanted to see. Payrolls were reported at 22,000, significantly below the 75,000 estimate. While on the surface this seems weak, it was the ideal number for investors craving monetary easing. As Gareth explained, this was the catalyst the market needed:

"This was a Goldilocks number... you might say, oh, that's weaker than expected. Why is that Goldilocks? Because the market wanted slightly weaker. Slightly weaker ensures that we're going to get that rate cut in September and likely more rate cuts in the remainder of the year. Remember, markets crave cheap money."

The genius of this report, from the market's perspective, was its balance. The headline number was weak enough to push the Federal Reserve towards cutting rates, but not so weak as to signal an imminent recession. Had the number been negative, panic would have ensued. Instead, other components of the report painted a picture of stability. The unemployment rate held steady at 4.3%, and the participation rate even ticked up by a tenth of a percent. This combination provided the perfect justification for a risk-on rally, a narrative further fueled by an unusual event surrounding the data release. Gareth noted, "The BLS website that reports these numbers was suspiciously down for a few minutes prior to the release of the number." While not drawing conclusions, it’s an observation that adds a layer of intrigue to a pivotal market day.

Three Rate Cuts Now on the Table

The immediate impact of the jobs report was a dramatic shift in rate cut expectations. The market, which runs on the fuel of liquidity, now sees a clear path to cheaper money for the remainder of the year. Using the Fed Watch tool, which tracks the probabilities of future Fed actions, the outlook is now crystal clear.

"The markets are now pricing in three rate cuts into the end of the year, one at every meeting. Here's September. Rate cut in September. Rate cut in October and rate cut in December."

This is the essence of the Goldilocks scenario. The data was just soft enough to get the Fed "off of their seat," as Gareth put it, but strong enough to avoid triggering recessionary fears. This repricing of monetary policy sent immediate ripples across asset classes. The S&P 500 futures, after an initial algorithmic dip on the headline "miss," quickly reversed and surged higher as investors digested the implications: more rate cuts are coming, and soon. This fundamental shift provides a powerful tailwind for equities as we head into the final quarter of the year.

S&P 500 Hits New Highs, But Nasdaq Lags

The reaction in the major indices tells a story of broad market strength but also reveals a subtle yet important divergence. The S&P 500 is set to gap up to a new all-time high, a clear bullish signal. The technical charts, which had shown the index recovering beautifully after a brief dip below a key trendline earlier in the week, now have a clear upside target.

"We move this arrow over and we have a distinctive resistance level that we'll be watching... that's at around 6565 on the S&P... I do think at this point the markets want to reach for that level."

This ascending trendline target, which will inch higher each day, provides a clear objective for the current rally. However, the tech-heavy Nasdaq 100 tells a slightly different story. While it is also rallying strongly, it is not making a new all-time high alongside the S&P 500. This relative weakness is a divergence worth noting. Technically, the Nasdaq chart performed a classic "fake out," briefly closing below its key trendline without confirmation before roaring back. Its next major hurdle is a clear double-top resistance. Gareth anticipates that both indices will likely hit their respective major resistance levels around the same time, setting the stage for a potential pullback next week.

A Changing of the Guard in AI? Broadcom vs. Nvidia

The biggest driver of the Nasdaq's strength today is Broadcom (AVGO), which posted an epic 15% surge after its earnings report. The company, valued at $1.4 trillion USD before the report, delivered guidance that sent the stock soaring. This powerful move has pushed AVGO directly into a key technical resistance zone identified by Gareth.

"Look at this trend line, guys. It has now hit my short level for the day... anything between $350 and $353 to me is a great potential day trading short level."

This level is defined by a multi-month upsloping trendline connecting the highs from June and December 2024. What makes this story so fascinating is what’s happening with the reigning AI king, Nvidia (NVDA). While Broadcom is exploding higher, Nvidia is selling off. This has led to a compelling theory of capital rotation.

"I almost speculate that there's some money that is saying, wait a minute, Nvidia's gotten a little too far ahead at a 4.5 trillion valuation. Let's rotate capital from Nvidia and put it in Broadcom."

This potential "passing of the guard" is reflected on Nvidia's chart, which is beginning to form a bearish continuation pattern known as a bear flag. This pattern suggests that after a period of consolidation, the stock could roll over. Gareth's long-standing target for Nvidia remains around the $153 USD level, representing a potential 10% drop from current prices.

Conflicting Signals from Bonds, The Dollar, and Commodities

A look across different markets reveals a series of intriguing and often conflicting signals. The 10-year Treasury yield broke down precisely as the charts suggested, falling sharply on the jobs data. It is now approaching a critical trendline support around 4.05%. As per technical principles, a third test of a significant trendline is unlikely to break, suggesting a bounce may be imminent before an eventual breakdown.

Meanwhile, the US Dollar (DXY) is weakening, consolidating in what appears to be a bearish pattern that favors further downside. This weakness is helping fuel a rally in gold, which is pushing higher. However, this creates an unusual dynamic. As Gareth pointed out, "Generally speaking, gold and the stock market don't continue to go up together... something at some point has to break." This divergence from historical correlation is a yellow flag that suggests one of these trends may have to give way soon.

Perhaps the most perplexing signal comes from the oil market. Crude oil is selling off substantially, down 2% for its third consecutive day of losses. This is counterintuitive. Rate cuts are meant to stimulate the economy, which should increase demand for oil. The fact that oil traders are selling aggressively suggests they are not buying the "strong economy" narrative, a stark contrast to the euphoria in the equity markets.

Lululemon’s Collapse and Other Market Movers

Earnings season continues to deliver spectacular moves. Lululemon (LULU) is the cautionary tale of the day, getting crushed by 20% after its report. The company cited a combination of tariffs and a failure to innovate, leading consumers to seek cheaper alternatives. For technical traders, however, the collapse was a masterclass in the power of long-term charts. The stock plunged directly into a major support zone between $153 and $163 USD, a level defined by key pivots dating back to 2018.

The VIX, or "fear index," is also telling a story. It has collapsed from a high of 19.38 on Tuesday to below 15 today. While this signals complacency, it is also entering a zone where traders who use volatility as a hedge may begin accumulating positions. Gareth noted that the VIX could fall to a low of around 13.50, at which point a significant spike becomes much more probable.

Conclusion: Navigating a Bullish but Complex Market

Today's market is defined by the bullish momentum unleashed by a "perfect" jobs report that has paved the way for multiple Fed rate cuts. The S&P 500 is charging towards new highs with a clear technical target in sight. However, beneath the surface, signs of caution abound. The Nasdaq's relative weakness, the potential capital rotation out of Nvidia, the unusual correlation between stocks and gold, and the bearish price action in oil all suggest that this rally may not be as straightforward as it appears.

Traders must balance the powerful upward momentum with an awareness of the key resistance levels overhead and the conflicting signals from other asset classes. The market has been given the green light it wanted, but the road ahead contains critical tests that will determine whether this rally has legs or is setting up for a significant reversal.