Waiting on the Jackson Hole Speech

In my post on Tuesday 4th August I was looking at the ambiguous setup on US indices and the Nikkei after the strong rally into the beginning of August, noting the three good quality topping patterns that were still intact on the Philadelphia Semiconductor Index (SOX), QQQ and Nikkei.

I also noted that SPX was close to the daily 3sd upper band, and said that I was looking for a short term consolidation of a week or so, to allow time for the daily middle bands to go higher, and for the daily outer bands to expand, opening up further possible upside. We have since seen that consolidation last for three weeks so far, the daily middle bands have turned up, and the outer bands expanded, but have since started to contract again.

Of those three topping patterns the high quality H&S on Nikkei has since failed with a target at a retest of the all time high but the but the topping patterns on SOX and QQQ remain intact. The H&S right shoulder high on SOX is at 13,249.07 and if that fails to hold as resistance the target would be an all time high retest, but so far that has not been in danger of failing, with a thorough backtest of the 50dma marking the high so far.

In my last post on Wednesday I was looking at the importance of the daily middle bands as trend support and since then we have seen good NVDA earnings on Wednesday night and a modest rally. We are still clearly in this inflection point though and it seems very possible we will see a break up or down on the Fed statement at Jackson Hole expected at 10am EST this morning.

In the meantime the Philadelphia Semiconductor Index (SOX) has rallied back to test daily middle band support from below. This is an index I am watching very carefully as, in the absence of a rejection higher, it is likely in the process of retracing 50% of the huge move up from the April 2025 low:

SOX daily chart:

IWM has also closed under the daily middle band every day this week including yesterday. There is currently no obvious reversal pattern setting up a retest of the all time high.

IWM daily chart:

Of the other indices SPX had a decent, though still modest, move up from the daily middle band yesterday, closing ~0.4% above it, QQQ and DAX did a bit better, closing ~0.7% above it, and both DIA and NIKK closed marginally above their daily middle bands. This is a promising start for possible high retests, but we are still clearly in the inflection point.

Are there any reversal patterns forming that might deliver those high retests? Yes. The best is on DIA, with a decent quality IHS formed that on a sustained break up would look for a retest of the all time high made in early August.

DIA 15min chart:

A possible IHS is forming on SPX and on a sustained break up would look for a retest of the all time high made in mid August.

SPX 15min chart:

A small IHS may be forming on QQQ as well, and on a sustained break up would look for a retest of the short term high made in mid August. That pattern wouldn’t be looking for a retest of the all time high, but wouldn’t need to go a lot further to deliver that.

QQQ 15min chart:

What are my expectations of the Jackson Hole Speech? Well any talk of a cut in the Fed Funds Rate seems unlikely, as there is still a lot of upwards pressure on prices, and the new trade war with Canada and talk of increased tariffs elsewhere will definitely not be helping with that. We should really see a rise in the Fed Funds Rate, but the consensus view seems to be that Warsh will try to delay further rises until after the midterm vote on November 3rd, by which time it is possible that inflationary pressures may have moderated. If we don’t see any shift in rates then the tone of the speech today will be watched carefully. We’ll see how that goes.

I am writing a big post on the outlook for bonds that I’m planning to publish later today or over the weekend on my The Bigger Picture substack, so watch out for that.

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my page on the platform previously known as twitter, and my YouTube channel.

The Importance of the Daily Middle Bands

In my post on Tuesday 4th August I was looking at the ambiguous setup on US indices and the Nikkei after the strong rally into the beginning of August, noting the three good quality topping patterns that were still intact on the Philadelphia Semiconductor Index (SOX), QQQ and Nikkei.

I also noted that SPX was close to the daily 3sd upper band, and said that I was looking for a short term consolidation of a week or so, to allow time for the daily middle bands to go higher, and for the daily outer bands to expand, opening up further possible upside. We have since seen that consolidation last for three weeks so far, the daily middle bands have turned up, and the outer bands expanded, but have since started to contract again.

Of those three topping patterns the high quality H&S on Nikkei has since failed with a target at a retest of the all time high but the but the topping patterns on SOX and QQQ remain intact. The H&S right shoulder high on SOX is at 13,249.07 and if that fails to hold as resistance the target would be an all time high retest, but so far that has not been in danger of failing, with a thorough backtest of the 50dma marking the high so far.

Moving on to this week there is a very good example here of something I talk about on a very regular basis, and that is the importance of the daily middle bands as support. We have seen some promising smallish topping patterns break down last week, but for the last few days almost all the stock indices that I follow have been fighting to hold their daily middle bands as support. So far these have been holding for the most part, and if that continues to be the case I’d expect to see some high retests starting soon.

On SPX the daily middle band has been holding as support for five days and SPX closed yesterday nine handles above the daily middle band, in effect a close on daily middle band support:

SPX daily chart:

On IWM the daily middle band has been holding as support for five days with a couple of closes slightly below, and IWM closed yesterday 0.08 handles above the daily middle band, a close almost exactly on daily middle band support:

IWM daily chart:

On DIA the daily middle band was broken for two days last week with DIA trading entirely below it on Thursday and Friday, but DIA broke back over it on Monday and closed well above it yesterday:

DIA daily chart:

Of the two non-US stock indices that I follow closely DAX has been testing the daily middle band as support for a week but again closed comfortably above it yesterday.

DAX daily chart:

On NIKK the daily middle band has been holding as support for five days with a couple of closes slightly below, and NIKK gapped below it at yesterday’s open below and then rallied to close back above it.

NIKK daily chart:

That brings me to the weakest looking indices on Tech, and if we are going to see some high retests then ideally Tech would be leading that move back up.

On QQQ the daily middle band has been tested as support over the last four days and both closes this week were visibly below it. That’s not a break down with much conviction yet, but it is a confirmed break down, with yesterday’s close confirming Monday’s break below the daily middle band:

QQQ daily chart:

Last and weakest is the Philadelphia Semiconductors Index (SOX) which broke below the daily middle band last Wednesday and has closed below it every day since. This failed hard at a double test of the 50dma as resistance over the previous week and of course still has an H&S which has broken down with a target a lot lower in the 9150 area.

SOX daily chart:

Which way will this go? Well it looks like markets may be waiting for NVDA earnings, which will be out after the RTH closes in the US tonight. NVDA is currently about 10% off the May highs and is also currently below the daily middle band. Earnings are likely to be strong and it will be very interesting to see how much attention is paid to those against NVDA’s exposure to an AI boom that doesn’t seem likely to deliver anything resembling a profit in the easily foreseeable future.

Warsh will also be delivering his keynote remarks at Jackson Hole on Friday morning and that too could be interesting.

Bottom line, this is an important support test for equities almost across the board, a failure to break down will likely deliver high retests, and a sustained support break here could take prices significantly lower. The direction of that break may well be delivered by the news over the rest of this week.

If you like my analysis and would like to see more, please take a free subscription at my chartingthemarkets substack, where I publish these posts first. I also do a premarket video every day on equity indices, bonds, currencies, energies, precious commodities and other commodities at 8.45am EST, but only for paying subscribers. Other places to find me are my page on the platform previously known as twitter, and my YouTube channel.