OVERVIEW
The Morning Setup

• Friday: SPY, QQQ, MDY and IWM all advanced. The S&P 500 gained 0.43%, Nasdaq 0.43% and Russell 2000 roughly 0.9%. Breadth improved, with Materials, Health Care and Financials among the strongest groups.

• QQQ: Closed at 713.44, effectively on its 50-day average. After last week’s failed breakout and technology selloff, that remains the most important technical level on the board.

• Broader market: MDY and IWM recovered Friday and eight of 11 Swingly sector ETFs advanced. Equal-weight indexes continue to hold up better than QQQ, but the improvement still needs follow-through.

• Premarket: At 7:28 a.m. ET, Dow futures were -0.24%, S&P 500 futures -0.28% and Nasdaq 100 futures -0.68%. Nvidia was down about 0.7%, with several semiconductor and storage names also weak.

• Iran: Treasury Secretary Scott Bessent is expected to outline a major new sanctions campaign against Iran later today. Brent is lower around $93 ahead of the announcement after gaining more than 5% last week.

• Rates: Treasury yields are easing slightly this morning but remain elevated. The 10-year is around 4.70% and the 30-year around 5.24%–5.25%.

• Wednesday: Nvidia reports, while Q2 GDP and July Personal Income and Outlays/PCE are both released at 8:30 a.m. ET.

• Friday: Fed Chair Kevin Warsh delivers his Jackson Hole keynote at 10:00 a.m. ET on August 28.

MARKET ANALYSIS
Friday Stabilised the Market

Friday was a useful response after Thursday’s broad selloff.

The S&P 500 gained 0.43%, the Nasdaq Composite 0.43%, the Dow 0.98% and the Russell 2000 around 0.9%. Advancers outnumbered decliners on both the NYSE and Nasdaq, while Materials, Health Care and Financials provided much of the strength.

The improvement is important because last week contained two materially weaker sessions: Tuesday’s semiconductor-led distribution and Thursday’s broad decline across most sectors.

Friday stopped that deterioration but it did not reverse it as we saw the S&P 500 still finished the week down 1.43%, the Nasdaq lost 2.05%, and the Russell 2000 fell around 1.6%. Semiconductors were particularly weak, with the Philadelphia Semiconductor Index losing roughly 5% over the week.

QQQ’s 50-Day Is the Main Technical Test

QQQ closed Friday at 713.44, almost exactly on its 50-day average. That is the most important level today.

Last week’s sequence was clear: QQQ broke through the high-720s, failed to hold the breakout, sold off sharply with technology, and eventually lost its 50-day before recovering back toward it Friday.

The practical hierarchy is now:

~713 — 50-day average / immediate trend test
~728–735 — failed breakout zone that eventually needs to be recovered
661 — deep structural support, not relevant to today’s exposure decision

The original draft spends too much time discussing QQQ’s distance from 734.58. That level matters for a full technical repair, but it is not today’s first decision.

First, QQQ has to prove it can hold its 50-day.

If price stabilises here and eventually begins working back through the high-720s, last week increasingly looks like a reset within the broader uptrend.

If QQQ loses the 50-day again and selling volume expands, the probability of a deeper Nasdaq correction rises materially.

This morning provides an immediate test. Nasdaq 100 futures are down roughly 0.7%, with weakness concentrated again in technology.

The Broader Market Is Holding Up Better

The healthier part of the picture remains outside QQQ. SPY closed Friday at 765.62, around 1.85% above its 50-day average. MDY finished at 699.63, only about 0.6% above its 50-day, while IWM closed at 299.94, roughly 1.1% above its own.

For MDY, the useful medium-term reference is around 695. For IWM, it is around 297.

That makes the current index structure straightforward:

QQQ — sitting on its 50-day
MDY — narrowly above its 50-day
IWM — narrowly above its 50-day
SPY — still carrying the largest cushion

Friday’s breadth improvement helps. Eight of 11 sector ETFs advanced, and the broader cash market also showed positive participation. The Russell 2000 outperformed the major large-cap indexes.

RSP and QQQE also remain further above their respective 50-day averages than QQQ.

The conclusion should remain simple: equal-weight and broader market structure is holding up better than cap-weighted Nasdaq.

That does not prove mega-cap concentration. It does tell us that the damage has not yet become a synchronized breakdown across the market.

If MDY and IWM begin losing their 50-day averages alongside QQQ, that distinction disappears quickly.

Nvidia Is This Week’s Main Equity Test

Nvidia reports on Wednesday, August 26, and the implications extend well beyond one company.

The stock sits at the centre of the AI infrastructure trade that has helped drive both equity performance and enormous capital spending. Reuters notes that Nvidia is now associated with more than $500 billion of planned AI infrastructure financing involving major financial institutions.

That matters after last week’s semiconductor weakness. The market is no longer simply asking whether AI demand is growing. It is increasingly asking whether the earnings produced by that demand justify the valuations, financing requirements and capital expenditure surrounding the theme.

That makes the reaction to Nvidia’s report at least as important as the headline numbers.

A strong report accompanied by a weak share-price reaction would tell us something very different from strong results followed by renewed leadership across semiconductors.

For QQQ, Wednesday could therefore determine whether the current 50-day test develops into a recovery or a deeper reset.

Iran Is Today’s Immediate Macro Event

Today’s macro event is not Jackson Hole, Treasury Secretary Scott Bessent is expected to provide details later today on a new U.S. sanctions campaign against Iran, potentially extending pressure to countries and companies that continue trading with Tehran.

Iranian oil flows are already under considerable pressure.

Kpler estimates shipments to China have fallen to roughly 534,000 barrels per day so far in August, from 823,000 in July. Visible traffic through the Strait of Hormuz also remains severely impaired.

Interestingly, crude is falling rather than rising ahead of the announcement.

Brent is around $93 and WTI around $85.50, with traders taking profits after both benchmarks gained more than 5% last week.

That offers some immediate relief to the inflation trade, but it does not remove the underlying supply risk.

Global inventories have fallen materially, Hormuz traffic remains heavily constrained and the market has already consumed a substantial portion of the emergency reserves released during the conflict. Reuters Breakingviews argues that the current low-$90s Brent price may increasingly behave like a floor if those buffers continue to fall.

Long-Term Yields Are Still a Problem

Treasury yields are also modestly lower this morning. The 10-year is around 4.70%–4.71%, while the 30-year is near 5.24%–5.25%.

That is better than last week’s peak, but not dramatically so. The 30-year touched 5.337% last week, its highest level since 2007, before Treasury announced an increase in long-dated bond buybacks. The intervention initially pushed long yields lower, but much of that move subsequently reversed.

The underlying issue remains intact: investors are demanding more compensation for absorbing heavy government borrowing, persistent inflation risk and enormous private-sector capital requirements from AI infrastructure.

That matters particularly for long-duration growth stocks.

A QQQ recovery would therefore be considerably more convincing if it occurs while long yields stabilise, rather than in spite of another move toward last week’s highs.

Wednesday Is the Biggest Day of the Week

Wednesday carries an unusually concentrated catalyst stack. At 8:30 a.m. ET, the Bureau of Economic Analysis releases:

• the second estimate of Q2 GDP and preliminary corporate profits

• July Personal Income and Outlays, including the Fed’s preferred PCE inflation measures

The BEA confirms both releases for August 26 at 8:30 a.m. ET and Nvidia then reports later that day. That gives the market both sides of the current debate simultaneously.

On the macro side: is inflation cooling enough to prevent another rate hike without growth deteriorating too quickly?

On the equity side: can AI earnings continue supporting the extraordinary level of investment and valuation embedded in technology?

The answers should matter considerably more than anything on today’s relatively light domestic calendar.

Jackson Hole Comes Friday

Fed Chair Kevin Warsh’s Jackson Hole keynote is Friday, August 28 at 10:00 a.m. ET, not today.

That timing matters because Warsh will speak after Wednesday’s GDP and PCE data.

The market will therefore enter Jackson Hole with a much fresher read on growth and inflation, as well as Nvidia’s results.

Reuters reports that markets currently fully price at least one 25-basis-point hike by year-end, while the probability of an immediate September move remains much lower.

Given Warsh’s reduced emphasis on forward guidance, the speech may be more useful for understanding his policy framework than for receiving an explicit September signal.

Either way, it belongs at the end of this week’s decision tree.