NEWS
Fed Chair Powell Issues Dire Warning on Tariffs and the Risk of Stagflation ⚠️

Federal Reserve Chair Jerome Powell delivered his sharpest warning yet on the economic risks posed by President Trump’s sweeping new tariffs, saying they could push the U.S. toward a troubling mix of rising inflation, higher unemployment, and slowing growth — a scenario not seen in decades.

Speaking at the Economic Club of Chicago, Powell said the scale of the tariff increases is “significantly larger than anticipated,” and that the Fed has no modern playbook for handling such aggressive trade policy shifts. “We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Powell noted, referring to the Fed’s responsibility to both maintain stable prices and support employment.

Markets reacted swiftly: the Dow fell 700 points, the S&P 500 dropped 2.5%, and the Nasdaq sank 3.5% during Powell’s remarks. The tariffs — which include massive duties on Chinese imports, autos, and metals — are already beginning to weigh on sentiment, and more hikes are on the horizon.

Powell also pushed back on Trump’s claim that foreign countries bear the cost of tariffs, stating that U.S. consumers and businesses will feel the financial pain. “In all likelihood, unemployment is likely to go up as the economy slows,” he warned.

With inflation still hovering above the Fed’s 2% target and employment risks growing, Powell said the central bank will hold rates steady for now — watching closely to see how the economy responds to Trump’s evolving trade agenda.

MARKET
Weak News, Strong Tape — That’s Telling

U.S. stocks faced a downturn on Wednesday, largely driven by a sharp decline in Nvidia's stock, which significantly impacted the broader technology sector. Nvidia, the third-largest company in the U.S. by market capitalization, saw its shares plummet by nearly 7% after it announced a $5.5 billion charge related to the export of its G20 chips to China and other international markets. This setback raised concerns about the company’s future growth prospects, especially in light of the ongoing tensions around global trade and tech exports.

However, the impact of Nvidia's drop on the broader market was compounded by comments from Federal Reserve Chairman Jerome Powell. While Powell attempted to reassure markets by emphasizing that the Fed’s dual mandate—focusing on both price stability and full employment—wasn’t at odds, his remarks still left investors uneasy. Many are now grappling with the possibility of a prolonged economic downturn, potentially leading to stagflation, a combination of high inflation and stagnant growth. Powell’s comments failed to quell these concerns, and market sentiment shifted toward the belief that a recession could be looming.

Adding to the volatility, President Donald Trump escalated the situation with harsh criticisms of Powell’s policies. Trump, who has repeatedly called for rate cuts, doubled down on his stance, demanding Powell be replaced. He remarked that Powell’s “termination cannot come fast enough,” further adding to the uncertainty and fueling investor anxiety.

Despite recent volatility, the market handled it well. Yesterday’s pullback simply tested structural support, which is a natural part of consolidation. Importantly, none of the key leaders that had been showing breakdown potential have followed through with those moves. Instead, they’ve held support, signaling resilience.

The tech sector, while under pressure—especially Nvidia—hasn’t broken down yet. Crucial support levels are still intact, meaning the broader trend remains in play. As long as these levels hold, there’s no reason to shift to an overly bearish stance.

Nasdaq

The Nasdaq showed solid defense yesterday, despite another rejection at the overhead supply level near the 20-EMA (highlighted in the red box above). However, the real takeaway is how the Point of Control (POC) at $437 on the daily chart attracted significant buying pressure, which helped to stabilize the market. This level was well defended, indicating that the bulls are still in the game. As we head into the premarket, we’re seeing the QQQ drift higher, suggesting that the support at $437 is holding strong and the market is setting up for a potential move higher.

The hourly chart reveals a key detail: the high relative volume close yesterday occurred right at a demand level, one that the QQQ has been choppy around since April 4th. This suggests that the market is finding support at this level, and there's potential for a continuation higher, especially if we see the QQQ overtake the overhead supply and the hourly POC.

While we still need to see further action to confirm the trend, we’re genuinely impressed by how the market absorbed Powell’s comments, which weren’t exactly calming. Despite that, the market held up well, suggesting it may have already priced in the worst-case scenario.

S&P Midcap 400

The midcaps also showed a similar high relative volume close on their own demand level, and now they’re facing resistance from the 10, 20, and 50-EMAs on the hourly chart. A potential turnaround could materialize here, but we’ll need to see some sustained buying pressure. The POC level below, around $482, stands out as a potential support zone where demand could step in, given the high-volume cluster at that level.

However, it’s important to note that the MDY (midcaps) will likely follow the Nasdaq’s lead. If the Nasdaq pushes higher, the midcaps may follow suit, but if the Nasdaq faces additional selling pressure, expect the same for the MDY.

Russell 2000

The small caps are holding their volatility contraction pattern (VCP) on the daily chart, mirroring the behavior of the QQQ and MDY, even though they track different segments of the market. Just like the QQQ, the IWM (small caps) is currently facing overhead resistance, with the daily 10-EMA acting as a key level to watch for any further rejection. However, we did see strong buying aggression in the final hours yesterday, pushing the IWM higher and closing off the session on a positive note.

While we haven’t yet seen a significant surge in relative volume across all groups, which is typically a precursor to bigger moves, the technicals across the board aren’t showing the same doom-and-gloom candles we saw just a few weeks ago. The market could still fade lower, and that’s a real possibility. But at this moment, it’s also reasonable to consider the potential for a breakout forming. The beauty of our approach as momentum traders is that we don’t need to predict where the market will go—we can act in real time as the setup unfolds and we actually see confirmation.

DAILY FOCUS
Don’t Get Overly Bearish: Keep An Open Mind

As traders, it’s easy to get caught up in the constant noise and headlines coming from the media. The markets are bombarded with opinions, speculation, and emotional reactions, especially in times like this—where you have the Trump vs. Powell drama playing out in the media. Yesterday, we saw another chapter of this with Trump continuing to criticize the Fed and Powell’s hawkish stance, all amid the ongoing tariff concerns. The narrative is certainly loud, but the question is: How much weight should we really give to it in our decision-making?

Here’s the thing. As traders, our job is not to react to the headlines, no matter how dramatic they may be. It’s about what the charts are telling us. The media’s role is to stir up sentiment, but sentiment is only one piece of the puzzle. If you allow the constant barrage of news to cloud your judgment, you risk making emotional decisions that don't align with the market's true price action.

Take yesterday, for example. The media was buzzing about Trump’s comments and Powell’s stance, with fears that the Fed’s actions might send the economy into a tailspin. It’s all over the headlines, yet when we look at the charts, the price action tells a different story. We’re still seeing structural support levels hold firm. Even with all the headlines, the market is digesting the news much better than many would expect.

If you want to learn more about how we exactly plan to position ourselves in these market conditions—and gain access to our much more detailed daily report—feel free to explore more here. We break down the charts, setups, and key levels, providing actionable insights to help you make informed decisions, free from the noise.

WATCHLIST
The Highest Probability Trade Today

MSTR: MicroStrategy Incorporated

• MSTR remains the number one stock on our radar heading into today’s session—and we’re inching closer to what could be a textbook breakout in one of the strongest setups across the entire equities market.

• As a high-beta proxy for Bitcoin exposure, MSTR continues to outperform both BTCUSD and broader indices like the SPY. Over the past few months, it’s built out a solid multi-month base and recently formed a long-standing triple bottom. Now, we’re seeing classic signs of contraction—tightening price action and declining volume—right below the key breakout level.

• If we see that breakout trigger, we’ll be ready to take the plunge and get aggressive. This is the kind of move where you press.