A hammer candle followed by an inside candle is what we are seeing on many charts right now. Thursday felt like a bit of a throwaway day as everyone just waited for Friday and Jerome Powell’s 10:00 AM ET speech. This will be Powell’s last Jackson Hole speech as Fed Chairman, and it’s shaping up to be an important one.

The Fed is always in the unenviable position of trying to thread needles in the economy with old, unreliable data—and their only tools are a hammer and a pickaxe. Let’s just say the tapestry they’re weaving usually ends up messy, disheveled, and often comes with a recession. (I may have lost the analogy there at the end, but you get the point.)

Odds of a rate cut in September have already shrunk to 75%, down from well over 90% just a week ago. In this wild market, strong economic data is actually bad news, because it lowers the chance of future cuts. After Powell’s speech, that probability will likely move sharply again—either down toward 50% or right back up near 95%.

Rate Probabilities for September Fed Meeting

Right now, SPY is sitting at $635 and could easily make a 2.5% move in either direction. In my opinion, the bulls have a slight edge over the bears simply because of the trend.

Here’s the bullish case for $650 on SPY in the next week or two:

1. We’ve already seen several days of selling in a row, and that’s exactly when bulls have stepped in since April.

2. We’re sitting on strong support and saw a textbook hammer candle Wednesday.

3. The parallel channel that’s been intact since May is still holding.

4. Short-term, midterm, and long-term trends are all bullish.

And here’s the bearish case:

1. New highs have been made on declining volume.

2. New highs have been made with bearish RSI divergence.

3. The market is extended and overdue for a pullback.

4. September is historically a weak month.

SPY

If we break above Wednesday’s hammer, we likely push toward $650. If we break below, $620 comes into play. NVDA earnings next Wednesday after the close will complicate things further—how the stock trades will almost certainly sway the market’s next big move. Time will tell, but September could finally deliver the pullback everyone has been waiting for.

NVDA

As for Bitcoin, it’s currently sitting right on top of $112,000 support. Last week, I was calling for weakness and we have gotten just that. I mentioned BTC tends to break the prior higher low after a bull trap, which is $112,000 right now. Let's see if history repeats once again. The main support zone after the breakdown has varied, but one simple support I like is the 100 SMA on the 3-day chart, which sits around $98,500 right now.

If $112,000 breaks, I suspect BTC heads toward $105,000–$95,000 to find support. That’s where I’ll be a buyer. However, if we get a sustained breakdown below the parallel channel that’s held this whole bull market, that’s a sign that bearish things are brewing.

BTCUSD