Market Recap
Markets sold off through the early part of the week before finding some relief with a bounce on Friday. Despite the recovery, the broader market remains under pressure as rising yields, oil prices and expectations for tighter monetary policy continue to weigh on risk assets.
$IWM remains one of the weaker areas of the market, continuing to sell off as expectations for a Fed rate hike have increased significantly. Markets are now heavily pricing in a 25bp hike at next week’s FOMC meeting, making Wednesday’s decision the major macro catalyst ahead.
Oil has also become an increasingly important part of the macro picture. WTI crude pushed back towards $100 this week, returning to levels last seen around May as geopolitical tensions and supply concerns drove another sharp move higher.
Friday’s CPI report reinforced those concerns. Headline inflation rose 0.4% MoM in August, with higher gasoline and energy prices contributing significantly to the increase. With oil back around $100, energy prices are once again becoming an important inflationary pressure and another factor complicating the Fed’s path.
Crypto held up relatively well despite the broader risk-off environment. Ethereum attempted to break out of its recent consolidation and bull flag on Friday, briefly pushing through resistance before closing back below the breakout level. The structure remains constructive, but failing to hold above the breakout level could be a sign of weak momentum overall.
Watchlist
The main event this week will be the FOMC meeting on Wednesday. With a rate hike now heavily expected, the focus will be less on the decision itself and more on the Fed’s guidance and what it signals for the path of rates going forward.
Another developing theme heading into the week is the growing concern around the speed of AI development.
Over the weekend, Anthropic CEO Dario Amodei published an essay calling for the industry to slow the pace of frontier AI development as model capabilities continue to improve at an increasingly rapid rate. Rather than calling for AI development to stop completely, Amodei argued that safety and oversight need more time to catch up, proposing independent safety evaluators, coordinated standards between the major AI labs and eventually broader international cooperation.
The comments gained further attention after OpenAI CEO Sam Altman and xAI’s Elon Musk expressed support for greater restraint, creating a rare point of agreement between some of the biggest competitors in the AI race.
This creates a new risk to watch for the AI infrastructure and capex trade. Much of the strength in datacenters, semiconductors, power and other picks-and-shovels names has been built around expectations for continued aggressive spending and an accelerating AI arms race. Any shift in sentiment towards slower development, tighter regulation or reduced capex expectations could put pressure on this group heading into the week.
More broadly, $QQQ remains extremely rangebound. The index is sitting around the middle of the roughly 705-725 range that has developed since the mid-August gap down, leaving little directional edge at current levels. Until that range begins to resolve, the better opportunities are likely to remain in individual stocks and themes rather than the broader index.
Strong Stocks
$AMD remains one of the stronger semiconductor names, particularly when looking at how little it has pulled back from its all-time highs relative to the rest of the group.
INTC 0.00%↑ has also been showing increasingly constructive price action, with a potential breakout above the recent highs around 107 worth watching.
$SKHY continues to show notable relative strength out of the memory group.
$SPCX has remained in a steady uptrend for most of the past month. The move has been relatively slow and controlled rather than momentum-driven, but the trend remains intact.
Despite Ethereum retracing much of Friday’s attempted breakout, it remains within its broader consolidation range. The first breakout attempt usually carries the greatest potential for an explosive momentum move, so any further push higher from here may be more likely to develop as a slower trend if ETH can eventually clear the range.
$MRNA remains in consolidation following the gap higher on its Phase 3 cancer trial news. It has yet to resolve the range, keeping it on watch for a potential continuation move.
$DELL and $HPE are two notable areas of strength within the computer hardware group. Both saw strong breakout action on Friday, although the ideal entries were likely on the initial move. They remain on watch for continuation or a constructive pullback.
$HUT, $NBIS, $BE and $IREN remain on watch across the datacenter and AI infrastructure theme. With the AI safety discussion developing over the weekend, this group could see increased volatility on Monday if the news begins to impact sentiment around the broader AI capex trade.
Oil was beginning to look extended as WTI crude approached $100, but Friday’s pullback helped cool the move. $USO and /CL futures remain on watch, particularly with energy now playing a larger role in the inflation and rates narrative.
Closing Thoughts
The broader market remains stuck in a range with little clear direction, while rising rates and oil continue to add pressure beneath the surface. Wednesday’s FOMC meeting will be the key catalyst this week and could finally provide some direction after several weeks of sideways action.
At the same time, the developing AI safety narrative adds another layer of uncertainty to some of the market’s strongest themes, particularly the AI infrastructure and capex trade. With $QQQ still sitting in the middle of its range, there is little reason to force trades before the market shows its hand.
However, the weakness developing over the weekend could put that range under pressure sooner than expected. If $QQQ gaps lower on Monday and fails to recover, the lower end of the range could quickly come back into play and potentially set up a broader breakdown.
Either way, the combination of the FOMC and renewed AI fears could be enough to bring some volatility back into the market this week.
If you enjoyed this read, please consider leaving a like on the post, and let me know in the comments if I missed anything or what you’re watching for this week!
P.S.
If you haven’t checked out the Valhalla Portal yet, it’s where I track catalysts, setups, and market activity in real time - a live feed of everything that moves the tape, built for the community. I’ll be doing a dedicated post soon walking through all the features in detail, so stay tuned for that. In the meantime, you can check it out here: