Yesterday, you could see in early trading that the euphoria over Nvidia (NVDA) would be limited, but I wasn't prepared for Technology (XLK) to be the only sector in the S&P 500 (SPX) to finish in the green.

The NASDAQ Composite performed well and bounced off its 50-day moving average, but there was still weird action among key niches, like memory and semiconductors.

Slam Dunk, or Slammed?

Memory should be the easiest trade in the market. The big names trade at ridiculously low valuations, and they have visibility for the next few years, maybe longer. By the time subscribers began calling us, we were already looking for news. I saw a chart on increased chip production from ChangXin Memory Technologies (CXMT). Still, I didn’t think it would be enough to douse the excitement about memory during the Jensen call. If this is the reason these stocks are an even bigger buy, I warned months ago that the entire artificial intelligence (AI) trade was derailed when Tim Cook threatened to use this Chinese company, and even lobbied the White House.

Factors

Although many hoped for even more “pop” yesterday, it was clear the safety trade wasn’t appealing either. Low volatility, quality, and value struggled.

Summer Fade

As the summer fades and we remember that harsh winter of 2026, the stock market is also feeling chillier.

We are still in the “greed” zone, but retreating and could be in neutral after Labor Day. The addiction to catalysts means near indifference to next week, with just two potential moving events—an end to the Iran Conflict and perhaps something from the Federal Reserve.

Kevin Warsh & the Walk of Shame

The establishment has set him up, hell-bent on molding him into one of their own, even though he arrived in D.C. with a bunch of new ideas and determination.

Kevin Warsh has already said this is the most consequential time to be Fed Chair outside of historic emergencies. In his mind, his term must stave off future emergencies, while also making the Fed more accountable to Main Street, not just Wall Street.

Also, the establishment began a campaign with the slogan, “Fed Credibility Crisis,” right out of the gate.  It is ironic since the establishment had just printed up a bunch of posters demanding “Fed Independence.”

They also want Warsh to put away silly notions of less placating, fewer meetings, fresh ways to measure, and dealing with inflation, and stick to the same old script (folks have done very well with it). He speaks this morning at 10:00 a.m., and I don’t think he will blink.

We all know the real problem and can visualize a catastrophic event like that mudslide in Nepal, swooping down on our economy one day (prayers to the victims). There will be a reckoning, but nobody knows when.

Warsh will talk tough about inflation, but he does not want to hike rates.

One reason Warsh is loath to pull the trigger on hikes (you cannot just hike once and walk away) is that he probably sees inflation at much lower levels than most of his colleagues. He also doesn’t think a growing economy should be derailed, or that occasional wage growth should spur the Fed to slow things down. I’ve read that he prefers the trimmed mean over the personal consumption expenditures (PCE) reading.

Today’s Session

It's quiet ahead of Warsh's speech in a few minutes.  Futures have improved, but this is a holding pattern. Financial markets and those who reap the biggest benefits have always tried to bully new Fed chairs, and Warsh is getting the business even more than usual.

The market has been in feast or famine mode like never before – yesterday, ten of eleven sectors were lower. There hasn’t been a session with 70% advancers since June 11^th, and no session with 80% advancers since February 6^th. There are lots of factors for this, and while it isn’t a death sentence, the rally needs greater participation.

The Strait of Hormuz story has improved dramatically and without any fanfare.  This is important on so many fronts:

• Economy
• Sentiment
• Midterm Election
• Fed policy

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