To The Moon

This week's price action in U.S. equities is critical for the market trend over the next several weeks — above all the FOMC decision due early Thursday Beijing time. The U.S. indices have arrived at a very important support level, and once a key variable pushes them into choosing a direction, the broader medium-term trend could change. The current calm may therefore be brewing sharp volatility in the back half of the week.

First, the latest developments on the technical side

As you can see, the Nasdaq has now reached a very critical level. On the head-and-shoulders top pattern, the formation can already be treated as a breakdown of the head structure; by conventional technical projection, the subsequent downside would theoretically be roughly equal to the distance from the head to the current level.

$纳指100ETF(QQQ)$ $纳斯达克(.IXIC)$ $NQ100指数主连 2609(NQmain)$ $微型NQ100指数主连 2609(MNQmain)$ $标普500(.SPX)$ $标普500ETF(SPY)$ $SP500指数主连 2609(ESmain)$ $微型SP500指数主连 2609(MESmain)$ $标普500波动率指数(VIX)$

$道琼斯(.DJI)$ $道琼斯指数主连 2609(YMmain)$ $微型道琼斯指数主连 2609(MYMmain)$ $房地产指数ETF-iShares道琼斯(IYR)$

But if you switch the lens from the daily to the weekly chart, things are not so simple. The space below the Nasdaq is not a complete vacuum — support still exists around the 20-week moving average, which means this area can easily turn into repeated tug-of-war. Before the market genuinely confirms a break of the 20-WMA and enters an accelerated decline, rushing into a one-sided short is not an ideal choice:

For exactly that reason, you cannot watch the Nasdaq alone right now. The better bellwether is SOX — the Philadelphia Semiconductor Index — because where it sits is almost synchronized with the current fate of the entire tech sector.

$高科技指数ETF-SPDR(XLK)$ $MACH7 TECHNOLOGIES LTD(M7T.AU)$

SOX has likewise arrived at the edge, consistent with my earlier warning. Its technical structure closely resembles the Nasdaq's; the only difference is that the Nasdaq's head structure already looks fairly dangerous, whereas SOX's head formation has not broken down decisively — key support still sits around 11,053. Once that level gives way, there is no sufficiently obvious resistance in between to create a tug-of-war, and price could go on to retest the 8,425 low.

$费城半导体指数(SOX)$ $三倍做多半导体ETF-Direxion Daily(SOXL)$ $美光科技(MU)$ $英伟达(NVDA)$ $1.5倍做空NVDA ETF-Tradr(NVDS)$ $SK海力士(SKHY)$ $南方两倍做多海力士(07709)$

So the recent price structures of star tech names — NVIDIA, SK Hynix and Micron — are already highly similar to SOX's. If the semiconductor index breaks down, those former leaders that rose the most and drove sentiment the hardest could well see a chain reaction in which they all sink together. A larger decline cannot be ruled out.

Yet the market has stubbornly refused to settle into a wholly pessimistic, one-directional state. SOX's MACD has begun to show green histogram bars converging upward, forming a daily-timeframe bullish divergence against continuously falling price. That means a short-term rebound is not off the table, and the semiconductor sector's performance over the next two or three sessions therefore becomes especially critical.

And the moment everyone is waiting for is precisely the Fed meeting early Thursday Beijing time. Because the market right now has neither broken down completely nor genuinely repaired itself, the one variable actually capable of breaking the balance is the meeting itself.

Warsh's hiking dilemma: a hike is not impossible

What makes this meeting hard to call is not an absence of market expectations, but that whichever way he goes, the cost is right there. The latest pricing in rate derivatives puts the probability of a July hike back up to around 30%, recovering from earlier lows, while the odds of a September hike have reached about 70% — the market still believes there is one more hike this year.

$美国2年期国债收益率(US2Y.BOND)$

The problem is that hiking and not hiking are both uncomfortable options. Many people see only that U.S. government debt has grown by more than a trillion dollars in a single year, and that star companies across the AI supply chain are issuing debt heavily to top up operating cash flow. From there they conclude that hiking now would merely push up interest costs, widen the deficit and depress equity earnings expectations — with near-devastating consequences.

But the other side is equally thorny. If the Fed keeps not hiking, then against a backdrop of heavy issuance by both the U.S. government and AI companies, falling bond prices would push yields up and further reinforce already-sensitive inflation expectations. And once inflation runs out of control, it is unhelpful for the November election on one hand, and on the other it damages the dollar's purchasing power and credibility — even the bid for Treasuries could come under threat.

So for Warsh this is not a meeting with an easy standard answer. The Fed needs at minimum to convey an attitude of 「we will not let rates keep spiraling upward」 if it is to soften concerns and steady the Treasury market. For exactly that reason, we also think you should not dogmatically bet on any single direction ahead of the meeting, but wait until it lands before constructing a strategy.

I still believe Warsh's remarks will most likely lean dovish and attempt to talk down September hike expectations, and that a July hike is very unlikely. If that is indeed the outcome, the market has a chance to stage a 「bad news fully priced in」 reaction, and SOX could lead a rebound across the AI and memory-chip star-name chain.

Bet on the meeting with both hands prepared

It is against this backdrop that U.S. equities can be defined as standing at a genuine crossroads. Down or up does not hinge on sentiment, but on whether the key technical levels are broken, or pulled back up after the meeting.

Scenario one: the meeting comes out more hawkish than expected, SOX breaks the lowest support of its head structure, and the Nasdaq loses the 20-week moving average and accelerates lower.

$纳斯达克(.IXIC)$

In that case the market is no longer merely choppy but in a clearer bearish trend, which suits strategies whose profit source is rising volatility — for example buying an at-the-money straddle on QQQ (a call and a put at the same strike, expiring in two weeks) to capture the profit from a volatility lift; or simply shorting Nasdaq futures to capture short-term downside. The key levels on the futures are:

Short from the 28,223 level on the Nasdaq, stop out if it rallies back up, with the downside target at the 200-day moving average at 26,426. But futures volatility can be very large, so it is best to wait for this week's Fed outcome — and for that outcome to be hawkish — before considering the short.

Scenario two: the meeting leans dovish — the higher-probability event.

If SOX stops falling and rebounds at the key level, dragging the Nasdaq and other U.S. indices into a repair, then the strategy should shift from a defensive long-both-legs structure to a short-both-legs structure that profits from falling volatility. The underlying is still QQQ: sell a call 10% above the current price and a put 10% below it, with a one-week tenor, to harvest the gains from declining implied volatility.

$纳指100ETF(QQQ)$

This is also why, at the current juncture, the cardinal sin is not getting the direction wrong but preparing for only one direction. Because the market right now has not given a signal worth staking everything on; it has given only one clear fact: the key levels are right in front of us, and the choice of direction has been handed to the meeting outcome.

Another strategy opportunity: the retreating crack spread

Beyond the Fed meeting, there is another equally important trading thread: the change in crude and the crack spread after the easing of the U.S.–Iran situation. The picture is clear — neither side actually wants to widen the conflict or escalate the war. Iran cannot afford a further spread of fighting on its own soil, and the U.S. cannot afford sustained economic pressure.

That also explains why crude always grinds higher and falls fast, and why long-duration U.S. Treasury vehicles like TLT have consistently struggled to break their prior lows effectively. On the more specific data backdrop: Brent's earlier rebound high only touched $100, and against JPMorgan's July fair value of $87, that is a mere $13 more even before considering any war premium. This is because, on one hand, although the Strait of Hormuz has been disrupted, alternative routes such as the Red Sea and pipelines have already run at full capacity, carrying volumes equal to half of the previous Hormuz throughput; on the other hand, global crude demand is below its historical average, with year-on-year demand in China and other regions weakening markedly.

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So the conclusion on crude is fairly clear: it remains an asset that is easier to short than to be long. If the U.S.–Iran situation does not change materially, a pullback in crude to a low like $65 would not be surprising. And as WTI futures fall, the crack spread has begun to retreat as well.

That means the profit margin of a typical refiner like Marathon Petroleum could narrow, and its share price would naturally come under pressure:  $马拉松原油(MPC)$

So to short the crack spread, consider a relatively stable approach: position directly around refinery stocks. Take Marathon Petroleum — it has itself already formed a topping structure, so you could consider a straddle at the highs to capture the profit from rising volatility once the share price falls back, or a bear option spread to capture the profit from the decline itself.

For instance, this is what I currently hold:

I have already taken profit on the position of selling puts below the 20-month moving average on GLD, having fully collected the premium. I still hold low-strike short puts on SLV and TLT, and I have just put on a straddle position on Marathon Petroleum.

One more very important point: if the U.S.–Iran situation reverses and war reignites or escalates, we must promptly take profit or cut losses on the strategies above.