Relief Rally Takes Hold as Warsh Strikes Balanced Tone and ES, NQ Reclaim Key Levels

A Clean Reclaim, Not Just a Bounce

Both index futures cleared the exact trigger levels the desk flagged after Monday's selloff — ES above 7,565 and NQ above 29,545 — rather than merely bouncing off their lows. That distinction matters: a level-based reclaim is a testable, objective signal, while a generic bounce is not. Both contracts printed “Bull Body” daily candles, and ES now sits above its 20-day and 50-day moving averages as well as its weekly and monthly VWAPs — a fully bullish technical alignment.

Warsh Calms the Hawkish Scare

Fed Chair Kevin Warsh's testimony before Congress reframed the hawkish minority flagged in June's meeting minutes as one data point among many, rather than a shift in the Fed's policy path. That restored the market's preferred framing — watch incoming data, not Fed rhetoric — and took pressure off the 10-year Treasury yield, which eased to 4.585% from Monday's 4.62% high.

Oil Stalls, But Hasn't Retreated

West Texas Intermediate crude held near $79.76, with its five-day rate of change cooling to +13.2% from Monday's +15.7%. That's a meaningful deceleration, but it is not a retreat: oil remains near cycle highs, and the Strait of Hormuz situation is unresolved. The desk reads this as the risk premium pausing rather than fading, which caps the pace of further upside until crude actually retreats toward the mid-$70s.

Chips Get a Second Chance

Semiconductor names stabilized Tuesday after Monday's failed rebound, giving the Nasdaq contract its first constructive session since last week. Notably, NQ remains below its 20-day moving average even after reclaiming its pivot and Monday's trigger level — a sign the desk wants a second confirming session before treating the AI-leadership trade as fully repaired.

What It Means for Traders

Our desk reads today's setup as roughly 45% likely to see continuation if this week's CPI and PPI prints confirm the calmer tone and both contracts clear resistance with breadth, 35% likely to consolidate between pivot and first resistance while the market awaits that data, and 20% likely to see a pullback if oil re-accelerates or the inflation prints run hot.

On ES, support sits at 7,535 (S1) then 7,507 (S2), with key support at 7,467 (S3); resistance is 7,603 (R1) then 7,643 (R2). On NQ, support is 29,228 (S1) then 28,980 (S2), with key support at 28,573 (S3); resistance is 29,882 (R1) then 30,289 (R2). NQ remains the more sensitive contract until it closes back above its 20-day moving average.

The Rest of the Week

CPI and PPI inflation data, still outstanding this week, are now the real confirmation event for today's relief rally. A cooler-than-expected print would validate the reclaim and open the door to a breadth-confirmed test of resistance; a hot print would revive Monday's hawkish-Fed narrative and put both contracts back on the defensive. Until that data lands, we'd treat today's strength as a confirmed reclaim, but one still pending validation — not a resumption of trend.