Seven Down and Then BOOM — NVDA Shows Why You Don’t Chase the Selloff

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Founder's Note:

PM Note

Futures are flat ahead of Warsh's 10 AM EST Jackson Hole speech.

The 0DTE straddle is just $38/49 bps ref 7,725 despite this mornings events. That is a touch over recent days, but still remains below even an average daily SPX move (~65bps). NVDA did buoy tech and the SPX up a bit yesterday, but one could indeed argue that the trend is waiting for clearing of Warsh today.

SPX gamma shows different setups based on time horizons. For today, resistance is at 7,775 to 7,800. Support is 7,600 - 7,575. For Monday the gamma is distinctly negative <=7,600. We'd also note that into Monday positive gamma above is lighter, suggesting less resistance.

You may notice that the VIX is also at YTD lows of 14.5. We saw this level briefly into August OPEX, then you have to zoom back to Dec '25 to find similar levels. The VIX is naturally going to calculate lower values as the SPX rallies due to fixed strike slide. If we look at actual SPX fixed strike vols we see that they are mildly lower from Monday, showing only a modest IV decline vs the VIX 1.5 pt decline over the same period. Considering this decline into Jackson Hole, it does speak to a market that is just looking for an excuse to continue upside.

We operate under the assumption that Warsh is a non-event, and the passing of JHOLE leads to some vol contraction and a market rally. We take this stance simply because these events rarely spark major downside, and generally owning options, particularly puts, pays a heavy tax if/when event-vol subsides.

How might you play this?

For "lotto speculation", or if you want to add a small long stock hedge, we like 0DTE SPX put flies playing a potential drop into 7,600 for today. You can slide the front strike from 7,650 to 7,600 to do standard 25 or 50 point flies. These flies range from $1 to $0.25 depending on distance and width, and the idea here is that there is a pocket of flat gamma in the 7,600 to 7,700 range as shown in TRACE. The market is simply not pricing in a 1% downside move, and if Warsh does spark a sharp drop, those put flies would likely multiply in value.

You can find similarly cheap put flies for Monday if you slide down toward 7,500 strikes. These are fairly far OTM at this moment, put a "Warsh Surprise" could not only generate a quick 1% downside move, but also a spike in vol from these low levels.

These short dated put flies price in a fairly unique way - that is to say we don't normally see such low prices on these lotto structures. We don't admittedly spend a ton of time looking at 0DTE skew, but the skew is flat into the 7,600 strike (black box) which seems unusual. We note to the upside similar flies are not available, and you can also see the call skew is much steeper into 7,800.

For the upside, we are eyeing a max move into 8k SPX for Sep OPEX. The Sep 25 delta calls are the ~7,875 and trade for a low IV of 10.3%. We are going to target getting long calls in this area after Warsh, assuming it's "all clear". Rates and equity vol, both likely moving higher/lower in tandem, will be our barometer of equity bullishness today.

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ES Levels

ES Daily Trading Guidance

The bull/bear line for the ES is at 7737.25. ES is currently trading around 7741.25, keeping price modestly above this key pivot. As long as 7737.25 holds, the short-term bias remains bullish, but buyers still need to push through nearby resistance to build momentum.

On the upside, the first resistance is 7742.50, followed by 7755.50. A sustained move above 7755.50 opens the door to 7770.25, which is today’s upper range target. If buyers can clear 7770.25 and hold above it, the next major upside level comes in at 7801.25.

On the downside, 7737.25 is the first and most important support. A failure back below the bull/bear line would shift the intraday tone weaker and put 7722.00 in play. Below there, the key downside target is 7704.25, today’s lower range target, with 7702.75 sitting just underneath it. A decisive break of that support zone could accelerate selling toward 7673.00.

Overall, ES has a slight bullish advantage while holding above 7737.25, but it is trading directly beneath resistance. Above 7755.50, buyers gain better control and can target 7770.25. Below 7737.25, the setup turns defensive, with 7722.00 and 7704.25 becoming the primary downside objectives.

NQ Daily Trading Guidance

The bull/bear line for the NQ is 29639.50. NQ is currently trading around 29630.75, just below this key pivot, so the overnight setup is neutral to slightly bearish unless buyers reclaim 29639.50 and hold above it.

A move back above the bull/bear line puts 29695.75 and 29708.00 in play as the first resistance zone. Clearing 29708.00 would strengthen the bullish setup and open the door to 29910.00, today's upper range target. Above that, the next major resistance is 30164.25.

On the downside, initial support comes in at 29499.50. A failure there would expose 29401.75, followed by 29369.00, today's lower range target. The 29333.75 area is another important support just underneath, and sustained selling below that zone could extend toward 29114.50.

Overall, 29639.50 is the decision point. Above it, the advantage shifts back toward the bulls with 29695.75–29708.00 as the first test and 29910.00 as the larger objective. Below it, sellers retain control, with 29499.50 as the first downside target and 29401.75–29369.00 the more important support zone.

Polaris Trading Group Summary - For Thursday, August 27, 2026

Thursday’s session developed from an initially bullish overnight setup into a constructive trend day, despite some choppy “meat-grinder” conditions during the morning. Buyers defended key support, multiple Daily Trade Strategy upside targets were achieved, and the market finished with a strong bid. Just as important, the room emphasized probability-based thinking, system trust, and consistent execution.

Overnight setup

• Nvidia earnings helped push price higher overnight in what David described as a Wyckoff-style “Jump the Creek.”

• ES pulled back into the 7700–7710 target zone from the DTS Briefing and found responsive buyers.

• NQ showed similar behavior, with buyers stepping in on the pullback.

• The initial Line in the Sand was 7720.

• David’s early assessment was that the bulls had control and that it was theirs to lose.

• A new Cycle Day 1 began.

Morning structure

• Price returned to test 7710 before the regular session developed.

• David adjusted 7710 to become the Dynamic Line in the Sand.

• The morning became more rotational and difficult to trade cleanly.

• David warned that the day could develop into “meat-grinder” rhythms ahead of Fed Chair Warsh’s Jackson Hole speech.

• Patience and selectivity were especially important during this phase.

Positive trades and targets

• The bullish structure remained intact despite the morning chop.

• Price eventually reached the 7740 objective from the Daily Trade Strategy.

• A room member reported catching a BLT near 7738.75.

• The 7750 DTS target was fulfilled by 1:08 PM.

• David noted that the A4 runner was continuing to play out nicely.

• Traders who stayed aligned with the larger bullish structure were rewarded as the session progressed.

Market-reading lesson

• Price continued moving higher even while volume delta remained negative.

• David explained that the Bid/Ask Volume Ratio measures the net difference in volume delta.

• Negative delta does not automatically mean price must move lower.

• Aggressive selling can be absorbed while price continues higher.

• Price action and market structure should therefore remain primary, with indicators used as supporting information rather than isolated signals.

Trading psychology

• David shared a Yumi lesson centered on accepting randomness.

• Traders are responsible for preparation and consistency, not for controlling the outcome of an individual trade.

• A single loss should not create the feeling that something immediately needs to be “fixed.”

• Ram added that traders need to fully trust their system and remain consistent over hundreds or thousands of trades rather than focusing on one result.

• The room strongly agreed with this probability-based mindset.

• Several comments also reinforced the importance of recognizing personal trading habits and being willing to adapt.

Simplicity and execution

• The room responded positively to David’s simple visual framework and “KISS” approach.

• Traders discussed Money Boxes, fair value zones, discount areas, wedges, and key reference levels.

• The broader lesson was to avoid unnecessary complexity.

• Clean structure, defined levels, and disciplined execution remained the focus.

Closing action

• The Market-on-Close imbalance initially showed approximately $654 million to sell.

• It then flipped rapidly to the buy side.

• The buy imbalance expanded from roughly $500 million to $1 billion, then $2 billion, and ultimately about $3 billion.

• David described the market as closing with a strong bid.

• He also noted a 93% positive three-day cycle statistic.

Key takeaways

• Buyers successfully defended the important 7700–7710 support zone.

• The bullish thesis remained intact throughout the session.

• Both the 7740 and 7750 DTS upside targets were achieved.

• Runners benefited from allowing the larger trend to develop.

• Morning chop reinforced the importance of patience and avoiding overtrading.

• Indicators such as delta should always be interpreted within the context of price behavior.

• Consistency, preparation, and trust in a proven process matter more than the outcome of any single trade.

• The session finished with strong buying pressure and a constructive bullish close.

DTG Room Preview – Friday, August 28, 2026

Morning Market Preview

• US futures are trading cautiously ahead of Fed Chair Kevin Warsh’s 10:00am ET Jackson Hole speech.

• Traders are reluctant to take strong directional positions before hearing his outlook on inflation, rates, and recent bond-market volatility.

• Hawkish comments from several Fed officials are keeping rate expectations unsettled.

• Treasury yields, the dollar, and gold remain important intraday signals.

Tech and Macro

• Nvidia remains in focus after its outsized rally, reinforcing its role as the market’s key AI bellwether.

• Continued global investment in AI, semiconductors, and memory supports the longer-term sector theme.

• Gold is holding near $4,600 as investors maintain demand for macro and geopolitical hedges.

• Rate-sensitive tech remains exposed to any hawkish surprise from Jackson Hole.

Economic Calendar

• Chicago PMI at 9:45am ET.

• Benchmark Payroll revisions at 10:00am ET.

• University of Michigan Consumer Sentiment at 10:00am ET.

• University of Michigan Inflation Expectations at 10:00am ET.

• Fed Chair Kevin Warsh speaks at Jackson Hole at 10:00am ET.

• No major corporate earnings of interest today.

ES Outlook

• Volatility remains moderate, with the 5-day average daily range rising to roughly 60 points.

• Whale positioning is leaning bearish on lighter-than-recent overnight volume.

• ES reclaimed 7700 and continues to trade between key trendlines.

• A break below 7618/15 could open the door to a move toward the 7500 area over the next couple of sessions.

• The 7855/60 area remains the primary upside resistance zone.

• The 50-day moving average at 7601 remains loose support below.

Key ES Levels

• Resistance: 7855/60

• Support: 7618/15

• Support: 7460/65

• Support: 7306/01

• Support: 7108/03

• 50-day MA: 7601