Thank you for reading this week’s edition of Closelook@US Stock Markets, dated April 26, 2026 👋. The next edition will be published on May 3, 2026.

For the schedule of our other publications, please check the publishing schedule at the end.

Table of Contents

1. This Week’s Action

2. Overview: The US Market Map

3. The State

4. The Outlook

5. What May Lie Ahead: Macro Setup

6. What May Lie Ahead: Technical Setup

7. The AI Build-Out Portfolio: What We Did

8. The AI Build-Out Portfolio: What We Plan To Do

9. Knowledge Corner

10. Upcoming Transactions: Be Informed

11. What May Go Wrong: Risk & Change Triggers

12. Final Words

(1) This Week’s Action

New all-time highs on S&P, Nasdaq-100, and Nasdaq Composite. SOXX printed an 18-session winning streak — a record since the ETF’s 2001 inception. ServiceNow lost 17.75% in one day on a headline beat — but IGV at the index level held flat on the week.

The damage was idiosyncratic. The earnings cluster of April 27 to May 1 delivers the structural verdict.

The numbers above set the structural read at a glance. The headline: semis vertical (SOXX +11.04%, SMH +9.11%), Rubin Build-Out 100 extending its YTD lead at +65% (EW and MW), software at the index level held flat (IGV +0.14%) despite NOW and IBM cracking individually. The chart below shows where the Nasdaq-100 sits on the long-term log channel.

The four timeframes capture the same trend at four resolutions. The next table summarises the indicator readings on the weekly view.

The macro indicator picture is constructive. The diagnostic read shifts when we cut the index by composition rather than by time — the chart below decomposes QQQ into Tech vs. Ex-Tech and Top-20 US stocks (not confined to the Nasdaq-100) vs. Tail-70 to show exactly what is driving the index this week.

What Happened

The major US index proxies closed the week at fresh territory. S&P 500 at 7,165.08 Friday, up +0.55% on the week to a fresh all-time high. Nasdaq-100 (NDX) at 27,303.67, up +2.37% on the week — QQQ tracked it at 663.88, +2.32% on the week from the prior Friday’s 648.85.

The broader Nasdaq Composite at 24,836.60, +1.50% on the week. Dow Jones at 49,230.71 was the lone diverger, finishing −0.41% on the week. IWM (Russell 2000 ETF) at 276.65 added +0.32% on the week — the broader Russell 2000 index closed at 2,787.00. VIX rose 7.04% on the week to 18.71 — volatility creeping back from the Hormuz-driven low but still historically benign.

The headline within the headline was the semiconductor extension. SMH closed at 506.44, +9.11% on the week. SOXX closed at 461.60, +11.04% on the week — SOXX printing its 18th consecutive up day on Friday, the longest streak in the ETF’s history since its 2001 inception. Per a NYSE research note circulated mid-week, semiconductors now account for ~15.5% of the S&P 500’s market-cap weight and have contributed roughly 4.9 percentage points of the index’s 12.8% rally since March 30 — about 40% of the entire move.

Two single-name prints framed the week. Intel surged +20.50% on a beat-and-raise, finally closing above its dot-com 2000 high — a 26-year price ceiling, finally cleared. Nvidia +3.27% on the week to retake the $5 trillion market cap mark on Friday’s session.

And then there was the other side of the tape. ServiceNow lost 17.75% on Wednesday, on a headline beat. Revenue beat consensus, cRPO up 25% YoY, the Now Assist ACV target raised from $1.0B to $1.5B. The market cap fell from $107B to $87.8B in a single session—roughly $20 billion evaporated.

IBM lost 6% the same day, also on a revenue and EPS beat with raised software guidance. Two beat-and-lose prints on the same day are not a coincidence. They are a market that is repricing a structural equation in real time.

We covered the bridge math in Friday’s Daily Pulse — legacy decay + insufficient AI uplift + hybrid-instead-of-outcome pricing = premium multiple no longer defensible.

The diagnostic feature: IGV closed Friday at $85.20, essentially flat on the week (+0.14%). The two single-name beats-and-losses cracked NOW (W/W −6.71% to $90.17) and IBM (W/W −8.48% to $231.98) — but the broader software complex held. The Friday +5% bounce on NOW alone reversed most of the week’s mid-week damage at the index level.

The IGV/QQQ ratio tested the 0.1255 trigger zone mid-week and recovered to close the week at 0.1284, above the line. The damage was idiosyncratic, not sector-wide. The structural hold level at $74.62 sits more than $10 below the current IGV close. Software did not crack — two specific names did, and the rest of the cohort absorbed it.

Two Friday signals tilt encouraging. NOW closed Friday at +5% from the Wednesday capitulation low — early evidence that the bad news may already be priced in. SAP, Europe’s enterprise software bellwether, printed positive earnings on Friday and held its bid. Neither resolves the verdict. Both are the first data points in the direction of a stabilization rather than a continuation lower.

The earnings cluster of April 27 through May 1 will deliver the resolving signal.

That contrast is not a contradiction. It is the rotation framework working — and the question of whether the software bottom is in remains open through Friday.

Six of the top ten weekly winners across the entire S&P 500 are Rubin Build-Out 100 constituents. AMD, TXN, INTC, ON, MCHP, NXPI — semiconductors dominating the broad-index single-name leaderboard. The within-tech rotation thesis is visible at the SP500 level, not only inside the functional index.

Week Losers

The defense sector cracked. NOC and LMT both down >13% on the week. Coverage centered on election-cycle de-rating risk is being priced into the sector. Notably absent from the SP500 winners list are defense names that dominated in 2025 — a regime change worth watching.

Note: NOW (−6.71% W/W to $90.17) and IBM (−8.48% W/W to $231.98) sit just outside the top-10 losers despite their Wednesday capitulation moves. The Friday +5% recovery on NOW pulled it back from the deepest weekly drawdown.

(2) Overview: The US Market Map

Live constituents and full sector dispersion.

(3) The State

Silicon leadership defines this bull market — and the leadership runs five layers deep. SMH +9.1% on the week, SOXX printing an 18-session winning streak (a record since 2001), Intel +23% through its 26-year price ceiling, Nvidia retaking $5 trillion. Those are the visible names.

Underneath them, the AI hardware supply chain extends across the full build-out — The bull is wider than NVDA and INTC.

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The Thesis — Silicon Leadership, Five Layers Deep

The semiconductor leadership that has carried this bull market since 2023 is broader than the headline names. The Rubin Build-Out 100 is up roughly 65% YTD on equal weight, ~70% on momentum weight — against Nasdaq ~6%. A 10× spread. That is not a quirk of construction. It is the framework that is working: leadership is focused on the AI hardware build-out, but distributed across the entire supply chain.

Inside the index this year and week:

Power Semiconductors +68% ytd on GB200 and Rubin rack architecture power-delivery — ON, MTD, STM, MPWR - all up +30 % this week

High-Speed Interconnects are up massively with Applied Optoelectronics, Lumentum, Marvell, and Coherent,t leading

Memory at +115% YTD — SK hynix, SanDi, SK, and Micron leading.

The Software Question — Verdict Pending

The April 19 Weekly Signal Special set up a litmus test for the most-attacked names in software. The setup ran exactly as forecast: IGV bounced double-digit off the March low — the expected revert-to-mean from oversold extremes. The bounce arrived on schedule, played out on schedule, and reached the levels where the second test would begin.

Then news arrived. Anthropic’s Claude Design launch as the proximate stress test for creative tools SaaS—ServiceNow’s earnings on Wednesday. The verdict on the bounce came mid-week: ServiceNow lost $20 billion of market cap in a single session — on a headline beat. IBM lost 6% on the same day, also on a beat.

Both prints reflected a market that has reached a working hypothesis on enterprise SaaS economics in the AI era: legacy decay + insufficient AI uplift + hybrid-instead-of-outcome monetization = premium multiple no longer defensible. The bridge math is in Friday’s Daily Pulse.

The earnings cluster of April 27 through May 1 carries the resolving signal—Microsoft on Tuesday with the Azure AI growth print. Alphabet, Meta, and Amazon are following. ServiceNow Analyst Day on May 4. Each one is a vote on whether the bridge math applies broadly across enterprise SaaS or stays idiosyncratic to NOW. Monday’s analyst reactions to the NOW/IBM prints will set the early tone — institutional desks return from the weekend with their re-rating, and the first hour of Monday’s tape is the leading indicator for the week.

The Frame — Within-Tech, Not Out of Tech

Two divergent tapes — silicon expanding across layers, software facing a verdict — are not a contradiction. They are the same thing observed from two angles. Both are the ninth within-tech rotation since the October 2022 low.

The pattern is documented and repeated: 2023 SVB, 2023 rate scare, 2024 sticky CPI, 2024 yen carry unwind, 2024 AI capex bubble wave one, January 2025 DeepSeek, March 2025 Liberation Day, summer 2025 AI capex bubble wave two, Q1 2026 equal-weight rotation. Every time, the tech selling concentrated in the previous cycle’s leaders while capital migrated to the next. Every time, the call for rotation OUT of tech was actually rotation WITHIN tech. This week is data point number nine. Software-as-a-service is the previous cycle’s leadership; AI hardware build-out is the next.

The Tech Thematic split is the diagnostic feature of the week — but not in the direction the headline narrative suggests. SOXX +11.04%, SMH +9.11%, IGV +0.14%. Software at the index level held flat; ARKK (- 3.45%) and CLOU (+0.10%) bracket the broader risk-software complex. CIBR +1.14% (Cybersecurity) and AIQ +1.92% (Broad AI) — both held positive.

The narrative “software cracked” is technically wrong at the index level. What cracked were two specific names: NOW −6.71% W/W and IBM −8.48% W/W. The AI trade extended into infrastructure (semis vertical) and held its software base at the index level.

Seasonality Setup

The seasonal map matches every other framework on the table. April 2026 is on track to print one of the strongest Aprils in the QTEC monthly history — currently around +18.54% month-to-date through April 23, the best April on record.

May seasonality thins (44% hit rate, average return barely positive). June is a coin flip. July is the destination — 4.1% average, 94% hit rate, the strongest seasonal window QQQ sees all year.

The regime reads Risk-On, with leadership concentrated in semiconductors and distributed across five build-out layers. Headline indices held or extended; thematics narrowed back into AI infrastructure but expanded within it. Breadth at the index level participated but did not lead; breadth inside the AI hardware supply chain was the diagnostic feature of the week.

Directional flow within the Rubin universe shows a continued handoff: Power Semis confirming the Mid-Ramp layer joining; Memory and Foundry stabilizing after weeks of distribution; Design heating up, signaling the next chip cycle is loading. This is the textbook signature of a within-tech rotation in progress, not a regime change at the index level.

Buildout Timeline — which stage leads the cycle?

The handoff phase continues. Design (Stage 1) heating signals the next chip cycle is loading — ARM, EDA names, and the architects of post-Rubin generations. Fabless / Foundry / Memory cooling Δ21 confirms that the current cycle is shipping and that those positions are rotating out — which aligns with the Hopper-era Sunset reading on the Generation Rotation Framework. Interconnect heating at the tail confirms back-end names are seeing the output flow.

The read pattern is consistent: the cycle leads the price. WDesignesign — if ARM and EDA names keep accelerating over the next 2-3 weeks while Memory and Foundry stabilize, the next leg is loaded 6-9 months ahead of the visible price move. That is the Δ21 signal in full operation.

(4) The Outlook

The Outlook rests on a Mag-7 earnings cluster across three days, the FOMC, and the ServiceNow Analyst Day. GOOGL Tuesday AMC. MSFT, META, AMZN, Wednesday AMC. AAPL Thursday AMC. FOMC Wednesday with SEP and Powell presser. ServiceNow Analyst Da,y May 4. Each one resolves a specific question.

Each one can extend, confirm, or invalidate the within-tech rotation read, and each one feeds into the verdict on the software bottom.

Forward Reads — Indices, Sectors, Thematics

QQQ leads SPY into next week on the Microsoft print. The 1W spread — XLK +3.80% vs the broad index — confirms tech is absorbing rotation dollars at the megacap level. IWM lags. Small-caps have no sector tailwind, no thematic catalyst, and the relative-strength story has not turned in their favor since the Q1 head-fake.

The index to watch is QQQ, which pulls away from SPY by 200+ basis points on any continuation day, driven by Mag-7 earnings.

Sector rotation tilts further into growth and away from defensives. XLK and XLY remain the twin engines into earnings. XLE caught the oil-rebound bid this week — sustainable only if the Hormuz situation re-escalates; otherwise, it means reversion to the mean. XLF holds its bid but trails meaningfully. Watch for XLC to accelerate on the Alphabet and Meta prints — Communication Services has been a base-building theme for three weeks, and platform-scale AI monetization needs a fundamental confirmation moment.

Thematic leadership has narrowed. SMH and SOXX have decoupled from IGV. Last week, these traded as one cohort; this week, they diverge by 10+ percentage points. The structural read is unchanged — AI infrastructure leads, software is on test. AIQ and CIBR are the names with 1M backing in the AI complex; their hold or break this week is the primary signal for the orchestration layer.

The Closelook indices to track this week. AW25 Agentic Winners is the index whose composition gets directly tested by next week’s Mag-7 earnings cluster. A held NOW $81.24 / IGV $74.62 floor — discussed below — keeps the AW25 setup alive for selective adds. A break of either kills it. The probabilistic case tilts toward the hold given Friday’s NOW +5% recovery and the SAP positive print, plus the multiple compression already 85-90% complete and NOW now trading below the S&P P/E for the first time in its post-IPO history. But the probabilistic case is a tilt, not a verdict. Monday’s tape and Tuesday’s Microsoft print are the first tests.

IGV $85.20 / QQQ $663.88 = ratio 0.1284. The ratio tested the 0.1255 trigger zone intraday on Wednesday and recovered to close above it. Bottom case for software needs continued holds above 0.1255 plus a reclaim of the prior-week 0.1311. Watch the next 5-10 trading days — that window contains more information than a normal quarter.

Watchlist — What Would Flip the Read

The next ten trading days (April 27 → May 8) deliver six resolving signals:

Monday April 27: analyst opinions on NOW/IBM. The first hour of US trading is the leading indicator — institutional desks publish their re-rating overnight, and the tape responds in real time. NOW closed Friday at $90.17 (already +5% off the Wednesday capitulation). A Monday print above $95 confirms the priced-in case advancing. A break below $81.24 reactivates the SaaSpocalypse continuation.

Tuesday April 28 AMC: Alphabet (GOOGL). The platform-scale AI monetization print. Search ad revenue, YouTube ad growth, and Cloud (GCP) AI capex commentary are the three diagnostic lines.

Wednesday April 29 — the day: MSFT, META, AMZN all report after the bell on the same evening — three Mag-7 prints in 90 minutes. Microsoft’s Azure AI growth print is the single most diagnostic line: 35%+ confirms the capex story and extends the AI infrastructure runway; below 30% signals enterprise AI adoption running slower than the semiconductor leadership thesis assumes. Meta on ad-engine AI uplift. Amazon on AWS infrastructure demand. Three-of-three confirming capex acceleration ratifies the within-tech rotation thesis structurally.

Wednesday April 29: FOMC rate decision (3:00 PM ET) + SEP dot-plot release + Powell press conference (3:30 PM ET). Hold expected at 3.75%; the press conference framing is the macro pivot of the quarter.

Thursday, April 30: AAPL AMC + GDP Q1 advance (consensus +2.1%) + Core PCE Mar (consensus 3.1% YoY) + Chicago PMI + initial claims + BoJ rate decision overnight. The single most data-dense day of the macro calendar this quarter — and the reaction to whichever Mag-7 surprised the night before will compound through these prints.

Sunday,y May 4: ServiceNow Analyst Day. Now, an Assist ACV walk-back from $1.5B to $1.0B would confirm that the bridge math the market priced in this week was correct — the AI uplift compensating term collapses, and the SaaSpocalypse case becomes the consensus. Reaffirmation or upward revision would break the bridge math the market just enforced and reset the entire enterprise SaaS multiple back toward pre-Wednesday levels.

Continuing trigger: Rubin Build-Out 100 W/W flipping negative while QQQ continues higher. The within-tech rotation thesis breaks. Capital is leaving the AI infrastructure layer rather than rotating between its sub-sectors. Reduce thematic exposure. The bear case for the entire generation rotation framework would be on the table.

(5) What May Lie Ahead: Macro Setup

Macro setup for next week: the Fed meeting on Wednesday is the structural event of the quarter; the Thursday data cluster (GDP Q1, Core PCE, BoJ overnight, AAPL AMC) is the most data-dense day of the calendar. Money Temperature drifts toward the gross-reduction trigger but has not yet reached it.

Central Bank Pulse

Fed: The Wednesday, April 29 FOMC meeting is the macro event of the quarter — rate decision, SEP dot-plot update, and Powell press conference all in a single afternoon. Market pricing assumes a hold at 3.75%; the question is (a) the dot-plot 2026 median — does the SEP imply two cuts still, or fewer? — and (b) Powell’s press conference framing on disinflation progress. Two crosscurrents: Q1 earnings beat rate (~28% reported, 80%+ beating both EPS and revenue) and resilient retail sales argue against a dovish pivot. Consumer sentiment at 49.8 — the lowest reading on record, below GFC, COVID, and post-Russia-invasion lows — argues for one. Inflation expectations for the year ahead remain elevated at 4.7%. Thursday’s Core PCE +3.1% YoY consensus (a 10bp uptick) and PCE +3.3% YoY (a 50bp uptick) hit the day after the FOMC — making the press-conference framing especially consequential. Fed nominee Kevin Warsh’s confirmation testimony was viewed as more hawkish than expected, which has begun to seep into the rates curve. The DOJ dropped its criminal probe into Powell, removing one source of policy-process uncertainty heading into the meeting.

ECB: The euro area’s dovish path remains intact, though dollar firming this week was less a hawkish-Fed story than a stalled-peace-talks story. The underlying ECB-Fed divergence supporting European equities is unchanged structurally.

BoJ: The Bank of Japan policy meeting is also next week — Thursday, April 30, the morning JST session, with Outlook Report on the same day. Rate-hike expectations have continued to fade in recent weeks. Still, the Outlook Report is the more material item — any hawkish revision would amplify yen-carry-unwind risk on a day already crowded with FOMC follow-through, GDP, Core PCE, and AAPL earnings.

PBoC: China’s Q1 GDP at 5.0% beat expectations. The PBoC’s accommodative stance continues without fresh stimulus. China-listed equities (MCHI) traded mixed on the week, sensitive to the dollar move and to the technology-export-control narrative.

The dollar-yield-oil triangle is the pivot for cross-asset positioning. Last week’s risk-on impulse was anchored on a weakening dollar, falling oil, and stable yields. This week’s sector dispersion was anchored on a firming dollar (UUP +0.44% W/W), rebounding oil (USO +14.10% W/W, a near-complete round-trip of the prior-week's selloff), and modestly higher yields (10Y around 4.30%). Gold also gave back, GLD −2.84% W/W, on the dollar firming. The mechanism is well-understood; the resolution depends on whether the Iran-US peace track resumes after stalling this week.

Macro Commentary

“The path of least resistance for the major US indices is still up. Fade rallies in defensives, lean into the trend in AI infrastructure, and recognize that the rotation thesis depends on the dollar — not on relative-value arguments alone.”

— Michael Hartnett, Bank of America Securities, “The Flow Show,” April 24, 2026

Hartnett’s note this week recommends curve steepeners, China, consumer cyclicals, and frames the AI-infrastructure trade as the dominant US risk-on expression. The AI-infrastructure call aligns directly with the within-tech rotation read — Hartnett identifies the same destination of capital that the Rubin Build-Out captures structurally. The curve-steepener trade presupposes the macro regime supports continued risk appetite, consistent with Money Temperature in the Transition zone rather than Hot. Consumer cyclicals and China are dollar-weakening trades; they sit a step ahead of this week’s price action. They will work when the dollar rolls again. This week’s firming was a pause, not a regime change.

Seasonality

The seasonal calendar (chart shown in Section 3) reinforces the structural read. April 2026 prints +18.54% on QTEC — the best April in the 16-year history. That is one of the largest monthly moves on record, and it happened during a month that the rotation camp had labeled as the moment when “tech leadership is over.” May historically be thin to a coin flip. June is similarly weak. July is the strongest single month of the year for QQQ — average +4.1%, hit rate 94%. August through mid-October enters the seasonal soft window. The structural map for the rest of 2026: a final push higher into summer (sub-5 of larger Wave 3 in the Closelook@Global frame), a sharp setback in late August through mid-October aligning with both seasonality and the historical midterm-year drawdown, and a year-end rally into 2027 from the post-midterm low.

The wave count, the seasonal calendar, and the presidential-cycle pattern all point at the same nine-month roadmap. The current edition is the early stage of that arc.

(6) What May Lie Ahead: Technical Setup

Technical setup: QQQ closed Friday at 663.88, a fresh all-time high. The 4Y log-channel upper band held resistance at 650 last week and was decisively broken this week. The Stochastic remains pinned in the upper range. In a confirmed trend impulse, this is the structural signature, not the warning.

The Technical Reading

QQQ at 663.88 has cleared the 4Y log-channel upper band that capped price last week at ~650. The breakout extended into Friday’s session and held into the close. This is the third impulse of the post-March advance: Wave 1 mid-March breakout from the 520 base, Wave 2 early-April pause at 595-605, Wave 3 the current leg now pressing through the channel ceiling. Invalidation lines: 648 (last week’s prior ATH — a daily close back below would confirm a false breakout); 600 (the 3M consolidation midpoint — close below would argue a deeper retest); 498 (the 4Y log-channel lower band — full structural invalidation).

The setup to watch into next week: a print to 670, followed by rejection back below 658, would activate a 645-650 retest of the breakout level. Sustained price above 670 keeps the structure constructive into the Mag-7 earnings cluster.

Technical Commentary

QQQ at 663.88 has confirmed the breakout above the 4Y channel that capped the price for two weeks. The hold or break at 658-660 on any pullback next week is the primary tactical level — it was upper resistance through Wednesday’s session and now needs to act as support. The reciprocal move requires demand at the prior ceiling, not just the absence of supply. A weekly close above 663.88 — with rising volume — confirms bid conviction into the FOMC. A failure here, with a close below 658, opens a flush toward the 645-650 range where the breakout originated.

The 3M breakout structure at 600 remains the secondary technical floor. A close below that level would end the wave-3 read and argue consolidation into the 580-585 zone. Neither is close at the current 663.88, but a rejection at the upper extension followed by a volume break below 645 would put the 600 test back on the calendar.

Indicator Focus — Why a pinned Stochastic is constructive

The Slow Stochastic (14,3,3) prints in the high range on QQQ weekly, similar to the prior week’s reading. In a confirmed trend impulse, mean-reversion oscillators stay pinned at “overbought” for the entire duration of the move. Every secular uptrend in equity history has looked overbought for most of its duration. The Coppock curve remains rising. ADX remains in a strong-trend reading. The 30W moving average is well below the price and rising. None of these reads are “exit” reads. They are continuation reads in a trending regime.

The diagnostic question is not “is QQQ overbought?” — it is “is this still a trend regime?” The Alignment Check below answers that.

Alignment Check

Dimension Reading Verdict Technical QQQ at 663.88 above 4Y log-channel upper band, fresh ATH, RS to SPY widening, Coppock rising, ADX strong-trend, Stoch pinned overbought ✓ Constructive Macro Money Temperature in Transition zone; Q1 earnings 80%+ beat rate; Fed expected hold; Thursday data day (GDP + Core PCE + BoJ + AAPL) heavy with binary outcomes ⚠ Data-dense ahead Seasonality April 2026 on track for one of the strongest QTEC Aprils on record; May historically thins to a coin flip; July is the destination (94% hit rate, +4.1% avg) ✓ Constructive into early May

═══ Confluent Bullish — Within-Tech Rotation In Progress ═══

All three pillars are constructive. The within-tech rotation thesis is the framework that explains both the software single-name break and the semiconductor extension simultaneously. What to respect: the upper extension of the channel — do not pyramid into 670—what to trust: the trend. The risk-off trigger is Money Temperature 75+ or sector breadth dropping below 50% — neither is on this week’s card.

(7) The AI Build-Out Portfolio: What We Did

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(8) The AI Build-Out Portfolio: What We Plan To Do

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(9) Knowledge Corner

This Week’s Topic: Why Functional Indices

The week the Tech sector sent two opposing signals at once — semiconductors at 18-day record streaks, software in active retest — is the week the case for functional indices became impossible to ignore. A reader holding XLK could not see the rotation. The ETF averaged it away.

The Problem with Broad Sector ETFs

XLK contains NVDA (semis vertical) and NOW (software cracked) in the same basket. IGV runs a different basket again. SMH a third. If you hold any of them, you get one number that averages multiple divergent stories. In a coherent regime — broad risk-on or broad risk-off — that averaging is fine. The single number tracks the dominant signal. In a within-sector rotation, the averaging is destructive: it hides exactly the signal that matters.

This week’s data illustrates the cost. IGV is down 24.7% YTD. QTEC is up roughly 30%. Both are “tech” by the conventional taxonomy. A reader with XLK exposure participates in the latter through NVDA’s weight and absorbs none of the IGV pain — fine. A reader thinking about whether the broader software complex has bottomed sees only “Tech is up X%” and misses the dispersion entirely. The broad ETF is a useful vehicle for ownership. It is a poor analytical instrument in transition phases.

The Functional Index Approach

A functional index does not start with the question “what stocks have a SIC code in this category?” It starts with “what value-creation function are we trying to capture?” — and then assembles the constituents that functionally deliver that value, regardless of which sector or thematic ETF labels them.

The Closelook Rubin Build-Out 100 captures the AI hardware supply chain — Memory, Packaging, Power, Cooling, Interconnect, Substrates, Lithography, Foundry, EDA. Six layers, 18 sectors. Each sub-sector answers a specific question about the AI build-out: which layer is leading, which is saturating, and which is the next handoff candidate. A reader following the Rubin sector dispersion sees Power Semis up 13.5% this week and knows that GB200 /Rubin power delivery is the active layer. A reader following XLK sees a single number and learns nothing.

This Week as Empirical Proof

The Rubin Build-Out is up roughly 65% YTD on equal weight, ~90% on momentum weight. The Nasdaq-100 is up roughly 6%. A 10-13× spread. That spread is not a quirk of construction. It is the framework working. The Rubin index isolates the AI infrastructure layer. The Nasdaq dilutes the signal with software, consumer, and services exposure. SMH averages across the entire chip complex, including Hopper-era names (Wafer Processing +3% YTD, EDA +16%) and Rubin Early Ramp names (Interconnects +124%, Memory +107%). Rubin separates them.

In a coherent rally where everything moves together, a broad ETF tracks the average,e and that is sufficient. In a rotation phase — Hopper Sunset to Rubin Early Ramp, broad software to narrow orchestration — the broad ETF systematically mispositions. It carries last cycle’s winners and next cycle’s winners in the same basket, weighted by past market cap rather than future capital flow. The functional index disaggregates exactly this distortion.

Beyond Rubin: Functional Indices as a Framework

The Closelook index family is a study in functional Design.

HALO Growth 100 answers: Which physical-world growth compounders sit in sectors that AI agents do not eat? Twelve sectors, deliberately AI-safe, deliberately not-tech. The complement to Rubin in a barbell.

Euro-AI Sovereign 50 answers: which European names are positioned for the EU’s AI sovereignty pivot — chip independence, sovereign data infrastructure, regulated AI deployment? The answer is geographic and regulatory, not sector-driven. No European ETF captures it.

AW25 Agentic Winners 25 answers: Which 25 names are the cleanest sensors for whether agentic software is gaining traction in enterprise workflows? A tactical sensor array, not a buy-and-hold index. Designed to read the orchestration layer the way Rubin reads the infrastructure layer.

ABR Framework answers: which large-cap names are most exposed to AI disruption on five qualitative axes — Legacy Exposure, Agent Benefit, Upside Unpriced, Downside Unpriced, and Confidence? An analytical scoring system that produces an investable index, not a price-screen output.

Each one is built around a question that broad ETFs cannot answer. Each one is reproducible — the methodology is documented, the constituents are tagged, and the rebalancing is rule-based. None of them is “we picked some stocks we like.” All of them are functional designs that pre-commit to capturing a specific value-creation signal.

The Practical Implication

In transition phases — and the Hopper-to-Rubin handoff is the exemplary case for 2026 — functional indices are not a marginal improvement over broad ETFs. They are the only instruments that show the rotation as it happens rather than after it has finished.

When the next cycle handoff comes — Rubin Sunset to Feynman Dawn — the same framework will surface that one in real time. Broad ETFs will report it after.

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(11) What May Go Wrong: Risk & Change Triggers

The falsification test: what would invalidate Sections 3, 5, and 6 — and how we would know.

Macro Change Triggers

Wednesday April 29 — FOMC + SEP + Powell: A hawkish dot-plot revision (median pulled to fewer-than-two cuts in 2026) or a hawkish press-conference framing on disinflation progress would lift yields, firm the dollar further, and pressure the multiple-expansion piece of the AI infrastructure trade. Base case: hold at 3.75%, balanced tone, dot-plot keeping two cuts in play.

Thursday, April 30 — the data day: GDP Q1 advance (consensus +2.1% vs +0.5% prior) + Core PCE Mar (consensus 3.1% YoY, +10bp) + PCE Mar (3.3% YoY, +50bp) + Chicago PMI + Initial Claims + BoJ overnight. Both GDP-hot AND Core-PCE-hot in the same morning would force a complete repricing of the rate path — expect a 10Y bid, a firmer dollar, and a risk-off rotation. Either one cooling alone is the base case.

Mag-7 earnings cluster — the AI capex test: GOOGL Tuesday AMC (Cloud + Search), MSFT/META/AMZN Wednesday AMC (the night of three Mag-7 prints in 90 minutes), AAPL Thursday AMC. Microsoft’s Azure AI growth print is the single most diagnostic line — a print below 30% growth would signal enterprise AI adoption running slower than the semiconductor leadership thesis assumes, and the within-tech rotation thesis would face its first fundamental challenge of the year. A print at 35%+ confirms the capex story and extends the runway.

Software-Specific Triggers — The Open Verdict

NOW closed Friday at $90.17, already +5% off Wednesday’s capitulation. IGV at $85.20 held flat on the week — the structural floor at $74.62 sits over $10 below current. The early reads tilt toward bottom-in. The triggers below are the structural decision points.

· NOW close below $81.24 daily: the bridge math collapses, the SaaSpocalypse thesis returns to base case, IGV tests $74.62 next.

· NOW Monday close above $95: the priced-in case advances strongly; analyst re-ratings are net positive; the bottom is in for this episode.

· IGV close below $74.62: the technical floor of the software complex breaks, the March bottom is invalidated, and the AW25 Agentic Winners setup is suspended pending the Q1 earnings sequence completing.

· WDAY (May 27) or CRM (May 28) cRPO deceleration below 15% CC: a sector-wide fundamental problem, not idiosyncratic to NOW. Would confirm that the bridge math applies broadly across enterprise SaaS, not just to ServiceNow.

· Now Assist ACV walk-back at the ServiceNow Analyst Day on May 4: the AI uplift number that supports the bridge math gets revised down. The compensating term in the equation collapses. Bear case for software confirmed.

· Now Assist ACV reaffirmation or upward revision on May 4: the bridge math the market just enforced is rejected by management. The multiple compression from this week begins to unwind. Bull case for software confirmed.

Technical Invalidation Levels (US Indices)

QQQ: weekly close below 648 confirms a false breakout from the channel ceiling. Below 600 ends the wave-3 read and argues consolidation into the 580-585 zone. Below 498 is the full structural invalidation of the multi-year bull case on QQQ.

Indicator Shift Triggers

· Coppock Curve rolling from rising to topping — would flag larger-degree maturity, consistent with the Section 3 forecast that the larger Wave 3 completes in summer 2026. Watch through May-July.

· ADX falling below 20 from a current strong-trend reading — would signal a transition from trending to ranging, consistent with sub-5 completion and a transition to the larger Wave 4 corrective phase forecast for late August through mid-October.

· Rubin Build-Out W/W flipping negative while QQQ continues higher — the within-tech rotation framework breaks. Capital is leaving the AI infrastructure layer rather than rotating between its sub-sectors. The bear case for the entire generation-rotation thesis would be activated.

The thesis holds until one of these triggers fires. When they do, the next edition updates the read.

(12) Final Words

“The best stock to buy is the one you already own.”

— Peter Lynch

Lynch said it about a different kind of market and a different kind of investor. The application to a within-tech rotation, however, is direct: the reader who held the AI infrastructure thesis through the March consolidation, through the rotation-out-of-tech narrative of Q1, through the SaaS scare of this week — that reader did not need to do anything new. The Rubin Build-Out kept holding the right names through every phase, because it was designed around the function the market was rewarding, not around the labels the market was discussing.

The Litmus Test bent — but did not break. The expected revert-to-mean ran its course off oversold extremes. News triggered the mid-week shock. NOW and IBM each took double-digit single-session damage on beats. And IGV at the index level closed essentially flat on the week. The damage was idiosyncratic. Friday’s NOW +5% recovery and SAP’s positive print already tilt the read toward priced-in rather than continuation lower. Tilts are not verdicts, and the earnings response from Tuesday onward is the resolving signal — but the early evidence is on the side of bottom-in, not new lows.

The verdict on software matters specifically for the AW25 setup. It does not matter for the broader thesis. Every “rotation out of tech” call since October 2022 has been a rotation within tech. Episode 47, by Saturday’s close, is data point number nine.

Sub-5 of larger Wave 3 has weeks to run. The Mag-7 earnings cluster is the next test. The FOMC is the macro pivot. The summer push will resolve into the late-August seasonal weakness, the midterm-year setback, and the post-midterm rally — three frameworks pointing to the same nine-month roadmap.

The within-tech rotation is the framework that explains why the software break did not become a tech break, why the semiconductor extension is not euphoria, and why the Rubin Build-Out has tracked at 13× the broad benchmarks year-to-date, and this week confirmed it again. The work is to stay with what works while it is still working — and to respect the falsification levels when they eventually fire.

Thank you for reading. See you next Saturday.

Annex — Further Reading at Closelook

Suggested navigation across Closelook’s own work.

This Week on the Pulse

· The SaaS Litmus Test: Is The March Bottom Real? — Weekly Signal Special, April 19 (closelook.net/weekly/2026-04-19/)

· Rubin Outruns the Nasdaq 100 — By a Factor of Thirteen — Daily Pulse, April 21 (closelook.net/pulse/2026-04-21/)

· The Great Rotation Out of Tech — Season 9, Episode 47 — Daily Pulse, April 23 (closelook.net/pulse/2026-04-23/)

· It ain’t over until it is over — Daily Pulse on NOW/IBM bridge math, April 24 (closelook.net/pulse/2026-04-24/)

Indices & Frameworks

· Rubin Build-Out 100 — 100 stocks, 18 sectors, AI infrastructure (closelook.net/indices/rubin)

· HALO Growth 100 — Physical-world growth, AI-safe sectors (closelook.net/indices/halo)

· Euro-AI Sovereign 50 — European AI sovereignty play (closelook.net/indices/euro-ai)

· Agentic Winners 25 — Tactical agentic infrastructure index (closelook.net/lab/agentic)

· Money Temperature — 8-instrument macro regime scoring (closelook.net/lab/temperature)

· Cointegration Monitor — Engle-Granger pairs + cascade tracker (closelook.net/lab/cointegration)

· ABR Framework — Agent Beneficiary Ratio for AI disruption (closelook.net/research/abr-framework)

Portfolios

· Global ETFs — ex-US regional + sector ETF portfolio (closelook.net/portfolios/global-etfs)

· AI Build-Out — Rubin-index-aligned single-stock portfolio (closelook.net/portfolios/ai-buildout) (this newsletter)

· Hypergrowth — 16 AI-native names + covered-calls layer (closelook.net/portfolios/hypergrowth)

· Global Tech 50 — Non-US tech, passive long-horizon (closelook.net/portfolios/global-tech-50)

· Derivatives — Covered calls, cash-secured puts overlay (closelook.net/portfolios/derivatives)

Editorial

· Weekly Signal — 9-dimensional market regime scorecard (closelook.net/weekly)

· Daily Pulse — Daily market notes archive (closelook.net/pulse)

· Research Dossiers — Deep-dive reports on themes and names (closelook.net/research)

· Closelook 101 — Concepts, frameworks, methodology (closelook.net/101)

· Glossary — Terms, definitions, cross-references (closelook.net/glossary)

Publishing Schedule

Thank you for reading this week’s edition of Closelook@US Stock Markets, dated April 19, 2026 👋. The next edition will be published on April 26, 2026.

For the schedule of our other publications, please check the publishing schedule at the end.

Table of Contents

1. This Week’s Action

2. Overview: The US Market Map

3. The State

4. The Outlook

5. What May Lie Ahead: Macro Setup

6. What May Lie Ahead: Technical Setup

7. The AI Build-Out Portfolio: What We Did

8. The AI Build-Out Portfolio: What We Plan To Do

9. Knowledge Corner

10. Upcoming Transactions: Be Informed

11. What May Go Wrong: Risk & Change Triggers

12. Final Words

(1) This Week’s Action

Nasdaq +5.9% on the week, the cleanest momentum signature in two years. And yet — QQQE (equal-weight) is catching up to QQQ. The rally has two pillars now: megacap tech and the Tail-70.

The Week at a Glance

Week at a Glance — hero basket performance table

Chart 1 — QQQ Across Four Timeframes

QQQ across four timeframes — log-channel + stochastic + S&R + Fib

Max-monthly / 4Y-weekly / 1Y-daily / 3M-daily. Auto-generated from EODHD closes, updated on each render.

Trend & Momentum Indicators (on QQQ weekly)

Trend & Momentum Indicators on QQQ weekly

Chart 2 — Index Cuts — Tech vs Ex-Tech × Top-20 vs Tail-70

QTEC · QQXT · QNXT · TOPT — Index Cuts — Tech vs Ex-Tech × Top-20 vs Tail-70

Same indicator overlay as Chart 1 (log-regression channel + stochastic + S&R + Fib).

This Week’s Signals

No pattern alerts this week.

What Happened

The S&P 500 gained 4.52% on the week. The Nasdaq-100 gained 6.18%. Those are not relief rally numbers. Those are regime-reset numbers. VIXY collapsed 6.12% on the week, extending its one-month slide to 16.85%. Volatility is not retreating. It is being structurally repriced lower, and that distinction matters. The tape is not healing. It is rotating into a new risk-on phase, and the leadership profile makes that plain.

Growth dominated. Defensives did not participate. ARKK led all major ETFs, up 14.35%. IGV Software added 13.94%. CLOU Cloud Computing gained 11.93%. Meanwhile, XLE Energy lost 3.37%. Utilities fell 1.70%. Consumer Staples barely printed green at +0.11%. That divergence is not noise. When speculative growth runs double digits and rate-sensitive defensives bleed, the market is pricing in a structural shift in the rate and liquidity regime, not just a sentiment bounce.

Semiconductors confirmed the thesis. SMH gained 6.24% on the week and 17.91% over the past month. That one-month number is the tell. It means the chip complex was already rebuilding before this week’s surge. AIQ Broad AI gained 9.58%. CIBR Cybersecurity added 9.45%. The AI infrastructure trade is not rotating out. It is rotating up the risk curve, from large-cap AI plays into software, cloud, and disruptive-growth vehicles. QQQ’s 9.07% one-month return lags SMH by nearly nine points. Semis are leading QQQ. That is early-cycle AI infrastructure behavior, not late-cycle multiple expansion.

IWM’s 5.54% weekly gain and 12.10% one-month return deserve attention. Small caps do not outperform over a month unless credit conditions are easing or the market expects them to. The USD Index fell 0.29% for the week and 1.76% for the month. Dollar weakness, small-cap strength, and collapsing volatility are a coherent signal. The §3 thesis will address whether this regime has legs or is running ahead of the macro data that would justify it.

Narrative briefing data — indices mentioned in the week summary

Week Winners

Week Winners — top movers this week

Week Losers

Week Losers — bottom movers this week

(2) Overview: The US Market Map

Sorted by 1W % descending · All returns in USD (unhedged) · Close of 2026-04-17

US Index Levels (ETF Proxies)

US Index Levels (ETF Proxies)

Sector ETFs

Sector ETFs

Tech Thematic ETFs

Tech Thematic ETFs

Closelook Functional Indices

Closelook Functional Indices

Closelook Lab Read on QQQ

Closelook Lab Read on QQQ

Closelook Lab Grid — Regime Shifts This Week

Closelook Lab Grid — regime shifts this week

(3) The State

Where we stand after the Hormuz opening: all four index ETFs at or near 52-week highs, breadth confirming, volatility collapsing to 17.48 on the VIX. Money Temperature moved to 62 — Transition (up-direction). Not euphoria yet, but the warming clock is on.

The Thesis

a) QQQ leads SPY by 166 basis points on the week, 6.18% vs 4.52%. That is a tech-forward tape, not a broad-market rally. QQQE’s 5.48% gain confirms the advance has genuine breadth inside the Nasdaq. IWM data is absent this week, so the small-cap read is inconclusive. DIA’s 3.12% trails every major index. Old-economy names are participating, not leading. The regime is growth-over-value, Nasdaq-over-Dow.

b) XLK’s 8.22% weekly gain sets the pace. XLY adds 6.66%. Everything else trails meaningfully. The cyclical-defensive split is stark: XLE dropped 3.37%, XLU fell 1.70%, XLP printed essentially flat at +0.11%. Healthcare managed only 1.01%. Industrials lagged at 1.16%. XLRE’s 3.88% is the one bright spot in the defensive-adjacent print. The sector tilt is unambiguous: risk-on, tech-led, with energy and utilities actively sold.

c) The internal Nasdaq structure shows concentration at work. QQQ’s 6.18% week is pulled higher by the megacap tech cohort, evidenced by XLK’s 8.22% outperformance. QQQE’s 5.48% trails QQQ by 70 basis points, confirming the top of the index is doing the heaviest lifting. The spread is not extreme enough to flag as a red-flag narrowing, but the breadth is not widening either. The equal-weight discount to cap-weight is the structural caution. Risk-on posture is valid. It is not yet broad-based enough to call a clean participation surge.

d) MGK’s 7.30% weekly gain outpaces SPY’s 4.52% by 278 basis points. Megacap growth is driving returns, not suppressing them. At this spread, concentration reads as healthy leadership rather than fragile crowding. Flag it if the gap widens further in the coming weeks.

e) ARKK’s 14.35% week tops the thematic table. IGV follows at 13.94%, CLOU at 11.93%. Speculative and software names are surging together. That is not an AI-native rotation. It is a broad risk-on lift across the growth spectrum. AIQ and CIBR, the more structurally grounded themes, gained 9.58% and 9.45% respectively. SMH lagged the group at 6.24% despite its 17.91% one-month base. The week belongs to speculation and software. AI-native semis are consolidating recent strength rather than extending it.

f) AW25 leads all Closelook indices at +12.86% for the week, confirming agentic-AI names as the sharpest edge of the tape. Rubin’s 6.60% week looks strong in isolation. Against its 25.93% one-month return, this deceleration is worth watching. HALO’s 4.32% week versus Rubin’s 6.60% opens a 228-basis-point spread. HALO’s 1.44% one-month return against Rubin’s 25.93% tells the full story: the infrastructure buildout thesis is running hot, broad growth quality is not keeping pace.

Seasonality Setup

QQQ monthly seasonal returns (16y)

QQQ seasonality — 16-year monthly

Seasonal tape is constructive through May but loses conviction by June — average returns thin to 1.1% on a coin-flip hit-rate. July is the real destination: 4.1% average, 94% hit-rate, the strongest seasonal window QQQ sees all year.

Regime Verdict

Regime Verdict — composite + 5 pillars

The regime reads Risk-On, but a score of 3 of 4 is not a clean green light. Headline indices averaged +4.84% on the week. Thematics surged +10.44%. Breadth confirmed — 73% of sectors participating. That is the surface. Underneath it, directional flow tells a different story: only 22% of the Rubin universe sits in Accel-Up or Reversing-Up. 61% is either decelerating or accelerating. This is a bounce with thinning internals, not a regime re-acceleration. Position for selective exposure — leadership in AI/software justified, broad beta not. One pillar flip kills the read: directional flow dropping below 15% Accel-Up collapses the composite to neutral or below.

Sector Dispersion — Rubin is not a homogeneous block

Rubin sector dispersion — heating vs cooling sectors with top movers

Buildout Timeline — which stage leads the cycle?

Buildout Timeline — 9 chip-cycle stages with Δ21 flow read

The read is a classic handoff phase: Design (Stage 1) heating at +11.5 signals the next chip cycle is loading, while Fabless (-16.2), Foundry (-10.7), and Memory (-16.5) are all distributing — the current cycle is shipping and those positions are rotating out.

Interconnect (+7.2) heating at the tail confirms it: back-end names see the output flow. Watch Design — if ARM and EDA names keep accelerating over the next 2-3 weeks while Fabless/Memory stabilize, the next leg is loaded 6-9 months ahead of the visible price move.

(4) The Outlook

The outlook rests on three catalysts arriving in the next 10 days: the April 22 ceasefire expiry, the April 25 Core PCE, and the April 28-29 FOMC. Each one can extend or reset the tape. The posture is constructive, the sizing is disciplined.

Forward Reads — Indices, Sectors, Thematics

QQQ leads SPY next week. The 1W spread — XLK +8.22% vs XLI +1.16% — confirms tech is absorbing rotation dollars fastest. IWM lags. Small-caps have no sector tailwind and no thematic catalyst. The index to watch is QQQ pulling away from SPY by at least 150 basis points on any continuation day.

Sector rotation is tilting hard into growth and away from defensives. XLK and XLY are the twin engines — consumer discretionary at +6.66% for the week confirms the risk-on regime is broad enough to include cyclical growth, not just mega-cap tech. XLF at +3.27% holds its bid but trails meaningfully. Watch for XLC to accelerate. Communication Services at +4.52% 1W is building base momentum. The next leg higher in XLC would confirm platform-scale AI monetization is getting priced, not just compute infrastructure.

Thematic leadership is unambiguous: speculative growth and software are running the table together. ARKK +14.35% and IGV +13.94% in a single week is a compressed risk rerating, not a rotation. CLOU at +11.93% with a negative 1M print tells you last week was catch-up compression — real breakout leadership sits in AIQ +9.58% and CIBR +9.45%, which have 1M backing. AI-native over broad software. Speculative names are participating but are not leading on a 1M basis. ARKK’s 1M at +10.95% is the exception — watch it closely for exhaustion signals.

The Closelook index to track this week is CL-AW25 Agentic Winners 25 at +12.86% 1W. It has no 1M baseline yet, which makes it a live discovery index. If AW25 holds its 1W gain into midweek and CL-Rubin Buildout 100 confirms with a 2%+ add-on to its +25.93% 1M base, the agentic infrastructure theme is entering a new leg. HALO Growth at +4.32% 1W is the laggard to watch for mean-reversion signals. ABR Framework at +0.12% is dead weight in this regime — ignore it.

Edition Focus Chart

QNXT/TOPT ratio — Breadth vs Concentration

QNXT/TOPT ratio vs 10W MA · 52W window. Default pair — edition can override.

Watchlist — What Would Flip the Read

· QQQ below 455: negates tech leadership call. SPY rotation signal activates. Reduce thematic exposure by 30% and move to XLF/XLI pair.

· IGV fails to hold 1W gain above prior resistance (watch 370 close): software breakout becomes a false start. CLOU and IGV both revert. AI-native thesis narrows to AIQ and CIBR only.

· ARKK two-day close below 57: speculative risk appetite exits. Regime composite drops toward neutral. AW25 agentic call is suspended until 1M data confirms.

(5) What May Lie Ahead: Macro Setup

Macro setup for next week: disinflation print is the single biggest tell. A Core PCE at or below 0.2% MoM extends the risk-on window into FOMC. A hotter print would collapse the dovish-Fed narrative that is partly underpinning current levels.

Money Temperature

Score: 62 🟡 Transition

Composite of 8 macro instruments — rates, credit, FX, commodities. Absorption ratio at 0.50 (5/10 fragility). Snapshot: 2026-04-17.

The Money Temperature sits at 62 — Transition zone, warming direction. The composite reflects last week’s macro repricing: WTI collapsed by 9.4% on Friday, compressing commodity stress; credit spreads tightened on risk-on flow; 10Y at 4.24% confirms the disinflationary read; dollar soft (UUP −0.29%). Absorption ratio at 0.50 — 5 of 10 macro instruments in shock-absorbing mode — neutral-to-constructive, not fragile. At 62 warming, we hold the current gross. The trigger for gross reduction is a composite print of 75+. On current pace, 2–3 weeks away. No sizing change this week. The tape is doing the work.

Full dashboard: closelook.net/lab/temperature/

Central Bank Pulse

Fed: The Fed holds at 4.25–4.50%, and the market prices the first cut in July with roughly 65 basis points of easing by year-end. Chair Powell’s April 16 remarks closed the door on a May move, citing persistent services inflation and tariff pass-through risk. The Fed is not pivoting. It is waiting for data that may not arrive on its preferred schedule.

ECB: The ECB cut its deposit rate to 2.25% on April 17, delivering its seventh consecutive reduction. Markets price one more 25-basis-point cut by June, with the terminal rate seen near 1.75%. The divergence with the Fed is now structural, not cyclical. EUR/USD bears have a policy tailwind; the trade is not done.

BoJ: The BoJ holds at 0.50%, and the April meeting produced no new forward guidance toward further hikes. Governor Ueda flagged global trade uncertainty — read: U.S. tariffs — as a reason for caution. Rate differentials keep the yen structurally weak against the dollar. USD/JPY will not break lower without a Fed pivot or a BoJ surprise, and neither is imminent.

PBoC: The PBoC holds its one-year loan prime rate at 3.10% and its five-year at 3.60%, but the easing bias remains intact. Authorities have room to cut; political will to deploy it aggressively is the variable. With export demand under tariff pressure and domestic consumption still soft, further LPR reductions before Q3 are the base case. CNY management remains the primary policy lever in the near term.

Macro Commentary

“Gold printed its all-time high on January 29 — a full month before the Iran strikes opened the current conflict. That means the $3,200→$5,594 run was momentum capital, not sovereign tail-risk hedging.

With the ceasefire in place and oil collapsing, that same capital rotated: out of gold (−14% from ATH), into risk. Bitcoin reclaiming $74k, with open interest up 59% over seven weeks, is the mirror trade: same money, same book, opposite direction from Q4 2025. For US equities, this matters because the liquidity expansion behind SPY 710 and SMH at new highs is the same flow. The positioning is the trade; the next trigger is the Fed.”

— Closelook Daily Pulse, April 20, 2026

The implicit point — positioning is the trade — maps directly to this edition’s thesis. The Rubin Buildout +25.93% 1M against HALO’s +1.44% is not a thematic divergence; it’s a liquidity-routing signature.

The same momentum book that abandoned gold is loading AI-infrastructure names. That flow is constructive through the FOMC window (April 28–29); beyond, it depends on what the Fed does next. A hawkish tilt forces some of that capital back to safety. A dovish hold extends it. The positioning reveals resets on the next catalyst.

(6) What May Lie Ahead: Technical Setup

Technical setup: QQQ is trading at the upper band of its 4Y log channel. The 3M breakout from the 540 base is clean, Alignment Check is confluent bullish, but the distance from the 30W MA is extended. Hold-territory, not add-territory.

The Technical Reading

Third impulse of the post-March advance. Wave 1: mid-March breakout from the 520 base. Wave 2: early-April pause at 595-605. Wave 3: current leg pressing the upper 4Y log-channel band near 649. Invalidation lines: 550 (3M breakout floor — close below ends the wave-3 read, argues consolidation to 520-525); 498 (4Y channel lower band — full structural invalidation). The setup to watch: a print to 585, followed by a rejection to 560 on volume, would activate the 550 test.

Main Chart

QQQ weekly 4Y with log-channel, S&R, Fib

QQQ weekly 4Y. Wave labels + tactical targets added manually during technical read.

Key Levels

Current: 648.85 · Upper Channel: 650 · Lower Channel: 498 · Horizontal Support: 550 · Fib 1.272: 585 · Fib 1.618: 605

Technical Commentary

§6 Technical Commentary + Indicator Focus Week of April 19, 2026

PART A — Technical Commentary

QQQ at 648.85 is trading without confirmed channel boundaries or active Fibonacci extensions. That absence is itself a read. Price is in structure-discovery mode. The path of least resistance depends entirely on whether 648.85 holds as a base or acts as a ceiling. A weekly close above 648.8, with increasing volume, confirms bid conviction. A failure here, with a close below 640, opens a flush toward the 620–615 range, where prior consolidation left unfilled structural demand.

Until channel walls are reestablished, resistance is air. No technical ceiling exists to slow a breakout move. That makes failed rallies more dangerous, not less. A rejection from current levels, with volume accelerating to the downside, is the primary invalidation of any constructive case. Bulls need QQQ to close the week above 648.85 and hold it on the retest.

Indicator Focus

The Slow Stochastic (14,3,3) prints 67.84 on %K and 39.26 on %D. That spread is wide. %K has run hard; %D has not confirmed. In a trending regime, this gap resolves by %D catching up, producing a bullish cross above 50 and extending the move. In a choppy or mean-reverting regime, it resolves as %K rolls back toward %D, signaling exhaustion.

The tell is the cross direction. A %D push through 50 with %K holding above it is the confirmation bulls need. A %K rollover below 65 before that cross happens ends the setup.

Alignment Check

Alignment Check — Technical, Macro, Seasonality dimensions

═══ Confluent Bullish — verdict ═══

Two pillars up, seasonality neutral. The tape has structural support. What to respect: the upper channel at 650 is active resistance; do not pyramid here—what to trust: the trend. Every confirmed bull impulse looks overbought for most of its duration. The risk-off trigger is Money Temp 75+ or a sector-breadth drop below 50% — neither is on this week’s card.

(7) The AI Buildout Portfolio: What We Did

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(8) The AI Buildout Portfolio: What We Plan To Do

Coming Soon

Forward-plan table with trigger conditions launches alongside §7. C+ subscribers see the candidates ’list before execution.

(9) Knowledge Corner

This Week’s Topic: Why ‘overbought’ gets weaponized against holders in trend regimes

Mean-reversion indicators (Stochastic, RSI) were designed for range markets. In a confirmed trend impulse, they stay pinned at ‘overbought’ for the entire duration of the move. Every secular uptrend in equity history has looked overbought for most of its duration.

The trap: treating mean-reversion signals as exit signals in a trend market. The discipline: Use the Alignment Check first. If Coppock is rising AND ADX is above 25 AND RS vs SPY is positive, you are in a trend regime and Stochastic 95+ is a hold signal, not a sell signal. In a range regime (ADX below 20, Coppock flat), the same reading is actionable. The regime determines the read — the indicator alone does not.

Want earlier Knowledge Corner entries? The Closelook Knowledge archive is at closelook.net/knowledge/ — indexed by topic and framework.

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(11) What May Go Wrong: Risk & Change Triggers

The falsification test: what would invalidate Sections 5 and 6 — and how we’d know.

Macro Change Triggers

Macro Change Triggers — upcoming dates, events, direction, what to watch

Technical Invalidation Levels

The 3M breakout floor is 550. A weekly close below ends the wave-3 read and argues consolidation into the 520–525 zone. The 4Y log-channel lower band at 498 is the full structural invalidation — below that, the multi-year bull case on QQQ is off the table. Neither is close at the current 648.85, but a rejection at 650, followed by a volume break below 600, puts the 550 test back on the calendar.

Indicator Shift Triggers

· Coppock Curve (currently −5.63, bottoming) — a second monthly print lower cancels the turning-up read and restores the mean-reversion case on the weekly.

· ADX (currently 16.83, range-bound) — a drop below 15 confirms no directional trend; a break above 25 confirms the trend impulse.

· RS vs SPY (4W) (currently +1.98pp) — turning negative ends QQQ-led leadership; triggers a rotation watch into broad-market (SPY/RSP) and small-caps (IWM).

The thesis holds until one of these triggers fires. When they do, the next edition updates the read.

(12) Final Words

“The hard part of bull markets isn’t riding them. It’s trusting them past the point where they look ‘too extended’. Every secular uptrend in equity history looked overbought for most of its duration. The ones who underperform the market are usually the ones who had an early thesis correct and then got scared out at the third extension.”

— Paul Tudor Jones (paraphrased, multiple interviews)

The week closed with the tape at record highs, the AI-infrastructure trade ripping, and every indicator flashing overbought — which, historically, is when the meat of bull markets gets put to the portfolio. The March consolidation was the pause. The third impulse is the move. The Tail-70 catching up to the Top-20 is a broadening signal indicating this leg still has room.

What doesn’t have room is complacency. Money Temperature at 62 warming toward 75 is the clock. The oil-shock tail has been removed but not replaced; a new exogenous shock could reset the setup in a week. Adding risk into the 595-605 QQQ zone is a low-reward, high-regret trade. Staying invested through it — that’s where the edge sits. Ride the bull; don’t chase it into the channel roof.

Thank you for reading. See you next week.

Annex — Further Reading at Closelook

Suggested navigation across Closelook’s own work. Not external — everything below lives at closelook.net.

Indices & Frameworks

· Rubin Build-Out 100 — 100 stocks, 18 sectors, AI infrastructure (closelook.net/indices/rubin)

· HALO Growth 100 — Physical-world growth, AI-safe sectors (closelook.net/indices/halo)

· Euro-AI Sovereign 50 — European AI sovereignty play (closelook.net/indices/euro-ai)

· Agentic Winners 25 — Tactical agentic infrastructure index (closelook.net/lab/agentic)

· Money Temperature — 8-instrument macro regime scoring (closelook.net/lab/temperature)

· Cointegration Monitor — Engle-Granger pairs + cascade tracker (closelook.net/lab/cointegration)

· ABR Framework — Agent Beneficiary Ratio for AI disruption (closelook.net/research/abr-framework)

Portfolios

· Global ETFs — ex-US regional + sector ETF portfolio (closelook.net/portfolios/global-etfs)

· AI Build-Out — Rubin-index-aligned single-stock portfolio (closelook.net/portfolios/ai-buildout) (this newsletter)

· Hypergrowth — 16 AI-native names + covered-calls layer (closelook.net/portfolios/hypergrowth)

· Global Tech 50 — Non-US tech, passive long-horizon (closelook.net/portfolios/global-tech-50)

· Derivatives — Covered calls, cash-secured puts overlay (closelook.net/portfolios/derivatives)

Editorial

· Weekly Signal — 9-dimensional market regime scorecard (closelook.net/weekly)

· Daily Pulse — Daily market notes archive (closelook.net/pulse)

· Research Dossiers — Deep-dive reports on themes and names (closelook.net/research)

· Closelook 101 — Concepts, frameworks, methodology (closelook.net/101)

· Glossary — Terms, definitions, cross-references (closelook.net/glossary)

Publishing Schedule

Publishing Schedule — all Closelook publications with current edition marker

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A Closelook At This Edition

Part 1 - Analysis

1. This Week's Action And More: A Close Look At The Current Bull Market

2. Technical Analysis: Watch Out For The Semis And Nvidia

3. Macro: Sticky Inflation, Continued Growth, Fiscal Troubles

4. Seasonality, Valuation, Earnings, And More:…

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A Closelook At This Edition

Part 1 - Analysis

1. This Week's Action And More: A Close Look At The Current Bull Market

2. Technical Analysis: Watch Out For The Semis And Nvidia

3. Macro: Sticky Inflation, Continued Growth, Fiscal Troubles

4. Seasonality, Valuation, Earnings, And More: Stretch…

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A Closelook At This Edition

Part 1 - Analysis

1. This Week's Action And More: A Close Look At The Current Bull Market

2. Technical Analysis: Watch Out For The Semis And Nvidia

3. Macro: Sticky Inflation, Continued Growth, Fiscal Troubles

4. Seasonality, Valuation, Earnings, And More: Stretch…

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated December 20, 2024 👋.

A Closelook At This Edition

1. This Week's Action: The End Of The Bull Market As We Know It

2. US Econ…

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated November 24, 2024 👋. The next edition will be published on December 01, 2024.

A Closelook At This Edition

1. This Week's Action: Bull Awakening

2. US Economy: No Sign Of Long And Variable Lags Materializing

3. US Stock Market Seasonality: Riding the Bull in November, December, and January

4. Long-Term Analysis: Nasdaq 100, Semiconductors, Nvidia And More

5. This Week's Spotlight: My Favorite Cloud And Software Stocks

6. Knowledge Corner: How Do Long And Variable Lags Affect The Economy?

7. The Derivatives Portfolios: More Transactions

8. Final Words: Buffett Cash vs. Market Cycles

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(1) This Week's Action: The Fading Trump Rally

Last week was the opposite of the week before. The weekly performance of all US stock markets was outstanding.

Weekly Performance Summary

1. Stock Market Indices:

   • The S&P 500, Nasdaq, and Dow saw moderate weekly gains of +1.7%, +1.7%, and +2.0%, respectively.

   • Year-to-date (YTD), the Nasdaq is leading with +26.6%, followed by the S&P 500 (+25.1%) and the Dow (+17.5%).

2. Small-Cap Stocks:

   • The Russell 2000 exhibited the largest weekly gain at +4.5%, signaling strong performance in smaller-cap stocks.

   • Its YTD performance stands at +18.7%.

3. Bonds:

   • The 10-year US Treasury yield remained unchanged at 4.41% for the week, with a modest YTD increase of +0.5%.

4. Commodities:

   • Oil prices rose by +6.3% over the week, now at $71.26, but show a slight YTD decline of -0.5%.

5. Cryptocurrency:

   • Bitcoin surged by +10.3% this week, bringing its YTD increase to an extraordinary +134.4%.

The data highlights a broadly positive week for equities, particularly small-cap stocks, alongside notable gains in Bitcoin and oil. Treasury yields remain stable, reflecting minimal volatility in fixed-income markets.

The dollar continued its advance, too. Since the lows around the GFC, the currency has appreciated by nearly fifty percent.

I expect the US Dollar Index to rise to the 115 level shortly.

The bullish channel of the SP 500 is still intact. The same is true for the Nasdaq 100 index.

The Nasdaq 100 found support at the short-term bull market trendline and moved back to the summer 2024 highs.

The Nasdaq 100 qual Weight Index outperformed the Nasdaq 100 Index. Mag-7 weakness negatively impacted the latter.

The Nasdaq 100 Technology Index is still lagging the overall index. It is still considerably lower than the summer 2024 highs.

The Nasdaq 100 EX Tech Sector has outperformed the tech sector since the summer of 2024. It is very close to its ATH.

The Nasdaq 100 TOP 30 index has been among the worst performers of the various Nasdaq 100 subindices.

This shows that the weakness is not confined to the Mag 7 stocks but encompasses the top 30 Nasdaq 100 stocks.

The Nasdaq 100 ex Top 30 Index, which covers the other 70 stocks of the index, has outperformed the Nasdaq 100 and the Nasdaq Top 30 index since the summer of 2024. It is very close to its SATH, too.

The megacap tech weakness can also be seen in the performance of the US Top 20 index.

Once highflying, VanEck Semiconductor ETF reached a top in early July 2024. Since then, it has moved sideways.

The recently introduced fabless VanEck Semiconductor ETF (SMHX) has outperformed the broader SMH ETH.

I expect the Russel 2000 index to reach new ATHs shortly.

The same applies to the Dow Jones Industrial Average.

The Dow Jones Transportation Index was up 0,84 % for the week. It looks like it will soon reach new ATHs - way above the 2021 levels.

This would be quite a bullish divergence, which may signal a more than short-term continuation of the bull market.

Software and services have been among the strongest sectors in the past weeks. The chart above shows the performance of an ETF that tracks the S&P Software & Services Select Industry Index.

The index represents the software and services segment of the S&P Total Market Index ("S&P TMI").

The same applies to the cloud sector. The Wisdom Tree Cloud Computing ETF has moved from a low of 28 USD in the summer of 2024 to 38 USD. The Wisdom Tree Cybersecurity ETF shows a similar performance.

The SP 500 Info Tech sector has moved up considerably and is now very close to its ATH (see ETF below).

It looks like there is a particular weakness in some Mag 7 stocks, but there is no weakness in the second-tier stocks. The broadening theme can also be seen inside the tech sector.

Nvidia performed better than the bulk of semiconductor stocks. The bull trend is intact. I am a buyer of any dip. Blackwell has just started shipping. I expect an exceptional earnings print in April 2025.

Bond yields were flat on the week and stayed inside the 4.25 - 4.50 % yield range. The TLT ETF closed around 90 USD.

I expect bond vigilantes to stage another attempt to move the bond yield firmly above 4.50 % in the weeks ahead.

Ten-year US Treasury yield changes since September lows:

• Total increase: 78 basis points

• Composition:

  • Real rates: 68% of the increase

  • Inflation expectations: 32% of the increase

Equity market reaction:

• Largely unaffected by the yield increase

The rise in yields, primarily driven by higher real rates, reflects ongoing economic strength rather than inflation concerns. This explains the resilient equity market performance despite the yield increase. Last week’s statement stays valid.

US presidents come and go, but this election may matter more than other ones. Why? Because there will be structural credit and deficit troubles ahead in the US, and how they are addressed will significantly impact whether we will have mediocre stock market returns in the next 10 years (the Goldman Sachs view) or (close to) double-digit annual returns (Ed Yardeni’s roaring 20s concept).

I anticipated a top in the TLT based on better-than-expected economic indicators rather than the beginning of another debt crisis like the one that occurred from August to October 2023.

I firmly believe that when the bond markets start to worry deeply about the federal deficit and debt and bond vigilantes push them south, moving prices of the TLT ETF to the bottom or even below its multi-month trading range, the stock market bull will end abruptly.

Like in 2016, gold declined on the Trump victory news. The uptrend in pace since the summer of 2024 was broken. Gold staged a recovery last week. I doubt it will reach new ATHs unless there is a substantial geopolitical escalation.

Silver exhibited similar price action and also moved lower. The trend in place since early 2024 has not yet been violated.

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(2) US Economy: No Sign Of Long And Variable Lags Materializing

Entitlements have become a large share of total government spending. Previous budget agreements will cut non-defense discretionary spending to the lowest share of GDP on record.

As for DOGE, good luck with that endeavor.

The latest jobless claims data presented a mixed picture of the U.S. labor market:

Initial Claims

• Current Level: 213,000

• Change: Decreased by 6,000

• Comparison to Estimates: Lower than the expected 220,000

• Significance: Reached the lowest level since April

This unexpected drop in initial claims suggests continued resilience in the job market, with fewer people filing for unemployment benefits than anticipated.

Continuing Claims

• Trend: Rose to a 3-year high

• Caveat: Seasonal adjustments may have influenced this increase

The rise in continuing claims representing ongoing unemployment benefit recipients could indicate challenges for job seekers in finding new employment. However, the impact of seasonal adjustments on this figure should be considered when interpreting its significance.

The Philadelphia Fed Manufacturing Index for November:

• Headline index: Unexpectedly fell into contraction

• Future expectations: Rose to highest level since June 2021

This divergence suggests current manufacturing challenges but improved optimism for future growth.

No Lagged Effects

The Federal Reserve's rate cut approach may stem from concerns about the "long and variable lags" of their monetary tightening from March 2022 to August 2024. However, the economy continues to show resilience, with no clear evidence of these lagged effects materializing.

Economic Indicators

The Index of Leading Economic Indicators (LEI) declined again in October, but its reliability as a recession predictor has been questionable since its peak in December 2021. While it may be useful for forecasting manufacturing sector recessions, it appears less suited for the service-oriented U.S. economy.

Stock Market Performance

The S&P 500, one of the LEI's most accurate components, has reached new record highs since early 2024, indicating positive economic sentiment.

Coincident Economic Indicators

The Index of Coincident Economic Indicators has consistently risen to new record highs, contrasting with the LEI's downward trend and suggesting ongoing economic strength.

Interest Rates and Economic Surprises

The increase in U.S. Treasury yields since the Fed began lowering the federal funds rate (FFR) on September 18 correlates with the upturn in the Citigroup Economic Surprise Index. This suggests that the neutral FFR might be closer to the 5.25%-5.50% range than the current 4.50%-4.75% range.

Diverging Views

• Market Perspective: The current FFR may provide additional economic stimulus, as it could be below the neutral rate.

• Fed's Stance: Federal Reserve officials maintain that the FFR remains restrictive and should be gradually lowered to around 2.90%.

This divergence in views highlights the ongoing debate about the appropriate monetary policy stance in the face of conflicting economic signals.

The Index of Leading Economic Indicators (LEI)

The Index of Leading Economic Indicators (LEI) may be misleading for the US economy due to several factors:

Manufacturing Bias

The LEI tends to give heavier weight to the economy's manufacturing sector without adequately recognizing the increasing importance of services. This bias can lead to a skewed representation of the overall economic health, especially considering that services drive approximately 70% of the U.S. economy.

Post-Pandemic Anomalies

The unusual impact of COVID-19 on the economy has likely resulted in data inconsistencies, policy distortions, and cycle anomalies, which have affected the LEI components. These unique circumstances make it challenging for the LEI to predict economic trends in the post-pandemic environment accurately.

Divergence from Other Indicators

While the LEI has been signaling a potential recession, other economic indicators paint a different picture:

1. The S&P 500 has been reaching new record highs since early 2024

2. The Index of Coincident Economic Indicators (CEI) has consistently risen to new record highs, contradicting the LEI's downward trend.

Historical Reliability vs. Current Performance

Although the LEI has historically been a reliable predictor of recessions, its recent performance has been questionable:

• The LEI has decreased for 23 consecutive months through January 2024, yet the U.S. economy has delivered impressive economic growth over the past 12 months

• The average lead time between the LEI falling 5% and the start of a recession has historically been around three months, but the Index dropped 5% in November 2022 without a recession materializing.

Composition and Weighting Issues

The LEI's composition may not adequately reflect the current structure of the U.S. economy:

• It may need to be adjusted to give more weight to the services sector, which plays a dominant role in the modern U.S. economy

• The index's components and their weightings may not have been updated to reflect recent economic shifts and trends

In conclusion, while the LEI remains a valuable tool for economic forecasting, its current methodology and composition may lead to misleading signals about the U.S. economy's health and direction. As the economy evolves, particularly in the wake of the pandemic, the LEI may require recalibration to maintain its predictive power.

(3) US Stock Market Seasonality: Riding the Bull in November, December, and January

The final quarter of the calendar year has historically been the best quarter of the SP 500. December, April, and November are traditionally the three best months of a calendar year.

On average, the 2-monthly period from November until December is also the best bi-monthly period of a calendar year.

Except for 2016, when Donald Trump won the presidential elections for the first time, price action has been positive since 2013.

Over the past ten years, the average performance of the S&P 500 during November and December was approximately 4.41%.

Data shows that during election years, the S&P 500 has historically underperformed in the September-to-early-November period compared to non-election years.

The table above is from Carson Investment Research.

I like to remember the final two months of 2023, which saw the underperformance of the Mag-7 stocks reversing in early 2024.

Right now, mutual funds are drastically underweight the Mag 7. TheMag-7 have become the index Drag-7.

While it’s been predominantly a cost-cutting and efficiency gains story to date, more companies are participating in the earnings recovery as ~60% of S&P 500 companies have positive EPS growth today versus ~50% in 1Q 2023.

I expect the broadening trend in earnings growth to continue. The market may have anticipated this, which may continue until the end of January 2025.

After that period, I see a return of Mag 7/ megacap tech market leadership.

(4) Long-Term Analysis: Nasdaq 100, Semiconductors, Nvidia And More

Please turn to section one for the analysis.

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated November 17, 2024 👋. The next edition will be published on November 24, 2024.

A Closelook At This Edition

1. This Week's Action: The Fading Trump Rally

2. US Economy: Another Fed Pivot

3. US Stock Market Seasonality: Riding the Bull in November, December, and January

4. Long-Term Analysis: Bitcoin, Ethereum and Solana

5. This Week's Spotlight: My Favorite Crypto Stocks

6. Knowledge Corner: The Coin50 Index

7. The Derivatives Portfolios: More Transactions

8. Final Words: Asset Watch Update

(1) This Week's Action: The Fading Trump Rally

Last week was the opposite of the week before. The weekly performance of all US stock markets was miserable.

Weekly Performance Summary

• S&P 500

  • Close: 5,871

  • Weekly Change: -2.1%

  • Year-to-Date (YTD) Change: 23.1%

• Nasdaq

  • Close: 18,680

  • Weekly Change: -3.1%

  • YTD Change: 24.4%

• Dow

  • Close: 43,445

  • Weekly Change: -1.2%

  • YTD Change: 15.3%

• Russell 2000

  • Close: 2,304

  • Weekly Change: -4%

  • YTD Change: 13.7%

• 10-yr US Treasury

  • Close: 4.44%

  • Weekly Change: 0.1%

  • YTD Change: 0.6%

• Oil

  • Close: $67.03

  • Weekly Change: -4.8%

  • YTD Change: -6.4%

• Bitcoin

  • Close: 91,214

  • Weekly Change: 13.3%

  • YTD Change: 115.8%

The R2K index was the worst-performing index, losing four percent. The Nasdaq lost about three percent. Losses for the SP 500 and the DJIA were more modest.

Selling pressure increased when Chair Powell indicated that the Fed was in no hurry to lower rates. Options expiration on Friday added to the increased volatility.

The bullish channel of the SP 500 is still intact. The same is true for the Nasdaq 100 index.

While the Nasdaq 100 did make a new high during the Trump election week, the Nasdaq 100 Tech index did not.

The same applies to the various semiconductor indices. These non-confirmations are bearish signs.

The R2K touched the ATHs seen in 2021 and gave back part of the gains. It may try again during the seasonally strongest 3-month calendar year period - November, December, and January.

The Dow Jones Industrial Average also made a new high, which the Dow Jones Transportation Index did not confirm.

If not confirmed quickly, this would be quite a bearish divergence, which may signal a more than short-term top.

Equity volatility stayed at normal levels. I expect the VIX to mostly trade between 10 and 20 until the end of the year.

Bond yields increased in the week but stayed inside the 4.25 - 4.50 % yield range. The TLT ETF closed around 90 USD.

Bond volatility moved up. I expect bond volatility to stay elevated for the time being.

I also expect bond vigilantes to stage another attempt to move the bond yield firmly above 4.50 % in the weeks ahead. Last week’s statement stays valid.

US presidents come and go, but this election may matter more than other ones. Why? Because there will be structural credit and deficit troubles ahead in the US, and how they are addressed will significantly impact whether we will have mediocre stock market returns in the next 10 years (the Goldman Sachs view) or (close to) double-digit annual returns (Ed Yardeni’s roaring 20s concept).

I anticipated a top in the TLT based on better-than-expected economic indicators rather than the beginning of another debt crisis like the one that occurred from August to October 2023.

I firmly believe that when the bond markets start to worry deeply about the federal deficit and debt and bond vigilantes push them south, moving prices of the TLT ETF to the bottom or even below its multi-month trading range, the stock market bull will end abruptly.

Like in 2016, gold fell on the Trump victory news. The uptrend in pace since early 2024 was broken.

Silver exhibited similar price action and also moved lower. The trend in place since early 2024 has not yet been violated.

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(2) US Economy: Another Fed Pivot

Federal Reserve Chair Jerome Powell is not known for his dancing skills, but he has once again demonstrated his ability to adjust monetary policy with precision.

In his prepared remarks for a speech to business leaders in Dallas on Friday, Powell stated that "the economy is not sending any signals that we need to be in a hurry to lower rates."

This stance aligns with the Fed's recent actions, which began on September 18 when they reduced the federal funds rate (FFR) by 50 basis points, a move that some considered too aggressive at the time.

The Fed continued this trend on November 7, cutting the FFR by another 25 basis points. However, Powell is now cautioning against expectations of immediate further rate cuts.

Last Thursday, during his press conference, he indicated that the FFR was still somewhat restrictive and needed to be adjusted to the neutral rate. While many Fed officials may agree with this assessment, they seem less urgent about making these adjustments.

This could mean that there might not be another rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on December 17-18.

The latest analysis from Ed Yardeni's "Nirvana Model" suggests that the unemployment and inflation rates indicate the current FFR is already at or near the neutral rate.

In the meantime, there are expectations of a potential "Santa Claus rally" in the S&P 500, which could push the index to 6100 by the end of the year.

Ed Yardeni's "Nirvana Scenario"

Ed Yardeni's "Nirvana Scenario" or "Nirvana Model" is a conceptual framework that describes an ideal economic state where several favorable conditions converge. Here are the key elements of this scenario:

Low Inflation

The model predicts a slowdown in inflation, a critical component for economic stability. This slowdown is expected to occur without the economy entering a recession, a scenario often seen as a trade-off in economic policy.

Economic Growth

The Nirvana Scenario involves continued economic growth. This growth is sustained without high inflation pressures, creating a balanced economic environment.

Moderate Interest Rates

The model implies that interest rates, particularly risk-free rates like those on 10-year Treasury notes, remain at levels that support economic growth without fueling inflation. This balance is crucial for maintaining investor confidence and stable financial markets.

Low Unemployment

A vital feature of the Nirvana Scenario is low unemployment rates. This condition is bullish for the stock market, as it indicates a strong labor market and overall economic health, provided it is not accompanied by rising inflation.

Investor Optimism

Yardeni's Nirvana Scenario suggests a period of investor optimism, where the combination of low inflation, economic growth, and stable interest rates creates a favorable environment for investments, particularly in the stock market.

In summary, the Nirvana Model represents an ideal economic state where inflation is under control, the economy is growing, unemployment is low, and interest rates are moderate, all contributing to a stable and favorable investment climate.

Fed Model

The Fed Model, also known as the Fed's Stock Valuation Model, is a valuation tool that compares the forward earnings yield of the stock market (typically the S&P 500 Index) to the yield on 10-year U.S. Treasury bonds. Here are its key points:

• It posits that the earnings yield on stocks should equal the yield on 10-year Treasury bonds or at least be highly correlated

• Based on this comparison, the model is used to determine if the stock market is fairly valued, overvalued, or undervalued.

• It has been criticized for its theoretical flaws, lack of predictive power, and failure to account for differences between nominal and real returns.

Key Differences

• Purpose: The Fed Model is a specific tool for evaluating stock market valuations by comparing earnings yields to bond yields. In contrast, the Nirvana Model is a broader conceptual framework describing optimal economic conditions.

• Scope: The Fed Model focuses narrowly on the relationship between stock and bond yields, while the Nirvana Model encompasses a range of macroeconomic indicators.

• Application: The Fed Model is used for market timing and valuation, whereas the Nirvana Model is more of a descriptive model highlighting ideal economic conditions rather than a predictive or valuation tool.

While both concepts are associated with Dr. Ed Yardeni, they serve different purposes and operate within various contexts.

(3) US Stock Market Seasonality: Riding the Bull in November, December, and January

The final quarter of the calendar year has historically been the best quarter of the SP 500. December, April, and November have been the three best months of a calendar year.

On average, the 2-monthly period from November until December is also the best bi-monthly period of a calendar year.

Except for 2016, when Donald Trump won the presidential elections for the first time, price action has been positive since 2013.

Over the past ten years, the average performance of the S&P 500 during November and December was approximately 4.41%.

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Data shows that during election years, the S&P 500 has historically underperformed in the September-to-early-November period compared to non-election years.

The best day of a calendar year has historically been October 28. The final ten days of November have been the best ten-day streak of the calendary year historically.

Nvidia is scheduled to report earnings on 20 November 2024 after market close. The report will be for the fiscal quarter ending Oct 2024.

The table above is from Carson Investment Research.

(4) Long-Term Analysis: Bitcoin, Ethereum and Solana

The Trump crypto narrative is more than one story; it is at least four. Trump’s election does change the prospects of (1) the Bitcoin narrative, (2) the Gensler and Defi narratives, (3) the manosphere narrative, and some Meme Coin narratives, such as AI, RWAs, and Murad meme coins and (4) the end of QT.

Trump wants the US to begin forming a strategic reserve of BTC. This is positive as it removes a BTC selling overhang, namely that the US might sell extensive holdings confiscated from various nefarious agents. It adds buying pressure on BTC and cements its status within the global financial system. The gain from removing a selling-pressure overhang is real. The strategic reserve of BTC is a long way off.

Gary Gensler, the current chair of the SEC, is the crypto industry’s most hated person. Elizabeth Warren is a distant second.

Trump’s repeatedly said he would “fire” Gensler “on day one.” It is customary for SEC chairs to step down when a new president takes office. Trump has to do nothing to keep his promise.

Given this, it is unlikely that the various SEC suits will go forward at all until a clear regulatory framework is in place. UNI and AAVE may be fine. POL did a bump (it’s also being sued), and even Cardano (ADA) jumped. Synthetix (SNX) cannot go back to posting oil and stock derivative coins. 

DeFi won’t be back where it once was. The most obvious winner is likely ETH (and Solanda) since DeFi is ETH’s killer app. It has a long way to go in catching up to BTC this cycle, and now its future looks more promising.

The manosphere is a loose association of public personalities, vloggers, and podcasters ranging from Joe Rogan and Jordan Peterson to Andrew Tate and Nick Fuentes, who have been Trump’s ardent supporters.

Meme coins represent various features of this cultural space. Based on the model Ernst Khalimov, the Giga Chad coin is a masculine ideal. SIGMA is a Gen Z phrase that crosses into the manosphere realm to indicate “the best man.”

The post-Trump manosphere narrative will boost these well-known coins and continue supporting them or similar coins. The ending of QT - likely in December 2024 - may boost the whole coin sphere.

Solana

Solana is firmly in bull territory, exhibiting impulse wave properties. It crossed the spring 2024 highs and reached close to 240 USD. It may soon get the ATH. It may be in the final wave before completing five waves.

It may well go into extension mode, reaching much higher. The chart below shows Solana vs. Bitcoin. I expect Solana to reach the 2021 ratio during an extended bull move.

Ethereum

Ether has lagged behind Bitcoin and Solana. It has not reached the spring 2024 highs.

The market cap dominance of Ether has declined considerably since 2020. It is only about 12 % of all cryptos.

Bitcoin

Bitcoin is about to reach 100,000 USD. This may be a more substantial top.

I expect the other coins to start catch-up trades after the big three reach topping zones. The total market cap of all coins ex, Bitcoin and Ether, is well below the peak seen during the last crypto bull market.

This may change in 2025 depending on whether the Trump administration will implement its crypto-friendly policy measures 2025.

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated November 10, 2024 👋. The next edition will be published on November 17, 2024, at 2:00 p.m. ET.

A Closelook At This Edition

1. This Week's Action: The Trump Rally

2. US Economy: Trumponomics

3. US Stock Markets: Trump Winners and Losers

4. US Stock Market Seasonality: Riding the Bull in November, December, and January

5. Long-Term Analysis: Elliott Waves - Nasdaq 100

6. This Week's Spotlight: Nvidia Earnings Ante Portas

7. Knowledge Corner: Nvidia Investment Ratios

8. The Derivatives Portfolios: Gains in November And More Transactions

9. Final Words: Asset Watch Update

(1) This Week's Action: The Trump Rally

Last week, the stock market experienced a rollercoaster ride driven by political developments and monetary policy decisions. The S&P 500 surged an impressive 4.7%, briefly surpassing the 6000 mark on Friday, capping off a week of intense market action.

Donald Trump's victory on Tuesday set the stage for a dramatic shift in market sentiment. The quick and decisive election result alleviated concerns about a potential hung outcome, releasing pent-up tension among investors.

The prospect of a Republican sweep in Congress reignited the "Trump Trade" playbook from 2016, with investors flocking to cyclical, small-cap, and financial stocks.

The Federal Reserve's decision to cut short-term rates by a quarter-point and Chair Jay Powell's dovish stance further fueled the bullish sentiment. This monetary easing came despite recent economic data surprising to the upside and inflation readings hovering slightly above the Fed's 2% target.

Even potential headwinds seemed to lose their bite. The 10-year Treasury yield briefly spiked above 4.4% on Wednesday but remained below springtime highs. Similarly, the dollar index showed strength but stayed below mid-year peaks.

This confluence of factors created a potent mix of bullish catalysts, presenting a challenging environment for bearish investors to navigate in the short term.

Weekly Performance Summary

• S&P 500: Closed at 5,996, up 4.7% for the week, with a year-to-date (YTD) gain of 25.7%.

• Nasdaq: Closed at 19,287, rising 5.7% for the week and up 28.5% YTD.

• Dow: Finished at 43,989, gaining 4.6% over the week, with a YTD increase of 16.7%.

• Russell 2000: Closed at 2,400, showing an impressive weekly gain of 8.6% and up 18.4% YTD.

• 10-year US Treasury: Yield ended at 4.30%, down slightly by -0.1% for the week and up just 0.4% YTD.

• Oil: Priced at $70.41 per barrel, up by 1.3% for the week but down -1.7% YTD.

• Bitcoin: Surged to $76,411 (above 81,000 USD on Monday morning), posting an impressive weekly gain of 11.1%, with a massive YTD increase of 80.8%.

This highlights strong performances across equities and cryptocurrencies, while bonds and oil showed more modest movements, and gold lost its luster.

The SP 500 moved into unchartered territory, firmly reigniting the bull. The bullish trend channel is intact.

The Nasdaq 100 finally made a new ATH, wiping out most of the negative bearish divergences that developed in the past months.

While the chart looked like a double-top formation last week, it now seems another bull market leg is unfolding during the seasonally strongest 3-month period of the calendar year - November, December, and January.

The R2K was the most robust equity index last week. The index failed to break above the multi-year resistance zone, where it could not move higher in the summer of 2024 and 2021. This may happen this week, depending on the outcome of the inflation numbers on Wednesday and Thursday.

The bullish trend of the Dow Jones was confirmed last week. The ATH confirmation by the Dow Jones Transportation index is still missing, but the index broke above the 2022 and 2023 highs and is in striking distance to a new ATH.

Equity volatility declined to normal levels. I expect the VIX to mostly trade between 10 and 20 until the end of the year.

Bond yields moved up initially only to recover and trade inside the 4.25 - 4.50 % yield range. The TLT ETF closed around 92.50 USD.

Bond volatility also declined. I expect bond volatility to stay elevated for the time being. I also expect bond vigilantes to stage another attempt to move the bond yield firmly above 4.50 % in the weeks ahead. Last week’s statement stays valid.

US presidents come and go, but this election may matter more than other ones. Why? Because there will be structural credit and deficit troubles ahead in the US, and how they are addressed will significantly impact whether we will have mediocre stock market returns in the next 10 years (the Goldman Sachs view) or (close to) double-digit annual returns (Ed Yardeni’s roaring 20s concept).

I anticipated a top in the TLT based on better-than-expected economic indicators rather than the beginning of another debt crisis like the one that occurred from August to October 2023.

I firmly believe that when the bond markets start to worry deeply about the federal deficit and debt and bond vigilantes push them south, moving prices of the TLT ETF to the bottom or even below its multi-month trading range, the stock market bull will end abruptly.

This trendline was broken to the downside in the last trading days of the previous week and confirmed by a weekly close on Friday, 1 November 2024!

Like in 2016, gold fell on the Trump victory news. The uptrend in pace since the summer of 2024 was broken. The longer-term uptrend is still intact. I believe that the lower trend line of the trend in place since spring 2024 will soon be tested.

It may well be broken to the downside as the momentum-based speculative funds may favor digital assets over precious metals in the months ahead.

Silver exhibited similar price action and also moved lower. The same as with gold applies to silver.

Bitcoin finally made a new ATH. It now trades above 80,000 USD and may soon reach 100,000 USD.

Solana advanced up to the resistance level at around 210 USD. It is on its way to reach the old highs north of 250 USD.

Ether is the digital laggard. It has moved up in the past week but has not been able to reach past the spring 2024 highs. It looks weaker technically than Bitcoin and Solana.

I still have no idea why Microstrategy has performed so much better than Bitcoin. I expect the shares to perform worse than the coins as the stock is overvalued based on the value of the SaaS part and the bitcoin holdings.

Meme-type speculation, insider knowledge, a reason to go short? I hold shares of Microstrategy as a leveraged Bitcoin proxy but do not trade them. I will continue to keep them.

(2) US Economy: Trumponomics

In his 2024 presidential campaign, Donald Trump outlined several initiatives to increase efficiency and reform the U.S. administration.

Government Efficiency Commission

Trump has pledged to establish a "government efficiency commission" to be led by Elon Musk. This commission is intended to conduct a thorough federal government audit and recommend significant reforms to eradicate fraud and improper payments. Trump claims this commission could achieve its goals, including eliminating fraud, within six months of its inception.

Reduction in Government Expenditures

Trump plans to drastically reduce government expenditures as part of his broader economic strategy. He has emphasized the need to cut unnecessary spending and streamline government operations to make them more efficient.

Regulatory Rollbacks

Trump has consistently advocated reducing regulations across various energy, finance, and infrastructure sectors. He believes that fewer regulations will lead to greater efficiency and economic growth. In his second term, he is expected to continue and expand his deregulatory efforts, including rolling back environmental and other regulations implemented during the Biden administration.

Streamlining Federal Agencies

Trump has proposed reclassifying a significant segment of the federal workforce, a plan known as 'Schedule F,' to facilitate the dismissal of civil servants he considers "rogue bureaucrats" or "corrupt actors." He also plans to relocate some federal agencies from Washington, D.C., to other parts of the country, aiming to reduce bureaucratic inefficiencies.

Presidential Power Over Spending

Trump has suggested reviving the practice of "impoundment," which would allow the president to reject congressional spending directives and redirect taxpayer funds. This move is part of his broader effort to reclaim presidential power over government spending from Congress.

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Economic and Tax Policies

• Tax Cuts and Extensions: Trump plans to extend the expiring provisions of the Tax Cuts and Jobs Act (TCJA), including making individual income and estate tax cuts permanent. He also proposes to lower the corporate tax rate to 15% for domestic production and reinstate the Domestic Production Activities Deduction.

• Tariffs and Trade: Trump intends to impose tariffs of 10% to 60% on imports, particularly from China, and on products from companies relocating manufacturing out of the U.S.

• Energy and Deregulation: He aims to reduce environmental regulations, increase fossil fuel production, and roll back fuel and emissions standards mandates to lower energy costs.

Immigration and Border Control

• Mass Deportations: Trump has vowed to undertake the largest deportation of undocumented immigrants in U.S. history, using expedited removal processes and potentially deploying the military to assist. He also plans to end "catch and release" policies and restore migrant family separations to deter illegal immigration.

• Border Wall and Citizenship: Trump intends to complete the border wall with Mexico and end "birthright" citizenship for children born in the U.S. to undocumented parents.

Health Care

• Overhauling Health Systems: While details are vague, Trump has mentioned overhauling health and food systems with input from Robert F. Kennedy Jr. However, he has not prioritized health care as he did during his first term, and his plans for replacing Obamacare remain unclear.

Education

• Cutting Federal Funding for Certain Schools: Trump has proposed cutting federal funding for schools that teach "critical race theory" and "transgender" matters. However, federal funding accounts for only about 8% of public school funding.

Environmental and Climate Policies

• Rolling Back Climate Regulations: Trump plans to reduce environmental regulations, including those focused on emissions reductions from power plants, vehicles, and energy production. He opposes the Paris Climate Agreement and the Inflation Reduction Act, aiming to increase fossil fuel production and lower energy costs.

Government Reformation and Spending

• Reclaiming Presidential Power Over Spending: Trump intends to revive the practice of "impoundment," allowing the president to reject congressional spending directives and redirect taxpayer funds. This move is part of his broader effort to reclaim presidential power over government spending from Congress.

• Government Efficiency Commission: Trump has proposed establishing a government efficiency commission, led by Elon Musk, to audit the federal government and recommend significant reforms to eliminate fraud and improper payments.

Other Initiatives

• Ending the Ukraine Conflict: Trump has promised to resolve the Ukraine conflict through negotiations within 24 hours, although specifics on his approach are lacking.

• Pardoning January 6 Participants: Trump has committed to pardoning some individuals convicted for their roles in the January 6, 2021, Capitol riot.

• Dismissing Special Counsel Jack Smith: Trump plans to dismiss Special Counsel Jack Smith, who is investigating Trump's alleged attempts to overturn the 2020 election and mishandling classified documents.

(3) US Stock Markets: Trump Winners and Losers

After President-elect Donald Trump's White House victory, some stocks may be poised for more upside. Apparent choices are banks and other financial stocks, fossil fuel and energy stocks, and defense.

Small-cap stocks may benefit from lower taxes and broad-based deregulation. I want to highlight four sectors that I think will particularly benefit from the Trump administration:

Public sector digitization and efficiency stocks

Donald Trump has pledged to establish a "government efficiency commission" to be led by Elon Musk. AI has the potential to enhance efficiency in government operations significantly.

The use of Artificial Intelligence (AI) in the context of enhancing efficiency in the U.S. government is a significant area of discussion and potential implementation. Here are some key points:

Potential Savings and Efficiency

Deloitte's research indicates that cognitive technologies, including AI, could free up hundreds of millions of public sector worker hours and save billions of dollars annually by automating specific tasks and allowing managers to shift employees to tasks requiring human judgment

Specific Applications

AI can be applied in various government functions to improve efficiency:

• Immigration Processing: AI can help reduce backlogs and streamline the processing of immigration applications

• Climate Change Mitigation: AI can be used to analyze data and develop more effective policies to address climate change

• Tax Policies: AI algorithms can help design tax policies that enhance economic efficiency and equity

• Government Services: AI can improve communication within federal government agencies and enhance the delivery of government services

Challenges and Barriers

• Antiquated Infrastructures: Many government agencies lack the modern infrastructure necessary to support AI technologies

• Workforce Preparation: The existing workforce may not be adequately prepared for the transition to AI-driven processes

Trump's Proposals

While Donald Trump's proposal for a government efficiency commission led by Elon Musk does not explicitly focus on AI, it does aim at broader efficiency reforms. However, there is no explicit mention of how AI would be integrated into this commission's work.

Given Musk's involvement and his background in innovative technologies, it is plausible that AI could be a part of the commission's strategy, but this remains speculative without further details.

A significant beneficiary could be ServiceNow. Trump's administration has emphasized the need for technological modernization within the federal government. ServiceNow's AI capabilities, including generative AI (GenAI) features, can support this modernization by enabling faster development of low-code apps, improving agent productivity, and enhancing citizen experiences. These advancements could be complementary to Trump's initiatives to modernize government operations.

The ServiceNow platform is positioned as a central tool for AI-driven transformation in government. The platform includes AI features such as:

• Automated responses to citizen queries

• Personalized citizen communication

• Improved service delivery

• Enhanced compliance and risk management

• Integration with other systems to streamline complex workflows

Clean food stocks

Donald Trump's stance on clean food, ultra-processed food, and the packaged food industry is complex and often contradictory, especially when comparing his past actions with his recent rhetoric.

In his current campaign, Trump has adopted a new rhetoric, influenced by his alliance with Robert F. Kennedy Jr., which seems to contradict his past actions:

• "Make America Healthy Again" (MAHA) Campaign: Trump has started talking about removing toxic chemicals from the food supply, ensuring safe food, and addressing chronic diseases. However, given his track record, this message is seen as a departure from his previous policies and is met with skepticism.

• Proposed Reforms: The MAHA agenda, as outlined by Kennedy, includes radical reforms such as banning sugary drinks and processed foods from the Supplemental Nutrition Assistance Program (SNAP), reforming farm subsidies to focus on healthier foods, and revamping pesticide regulations. However, given his past actions, these proposals are not officially part of Trump's campaign doctrine and are viewed as unlikely to be implemented.

The "Make America Healthy Again" (MAHA) initiative, as associated with Donald Trump's recent campaign rhetoric and his alliance with Robert F. Kennedy Jr., is a complex and multifaceted proposal that aims to address various aspects of public health, mainly focusing on food safety, nutrition, and the reduction of toxic substances in the environment and food supply. Here are some key details and proposed reforms:

Key Proposals and Objectives

1. Food Safety and Nutrition

• Ban on Sugary Drinks and Processed Foods from SNAP: One of the proposed reforms is to ban sugary drinks and highly processed foods from the Supplemental Nutrition Assistance Program (SNAP). This aims to encourage healthier eating habits among low-income families.

• Reform of School Nutrition Standards: There is a call to revert to or enhance the Obama-era school nutrition standards, rolled back during Trump's first term. This includes increasing the availability of whole grains, fruits, and vegetables in school meals.

• Labeling and Transparency: Advocating for clearer labeling on food products to help consumers make informed choices about the ingredients and nutritional content of the foods they buy.

2. Toxic Substances and Pesticides

• Banning Toxic Chemicals: The MAHA initiative proposes banning or strictly regulating toxic chemicals in food, water, and the environment. This includes pesticides like glyphosate (Roundup) and other substances linked to health issues.

• Reform of Pesticide Regulations: Kennedy and allies have called for a complete overhaul of pesticide regulations, arguing that current standards are inadequate and fail to protect public health.

3. Farm Subsidies and Agricultural Practices

• Reform of Farm Subsidies: The proposal includes changing farm subsidy programs to incentivize the production of healthier foods, such as organic produce and whole grains, rather than primarily supporting corn and soybean production for processed foods.

• Support for Small and Organic Farmers: There is a push to support small, local, and organic farmers through policy changes and financial incentives, aiming to promote more sustainable and healthier agricultural practices.

4. Environmental Health

• Clean Water Initiatives: Ensuring clean drinking water by strengthening regulations on water pollutants and enforcing stricter standards for water quality.

• Air Quality Improvements: Reducing air pollution by implementing stricter emissions standards and promoting cleaner energy sources.

Sprouts Farmers Market and similar companies focusing on healthier nutrition and foods may benefit from these policy changes.

Housing

Affordable Housing: Trump aims to make housing more affordable by reducing regulations, opening federal land for construction, and preventing undocumented immigrants from getting mortgages. He also proposes a home-building program on federal land.

Manufacturing Revitalization: Trump wants to cut the corporate tax rate to 15% for U.S.-made products and impose tariffs on companies moving production overseas. He aims to revitalize the manufacturing sector by reducing costs for U.S. manufacturers.

The current housing problem in the US is both an availability problem and an affordability problem. The Trump policy measures may benefit the housing industry if, on the other hand, interest rates do not rise because of rising fiscal and budgetary deficits and the bond vigilantes taking center stage.

Crypto stocks

The Trump Crypto Narrative is more than one story; it is at least four.

Trump’s election does change the prospects of (1) the Bitcoin narrative, (2) the Gensler and Defi narratives, (3) the manosphere narrative, and some Meme Coin narratives, such as AI, RWAs, and Murad meme coins and (4) the end of QT.

Trump wants the US to begin forming a strategic reserve of BTC. This is positive as it removes a BTC selling overhang, namely that the US might sell extensive holdings confiscated from various nefarious agents. It adds buying pressure on BTC and cements its status within the global financial system. The gain from removing a selling-pressure overhang is real. The strategic reserve of BTC is a long way off.

Gary Gensler, the current chair of the SEC, is the crypto industry’s most hated person. Elizabeth Warren is a distant second.

Trump’s repeatedly said he would “fire” Gensler “on day one.” It is customary for SEC chairs to step down when a new president takes office. Trump has to do nothing to keep his promise.

Given this, it is unlikely that the various SEC suits will go forward at all until a clear regulatory framework is in place. UNI and AAVE may be fine. POL did a bump (it’s also being sued), and even Cardano (ADA) jumped. Synthetix (SNX) cannot go back to posting oil and stock derivative coins. 

DeFi won’t be back where it once was. The most obvious winner is likely ETH (and Solanda) since DeFi is ETH’s killer app. It has a long way to go in catching up to BTC this cycle, and now its future looks more promising.

The manosphere is a loose association of public personalities, vloggers, and podcasters ranging from Joe Rogan and Jordan Peterson to Andrew Tate and Nick Fuentes, who have been Trump’s ardent supporters.

Meme coins represent various features of this cultural space. Based on the model Ernst Khalimov, the Giga Chad coin is a masculine ideal. SIGMA is a Gen Z phrase that crosses into the manosphere realm to indicate “the best man.”

The post-Trump manosphere narrative will boost these well-known coins and continue supporting them or similar coins.

The ending of QT - likely in December 2024 - may boost the whole coin sphere.

(4) US Stock Market Seasonality: Riding the Bull in November, December, and January

The final quarter of the calendar year has historically been the best quarter of the SP 500. December, April, and November have been the three best months of a calendar year.

On average, the 2-monthly period from November until December is also the best bi-monthly period of a calendar year.

Except for 2016, when Donald Trump won the presidential elections for the first time, price action has been positive since 2013.

Over the past ten years, the average performance of the S&P 500 during November and December was approximately 4.41%.

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Data shows that during election years, the S&P 500 has historically underperformed in the September-to-early-November period compared to non-election years.

The best day of a calendar year has historically been October 28. The final ten days of November have been the best ten-day streak of the calendary year historically.

Nvidia is scheduled to report earnings on 20 November 2024 after market close. The report will be for the fiscal quarter ending Oct 2024.

The table above is from Carson Investment Research.

(5) Long-Term Analysis: Elliott Waves - Nasdaq 100

Nasdaq 100 has been in a bull market since autumn 2022. It may be in the final wave before completing five extended waves (nine waves) up.

The current move until last week's top looked like a wave b to me. In that case, I reasoned that we would not see a year-end rally starting directly after the election but rather a wave c and a test of the August lows first.

The year-end rally would only begin on November 20, when Nvidia reported earnings. Unless we see very negative inflation figures this week, the clear-cut Trump victory made that count wrong.

Given the strong seasonality from early November until the end of January and the macro picture, we will most likely see a continuation of the bull market in the weeks ahead.

For me, this week’s price action is more important than last week's initial reaction. I like to watch how the week proceeds and give a more precise assessment of what I think will happen until the end of January next week.

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated October 03, 2024 👋. The next edition will be published on November 10, 2024, at 2:00 p.m. ET.

A Closelook At This Edition

1. This Week's Action: The End Of Tax Selling

2. US Economy: A New Bond Market Massacre?

3. US Stock Markets: Mixed Earnings From the Mag-5

4. US Stock Markets: The Trend Is Your Friend Until It is No More

5. Long-Term Analysis: Elliott Waves - Nasdaq 100

6. This Week's Spotlight: Google, Amazon, Apple, Microsoft And Meta In A Nutshell

7. Knowledge Corner: The Disconnect Decoded: Why Economic Models Fall Short in Financial Markets

8. The Derivatives Portfolio: A Good October And More Transactions

9. Final Words: Mag-7 Time To Watch

(1) This Week's Action: The End Of Tax Selling Season Is Near

The headline from early October was "US Stock Market: An Illusion of Perfection or a Rare Moment of Near-Perfect Conditions? The Bears seem to be staging a comeback and trying to make 2024 their year.

The weekly performance summary from Monday, October 28, to Friday, November 1, 2024, shows the major markets heading south.

Weekly Performance Summary

1. S&P 500 Index (SPX)

   • October 28: 5,823.52

   • November 1: 5,728.80

   • Weekly Change: -94.72 points (-1.63%)

2. Dow Jones Industrial Average (DJIA)

   • October 28: 42,387.57

   • November 1: 42,052.19

   • Weekly Change: -335.38 points (-0.79%)

3. Nasdaq Composite Index

   • October 28: 18,567.19

   • November 1: 18,239.92

   • Weekly Change: -327.27 points (-1.76%)

4. Russell 2000 Index

   • October 28: 2,244.07

   • November 1: 2,210.13

   • Weekly Change: -33.94 points (-1.51%)

5. 10-Year U.S. Treasury Yield

   • October 28: 4.274%

   • November 1: 4.386%

   • Weekly Change: +0.112 percentage points

6. Bitcoin (BTC/USD)

   • October 28: Approximately $68,428.00

   • November 1: Approximately $67,249.00

   • Weekly Change: -$1,179.00 (-1.72%)

7. Gold (Spot in USD)

   • October 28: Approximately $2,800.80 per ounce

   • November 1: Approximately $2,749.30 per ounce

   • Weekly Change: -$51.50 (-1.84%)

8. Oil (WTI Crude)

   • October 28: Approximately $72.35 per barrel

   • November 1: Approximately $70.55 per barrel

   • Weekly Change: -$1.80 (-2.49%)

Last week saw the Dow Jones Industrial Average and S&P 500 second losing week in a row. The SP 500 violated its uptrend in place since the August lows on a weekly closing basis.

The Nasdaq broke its winning streak of seven straight positive weeks. It violated the uptrend in place since August 2024 on a weekly closing basis. The chart looks like a double-top formation.

The R2K finished about 1.5 % lower. The index failed to break above the multi-year resistance zone, where it could not move higher in the summer of 2024 and 2021.

As the election approaches, further elevated market volatility can be anticipated before and immediately after the election.

The VIX moved above 20 again but is far away from former peaks around 30 seen during the bear market in 2022.

As measured by the TLT Vix, the Bond Vix traded at a 52-week high last week. Bond volatility has been much higher recently than equity volatility.

Knowledge Corner

The two leading volatility indices for bonds that are similar to the VIX (which measures equity market volatility) are:

VIXTLT Index

This index is calculated using listed options on the iShares 20+ Year Treasury Bond ETF (TLT). It provides a real-time gauge of the next 30 days of expected volatility in the U.S. Treasury market, particularly for bonds with maturities exceeding 20 years.

It is expressed in basis points, which is more relevant for the bond market, where small changes can have significant implications.

• The VIXTLT Index is a real-time gauge of the expected volatility in the U.S. Treasury market over the next 30 days. It is calculated using listed options on the iShares 20+ Year Treasury Bond ETF (TLT), a highly liquid ETF composed of U.S. Treasury bonds with maturities exceeding 20 years and relatively high duration.

• This index leverages Cboe’s proprietary VIX Index methodology, adapted for the bond market. It provides a measure of volatility in basis points, which is more relevant for fixed-income markets where risk is often perceived as absolute rather than percentage changes.

• The VIXTLT Index offers insights into how the bond market reacts to different volatility regimes and can be compared with the VIX Index to understand the relationship between equity and bond market volatility.

ICE BofAML MOVE Index

This index gauges U.S. bond market volatility across different maturities. It is designed to measure the expected volatility of U.S. Treasury yields. It is often used as a broader indicator of bond market volatility compared to the VIXTLT, which focuses on longer-term Treasuries.

• The ICE BofAML MOVE Index measures the expected volatility of U.S. Treasury yields across various maturities. Unlike the VIXTLT, which focuses on longer-term Treasuries (20+ years), the MOVE Index provides a broader view of bond market volatility by covering a range of maturities.

• This index is used to gauge the overall volatility in the U.S. Treasury market, making it a valuable tool for understanding market sentiment and risk across different bond market segments.

• The MOVE Index is particularly valuable for investors seeking a comprehensive view of bond market volatility, as it captures the expected volatility across multiple maturities, providing a more holistic picture compared to the VIXTLT, which is more focused on long-term Treasuries.

The bond market volatility indices are standalone tools used to gauge market sentiment and predict potential price swings in the bond market. Still, they do not have a secondary layer of volatility measurement as the VIX of VIX does for the VIX.

US presidents come and go, but this election may matter more than other ones. Why? Because there will be structural credit and deficit troubles ahead in the US, and how they are addressed will significantly impact whether we will have mediocre stock market returns in the next 10 years (the Goldman Sachs view) or (close to) double-digit annual returns (Ed Yardeni’s roaring 20s concept).

I anticipated a top in the TLT based on better-than-expected economic indicators rather than the beginning of another debt crisis like the one that occurred from August to October 2023.

The TLT ETF cratered from highs above 100 USD before the Fed lowered rates in mid-September to the middle of the trading range of around 92 USD.

It initially found support at the lower trend line of the upward-sloping trend channel in place since late 2023.

This may indicate elevated volatility ahead, as even an employment report indicating weaker job growth did not help the bond market move north on Friday.

The second-best-performing asset class (Bitcoin has been the best performer) year-to-date has been Gold. It is up by more than 30% ytd. It fell close to two percent last week.

Silver has completed a break-out from its summer trading range and seems to be heading further north in the longer term. It has now been up more than 50 % since the spring lows. Silver also moved lower last week.

Bitcoin made another attempt to close above 70000 USD but failed again. It lost close to two percent on the week. The chart looks bullish to me. It looks like a wave 4 formation.

While the minimum a-b-c-d-e requirements have been fulfilled, a wave 4 quite often takes a more complex form than an a-b-c-d-e formation.

The current break-out would fail in such a case, and the lows of around 50,000 would be tested again (see chart below).

The formation may even become more complex, encompassing two three-wave corrective moves (see chart below), unless there are not many Bitcoin bulls left to initiate the pain trade and move the coin to new ATHs.

I have no idea why Microstrategy has performed so much better than Bitcoin. When the coins peaked in the spring of 2024 at around 70000 USD, MSTR traded a bit below 200 USD. Last week, it peaked at over 265 USD before moving to around 225 USD.

Meme-type speculation, insider knowledge, a reason to go short? I hold shares of Microstrategy as a leveraged Bitcoin proxy but do not trade them.

(2) US Economy: A New Bond Market Massacre?

Since the Federal Reserve's September 17-18 meeting, the 10-year US Treasury bond yield has surged by 77 basis points to 4.39%.

This significant increase reflects the Bond Vigilantes' concerns about Fed Chair Jerome Powell's dovish monetary policy and the potential for economic overheating.

Market Reaction and Analysis

On Monday, October 28, 2024, the Treasury announced its marketable borrowing estimates. The projected financing is $546 billion in Q4-2024 and $823 billion during Q1-2025.

This announcement comes against a staggering national debt, currently at $35.5 trillion. This includes $27.7 trillion of US Treasury marketable debt and $7.2 trillion of intragovernmental holdings.

The latter represents the government's IOUs to itself, primarily resulting from borrowing from public trust funds like Social Security and Medicare.

Alarmingly, this debt is projected to expand at an annual rate of over $1.0 trillion solely to cover the net interest outlays of the Treasury.

The Bond Vigilantes appear to be voting against the Fed's recent actions, particularly the 50 basis point rate cut on September 18. Their concern stems from the perception that the economy is already running hot and further easing could lead to overheating.

Fiscal Policy Concerns and Challenges

The Bond Vigilantes' reaction may also reflect apprehension about future fiscal policies, regardless of which party wins the upcoming elections. Some are concerned that continued expansionary budgetary policies could further inflate the substantial federal budget deficit and fuel inflation.

The next administration will face significant fiscal challenges, particularly regarding debt servicing:

The next administration will face net interest outlays of over $1 trillion on the ballooning federal debt.

This underscores the growing burden of interest payments on the federal debt, likely influencing future fiscal and monetary policy decisions.

Disinflation on Track

US September PCE core inflation came in at +0.3% vs +0.3% expected.

• Prior m/m +0.1%

• Unrounded core PCE was +0.254%

• Core PCE +2.7% y/y vs +2.6% expected

• Headline inflation PCE +2.1% y/y vs +2.1% expected (Prior +2.2, revised to +2.3%)

• Deflator +0.2% m/m vs +0.2% expected

• Unrounded +0.175% m/m vs +0.0907% prior

Consumer spending and income for August:

• Personal income +0.3% vs +0.3% expected. Prior month +0.2%

• Personal spending +0.5% vs +0.4% expected. Prior month +0.2% (revised to +0.3%)

• Real personal spending +0.4% vs +0.1% prior (revised to +0.2%)

The unrounded numbers reveal softer inflation than the headlines, particularly on core m/m, which was very close to being reported as +0.2%. Meanwhile, the consumption numbers were solid.

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The Fed should be on track to continue to lower interest rates in each of the following three meetings.

In a scenario like this, I prefer megacap stocks and related ETFs, as well as Bitcoin over government bonds.

(3) US Stock Markets: Solid Earnings From the Mag-5 Failed to Drive The Market Up

• Meta: Revenue in line, earnings above consensus, guidance consistent.

• Microsoft: Revenue slightly above, earnings in line, guidance below consensus.

• Alphabet: Revenue and earnings in line or slightly above consensus, guidance on capital spending but not detailed on revenue.

• Amazon: Revenue slightly below consensus, earnings in line or slightly below, guidance generally in line.

• Apple: Revenue and earnings in line or slightly below consensus, cautious guidance on iPhone sales.

Meta (META)

• Revenue: Reported $41 billion, approximately in line with expectations of $40.25 billion.

• Earnings: Statutory earnings per share (EPS) of $6.03, beating analyst predictions by 14%.

• Guidance: Meta raised its capital expenditure guidance 2024 to between $38 billion and $40 billion and expects significant acceleration in 2025. Revenue guidance for the fourth quarter is between $45 billion and $48 billion, consistent with analyst expectations

Microsoft (MSFT)

• Revenue: Reported $65.685 billion, slightly above consensus estimates.

• Earnings: Net income of $24.667 billion, with EPS beating some estimates but overall in line with expectations.

• Guidance: Microsoft's forecast for the next quarter fell short of analyst estimates, with anticipated revenue between $68.1 billion and $69.1 billion, compared to the expected $69.83 billion

Alphabet (GOOG, GOOGL)

• Revenue: Expected to rise over 12% year-over-year to $86.41 billion, generally in line with consensus estimates.

• Earnings: Net income expected to increase to $23.03 billion, or $1.85 per share, up from $1.55 per share in Q3 2023, meeting or slightly exceeding expectations.

• Guidance: Alphabet expects higher capital spending in 2025 compared to the current year, but specific revenue and earnings guidance for the next quarter is not detailed in the sources

Amazon (AMZN)

• Revenue: Reported revenue between $154 billion and $158 billion for Q3, aiming for approximately 9.5% growth, slightly below the double-digit growth many analysts had hoped for.

• Earnings: EPS of $1.14, which aligns with or is slightly below some analyst expectations.

• Guidance: Amazon expects to spend about $75 billion in capital expenditures for 2024 and has already spent $51.9 billion. The company's revenue guidance for the next quarter generally aligns with expectations but is slightly below some analysts’ hopes for double-digit growth.

Apple (AAPL)

• Revenue: Apple reported earnings and revenue that were generally in line with or slightly below expectations. The company gave a cautious iPhone forecast.

• Earnings: Net income declined due to a European tax-related payment, and services revenue missed estimates.

• Guidance: The company's cautious iPhone forecast suggests some caution in future growth expectations

The final quarter of the calendar year has historically been the best quarter of the SP 500. December, April, and November have been the three best months of a calendar year.

On average, the 2-monthly period from November until December is also the best bi-monthly period of a calendar year.

Except for 2016, when Donald Trump won the presidential elections for the first time, price action has been positive since 2013.

Over the past ten years, the average performance of the S&P 500 during November and December was approximately 4.41%.

Data shows that during election years, the S&P 500 has historically underperformed in the September-to-early-November period compared to non-election years.

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The best day of a calendar year has historically been October 28. The final ten days of November have been the best ten-day streak of the calendary year historically.

Nvidia is scheduled to report earnings on 20 November 2024 after market close. The report will be for the fiscal quarter ending Oct 2024.

The table above is from Carson Investment Research.

(4) US Stock Markets: The Trend Is Your Friend Until It Is No More

The trend is your friend until it is no more - until a significant trend line has been broken and a trend reversal may have occurred. We may have witnessed the beginnings of this last week.

The Nasdaq 100 long-term bullish trend is intact. The index closed the last of the three gaps (bearish break-away, continuation gap, and exhaustion gap) since the summer of 2024 and failed to reach a new ATH.

The Mag-7 index also failed to make a new ATH but performed better than the Nasdaq or Nasdaq 100.

Unless there is a bad earnings print from Nvidia, I expect the outperformance of the Mag-7 stocks to resume in a higher yield environment.

(5) Long-Term Analysis: Elliott Waves - Nasdaq 100

Nasdaq 100 has been in a bull market since autumn 2022. It may have completed nine waves up.

The current move until last week's top looks like a wave b. Contrary to popular belief, we may see no year-end rally starting directly after the election but rather a wave c and a test of the August lows first.

The year-end rally may start on November 20 when Nvidia reports earnings.

The chart below shows some Fibonacci levels that may become important again.

The chart below shows Fibonacci fans and their alignment with different trend channels.

The chart below shows my preferred Elliott wave count for the Nasdaq 100.

In this scenario, a final leg up now would lead to a larger consolidation pattern in early 2025.

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated October 27, 2024 👋. The next edition will be published on November 03, 2024, at 2:00 p.m. ET.

A Closelook At This Edition

1. This Week's Action: The End Of Tax Selling Season Is Near

2. US Economy: Bond Vigilantes Have Voted Earlier

3. US Stock Markets: A Positive October Bodes Well For The Rest Of The Year

4. US Stock Markets: A New ATH For The Nasdaq, But Not For The Nasdaq 100

5. Long-Term Analysis: Elliott Waves - Nasdaq 100

6. This Week's Spotlight: ServiceNow - The AI Leader in the Enterprise Software Sector

7. Knowledge Corner: Agentic AI

8. The Derivatives Portfolio: A Good Start and More Transactions

9. Final Words: Mag-7 Earnings Ante Portas

(1) This Week's Action: The End Of Tax Selling Season Is Near

The headline from early October was "US Stock Market: An Illusion of Perfection or a Rare Moment of Near-Perfect Conditions? It seems 2024 will be another lost year for the stock market bears.

Last week saw the Dow Jones Industrial Average and S&P 500 winning streaks of six straight weekly gains end. The Nasdaq did hold positive, however, and extended its winning streak to seven straight positive weeks.

Nasdaq and Nasdaq 100 showed renewed relative strength compared with the DJIA, the SP 500, and the R2K. The breakout of the R2K index failed.

As the election approaches, some elevated market volatility can be anticipated. The election may cause investor unease, but I believe these concerns will dissipate quickly if the results show a winner.

However, prolonged uncertainty due to the need for lengthy recountings of election results in different states could negatively impact the stock and bond markets.

The Vix traded higher in October but has been far from panic readings. The Vix of Vix has been stable to date in October, indicating no elevated levels of uncertainty.

Knowledge Corner

The VIX and the VIX of VIX are two related but distinct volatility measures that provide insights into market sentiment and expected volatility.

VIX (CBOE Volatility Index)

The VIX, often called the "fear index," measures the market's expectation of 30-day forward-looking volatility for the S&P 500 Index

What VIX Measures:

• Expected volatility of the S&P 500 over the next 30 days

• Market sentiment and investor fear levels

Interpretation:

• VIX values below 20 generally indicate periods of market stability and low volatility

• VIX values between 20-30 indicate increasing market uncertainty

• VIX values above 30 suggest high volatility and significant market fear or stress

Key Points:

• The VIX is calculated using S&P 500 option prices

• It has an inverse relationship with the S&P 500 - typically rising when the market falls and vice versa

• VIX values are expressed as percentages, representing the expected annualized change in the S&P 500 at a 68% confidence interval

VIX of VIX (VVIX)

The VVIX, sometimes called the "VIX of VIX," measures the volatility of the VIX itself.

What VVIX Measures:

• Expected volatility of the VIX index over the next 30 days

• Market's expectation of volatility in volatility expectations

Interpretation:

• Higher VVIX values indicate greater uncertainty about future volatility levels

• Lower VVIX values suggest more stability in volatility expectations

Key Points:

• VVIX provides a "second-order" view of market sentiment

• It can offer insights into how stable or unstable the market's volatility expectations are

Comparing VIX and VVIX

• VIX focuses on expected market volatility

• VVIX focuses on the expected volatility of volatility itself

Both indices provide valuable information for traders and investors:

1. The VIX helps gauge overall market sentiment and expected near-term volatility.

2. The VVIX offers insights into how uncertain the market is about future volatility levels.

The TLT ETF made a double top and cratered on the back of economic data, signaling a much more robust US economy.

It is now below the middle of its year-long trading range and on the verge of breaking its bull trend to the downside.

In contrast to the stock market, the bond market's volatility has been elevated recently.

VIXTLT Index

Cboe Global Markets recently introduced the VIXTLT Index. It's designed to be a real-time gauge for the U.S. Treasury market's next 30 days of expected volatility. The VIXTLT focuses on U.S. Treasuries with maturities exceeding 20 years, using the highly liquid iShares 20+ Year Treasury Bond ETF (TLT).

Unlike the VIX, which deals with percentage changes, the VIXTLT measures volatility in basis points - a crucial distinction in the bond market. It uses a methodology similar to the VIX, leveraging listed options on the TLT ETF.

The second-best-performing asset class (Bitcoin has been the best performer) year-to-date has been Gold. It is up by more than 35% ytd. It trended sideways last week.

Silver has completed a break-out from its summer trading range and seems to be heading further north. It has now been up more than 50 % since the spring lows.

The chart above shows the price action of the iShares Silver Trust. The iShares Silver Trust ETF (SLV) is an exchange-traded fund that seeks to reflect the performance of the price of silver minus expenses.

It provides investors with a cost-effective and convenient way to invest in silver without taking physical delivery of the metal.

(2) US Economy: Bond Vigilantes Have Voted Earlier

The bond market has started to vote early, sending a clear message ahead of the November 5 US presidential and congressional elections.

Since the Federal Reserve's September 17-18 meeting, the 10-year US Treasury bond yield has surged by 64 basis points to 4.26% before settling down slightly and closing at 4.24 %.

This significant increase reflects the Bond Vigilantes' concerns about Fed Chair Jerome Powell's dovish monetary policy and the potential for economic overheating.

Market Reaction and Analysis

The Bond Vigilantes appear to be voting against the Fed's recent actions, particularly the 50 basis point rate cut on September 18. Their concern stems from the perception that the economy is already running hot and further easing could lead to overheating.

This market reaction was not entirely unexpected. On September 2, Ed Yardeni predicted that positive economic indicators might unsettle the bond market.

In his September 22 commentary, he further highlighted the possibility of diverging yields, with the 2-year yield potentially decreasing due to Fed easing while the 10-year yield might rise on concerns about economic overheating.

Fiscal Policy Concerns and Challenges

The Bond Vigilantes' reaction may also reflect apprehension about future fiscal policies, regardless of which party wins the upcoming elections. Some are concerned that continued expansionary budgetary policies could further inflate the substantial federal budget deficit and fuel inflation.

The next administration will face significant fiscal challenges, particularly regarding debt servicing:

The next administration will face net interest outlays of over $1 trillion on the ballooning federal debt.

This underscores the growing burden of interest payments on the federal debt, likely influencing future fiscal and monetary policy decisions.

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The U.S. has reached a historic milestone, with annual interest payments on the national debt surpassing $1 trillion, driven by rising interest rates and a debt load now exceeding $35 trillion.

The Congressional Budget Office highlights this cost as outpacing major budget items like defense spending. This significant increase in debt servicing pressures will influence fiscal policy decisions and budget allocations for years.

Japan, China, and the United Kingdom are the largest foreign holders of U.S. debt. As of 2024, Japan is the top foreign holder, with approximately $1.15 trillion in U.S. Treasury securities. China holds around $750 billion, while the U.K. follows closely with about $690 billion. Other countries with significant U.S. debt holdings include Luxembourg and the Cayman Islands, each owning a few hundred billion dollars in Treasuries.

In recent U.S. Treasury auctions throughout 2024, primary dealers, direct bidders, and indirect bidders have continued to play significant roles in purchasing government debt. Primary dealers, financial institutions authorized to trade directly with the Federal Reserve, have been the primary buyers in many auctions. There has also been notable participation from indirect bidders, a category that includes foreign central banks and other international investors.

In several 2024 auctions for securities such as the 20-year bonds and 28-day bills, indirect bidders accounted for substantial portions of the accepted bids, indicating robust foreign demand for U.S. Treasuries.

Recent data shows that indirect bidders—often acting through the Federal Reserve Bank of New York on behalf of foreign monetary authorities—continue to secure a large share of the bids, especially for longer-term securities. This ongoing foreign interest is consistent with historical patterns where foreign central banks use Treasuries to maintain reserves and stabilize currencies.

The bid-to-cover ratios in these auctions, frequently above 2.5, also highlight strong demand for domestic and international buyers, reinforcing Treasuries' appeal as safe-haven assets.

Currently, I see no real threat of bond vigilantes stopping to buy US bonds. But this may change anytime soon.

Allianz CEO Oliver Baete recently expressed concern over high public debt levels, describing the situation as “really scary.” He emphasized that investments in sovereign debt, commonly perceived as risk-free, are far from it and highlighted the U.S. as an example. Baete’s remarks reflect Allianz's cautious stance on sovereign bonds, especially amid ongoing market volatility. He criticized the assumption that domestic sovereign debt lacks risk, suggesting that such a view could have significant financial repercussions.​

The IMF expressed concerns in October 2024 about elevated global sovereign debt levels, projecting that total public debt will exceed $100 trillion in 2024, equivalent to around 93% of global GDP. This debt trajectory is expected to approach 100% of global GDP by 2030, partly driven by factors such as pandemic-related spending, inflation, and rising interest rates, which have increased the cost of borrowing.

The IMF’s October 2024 Fiscal Monitor emphasizes the need for countries to address these high debt levels through careful fiscal policies, aiming to balance economic growth and debt reduction.

The IMF warns that global public debt could spike to 115% of GDP by 2026 in a particularly adverse scenario. This is due to potential risks such as slower growth, continued high financing costs, and fiscal pressures from social needs and climate initiatives.

The IMF suggests a substantial fiscal adjustment (around 3-4.5% of GDP over six years) may be required to stabilize debt effectively, particularly for high-debt countries like the U.S., China, and several European nations. However, the IMF notes that delaying such adjustments could increase the risk of market instability, impacting financial resilience and economic growth globally.​

In a scenario like this, I prefer megacap stocks and related ETFs, as well as Bitcoin over government bonds.

(3) US Stock Markets: A Positive October Bodes Well For The Rest Of The Year

An October ending with monthly SP 500 gains usually bodes well for the rest of the year. The table below shows the SP 500 action after ending October with a 6-month trailing return above ten percent.

This has happened 12 times since 1950, and in each instance, the $SPX went on to finish November and December in the green with an average gain of 7.4%!

The final quarter of the calendar year has historically been the best quarter of the SP 500. December, April, and November have been the three best months of a calendar year.

On average, the 2-monthly period from November until December is also the best bi-monthly period of a calendar year.

Except for 2016, when Donald Trump won the presidential elections for the first time, price action has been positive since 2013.

Over the past ten years, the average performance of the S&P 500 during November and December was approximately 4.41%.

Data shows that during election years, the S&P 500 has historically underperformed in the September-to-early-November period compared to non-election years.

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The best day of a calendar year has historically been October 28. A day when tax selling often finishes as many mutual funds have a fiscal year-end of October 31.

The table above is from Carson Investment Research.

(4) US Stock Markets: A New ATH For The Nasdaq, But Not For The Nasdaq 100Subsectors

While the Nasdaq hit an ATH this week, the Nasdaq 100 traded below the summer peaks last week.

The Nasdaq 100 long-term bullish trend is intact. The index has just closed the last of the three gaps (bearish break-away, continuation gap, and exhaustion gap) since the summer of 2024.

The Nasdaq 100 Equal Weight Index ran into heavy resistance last week and underperformed the Nasdaq Top 30 index.

62 % of Nasdaq 100 stock traded above their 50-day moving averages, down from over 80 % a week ago.

The Nasdaq 100 Tech Index failed to move close to its ATH recorded in the summer of 2024.

The Nasdaq 100 Ex Tech Index reached a new ATH last week before moving down rather sharply. Rising yields put pressure on smaller growth stocks.

The Nasdaq 100 Top 30 Index reached above the prior September highs. Megacap tech stocks staged a comeback.

The Mag-7 stock index showed considerable relative strength, moving close to its ATH.

I expect the outperformance of the Mag-7 stocks to resume in a higher yield environment.

(5) Long-Term Analysis: Elliott Waves - Nasdaq 100

Nasdaq 100 has been in a bull market since autumn 2022. I see two possible Elliott Wave counts.

Scenario 1: The current move up is a wave b. Then, contrary to popular belief, we will see no year-end rally after the election but rather a wave c and a test of the August lows.

Or the autumn consolidation stopped before the end of the tax-selling season, and we are already in the middle of a new bull market leg.

The chart below shows some Fibonacci levels that match peaks and lows since the bull market started.

The chart below shows Fibonacci fans and their alignment with different trend channels.

The chart below shows my preferred Elliott wave count for the Nasdaq 100.

In this scenario, a final leg up now would lead to a larger consolidation pattern in early 2025.

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated October 20, 2024 👋. The next edition will be published on October 27, 2024, at 2:00 p.m. ET.

A Closelook At This Edition

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated October 13, 2024 👋. The next edition will be published on October 20, 2024, at 1:00 p.m. ET.

A Closelook into This Edit…

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated October 06, 2024 👋.

A Closelook into This Edition

1. This Week's Action: A Hard Landers Nightmare Unfolding

2. US Stock Markets: The Resilient US Economy

3. US Stock Markets: A New Bull Market Leg in the Making

4. US Stock Markets: Technical Picture and Elliott Wave An…

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated September 29, 2024 👋.

A Closelook into This Edition

1. This Week's Action: It's a bubble dream

2. US Stock Ma…

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated September 22, 2024 👋

Stay sharp on the markets with Closelook!

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Thank you for reading this week's edition of Closelook@US Stock Markets, dated September 15, 2024 👋

📅 The next update will be published on Sunday, September 22, at 7:00 AM ET

📅 The next edition of the Closelook@Global Stock Markets newsletter detailing portfolio changes and the list of global ETFs I like to buy and avoid will be …

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