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This week’s edition of Closelook@US Stock Markets, dated July 26, 2026.

Last week ended with a question — was Friday’s round trip a spring or the last reclaim? — and this week answered it twice. First the bulls’ way: the semiconductor index rallied six percent off the washout, reclaimed its June zone, and on Tuesday closed within two dollars of the broken 554 line. Then the bears’ way: a rate repricing that took September hike odds from one-in-five to four-in-five, an oil print through $100, and a Friday that closed the chip complex below its capitulation band — on the day Intel reported its fastest revenue growth in fifteen years and was sold eight percent for it. In between, six of the biggest prints of the season landed, and the market applied one consistent rule to all of them: it did not score the earnings. It scored the layer of the stack the company lives in. That rule — who gets sold on a beat, who gets paid on one — is the whole letter.

1 · This Week’s Action

The tape, day by day. Monday drifted; the week was always going to start Wednesday night. Tuesday gave the bulls their evidence: SOXX closed at 552.69, a full reclaim of the June zone that stopped almost exactly at the old 554 floor — tested from below, not regained. Wednesday was verdict night: Alphabet held the beat, raised its capex path again and showed Cloud accelerating; ServiceNow beat on essentially every line; IBM missed with a cut, its mainframe segment down 42% against distributed compute up 37% — the product cycle turning inside one income statement; Tesla missed. Thursday the macro arrived: spot crude traded through $100, September-hike odds spiked toward 80%, the tape fell 2% — Tesla −13.7%, Alphabet −6.5% through its 200-day on a raised guide, gold failing its haven test — while SAP printed positively and rose 6% off its 52-week low and Intel rallied 10% into its own report. Friday sorted the survivors: Intel’s double-beat was sold 7.9%, SOXX fell 4.4% to 527.01 — below the 530–532 band, QQQ broke 694 on its third test — and on the same tape SAP rose another 9.3%, ServiceNow 7.4%, and the S&P closed green with ten of eleven sectors up.

The sector read. Energy led for the third straight week (XLE +3.6%, +33% YTD) with utilities (+2.1%), real estate (+1.4%), materials (+1.2%) and industrials (+1.1%) behind it — the defensive-and-real shelf, again. The bottom two sectors are really two stocks: consumer discretionary −5.9% is Tesla’s −19% week wearing a sector costume, and communications −4.1% is Alphabet’s. Tech itself closed just −0.7% — because inside it, one complex cracked and another rallied, and they nearly cancelled.

The factor read — the average stock skipped this week. The equal-weight S&P closed at −0.1% against the cap-weighted −1.1% and the Nasdaq’s −2.6%; value gained 1.8% while growth lost 2.7%; low-vol and min-vol were green. For the second stress episode running, this is a concentration event, not a market event — the damage lives where the index weight lives.

Inside tech. The weekly numbers hide a violent round trip: SOXX’s −1.3% week contains a six-percent reclaim and a six-percent rejection. The month-scale ledger is the honest one — SMH −11.9% over a month against cloud software +9.2% and the broad software basket +3.8%, a twenty-point spread inside “tech.” And July’s semiconductor breadth is three green names out of twenty-two: NVIDIA, AMD, ASML — everything else red, Intel −30% for the month with the season’s best print. The complex is being repriced from its speculative edge inward: on Friday the chip-designer sleeve (XSD) fell hardest, the broad complex least.

2 · The State

The rule the reaction function is running. Line up the week’s six verdicts and the pattern is not subtle. Beats sold: Alphabet — held guide, raised capex, Cloud accelerating — closed the week −8.9%, below its 200-day. Intel — earnings roughly double the estimate, revenue +25%, its best growth since 2011 — jumped double digits after hours and gave back the entire move by Friday’s open, closing −7.9%; the reversal tracked the one number in the release that wasn’t about the quarter: Intel raising its own capex plans. Its record now reads three beats, zero relief rallies, eight declines. Beats paid: SAP +9.3% on Friday alone, ServiceNow +7.4% — the two names that used their calls to claim the same seat: orchestrator of the agentic enterprise. Misses executed: Tesla −18.9% on the week, unrescued; IBM sold on the cut. The market is not grading earnings anymore. It is grading position in the emerging stack — and this week it told us which transition it is pricing. We published the orchestration half this week — the Pulse (Agentic AI: The Orchestration Knock Out) and the long read (The Agent Is Not the Product. The Orchestrator Is.). The other half has a name too.

The handoff, named: capex → opex. Every infrastructure cycle runs the same sequence: first the market rewards building the capacity, then operating it, then using it. The switch between the first two does not happen on a date — it happens when the constraint moves from building AI to operating and monetizing it, and the market’s tell is precise: capex announcements stop producing positive reactions. That tell printed twice this week, on both sides of the same trade, within 24 hours. Wednesday night the demand side: Alphabet’s quarterly capex ($44.9B) exceeded its operating cash flow — quarterly free cash flow printed negative for the first time on record — while the full-year guide rose toward a ~$200B midpoint and disclosed purchase obligations swelled dramatically (a number to handle with care: those commitments span far more than chip orders, so they support the build’s visibility without being a semiconductor backlog). A marginal-return warning, not a financing crisis — trailing-year cash flow remains solidly positive — but the question changed from how much are you building to what does it return. Thursday night the supply side answered with the same sin: Intel, spending well ahead of its own cash generation, raised capex again — and the market sold the season’s best print for it. When both sides of a trade are spending beyond their cash flow, the sustainability of the orders in between becomes the risk. That is what Friday repriced.

The repricing, read at the sector degree. Sort Friday’s tape by dependence on future hyperscaler orders and the market’s new rule is legible in the sleeves before any single name: the chip-designer cut fell hardest, the broad complex less, the diversified complex least — the same speculative-end-first hierarchy the whole July de-rate has followed. The equipment sleeve repriced before the chip sleeve, as it always does — capex changes reach order books before they reach shipments — and behind it the physical layer of the build (the power, cooling and grid-connection complex) took three-to-five-percent hits as a group: fewer data centers under construction means fewer of everything those buildings contain. Meanwhile the software shelf next door was green. One number quantifies the whole boundary: the spread between the complex’s most order-dependent name and its most usage-priced one was seven points in a single session — the market drawing the line between what is priced on orders and what is priced on workloads. The full name-by-name ladder is Sunday’s Hypergrowth material; what belongs here is the architecture it reveals.

The four layers, named — the thesis this letter now runs on. This week forced the AI trade apart into four layers, each with its own index expression and its own verdict:

1. AI Capex — the build trade (the semiconductor complex, the broad build-out index): repriced. Priced on order flow whose sustainability is now the open question; the band crack is this layer’s chart.

2. The Rubin constraints — scarcity inside the build (test & verification, metrology, consumables, advanced memory and packaging — the layers that get more scarce, not less, when designs and deployments multiply): held. The Handoff Board’s inside-Rubin ratios — verification-versus-design and consumables-versus-tools — were green through the crack week. When the broad capex trade de-rates, the constraint layers are where the build’s value concentrates.

3. AI Opex — the operating layer (software’s consumption side, security, observability, orchestration; our Agentic Infrastructure index, +38% YTD): paid. The orchestrator Friday was this layer’s coming-out session.

4. AI Beneficiaries — the using layer (the Agentic Winners cohort): selective, print by print. No basket treatment yet — this layer must show attributable economics name by name, and mostly hasn’t.

The market stopped trading “AI” this week. It started trading the layers — and every index needed to score that transition is already on the site.

The house instrument already tracks this — and it agrees. We built the AI Handoff Board precisely for this transition: nine ratios measuring value migration across the three-index chain — Rubin builds, Agentic Infrastructure operates, Agentic Winners use — each normalized to 1.00 at June 30. The readings as of Friday: the master ratio (operate ÷ build) stands at 1.12 — the operating layer has re-rated 12% against the building layer in four weeks; the scoreboard (use ÷ build) stands at 1.24. This week both ratios dipped — Rubin stabilizing while the operators gave back — which is exactly what a broadening looks like as opposed to a clean replacement. The board is the standing referee for everything this section claims, updated daily, in public.

The macro engine underneath. None of this happened in a vacuum: Thursday’s flush repriced the September meeting from roughly 20% hike odds to above 80%, real yields pressed toward 3%, and — the week’s signature — Treasuries fell with stocks (IEF −0.8%, TLT −1.3%). A tape where bonds can’t catch the safety bid is a tape repricing its discount rate, and the most extended complex on the board absorbed the hit. Oil is the input behind the odds — spot through $100 this week — but the full term-structure read (and why the December contract near $80 says temporary) is Saturday’s Global letter; for the US tape the transmission is one line: oil → inflation odds → the discount rate → the concentrates.

The levels, and what broke. Tuesday’s 552.69 close is now the defining rejection — the old 554 floor confirmed as ceiling. Friday’s 527.01 close sits below the 530–532 June capitulation band (the first close-basis crack in that band since the spring advance) but above the 522.24 June washout line. One degree up, the escalation line we flagged last week — QQQ closing below the 686.37/686.76 double-washout floor — fired: Friday’s third test of 694 resolved as a break, and the 684.23 close sits two points beneath the floor. And yet the degree above that refused to confirm: the S&P closed green on Friday, the equal-weight was flat on the week, and ten of eleven sectors rose. Last week’s containment question has a split answer — the Nasdaq degree cracked, the market degree did not. Both facts are in ink; neither cancels the other.

The quiet strength, read correctly. NVIDIA finished the week green (+0.5%, above both moving averages) and was the only major AI-hardware name to sit Friday out — not an accident, per the boundary above: it is the one name in the complex priced on workload execution rather than on the next order. A sector-degree break that its usage-priced leader declines to confirm is not yet a bear market in the AI trade — it is the market splitting the AI trade along the order/usage line. Whether the leader eventually pulls the complex up or the complex pulls the leader down remains the cleanest single tell in the US book.

3 · The Outlook

The four indices — the reaction rule, visible in our own instruments. The sold-the-beat/paid-the-plane rule from §2 printed straight through the Closelook index family. On the week: Rubin +0.4% (+92% YTD) — the build-out stabilizing after its washout, even as its ETF proxies cracked. AW40 −3.7% (−23% YTD) — but +2.2% on Friday alone, the orchestrator day, the index’s Control-Plane cohort doing exactly what SAP and ServiceNow’s tape did. The Agentic Ecosystem −2.9% (+38%), HALO −1.9% (−1%). One tape, four different verdicts — the AI trade is no longer one trade, and the full four-bucket flow system behind these numbers is the Hypergrowth letter’s home turf (also out this Sunday). Here the Agentic Winners index earns one sentence: it is where the orchestration thesis gets scored print by print, in an index, in public.

The regime gauge. Money Temperature at 50, up from 44 — back to dead-neutral. The forced-selling phase cooled; nothing euphoric replaced it. At 50 the market funds rotations, not chases — which is precisely what the sector board shows.

What would confirm the handoff — the diary’s checklist. One violent Friday names a transition; it does not confirm one. We will call the capex→opex handoff confirmed when, and only when, several things print together: capex raises keep getting sold across the hyperscalers (Wednesday and Thursday are live tests); analysts stop raising out-year estimates for equipment and memory while orders are still strong; consumption-linked revenue — inference, observability, security, orchestration — visibly accelerates off the installed base; and the opex names show attributable AI revenue, not “AI is a tailwind.” By that standard, July 23–24 was the opening shot, not the verdict: confirmation needs roughly two earnings cycles of relative estimate migration, which points at the second half of 2026 as the transition window. And the both-hands clause, stated plainly: this is a broadening, not a replacement — inference growth itself demands compute, so the usage-priced end of the hardware complex can stay a winner while the order-priced end de-rates. The vulnerable cohort is narrow and specific: marginal, long-duration capacity whose valuation requires hyperscaler capex to accelerate forever.

The week ahead is the season’s center of gravity. Cadence prints Monday — one session after Kimi K3’s promised weights release, making it the one name carrying both the design-shock verification and the sold-beat regime at once. Then the block that funds the entire AI trade: Microsoft and Meta on Wednesday, Amazon and Apple on Thursday — the four largest capex budgets reporting within 24 hours, into a cracked semiconductor band, an 80% hike probability, and month-end flows. Our Microsoft print-record card carries the season’s sharpest stat into Wednesday: twenty beats in twenty quarters — and a stock that has been sold anyway in the recent ones. If the sold-beat rule survives that print block, it is a regime. If it breaks, Friday’s crack loses its sponsor.

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4 · What May Lie Ahead

The levels, updated. SOXX: the map now reads 530–532 as overhead (the band, lost on Friday’s close), then 522.24 (the June washout line — Friday closed 527.01, between the two), then the primary rising channel floor near 520 — the line that decides whether the down-channel from the June highs stays corrective — and below it Friday-of-last-week’s 498.54 print. The structural read is unchanged from our chart work: the decline from June still counts as a flag-shaped correction while the channel floor holds. QQQ: 694 and the 686.37/686.76 double-washout floor are both overhead now — Friday closed 684.23, the first close beneath the floor; a fast reclaim of 686–694 would mark Friday as a false break (SPY’s green close argues that branch is live), while acceptance below it points the map toward the June congestion zone. SPY: green Friday, ~745 (the 50-day) overhead, structure intact. Alphabet: closed 319.74 against the 200-day at ~324 — the raise-and-sold print leaves it below the line institutions defend; a reclaim would be the first evidence the collector-selling is exhausting. Intel: the 3-0-8 record needs no level — it needs a reaction regime change.

The calendar just testified — against itself. July is, by a wide margin, QQQ’s most reliable month: +3.45% average, positive 88% of the time — 15 of the last 17 years. July 2026 printed −7.08% — not merely the first red July since 2024, but the worst July in the entire 17-year sample, more than four points beyond the previous worst. When the strongest seasonal tailwind of the year produces the worst print in its own history, the message is not seasonal noise — it is that something in the tape currently overpowers the calendar’s most dependable pattern. And the calendar now stops helping: August is mediocre on QQQ’s history (+0.65% average, 56% positive) and September is the only negative-average month of the year (−0.31%, positive less than half the time). The next reliably green columns are October (+2.50%) and November (+2.92%). The band cracked at precisely the moment the seasonal floor was scheduled to leave the building — which cuts both ways: the bears lose their “it’s just seasonality” objection for July, and the bulls lose the calendar as a crutch until October.

The three bellwethers. The architect diverged from its complex: NVIDIA +0.5% on the week, green, above both averages — the only major AI-hardware name that ignored Friday. Micron +4.0% — the first green week after a −24% month, the memory unwind pausing at scale. TSMC −1.1%, quiet, still below its 50-day (~426) but far above its July low: the paradox holder is consolidating, not breaking. A band crack with all three bellwethers flat-to-green is a very different animal from June 9, when they led the washout. Watch whether that divergence resolves upward (leaders pull the complex) or downward (the complex pulls the leaders) — it is the cleanest single tell in the US book right now.

Read more

On Friday the market ran the entire distance to the June capitulation zone, touched it to the dollar, reclaimed everything by lunch — and gave most of it back by the close. This is what a verdict week looks like when both sides get their day.

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Last week we drew two lines and said the market would have to choose: SOXX at 554 and NVIDIA at 191. This week it chose — twice. Tuesday broke the first line and looked like the start of a correction. By Thursday the break had reversed, extended, and been paid for with the largest foreign US listing on record. And underneath the round trip sits the real story: where the buying went. Not to the architect — down the stack, to the layers that had not yet repriced. Which happens to be exactly where the AI dollar itself is headed. That is this week’s letter.

1 · This Week’s Action Free

The tape, day by day. Monday was setup. Tuesday was the software day — SOXX broke 554 and our build-out index had its worst session of the series (−5.6%). Wednesday reversed it: SOXX reclaimed the line at 562, NVIDIA rose 3.7% back above 200, Broadcom added 4.8% on the ~$30B Apple deal. Thursday extended: SOXX +3.5% to 581.7 — the second close above 554 — Micron +4.5% to a $1.12 trillion market cap, software green on a semi day for the first all-green session of the four indices since Monday. Friday resolved the week in character: the memory complex took profits into the SK Hynix debut, while the architect had its comeback — NVIDIA +4.0% to 210.96, back above its 50-day, and SOXX closed at 581.3, flat on the day and twenty-seven points above the line it broke on Tuesday. The week’s net: SOXX −0.3%. The round trip was violent; the destination was where it started. That is what a shakeout looks like on a weekly print.

The sector read. Energy led the week (+3.8%) as oil caught a real bid — the “oil isn’t buying the war” read of recent weeks weakened this week. Tech (+1.7%) and communications (+1.4%) carried the rest; every other sector closed red, with materials (−2.0%) and industrials (−1.5%) at the bottom. Narrow, commodity-accented risk-on.

The macro frame. The FOMC minutes put rate hikes back on the distribution as a contingency — the hawkish tail is alive, the 10-year sits near 4.5%, and the long end sold off again into the weekend. Gold eased but held the 4,000 belief line; bitcoin continued its repair (+4% on the week). The rates question is not resolved; it simply was not this week’s headline. Tuesday it becomes the headline.

2 · The State Free

The count, updated. The five-year view puts the week in its structural place. The advance from the late-2022 low counts as a completed five — that was Wave 1, topping in early 2025. The spring-2025 flush was Wave 2. Everything since is Wave 3, ongoing: its own first sub-wave completed into the winter, its second bottomed at the spring-2026 low, and price now rides the upper half of the red channel in the third-of-third — the strongest part of the sequence, if the count is right. Tuesday’s break never seriously threatened the channel midline, let alone the lower rail; the weekly stochastic has reset to mid-range rather than overbought. The bearish alternative — a completed five at the high — needed the break to stick, and it lasted one session. The channel rails are the count’s own invalidation levels: the midline is where the bulls get their first real question, the lower rail is where the count dies.

The semi complex — the group that decided the week. The four semiconductor wrappers tell the shakeout story in one frame: Tuesday’s break, Wednesday’s reclaim, Thursday’s extension — and a Friday that held the ground. The fabless sleeve (SMHX, +3.2% on the week) led the complex out while the broad wrappers ended flat: break → reclaim → extend is the signature of forced selling absorbed by size, not the start of distribution.

Inside the buying — down the stack. The detail that separates this reversal from a simple bounce: on the strongest day of the week the architect sat out. NVIDIA closed red on Thursday while the layers beneath it re-rated — Storage +6.9%, Deposition & Etch +6.1%, Advanced Packaging +5.7% inside our build-out index, and Micron closed the day worth $1.12 trillion, roughly ten times its 52-week low, still near 6.6x forward earnings. Capital did not chase the top of the stack; it bought the layers that had not yet repriced. That broadens the trade rather than narrowing it.

Where the dollar itself is going. The down-the-stack buying is not a one-week quirk — it mirrors the migration of the AI dollar itself. Last week’s Global edition traced the geography: of every $100 the hyperscalers spend, roughly $45–55 stays in the US — but what stays is the design and IP margin, the cloud economics and the concrete, while the physical system bill runs through the supply chain.

The forward path matters more than the snapshot. Generation by generation — Blackwell today, the Vera Rubin platform entering the market this half, Rubin Ultra scaling toward 576-GPU domains, Feynman behind it — our estimate of the rack dollar shifts the same way the week’s tape did: compute’s share falls from roughly 43% toward ~31%, total memory rises from ~29% toward ~39%, and networking stops being an accessory and becomes part of the processor. The buyers who re-rated storage, etch and packaging on Thursday were, knowingly or not, front-running that table.

3 · The Outlook Free

The four indices — the week in one line each. Rubin Build-Out: −5.6% Tuesday, +3.9% Thursday, −0.1% on the week — a round trip that proved the holder base. The Agentic Ecosystem Index led into Thursday and gave back 3.3% on Friday into the debut, closing the week +1.4%; AW40 added +1.7%; HALO lost −2.6%. Year-to-date the ladder reads Rubin +119%, AEI +47%, HALO +5%, AW40 −21% (equal-weight variants). The barbell swapped sides twice and ended the week near balance — a tug-of-war, not a regime change. Friday’s split inside the pair — the architect +4% while the agentic complex gave back — is the same rotation §2 describes, running in real time.

The road ahead — our working map, and the number that will decide it. Here is the path we are working with, stated plainly enough to be wrong. The tape keeps rising into earnings season — mid-season, perhaps to its end, at the outside until the July-quarter reports land in August. Then the calendar turns hostile: the seasonally weakest stretch of the year meets midterm-election uncertainty, and by then the peak in earnings expectations may already be behind us. Consensus has S&P 500 earnings growing roughly 23–24% this year, and with normal beats the second quarter alone could print near 29% — growth rates the index normally only achieves coming out of a recession. If that is the expectations peak, the autumn setup is a correction — and after the election, the year-end rally.

But the 24% is not what it appears to be. The aggregate is profit-dollar-weighted: a small cohort of AI, energy and capital-markets names growing 25–40% pulls the headline while the median S&P 500 company grows perhaps 7–10% — a respectable expansion, not a boom. The index’s earnings line is growing roughly three times faster than the representative constituent’s. And part of the aggregate is not operating earnings at all: when Amazon books gains on its Anthropic stake — Alphabet likely the same — valuation marks become profits, and inside the AI build-out itself one side of every dollar records 100% as revenue today while the other side spreads its cost across years of depreciation. Earnings booms built on that arithmetic can run for a long time — and they can also unwind through the income statement rather than the multiple.

We will track this through the season with one number: the Earnings Dispersion Ratio — aggregate index earnings growth divided by median constituent growth. Around 3.0 today, by our working estimate. What that ratio does from Tuesday’s bank prints onward tells us which regime this actually is: an earnings boom — or a concentration wearing one as a costume. The paid half of this letter maps the levels, the bellwethers and the book; the EDR gets its own treatment in the coming editions.

The road ahead — our working map, and the number that will decide it. Here is the path we are working with, stated plainly enough to be wrong. The tape keeps rising into earnings season — mid-season, perhaps to its end, at the outside until the July-quarter reports land in August. Then the calendar turns hostile: the seasonally weakest stretch of the year meets midterm-election uncertainty, and by then the peak in earnings expectations may already be behind us. Consensus has S&P 500 earnings growing roughly 23–24% this year, and with normal beats the second quarter alone could print near 29% — growth rates the index normally only achieves coming out of a recession. If that is the expectations peak, the autumn setup is a correction — and after the election, the year-end rally.

But the 24% is not what it appears to be. The aggregate is profit-dollar-weighted: a small cohort of AI, energy and capital-markets names growing 25–40% pulls the headline while the median S&P 500 company grows perhaps 7–10% — a respectable expansion, not a boom. The index’s earnings line is growing roughly three times faster than the representative constituent’s. And part of the aggregate is not operating earnings at all: when Amazon books gains on its Anthropic stake — Alphabet likely the same — valuation marks become profits, and inside the AI build-out itself one side of every dollar records 100% as revenue today while the other side spreads its cost across years of depreciation. Earnings booms built on that arithmetic can run for a long time — and they can also unwind through the income statement rather than the multiple.

We will track this through the season with one number: the Earnings Dispersion Ratio — aggregate index earnings growth divided by median constituent growth. Around 3.0 today, by our working estimate. What that ratio does from Tuesday’s bank prints onward tells us which regime this actually is: an earnings boom — or a concentration wearing one as a costume. The paid half of this letter maps the levels, the bellwethers and the book; the EDR gets its own treatment in the coming editions.

Read more

Almost everything rose — but the two ends of the barbell we live on went opposite ways, and the divide ran straight through technology. The read below holds that this is rotation, not risk-off, with a rising earnings bar behind it. The schedule of our other publications is at the end.

1 · This Week’s Action

Five boards, top to bottom: the macro backdrop first, then the US sectors, technology, the regions, and the world. Each is sorted by Weighted Alpha, leaders at the top.

The cross-asset backdrop. The bellwethers set the tone before equities open. This week, long bonds softened as yields firmed, the dollar drifted lower, gold held its ground, and Bitcoin pushed higher through the long weekend — a backdrop that leans risk-friendly, with the one caveat that rising yields sit under the rate-sensitive corners of the equity market.

Sorted by Weighted Alpha (leaders → laggards) · Barchart, close of week.

The tell here is what is absent: no haven bid, no credit stress, no scramble for protection. Volatility fell on the week even as one corner of the market was repriced hard — the fingerprint of repositioning, not de-risking.

The eleven US sectors. The broad market had a good week — the S&P and its equal-weight version rose together, so participation was genuinely wide. Underneath, financials and communication services did the leading; the defensives and the rate-proxies — utilities, energy, real estate — sat at the bottom. Technology finished near flat, which sounds unremarkable until you look inside it.

Sorted by Weighted Alpha (leaders → laggards) · Barchart, close of week.

Read top-to-bottom, this was a mixed board that leaned decidedly green: most of the eleven sectors finished higher, a textbook risk-on rotation with banks and communications on top, and only the bond proxies — utilities, energy, real estate — plus a near-flat technology in the red. The anomaly is not that tech led or lagged; it is that the sector’s flat headline hides the widest internal split we have seen since the spring.

Inside technology. Here is the week’s real story. The tech shelf broke cleanly in half: software and cloud ran hard, while the entire semiconductor complex fell — and the heavier the equipment and memory tilt, the deeper the damage. A double-digit gap opened between the software baskets and the semis in five sessions.

Sorted by Weighted Alpha (leaders → laggards) · Barchart, close of week.

The split inside tech — software firm, silicon soft — is the cleanest tell on the board, and the one we lean on most below. Note the path, not just the close: the semis were up sharply at midweek before giving it all back and more into the holiday, and the memory and equipment names were the epicenter.

Across the regions. Regionally, the US kept a relative bid while Europe stayed firm, and the emerging complex was mixed. Nothing here argues for a leadership change away from US large-cap yet, though the softer dollar quietly helps the non-US books.

Sorted by Weighted Alpha (leaders → laggards) · Barchart, close of week.

The global sector picture. Globally, the same signature repeats — growth-and-cyclicals lead, defensives lag — which tells us the week’s move is a factor story, not a US-only one.

Sorted by Weighted Alpha (leaders → laggards) · Barchart, close of week.

Whether the software leg is durable broadening or a violent one-week rotation against a still-unresolved semi selloff is the next section’s question.

2 · The State

The US market map. Read through the relative-rotation lens, the eleven sectors cluster the way the boards imply: financials and communications sit in the Leading quadrant, the defensives are Lagging, and technology sits astride the divide — because the sector is no longer one thing.

The one-line reduction: broad participation on the surface, a deep fault line underneath.

The thesis. The tape is risk-on and broadening at the index level, but the broadening is uneven — and the single most important relationship on our screen, chips-versus-software, just inverted hard. For a year the AI trade meant buy the build-out; this week the market paid for what uses intelligence and sold what builds it.

• How wide — the software-over-semis spread is the widest in months, and it opened in a single week. Spreads this wide, this fast, tend to be either the start of a genuine leadership change or a repositioning that snaps back — rarely nothing.

• Where the damage concentrated — not “big tech,” and not broad semis evenly. It was the most capex-sensitive nodes: memory, storage, and the equipment names. The application and software layer was not just spared — it led.

• The earnings backing — the reason the market can rotate rather than de-risk is the profit picture behind it. Consensus still carries an unusually high 2026 earnings bar, and it is concentrated: tech and infrastructure carry the heaviest projected growth, the low-expectation half of the market much less. This week the low-expectation half rallied while the highest-expectation corner repriced — a rehearsal of what a bar this high does to a small miss.

• Seasonality — July is historically one of the Nasdaq’s better months, which argues for continuation; but 2026 is a midterm year, and the run into a midterm has historically been the weakest stretch of the four-year cycle. The tilt argues both ways — we hold both.

Leadership across the themes. The more useful cut this week is thematic, and it maps directly to our own indices — the deployment side of the trade and the build-out side went opposite directions by a wide margin in five sessions.

• Leading — the agentic and deployment cohort: applications, security, identity, the names that run on AI. This is the AW40 and HALO side of the barbell.

• Lagging — the build-out core: memory, storage, foundry and fab subsystems — the Rubin side, where the capex sensitivity is highest.

But the damage inside the build-out was selective, not uniform — and the internal tell cuts the other way. Inside Rubin the periphery held while the crowded core cracked: the previously-lagging peripheral sectors (materials, vision, grid) actually led the index on the week, while the consensus core (memory, storage, foundry) took the hit. That relative-laggard outperformance is a mean-reversion signal worth flagging — the money leaving the crowded core did not leave the thesis, it rotated within it.

That chips-over-software split — deployment over build-out — is the single relationship we would watch break first if the regime is turning, in either direction.

The structural read — two counts, one fork. The Nasdaq-100’s weekly Elliott picture is genuinely two-handed this week, and the distance between the two readings is unusually wide — so we hold both.

• The bullish count — an extended third wave, no end in sight. On this reading the advance off the 2025 low is a large, extending third wave that is nowhere near finished. Count the sub-structure and it is still early: wave 1-of-3 ran into the end of 2025, wave 2-of-3 corrected into April 2026, and we are now inside wave 3-of-3 — the most powerful stretch of any impulse, and the one that tends to extend rather than terminate. If this is the right label, the recent chop is a pause inside a third wave, not a top, and the trend has room well beyond the prior high.

• The bearish count — a completed five. On the mirror reading, the same rally is a finished five-wave sequence from the 2022 low: the recent high in the 31–32k zone is wave (5), not wave (3). If that is the label, the impulse is complete and the correction now due is of a larger degree than anything since 2022 — a months-long affair, not a dip.

The two agree on the near term — a pause here — and disagree on everything after it. We do not need to pick today; we need the level that tells us which, and the semis are the cleanest early tell.

Inside the semis — a broken steep trend, a double bottom, one clean test. The semiconductor complex (SOXX) ran in a very steep uptrend from early April; that steep line is now broken and over. A broken steep trend is not a broken bull — steep trends almost always give way to shallower ones or a pause, not necessarily a reversal. Price now sits at double-bottom support, and the normal, constructive path from here is another bounce attempt off that base.

The read stays bullish as long as the double bottom holds. It turns only on one of two failures: if the double-bottom low gives way, or if the bounce that follows cannot carry price back to a new all-time high. Either failure argues for a more prolonged correction — and would be the semi-side confirmation of the completed-five count above.

The internals behind the map. The same picture, three ways down: the sector indices show where the absolute return is being made, the rotation map shows what is shifting beneath the surface, and the single-stock movers name which stocks did the leading and the wrecking.

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3 · The Outlook

The forward read we hold lightly and reset each week — the price will tell us before the narrative does. This week the question is a single one, and it is a level: does the semi dip get bought.

The four indices — the clearest read we have. We track this cycle through four functional indices, and last week they separated in a way that tells the story better than any single number.

The build-out side — Rubin — was the only one red, dragged by the semis. The three that lean to the deployment of AI were all green: the agentic-opex index (AEI), the agentic winners (AW40) and functional growth (HALO) — with AW40 and HALO out in front of AEI. Read alongside software’s leadership, it suggests the bottom in the software and application complex (IGV) is probably in.

The distinction between the two agentic indices is the point. AW40 is the bet that you know which applications win — a concentrated winners’ list. AEI is the humbler bet: that there will be winners, whoever they turn out to be, and that all of them get taxed by the same toll-booth infrastructure underneath. Which of the two leads over the coming months is genuinely unclear — and we hold it open.

Two scenarios into the seasonally softer late-summer and autumn window:

• The bullish one — all three AI indices (build-out, opex and winners) move up together, HALO with them, and the four form a longer-, medium-term bottom. That is the shape we lean to for July.

• The less-bullish one — the strength narrows, and only one of the three AI indices carries while the others lag.

Either way we expect positive results into the earnings season. The risk we watch is not price but expectations: earnings-growth estimates may be peaking this summer, and if they are, the downward revisions arrive by autumn — the same conclusion we reach, from the other direction, in this week’s Weekly Signal.

If the equipment and memory complex is reclaimed quickly, this week was positioning ahead of the July prints and the dispersion closes from below — the build-out rejoins the deployment side. If it is not, the market is telling us something about AI-capex expectations before a single number is reported, and the build-out core stays the live read on that conversation.

The macro frame sits underneath all of it — whether the inflation impulse is cresting or entrenching is what decides how much multiple the build-out gets to keep, and firmer yields this week are a small vote for caution on the long-duration names.

The point is not to chase the software leader but to watch the semi laggard: the asymmetry into next quarter lies in whether the build-out turns up to rejoin the deployment side, or whether the split widens into the earnings season and the summer.

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In This Edition

(1) This Week’s Action

(2) Overview: The US Market Map

(3) The State

(4) The Outlook

(5) What May Lie Ahea…

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Thank you for reading this week’s edition of Closelook@US Stock Markets. The next edition will be published next Sunday, 31 May. For the schedule of our other publications, please see the end of this document.

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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.

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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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