Today’s update will cover:

• The stock market chop fest.

• Unpacking the pullback in bond yields.

• A new trade idea for a boost from agentic AI.

• Watch this country ETF for clues on the…

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Stock Market Update

While investors expect the Federal Reserve to hold rates steady at its next meeting later this month, a growing inflation problem will keep favoring tighter monetary policy. The Consumer Price Index (CPI) for the month of September was reported at 3.7% year-over-year versus expectations for an increase of 3.6%. The Producer Price Index (PPI) was especially worrisome, with a headline increase of 6.3% compared to estimates for 5.3%. The core PPI that strips out food and energy prices jumped by 5.0% compared to last year. The chart below overlays headline CPI and PPI, where you can see that PPI has accelerated to the highest level since 2022 (blue line) and keeps the acceleration in producer inflation intact. You can also see that the PPI tends to lead CPI historically.

The reaction from the bond market was unexpected. A recent reversal lower in longer-term interest rates continued pulling back despite worse than expected inflation. The 10-year Treasury yield sits at 5.09% compared to 5.31% at the start of October (chart below). At the same time, the AI trade remains under pressure ever since OpenAI announced lower than expected annualized revenue at $50 billion. While the miss is being blamed on an accounting discrepancy, investors are second guessing the potential return on trillions being plowed into AI infrastructure spending. Chip stocks have been a huge beneficiary of AI spending, and are collectively pulling back toward the summer lows as evidenced by the VanEck Semiconductor ETF (SMH).

The AI trade is being pressured by the outlook for returns on investment along with rising rates and accelerating inflation that also threatens the cost of capital. Given the role of AI capex spending in contributing to economic growth, any deterioration in the outlook could be a factor in driving the recent decline in bond yields. But if recession fears were on the rise, then I would anticipate a broader pullback in equities. Instead, the recent price action has been a rotation out of AI and related growth stocks and back into value. Since October 6, large-cap growth stocks are down 6% while large-cap value is up nearly 2%.

The price action remains volatile with quick rotations over the past several months now. That makes breakouts hard to come by, but tracking relative strength across stocks and sectors remains key to finding the next round of position trading opportunities. Keep reading to see:

• Open ETF positions.

• Open stock positions.

• Chart analysis for new trade ideas.

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Today’s update will cover:

• The concerning signal from bond yields.

• Signs from PPI that inflation will get worse.

• Is the S&P 500 pullback a rotation or correction?

• How being patien…

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Today’s update will cover:

• Bullish conditions to spark a 4Q rally.

• A tale of two markets (AI versus not AI).

• Why the consolidation in chip stocks is nearing its end.

• Three major c…

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These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.

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Stock Market Update

A pair of reports covering the Federal Reserve’s dual mandate hit the “Goldilocks” zone for investors. First up was the Personal Consumption Expenditures (PCE) price index for the month of August. Headline PCE inflation was reported at 3.4% while the core measure that excludes food and energy prices rose by 3.0%. Both increases were less than expected and moderated from the pace seen in July. Next came the nonfarm payrolls report for September, which showed 29,000 jobs added during the month. The figure fell well short of estimates for 84,000 while the prior two months were revised lower by 60,000 total jobs. The chart below shows the three- and six-month average of payroll growth to smooth out monthly fluctuations.

While the jobs report missed expectations, the result wasn’t bad enough to spark fears of a more significant slowdown in the economy. But along with the cooler than expected PCE report, the outlook for the Fed’s next move took a dovish turn. Market-implied odds now favor the Fed holding rates steady when it meets later this month compared to a 70% chance for another rate hike before last week’s reports. Fears around the Fed are easing at a time when market breadth over longer-term measures are hitting extremely oversold levels. At one point last week, the percent of stocks across major exchanges trading above their 50-day moving average (MA) stood at just 25% in the chart below.

Breadth has been this oversold just one other time this year, which was back in late March as the S&P 500 fell near correction territory. Oversold conditions helped spark a reversal back then, and could do so again. That’s especially the case with various measures of investor sentiment showing heightened levels of fear in the market. Shifting views around the Fed and a slower pace of rate hikes could become the catalyst for a durable rally.

Keep reading to see:

• Open ETF positions.

• Open stock positions.

• Chart analysis for new trade ideas.

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Today’s update will cover:

• Is a year-end rally about to start?

• Key reports impacting the Fed’s two mandates.

• Why bonds aren’t reacting to the PCE inflation report.

• The breadth and…

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These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.

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Stock Market Update

Bond market volatility is pressuring the stock market, except for the biggest stocks. An ETF tracking the “Magnificent 7” broke out to new records highs last week driven by a surge in Meta Platforms following their new AI agent. That’s helping prop up the S&P 500 and Nasdaq which are both trading just below their respective record highs. But it’s a much different story under the hood, where the average stock is pulling back. The percent of stocks across the market trading above their 20-day moving average (MA) stands at just 29%. There have also been more stocks making new 52-week lows than new highs across major exchanges since the end of August that you can see in the chart below tracking net new highs.

While market breadth is deteriorating sharply since mid-August, an extremely oversold breadth condition is forming. On a year-to-date basis, the percent of stocks trading in short-term uptrends has only been this low back in late March when the S&P fell near correction territory. Many other measures of breadth show the presence of an oversold condition while investor sentiment has seen a large jump in bearish views over the past two weeks. The AAII sentiment survey of retail investors showed bearish views at 53.3% last week and 48.1% this week, which is well above the historical average of 31.5% and outnumbers bullish views (chart below). CNN’s Fear & Greed Index also remains firmly in “fear” territory.

While interest rate volatility and hawkish shift at the Federal Reserve is playing a role in pressuring the average stock, evidence doesn’t yet point to a deteriorating economy. That supports the corporate earnings outlook, which means the combination of oversold breadth and negative investor sentiment could help spark a rally.

Keep reading to see:

• Open ETF positions.

• Open stock positions.

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Today’s update will cover:

• An extremely oversold breadth condition.

• How to manage risk on a strong breakout.

• The other risk to the Fed outlook (not inflation).

• Best chart action i…

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Now for this week’s issue…

For the first time in over three years, the Federal Reserve hiked interest rates by a quarter point with the fed funds target now in a range of 3.75%-4.0%.

Following the meeting, Fed Chair Kevin Warsh indirectly signaled there could be additional increases ahead. Warsh acknowledged that economic and labor market activity aren’t cause for concern while the meeting statement reiterated that the Fed will “deliver price stability”.

Warsh also described the action as removing “a dose of accommodation”, which implies that the central bank still sees the current stance of monetary policy as being stimulative to the economy rather than being restrictive.

If the Fed views policy as being accommodative, then recent data supports additional hikes ahead. The August payrolls report blew past expectations with 162,000 jobs created during the month while initial jobless claims trend near historically low levels.

The August report on retail sales increased by 1.2% month-over-month, which was the strongest report in five months (chart below). Evidence of a strong consumer is boosting current quarter estimates of GDP growth.

While the Fed turned more hawkish as investors feared heading into the meeting, major indexes posted strong gains during the following trading session. Measures of stock market breadth were nearing extremely oversold levels which is supportive of a bounce.

The rebound in equities could also reflect the measured pace of rate hikes being priced in. A slow tightening cycle that doesn’t derail recent strong economic activity supports the earnings outlook and thus the bull market.

This week, let’s look at why Fed rates hikes aren’t over and how evidence of a strong economy could present another challenge for the central bank. We’ll also look at the key variable that matters for the economy and stock market, and why breadth is signaling an oversold bounce could develop.

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The Chart Report

In recent weeks, speculation grew that the Fed would hike interest rates. But market based signals were warning of a tightening cycle several months ago. The 2-year Treasury yield tends to lead changes in the fed funds rate, though it’s not a precision indicator on when a hiking cycle will commence. As inflationary pressures grew following a breakout in commodity prices earlier this year, the 2-year yield crossed above fed funds in March for the first time in over three years. That’s the bond market’s way of warning of rate hikes, with more potentially in store. Despite the hike last week, the 2-year rate sits 76 basis points above the fed funds upper target (chart below), implying three more quarter point rate hikes ahead.

The Fed is missing badly on the price stability portion of its mandate, with consumer inflation running above the Fed’s 2% target for over five years. Fed Chair Kevin Warsh has made returning inflation to the Fed’s 2% target a focus of recent keynote speeches and meeting statements. But another challenge to the fed funds rate could come in the form of strong economic growth. Following last week’s meeting, Warsh characterized monetary policy as accommodative for the economy which promotes growth. The pace of economic growth could come under scrutiny if the Atlanta Fed’s GDPNow estimate holds up, which is running at 5.1% annualized for the third quarter (chart below). The estimate is also receiving a boost from evidence of strong consumer spending along with inventory restocking. A strong economy coupled with high inflation will keep the pressure on the Fed to hike rates.

While investors were anticipating a hawkish Fed pivot, the price action in the S&P 500 made it look like stocks were grinding sideways since the start of August. But that masks deteriorating breadth under the hood as the average stock has pulled back in recent weeks. The chart below shows the percent of stocks in the S&P 500 that are trading above their 20-day moving average (MA). That’s a way of measuring how many stocks are trading in short-term uptrends, which stands at just 20% for the S&P. Various other breadth metrics show an oversold breadth condition developing across the market. While the S&P could “catch down” to the average stock, it’s worth noting that breadth measures are hitting oversold levels that have sparked past rallies.

With the pullback in the average stock into a hawkish Fed pivot, investors are now questioning if the bull market is on borrowed time. While the Fed is often a catalyst to bring about the end of the business cycle expansion, it often follows an overall tightening of financial conditions. Financial conditions refers to the cost and availability of credit, where loose conditions and easy credit are supportive of the economy and thus the corporate earnings outlook. While the Fed is a key driver of conditions, other variables like credit spreads and capital market volatility can lead to changes in conditions as well. The chart below shows a measure of conditions from the Fed’s Chicago district, which remains extremely loose compared to the long-term average (the zero line represents the average). Overall loose conditions remains supportive of the economy and bull market.

Heard in the Hub

The Traders Hub features live trade alerts, market update videos, and other educational content for members.

Here’s a quick recap of recent alerts, market updates, and educational posts:

• The first Fed rate hike in over three years.

• Estimates of economic growth running hot.

• What determines the S&P 500’s path from here.

• Are the market’s biggest stocks about to breakout?

• A boost to GDP estimates from inventory restocking.

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Trade Idea

Roundhill Magnificent Seven ETF (MAGS)

The Mag 7 ETF is making a series of higher lows since June while testing the prior highs from May recently. Turning back higher following a MACD hook with weekly momentum indicators supporting a breakout. I’m watching for a move over $72.

Key Upcoming Data

Economic Reports

Earnings Reports

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And if you have any questions or feedback, feel free to shoot me an email at mosaicassetco@gmail.com

Disclaimer: these are not recommendations and just my thoughts and opinions…do your own due diligence! I may hold a position in the securities mentioned in this report.

These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.

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Stock Market Update

For the first time in over three years, the Federal Reserve hiked interest rates by a quarter point to a range of 3.75% to 4.0% and signaled there could be additional increases ahead. Fed Chair Kevin Warsh acknowledged that economic and labor market activity aren’t cause for concern while the meeting statement reiterated that the Fed will “deliver price stability”. Warsh also described the action as removing “a dose of accommodation”, which implies that the central bank still sees the current stance of monetary policy as being stimulative to the economy rather than being restrictive. Following the meeting, market-implied odds now favor three additional rate hikes into mid-2027 (table below).

The 2-year Treasury yield, which warned of tighter monetary policy, still sits at 4.67% or 67 basis points above the upper end of the Fed’s new target. The bond market also favors more rate hikes ahead, and signs of an economy expanding at a solid pace could place additional pressure on the Fed to act. A report on retail sales showed a 1.2% monthly gain in August which was the strongest increase in five months. Strong consumer spending is helping boost GDP estimates, with the Atlanta Fed’s GDPNow estimate running at 5.1% annualized for the third quarter (chart below). The estimate is also receiving a boost from inventory restocking which bodes well for future economic activity.

While investors are wondering what the Fed’s rate hiking cycle means for the S&P 500, evidence of strong economic growth should help keep the earnings outlook in tact. As long as the Fed is hiking at a measured pace that doesn’t call into question the growth outlook, the rally in equities can persist.

Keep reading to see:

• Open ETF positions.

• Open stock positions.

• Chart analysis for new trade ideas.

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Today’s update will cover:

• The first Fed rate hike in over three years.

• Estimates of economic growth running hot.

• What determines the S&P 500’s path from here.

• Are the market’s bi…

Read more

These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.

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Stock Market Update

Following the latest reports on consumer and producer inflation, expectations are now running high that the fed will hike rates at their meeting this week. The Producer Price Index (PPI) jumped 5.4% in August while the core measure that excludes food and energy prices gained by 4.6%. The Consumer Price Index (CPI) came in at 3.4% year-over-year while the core measure increased by 2.4%. While consumer inflation isn’t showing signs of renewed acceleration, Fed officials are growing impatient with inflation running above the 2% target (chart below). That comes on the heels of the August payrolls report that showed 162,000 jobs created during the month. As a result, market implied odds now show an 86% chance of a Fed rate hike this week.

Despite the latest market odds pivoting to anticipate tighter monetary policy, stocks finished the week with strong gains. That followed the development of an oversold breath condition, which you can see with the percentage of stocks trading above their 20-day moving average in the chart below. The breadth metric dropped below 30%, which has coincided with bottoms around prior selloffs over the past year. Despite the recent rebound, I would continue being mindful of difficult calendar seasonality especially during the lats two weeks of September that are historically one of the worst two-week stretches of the year.

I would prefer to see one more push lower in breadth metrics to reach into deeply oversold territory. Then if stocks do start to rally from an oversold breath condition, focus on sectors showing the best relative strength. Stock in copper miners, select semiconductors, and gold mining stocks are worth following closely for new breakouts. Keep reading to see:

• Open ETF positions.

• Open stock positions.

• Chart analysis for new trade ideas.

Read more

Today’s update will cover:

• Inflation pressures are on the rise.

• Broad commodities ETF staging another breakout.

• The Fed’s “green light” to start hiking interest rates.

• My favorite…

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Now for this week’s issue…

An August payrolls report that smashed expectations is adding additional pressure to the Federal Reserve to hike interest rates at its next meeting.

Nonfarm payrolls added 162,000 jobs last month which was triple the 53,000 expected and brings the three-month average to 71,000 (chart below). The prior two months were also revised higher by a combined 55,000. Along with a low level of weekly jobless claims, data suggests the labor market is strong.

Evidence of a decent labor market could pressure recent comments from Fed Governor Christopher Waller, who favors keeping rates steady in September assuming no big surprises across inflation reports this week.

But various measures of consumer inflation have run above the Fed’s 2% target for over five years. That means the Fed’s dual mandate of full employment along with price stability support rate hikes in the months ahead.

The bond market agrees, with the 2-year Treasury yield currently sitting 62 basis points above the current upper fed funds target. The 2-year yield tends to lead changes in the fed funds rate and is implying the bond market expects at least two rate hikes ahead.

While investors are on edge over the potential for a renewed hiking cycle, a slow pace of rate increases shouldn’t derail the bull market. Part of the pressure on rates is a strong economy, which should also be a tailwind for the earnings picture.

The stock market should be able to handle measured increases in the fed funds rate, provided that inflationary pressures don’t push the Fed into a quick pace of hikes like back in 2022.

This week, let’s look at market-based evidence that Fed rate hikes could be around the corner, and the latest chart breakout signaling higher inflation in the months ahead. We’ll also look at why volatility is running much higher than the VIX would suggest and why price swings could pick up soon.

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The Chart Report

Following a strong payrolls report, investor attention will turn toward consumer and producer inflation data due to be released this week. Expectations for a Fed rate hike at their upcoming September meeting is bouncing all over, with odds pushed higher by a hawkish tone from Fed Chair Kevin Warsh at Jackson Hole and tempered by dovish talk from Waller last week. Current odds implied by fed funds futures shows a 60% chance of a rate hike at the next meeting. The bond market also agrees on tighter policy. The 2-year Treasury yield tends to lead changes in the fed funds rate and currently sits 62 basis points above the upper end of the target range (chart below).

A fresh break out in commodities could add further upside to inflation in the months ahead. Everything from energy to metals and agricultural products are rising on supply and demand imbalances. The flow of tanker traffic through the Strait of Hormuz remains limited which is impacting oil and supplies used for farm fertilizers. Wheat supplies are taking a hit as Russia and Ukraine target attacks on grain terminals, where both countries comprise a quarter of the world’s wheat exports. And data center construction is boosting demand for copper. The iShares S&P GSCI Commodity-Indexed Trust ETF (GSG) that tracks a broad basket of commodities is breaking out from continuation triangle which follows a move out of a massive basing structure earlier this year.

While broader market volatility dries up, there are large divergences happening under the market’s hood. The CBOE Volatility Index (VIX) touched its lowest level of the year last week and has closed between the 14-17 point range for 25 consecutive trading days. That’s the longest streak since 1992. But return dispersion within the S&P 500 has been running much higher. Weekly return differentials have been running at elevated levels while the 3-month implied correlation for stocks within the S&P are running at record low levels (chart below). While the price action on the surface of the index appears calm, there are outsized moves happening under the hood.

While broader stock market volatility is running at low levels, a couple catalysts could result in larger price swings ahead. The first is with calendar seasonality, with September ranking as the worst month of the year based on both average returns and win rate using data going back to 1950. It’s also worth noting that poor seasonals in September are concentrated in the last two weeks of the month. At the same time, a negative breadth divergence is forming on the NYSE. The chart below shows the cumulative advance/decline line for securities listed on the NYSE, and is a way to track the average stock. The A/D line peaked in mid-August and is turning lower even as the S&P 500 moves sideways and remains near the high.

Trade Idea

Lumentum Holdings (LITE)

The stock topped just above $1,000 in May and is forming a new basing pattern. Recently completed a smaller pullback following a test of resistance that reset the MACD at the zero line. I’m watching for a move over $1,000.

Heard in the Hub

The Traders Hub features live trade alerts, market update videos, and other educational content for members.

Here’s a quick recap of recent alerts, market updates, and educational posts:

• The setup you need to watch in mining stocks.

• How to tell when rising rates will spillover to equities.

• Global sovereign yields highest since the financial crisis.

• Increasing money supply boosting gold’s appeal (and price target).

• Sectors showing the best relative strength as the S&P 500 consolidates.

You can follow everything we’re trading and tracking by becoming a member of the Traders Hub.

By becoming a member, you will unlock all market updates and trade alerts reserved exclusively for members.

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Key Upcoming Data

Economic Reports

Earnings Reports

I hope you’ve enjoyed The Market Mosaic, and please share this report with your family, friends, coworkers…or anyone that would benefit from an objective look at the stock market.

Share

Become a member of the Traders Hub to unlock access to:

✅Model Portfolio

✅Members Only Chat

✅Trade Ideas & Live Alerts

✅Mosaic Vision Market Updates + More

Our model portfolio is built using a “core and explore” approach, including a Stock Trading Portfolio and ETF Investment Portfolio.

Come join us over at the Hub as we seek to capitalize on stocks and ETFs that are breaking out!

Subscribe now

And if you have any questions or feedback, feel free to shoot me an email at mosaicassetco@gmail.com

Disclaimer: these are not recommendations and just my thoughts and opinions…do your own due diligence! I may hold a position in the securities mentioned in this report.

These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.

Subscribe now

Stock Market Update

An August payrolls report that smashed expectations is adding additional uncertainty over the Federal Reserve’s next move on interest rates. Nonfarm payrolls added 162,000 jobs last month which was triple the 53,000 expected. The prior two months were also revised higher by a combined 55,000. The report came a day after influential Fed Governor Christopher Waller favored keeping rates steady in September assuming no big surprises in next week’s inflation reports. But evidence of a strong job market coupled with inflation that’s ran above the Fed’s 2% target for over five years will put pressure on the Fed to act. The 2-year Treasury yield that tends to lead changes in the fed funds rate now sits 62 basis points above the current upper fed funds target, implying the bond market expects at least two rate hikes ahead (chart below).

Major stock indexes pulled back slightly after the jobs report, with stocks recently rallying on hopes of the Fed holding rates steady versus pulling back when odds for a hike increase. While the knee-jerk reaction is centered around the rate outlook, it’s worth keeping in mind that good news for the economy should be good news for corporate earnings. The jobs report adds to recent data pointing to an economy expanding at solid pace, which should support the bull market looking ahead. Over the near-term, stocks are just starting the worst month of the year for calendar seasonality while volatility should be no surprise heading into midterm elections. It’s worth noting that we’re seeing a deterioration in breadth, with the cumulative NYSE advance/decline line pulling back in the chart below.

While the average stock is pulling back, it’s interesting to note that the market’s biggest stocks including the Mag 7 could be setting up to take the lead again. I’ll have more on that in our chart breakdown for trade ideas below.

Keep reading to see:

• Open ETF positions.

• Open stock positions.

• Chart analysis for new trade ideas.

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Today’s update will cover:

• The setup you need to watch in mining stocks.

• How to tell when rising rates will spillover to equities.

• Global sovereign yields highest since the financ…

Read more

These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.

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Stock Market Update

Although new Federal Reserve Chair Kevin Warsh promised to change how the Fed communicates with the capital markets, his first keynote speech at the Jackson Hole Symposium contained few surprises. Warsh sounded hawkish in describing inflation as running above target and reiterated the Fed’s need to focus on price stability, but stopped short of hinting at any policy action at the next rate-setting meeting in September. Comments around price stability mostly echoed statements that Warsh has previously made following Fed meetings. While equities didn’t see much intraday volatility following the address, it’s worth noting that odds for a September rate increase versus holding steady slightly favor a hike compared to odds favoring no change in rates before (chart below).

While declining to provide any sort of forward guidance, Warsh did note that financial conditions could not be described as restrictive. If anything, overall financial conditions are running at extremely loose levels based on a measure released by the Fed’s Chicago district in the chart below where a reading below zero indicates looser than average conditions. Loose conditions point to relatively cheap and plentiful credit, which is associated with positive economic activity and is a tailwind for asset prices. Extremely loose conditions should give the Fed plenty of cover to raise rates at a gradual pace if it chooses to do so. It will be hard to justify keeping rates steady with an economy showing strong activity while the most recent PCE price index came in at 3.7% in July compared to last year. Inflation has remained above the Fed’s 2% target for over five years.

While stocks could be vulnerable to short-term volatility around uncertainty to the rate outlook along with approaching mid-term elections, it’s hard to see a tightening cycle repeating 2022’s pace of rate hikes. Loose financial conditions and evidence of positive economic activity that supports the earnings outlook should keep the bull market moving forward. Keep reading to see:

• Open ETF positions.

• Open stock positions.

• Chart analysis for new trade ideas.

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Today’s update will cover:

• Why the bond buyback won’t work.

• One chart pointing to a strong earnings outlook.

• What copper has to do with the outlook for rate hikes.

• Chart setups in …

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If you find this report helpful please hit that “like” button, share this post, and become a subscriber if you haven’t already done so!

🚨And be sure to check out Mosaic Traders Hub. It’s a members-only platform to alert trade ideas, track a model portfolio of open positions, and further analyze the message coming from the capital markets.

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Now for this week’s issue…

A turbulent week for equities featured evidence of a strengthening economy coupled with efforts by the U.S. Treasury to stem the jump in longer-dated yields.

A report from S&P Global showed their U.S. Flash PMI jumping to 56.0 compared to 54.5 last month. A reading over 50 indicates expansion, with the monthly gains concentrated in the service sector of the economy.

That was the highest reading in over four years and adds to recent reports showing economic activity holding up. At the same time, no resolution to the conflict in the Middle East is keeping pressure on oil prices.

The inflationary implications of an accelerating economy and high oil prices is pushing long-term interest rates higher. The rate on the 30-year U.S. Treasury hit 5.31% last week…the highest level in 19 years.

A day later, U.S. Treasury Secretary Scott Bessent announced that a buyback program targeting long-term bonds would at least double in size to $4 billion. While the move is being described as providing liquidity, the real reason is a form of yield curve control.

Short-term bonds will be issued to fund proceeds for the buyback program, meaning there should not be a net change in money supply as a result. It’s also worth noting the program size is nothing compared to the amount of Treasuries outstanding that’s now crossing above $40 trillion.

But the intervention shows that officials are watching rates with concern and are willing to take action to stem the rise in yields…potentially hinting at more action ahead should rates not respond.

The intervention ignited a move in assets sensitive to the outlook for liquidity, including gold and Bitcoin. That hints at market concerns over currency debasement should measures like quantitative easing make a return to contain interest rates.

This week, let’s look at evidence that the economy is holding up much better than feared against geopolitical uncertainty and how that’s benefiting the average stock. We’ll also look at the jump in bond yields around the world that’s prompting intervention.

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The Chart Report

Against geopolitical uncertainties and elevated energy prices, economic data is holding up rather well. The Atlanta Fed’s GDPNow model is estimating third quarter growth at 4% while another report shows accelerating activity in the domestic manufacturing and service sector of the economy. S&P Global’s Flash U.S. PMI came in at 56.0 compared to 54.5 last month where reading over 50 indicates expansion. The monthly gains were concentrated in the service sector of the economy. The chart below overlays the U.S. composite PMI with annualized GDP growth, with the PMI hitting the highest level in over four years.

Commodity prices sensitive to economic activity are holding near record levels and are setting up to potentially breakout. Copper is used in a variety of construction end markets and is also seeing a boost from AI capex pouring into data centers. Copper prices traded on the LME (which is a better global benchmark) broke to record highs from a large ascending triangle pattern that formed over several years. In the near-term, copper is forming another ascending triangle continuation pattern which could see copper prices make another run higher. That would confirm recent strong economic data but also be a warning on the outlook for inflation.

With the underlying economy holding up, that should benefit the earnings outlook for the average stock. So far in 2026, stock market leadership is rotating away from companies leveraged to AI like the Mag 7 and into the the average stock. You can see in the chart below that the equal-weight S&P 500 is outpacing the capitalization weight index and is well ahead of the Mag 7 year-to-date. That also speaks to broadening participation in the bull market and runs counter to concerns that gains are being narrowly concentrated in stocks most geared to AI infrastructure spending like semiconductors.

Interest rates around the world are on the rise as inflation pressures collide with concerns over rising debt levels and persistently high government budget deficits. The black line in the chart below shows the median bond yield for advanced economies. Rising rates prompted the U.S. Treasury to intervene in rate markets by doubling a buyback program to purchase long-term bonds. While the move is being described as providing liquidity, the real reason is a form of yield curve control where short-term bonds will be issued to fund proceeds for the buyback program. The intervention shows that officials are watching rates with concern and are willing to take action to stem the rise in yields.

Heard in the Hub

The Traders Hub features live trade alerts, market update videos, and other educational content for members.

Here’s a quick recap of recent alerts, market updates, and educational posts:

• When will rising rates impact stocks.

• The surprising trend in recent investor sentiment views.

• The S&P 500’s next move based on this cycle composite.

• How I’m using weekly charts to determine the state of the trend.

• Loose financial conditions remain a massive tailwind for stocks.

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Trade Idea

Ero Copper (ERO)

Copper mining stock that ran up to the $40 level in January and trading in a sideways basing pattern. The stock is recently testing resistance but with the MACD extended. Need a smaller pullback and MACD reset before breaking out to new highs.

Key Upcoming Data

Economic Reports

Earnings Reports

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Disclaimer: these are not recommendations and just my thoughts and opinions…do your own due diligence! I may hold a position in the securities mentioned in this report.

These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.

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Stock Market Update

A report pointing to rising economic activity and easing inflationary pressures coupled with renewed efforts to lower long-term interest rates is boosting sectors sensitive to liquidity. The latest data covering activity in the domestic manufacturing and service sector of the economy show activity expanding at an accelerating pace, with S&P Global’s Flash U.S. PMI coming in at 56.0 compared to 54.5 last month. A reading over 50 indicates expansion, with the monthly gains concentrated in the service sector of the economy. The chart below overlays the U.S. composite PMI with annualized GDP growth, with the PMI hitting the highest level in over four years.

While the PMI report shows output prices remaining above the 50 threshold, recent months have seen a deceleration alongside some moderation in consumer inflation. That hasn’t stopped longer-dated Treasury yields from rising to the highest levels seen in nearly 20 years, so the U.S. Treasury is stepping in to intervene by doubling a buyback program to purchase long-term bonds. While the move is being described as providing liquidity, the real reason is a form of yield curve control where short-term bonds will be issued to fund proceeds for the buyback program. The program size will increase to at least $4 billion, which is a negligible amount relative to the amount of Treasuries outstanding that’s crossing above $40 trillion (chart below). But the intervention shows that officials are watching rates with concern and are willing to take action to stem the rise in yields.

More evidence of a strong economy that supports the earnings outlook and moves to boost liquidity are more tailwinds for the stock market and are delivering a boost to liquidity-sensitive asset classes including gold and Bitcoin. Gold mining stocks are back to showing relative strength, and are setting up new basing patterns.

Keep reading to see:

• Open ETF positions.

• Open stock positions.

• Chart analysis for new trade ideas.

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