Weekly Report

The breadth over the last couple of days probably puts to rest the chance of a Zweig Breadth Thrust, but regardless of whether or not we get that signal, there has been substantial improvement in breadth – a bullish development.

Breadth has improved dramatically.  We will use pullbacks in stocks to add them if they get to our prices.

We still believe a rally into the end of the year is likely, as the current oversold readings support a seasonal advance.  There are some real signs of rotation in the market but nothing that prevents our yearend rally scenario.

The McClellan Oscillator, one of my favorite short-term indicators has turned up from a low level.  Daily stochastics on SPY and QQQ are now oversold and in position to turn up in buy recycles.

SPY should hold 660 to 650 if we are going to be right about our rally scenario.  Watch Value stocks as they should start to show even more relative strength.  Our contention is that the Dollar is a bullish pattern, and that a move back above 100 could be the signal for the start of a new rally.

We don’t have any changes to our equity market outlook, so I we can have a little bit of fun in this piece.

New Highs/New Lows showed negative new lows – i.e. more new lows than new highs. My good friend Walter Murphy mentioned that this was the first time this has occurred since April, and that this breaks a string of 27 weeks with more highs than lows – the longest such run since 2020/2021 when markets were coming off the Covid low.

So far this is just a quick pullback to support, we would like to see a little more downside over this week.  Buy stuff as it comes to you.  As long as 360 holds on a closing basis, GLD can rally from here.

Upside here for XTN adn $TRAN would be a strong indication of a better 2026 than we have been thinking, as well as confirmation of a strong end to 2025.  There are two groups of commodities that start seasonally favorable moves in the November timeframe. These are the Agricultural commodities, and the Petroleum Complex.  Now that the Argentina election is over, the same fund manager suggests Argentina is buyable again fundamentally. Our technical work confirms this view.

It seems that the market is expecting a rate cut – the surprise will be if there is NO rate cut.

Stocks made new highs Friday and a look at the internal indicators suggests the yearend rally we have been looking for has started.  Gold is in a precarious position, mostly because of the weaker stocks, but last week’s analysis holds – it should make a higher high after the next buy signal.

Our “Divergence High” indicator triggered a signal suggesting that GLD will make a higher high before this market peaks.  Key numbers for GLD are 381 and 385.  The message here is that we would buy a dip in GLD but not SLV.

Short-term breadth indicators have favorable formations, but the intermediate indicators are still a bit overbought.  Key numbers to watch are from 88 to 85 on TLT, if these levels break, a significant decline has probably started.  A break of 376 on GLD would be an indication of at least a short-term peak.

Stochastics are coming down with the daily SPY in the low 30’s and QQQ in the same configuration.  Traders should be buying as things get into their preferred price targets and buy a daily stochastics recycle that seems close by here.  As long as IJR can hold the 111 area and XTN can hold 80 or so, this is another indication of a short-term bottom in equities.

The market finally came down on Friday, moving slightly below the SPY 656 we mentioned in the Midweek.  Realize SPY could break 650, as this would be typical expiration behavior.

Support areas on SPY are around 667 to 664, then 656.  % Bears Chart has just moved below 20%. Look at July of 2023, or even July 2020. These illustrate what happens when the chart just moves below 20%.

We continue to look for a decent advance into the end of the year.  The two main equal weight ETFs have staged an upside breakout.  It looks like the dollar has moved into a consolidation. This could last for another year or so but should resolve in some upside.

While we do not see another crash coming, recent articles on valuations being "permanently higher" is one factor suggesting 2026 might be a bit more difficult than 2025 has been. If XLF can break 50 it could test 46 or so.

The last few trading days of the month are generally positive, so we could see some rally this week.  The industrial metals is a complex picture, so if we were invested in CPER, we would keep it, but we would put new money in DBB.

We continue to see signs of a tired market.  While we would not chase oil, we expect higher prices in the very short-term.