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This Week on Wall Street
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| A thin calendar this week leaves the tape exposed to headlines, and oil is the loudest one. Seven core OPEC+ members met Sunday and left November production quotas unchanged, extending a pause that began in October. Brent is still trading near $100 after moving sharply higher late last week on reports that a third U.S. carrier strike group is heading to the Middle East. Crude flows out of the region have largely recovered to prewar levels, but the recovery is fragile, with tankers again coming under attack as they transit the Strait of Hormuz and Saudi-backed forces in Yemen opening an operation against Houthi-held areas. Diesel is the tighter market, squeezed by Russian refinery outages and constrained Middle East exports, which is where crude reaches transport and freight costs first. Mainland China is closed through Wednesday for Golden Week, thinning liquidity across Asia. Third-quarter earnings season opens Friday with Delta Air Lines, where fuel is a live line item. |
| The rates story runs through Wednesday, when the Fed publishes the minutes of its September meeting. That is the meeting where the committee raised rates for the first time since 2023, a unanimous decision taken with inflation still above target and an energy shock working through prices. What has changed since is the labor market. Hiring slowed sharply in September and the unemployment rate drifted up, and futures markets moved within a day from pricing another increase at the October meeting to pricing a hold. The minutes are the first look at how close the committee came to signaling a second move, and at how members weighed energy against the softer demand for labor. Before that, this morning's ISM services reading is the week's main read on the part of the economy doing most of the hiring, with consensus near 55.7 against 55.4 in August. Jobless claims follow Thursday. The long end gets its own test this week, when Treasury auctions new 10-year notes and 30-year bonds into yields sitting at their highest levels in about two decades. |
| Underneath the index level sits a question about participation. The Nasdaq has been trading around record highs on the strength of a small group of technology and AI-linked names, while the equal-weighted S&P 500, the Dow and the Russell 2000 have spent weeks drifting lower. Narrow leadership is not unusual inside a long advance, but it changes what an index level describes. When a short list of names carries the tape, the headline return reports those names rather than the median position in a diversified portfolio, and the index itself holds more single-name risk than its label suggests. The weakness has concentrated in the rate-sensitive and economically sensitive parts of the market, which tracks a bond market that has been repricing for weeks. Earnings season starting Friday is the stretch that usually settles this. Whether profit growth outside the AI complex is firm enough to bring more of the market along is what we will be watching into the middle of the month. |
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How Much of the Market Is Still Participating
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| The share of S&P 500 stocks above their 50-day and 200-day moving averages has plunged. About 45% of members closed September above the 200-day line, and roughly 25% above the 50-day, after both measures sat above 70% as recently as July. The 50-day line moves faster, which is why it has fallen furthest. |
| Source: Bespoke Investment Group (@bespokeinvest) |
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Economic Releases This Week
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| Monday |
ISM Services |
| Tuesday |
None |
| Wednesday |
None |
| Thursday |
Initial Jobless Claims |
| Friday |
Consumer Sentiment (Preliminary) |
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Stories to Start the Week
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What is Newton?
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Our Newton model determines the highest probability of future price direction using advanced algorithmic and high-order mathematical techniques on the current market environment. It scores securities over multiple time periods on a 0–20 scale (0 worst, 20 best). Trend and level both matter. A name moving from 18 to 16 still signals a strong level, with slight exhaustion in the trend.
▼ 0–8 declining ▬ 9–13 neutral ▲ 14–20 strong
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| Equities | Trend | This Wk | Last Wk | | Emerging Markets | ▬ | 13 | 16 | | Large Cap | ▬ | 12 | 14 | | Foreign Developed | ▬ | 9 | 6 | | Mid Cap | ▼ | 8 | 8 | | Small Cap | ▼ | 6 | 8 |
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| Fixed Income | Trend | This Wk | Last Wk | | Floating Rate Bond | ▬ | 12 | 11 | | Short Term Bond | ▼ | 7 | 5 | | Intermediate Term Bond | ▼ | 5 | 3 | | High Yield Bond | ▼ | 4 | 5 | | Long-Term Bond | ▼ | 1 | 7 | | Corporate Bond | ▼ | 1 | 3 |
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| Sectors | Trend | This Wk | Last Wk | | Technology | ▬ | 13 | 17 | | Health Care | ▬ | 11 | 9 | | Communications | ▬ | 9 | 14 | | Utilities | ▼ | 8 | 0 | | Consumer Cyclical | ▼ | 7 | 10 | | Financials | ▼ | 6 | 5 | | Energy | ▼ | 6 | 4 | | Consumer Defensive | ▼ | 4 | 8 | | Industrials | ▼ | 4 | 7 | | Materials | ▼ | 2 | 11 | | Real Estate | ▼ | 1 | 2 |
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| Market Segments | Trend | This Wk | Last Wk | | Small Growth | ▬ | 13 | 10 | | Large Growth | ▬ | 12 | 16 | | Mid-Cap Growth | ▼ | 8 | 10 | | Large Value | ▼ | 5 | 7 | | Small Value | ▼ | 3 | 5 | | Mid-Cap Value | ▼ | 3 | 5 |
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Notable Newton Moves This Week: Scores fell broadly again, and nothing finished in the strong band. Technology held the top sector spot at 13 but gave back four points, while Materials dropped 11 to 2 and Communications 14 to 9. Fixed income was the weakest group on the board, with Long-Term Bond falling 7 to 1 and Corporate Bond 3 to 1. The improvements were narrow, Utilities rising 0 to 8, Small Growth 10 to 13 and Foreign Developed 6 to 9.
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Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.
Disclosure: Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results. This newsletter is not intended to be relied upon as forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date noted and may change as subsequent conditions vary. The information and opinions contained in this letter are derived from proprietary and nonproprietary sources deemed by Waterloo Capital to be reliable. The letter may contain "forward-looking" information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecast made will materialize. Reliance upon information in this letter is at sole discretion of the reader. Please consult with a Waterloo Capital financial advisor to ensure that any contemplated transaction in any securities or investment strategy mentioned in this newsletter aligns with your overall investment goals, objectives and tolerance for risk. Additional information about Waterloo Capital is available in its current disclosure documents, Form ADV, Form ADV Part 2A Brochure, and Client Relationship Summary report which are accessible online via the SEC's Investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using SEC # 133705. Waterloo Capital is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice.
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