Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.
Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.
1.Markets Last Week
- 30-year Treasury yield down 3.8 bps on the week; 20-yr yield down 3.3 bps; 10-yr down 5.4 bps; 7-yr down 6.2 bps; 5-yr down 6.6 bps; 3-yr down 7 bps; 2-yr down 7 bps; 1-yr down 5 bps;
- TLT up 64 bps; EDV up 84 bps; ZROZ up 1.1%; TMF up 1.8%; HYG up 93 bps; JNK up 93 bps; EMB up 1.2%;
US Indices:
- VIX down 3.8%; Dow up 1.6%; SPX up 1.7%; RSP up 1.6%; NDX up 2.5%; SMH up 5.4%; RUT up 2.4%; MDY up 1.9%; XLU up 1.2%;
Key Stocks & Sectors:
- AAPL up 2.9%; AMZN down 1.5%; GOOGL up 7.1%; META up 1.7%; MSFT up 51bps; NFLX down 1.7%; NVDA up 3 bps; MU up 11.4%; BAC up 5.4%; C up 3.8%; GS down 1.8%; JPM down 1.1%; KRE down 1.9%; EUFN down 51 bps; SCHW up 2.4%; APO up 2.7%; BX up 1.7%; KKR down 19 bps; HDB up 5.5%; IBN up 6%;
Dollar was down 50 bps on UUP & down 54 bps on DXY:
- Gold up 5.2%; GDX up 3.9%; Silver up 5.9%; Copper up 1.7%; CLF up 1.1%; FCX up 73 bps; MOS down 3.4%; Oil down 2.3%; Brent down 2.4%; OIH up 3.8%; XLE up 89 bps;
International Stocks:
- EEM up 4.3%; FXI up 4.4%; KWEB up 2.7%; EWZ up 3.2%; EWY up 9.7%; EWG down 4.4%; INDA up 3.2%; INDY up 3.3%; EPI up 2.9%; SMIN up 2.4%;
2. Reversal week?
Last week VIX was up 30%. This past Thursday, it rocketed up 20% in the heat of regional banking scares. Then,
- Jason Leavitt, LeavittBrothers.com@JasonLeavitt – Fri – VIX – big gap up…then it got crushed
Perhaps credit goes to CNBC’s Sara Eisen as she tried to undercut optimism of Dan Niles on Friday late morning by bringing up rising VIX. Then came Friday afternoon and,
- Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi – Fri – $VIX went straight down in the afternoon. From 25 to under 21.
Thank you Ms. Eisen, we feel compelled to say! Perhaps, Ms. Eisen can look beyond one afternoon to what might be an interesting message!
- Subu Trade@SubuTrade – Sun 10-19 – This is uncommon: On Friday morning, $VIX jumped above 28 while the S&P was within 3% of an all-time high. This also happened during the 1999 and 2020/2021 melt-ups ⬇️
In this context, a Sentiment Trader email highlighted the risk in their article titled – A Reversal From a New High and a Surging VIX Suggests Market Headwinds – A rare technical setup has triggered:
- The S&P 500 hit record highs; Then saw its sharpest one-day drop in months; VIX spiked more than 30%. Historical back tests show this combo often precedes a short-lived rebound — followed by market inconsistency and defensive rotation.
Moving back to potential reversals:
- Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi – The underperformance of US Small Cap relative to Large Cap over the past two days is the worst since April. @AugurInfinity
https://augurdigest.com/p/augur-digest-105
On the other hand,
- Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi – $IWM closes the week above its Nov 2021 and Nov 2024 weekly highs
Speaking of another dismal sector:
- Charlie Bilello@charliebilello – The Ratio of Real Estate stocks to the S&P 500 has moved down to the lowest level since August 2000. Video: https://youtube.com/watch?v=6xICRoTA7VA&t=1294s
On the other hand,
- Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi – Real Estate $XLRE $VNQ almost did a bullish engulfing weekly
The following is not really a reversal but a corollary of sorts!
- Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi – GS US Equity Sentiment Indicator of investor positioning is low
Perhaps as a corollary:
- Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi – GS expects the SPX to rally to 6800 by year-end
And a non-reversal in a “perfectly tested” sector!
- Seth Golden@SethCL – Absolutely PERFECT💯 – Semiconductor perfectly tests 21-EMA. Doubtful earnings season will find a retest, and more likely new ATH for the industry market-leader. $SPX $SPY $QQQ $NDX $SMH $SOXX $NVDA $MU $AMD $XLK $ASML $QCOM $OKLO
Now a transition from “perfectly tested” to “complete uncertainty”!
3. What’s Next?
The promised land now seems near. Chair Powell confirmed early this week that their QT should end soon & left unspoken the next step of launching QE. This week’s banking near-disaster was almost the direct result of lack of adequate Bank Reserves forcing SOFR levels to shoot up. That is what made the credit problems of regional banks seem unsurmountable.
If we assume that increased Fed liquidity is on the way and the Fed is nearly certain to cut interest rates in late October & December, then it seems all clear, right? Meaning the stock market will get this & say good times are here again. And, as Dan Niles said on CNBC, that a melt-up in stocks would happen by Thanksgiving. Jeff DeGraff of Renaissance Macro called it something like “stock market will see it before we do” conviction.
We obviously know far less than these luminaries of investing & trading. And buying calls that expire around Thanksgiving seems sensible. But between now & Thanksgiving, there is an event – Fed decision & presser on Wednesday October 29. What if the Fed disappoints again? Say by not ending QT, by pooh-poohing a potential QE & only cutting at 25 bps instead of 50 bps?
We have heard from luminaries on TV that this is NOT 2007 & that the Auto sector is nothing like the Housing sector in terms of impact on the US Economy. We hope they are right even though we keep reading about how many households are delinquent in their car payments, at least the payment on the family’s second car. They can’t pay & the lender is too frightened to repossess because repossession instantly drops a huge loss on the lender’s books (residual values on cars are far far lower than unpaid loan balances).
And then add the below, hitherto unsaid problem:
- Markets & Mayhem@Mayhem4Markets – Housing is in a bubble. There’s no doubt about that. Prices are so high that there’s an entire generation that cannot afford to buy a home or start a family. Eventually this thing pops, and when it does it’s going to be really nasty given how many bought at high prices.
By the way “bought at high prices” is the main reason the auto sector is in such loan trouble. Cars that were bought in 21-23 with the Biden payments were priced at $55-60K & they are now valued at $25-$30K. Hence lenders are somewhat dis-inclined to go-ahead & repossess cars.
See what happens even when we begin writing an optimistic, positive section. Discussion just moves towards the depressing. So why not go all the way to the really depressing event that began in October 2007 when the stock market rallied to a new high before the Fed meeting. There was a mood of hope that the stock market will realize that QE is coming, rate cuts are almost here again amid a neo-panglossian mood.
That should be a warning to Jay Powell. He should remember that the 2007 debacle began after the Fed meeting in October 2007. Not only did the stock market sell off but, later, the bookonomist cognoscenti declared that the recession had begun in November 2007.
This week Diwali begins, the festival of lights winning over darkness & a happy benign positive prosperous feeling pervades all. If you don’t believe us, look even the Indian stock market has rallied for 2 straight weeks.
May be it is just the Diwali feeling but look at the rare, unusual & Diwali-bright smile on the face of Neal Dutta of RenMac as he began answering “why is there nothing to worry about” question of Jonathan Ferro (Bloomberg Surveillance 10-16-25). Come on, Mr. Ferro, won’t you light up a little?
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