One Down, Two to Go

Mid-week market update: My former Merrill Lynch colleague Fred Meissner of The Fred Report wrote on the weekend that "the yearend rally has started, and a trend following indicator...we primarily use for risk management to show that trends have turned positive on key indexes". From a purely technical perspective, I agree. The S&P 500 has begun an upper Bollinger Band ride. Past upper BB ride episodes has seen the index advance further, followed by a period of consolidation and mild pullback.

 

Is the pause in the advance in stock prices the end of the upper BB ride that signals an imminent pullback and consolidation? In the short run, there are three sources of volatility for the stock market. We just had the Fed decision today. This week, we will see several Magnificent 7 stocks report earnings. In addition, the market will see the results of the Trump-Xi meeting.

 

The full post can be found here.

Time to Sound the All-Clear?

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

 

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below. 

 

  

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Bullish (Last changed from “bearish” on 27-Jun-2025)*
• Trading model: Neutral (Last changed from “bullish” on 31-Jul-2025)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent and on BlueSky at @humblestudent.bsky.social. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real time here.

 

On the Verge of a Buy Signal

Ever since the NYSE McClellan Summation Index (NYSI, bottom panel) broke support on the weekly chart, I warned that the stock market was at risk of a pullback. Indeed, stock prices did briefly weaken, but they have rallied and begun to consolidate sideways. In addition, NYSI has begun to turn up. Is the pullback over?

 

The answer to this question can be found in the 14-week RSI (top panel), which ended the week just shy of the 70 overbought level. In the last five years, the market has continued to rally whenever the RSI returned to an overbought, which I call a “good overbought”, condition. The episodes when stock prices continued to weaken were accompanied by falling RSI readings.

 

I am seeing signs of constructive healing in market internals and I am on the verge of a buy signal, but it may be too early to sound the all-clear just yet.

The full post can be found here.

Ready for the Contrarian Gold Trade?

I have been a gold bull for quite some time. I highlighted its bullish potential in early 2024 when it staged an upside breakout to an all-time high at 2100. Last November, I reiterated my bullish view with the publication, 2025 High Conviction Idea: Gold. Since then, gold prices have gone parabolic and soared to new highs in all major currencies, including the Swiss Franc, which is considered to be a “hard currency”.

 
It may be time for a pause. If you are ready to be a contrarian on gold, the tactical contrarian trade here would be to sell gold and buy bonds.

The full post can be found here.

Drawing Lines in the Sand

Mid-week market update: As the bulls and bears battle it out during this phase of consolidation, it's time to set out some lines in the sand to see which side has the upper hand. The accompanying chart shows the S&P 500, the equal-weighted S&P 500, and the Russell 2000, along with their respective rising trend lines (dotted lines), their 50 dma, and levels of likely support.

 

 

Here are my takeaways:

• The S&P 500 and equal-weighted S&P 500 are testing their rising trend line while the Russell 2000 has been below the trend line for several sessions.
• All three indices are trading just above their 50 dma initial support.
• The S&P 500 can find decent support at about the 6500 level, and the equal-weighted S&P 500 and Russell 2000 are very close to their 50 dma and secondary support levels. Violations of those support levels opens the door to deeper price weakness.

In other words, there are few clear signs of bullish or bearish dominance.

The full post can be found here.

It's Not Over Until the Iron Lady Sings

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

 

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below. 

  

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Bullish (Last changed from “bearish” on 27-Jun-2025)*
• Trading model: Neutral (Last changed from “bullish” on 31-Jul-2025)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent and on BlueSky at @humblestudent.bsky.social. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real time here.

 

The Trade War Continues

Even as the S&P 500 tests its rising trend line after the sudden trade war-related shock, we believe the risk of further stock price downdrafts isn’t over. The VVIX, or the volatility of the VIX Index, spiked above 100, indicating elevated levels of anxiety. If history is any guide, such conditions have seen market volatility and price pullbacks. 

By no means is the trade war over. Here are some reasons why.
 

The full post can be found here.  

A Fragile Bull

While I am intermediate-term bullish on stocks, I am also increasingly concerned about the narrowness of market leadership. Market leadership continues to be concentrated in the Magnificent Seven, as the equal-weighted S&P 500, which represents the average stock, lags the index. 

Here is what this means from top-down macro and a chartist’s viewpoints.

The full post can be found here.

Are the Bulls Back in Town?

Mid-week market update: The stock market has seen a remarkable recovery. After a -2.7% wipeout on Friday, the S&P 500, the equal-weighted S&P 500, and the Russell 2000 all recovered back above their rising trend lines.

Are the bulls back in town?

The full post can be found here.

The Return of Tariff Man

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

 

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below. 

  

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Bullish (Last changed from “bearish” on 27-Jun-2025)*
• Trading model: Neutral (Last changed from “bullish” on 31-Jul-2025)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent and on BlueSky at @humblestudent.bsky.social. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real time here.

 

The Bearish Trigger?

The trade truce was too good to be true. That all changed last Friday when President Trump upended the trade truce in response to heightened Chinese control on exports with rare earth elements. Trump threatened higher tariffs on China in a Truth Social post. He added, “I was to meet President Xi in two weeks, at APEC, in South Korea, but now there seems to be no reason to do so.” Later in the day, he announced an additional 100% tariff on Chinese exports on top of the current 30% duty and added export controls on critical software. 

Even though my trade war factor had been signaling rising anxiety since early August as U.S. companies with domestic revenues were leading the equal-weighted S&P 500, implied stock and bond volatility (bottom panel) had been tame for months. To be sure, tariffs were starting to bite, but most trade partners declined to retaliate. Implied volatility readings were in the “Assertive Trump” zone. It was only a matter of time before Trump spent some of the built up political capital to assertive his authority.

Stock prices were rattled by the news. I had been warning for weeks that the market is extended and could pull back at any time. Is this the bearish trigger?

 

 The full post can be found here.

The AI Bubble Debate

Are we in an artificial intelligence investment bubble? That’s becoming the narrative in the financial media. A search on Bloomberg for “AI bubble” showed elevated number of stories, with a peak in January 2025 after the news of the DeepSeek breakthrough.

 
In practice, what does that mean for equities, and the economy?

 

The full post can be found here.

It's a little too quiet out there

Mid-week market update: As the stock market grinds upward, I am seeing different variations of "it's a little too quiet out there" warnings from market analysts. One example is the growing gap between the implied volatility (IV) of the S&P 500 and the historical realized volatility (HV).

 

Eventually, something has to give. It usually ends with a spike in IV, or VIX, which has an inverse relationship with stock prices.

 

The full post can be found here.

The Valuation Challenge to Stock Prices

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

 

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below. 

  

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Bullish (Last changed from “bearish” on 27-Jun-2025)*
• Trading model: Neutral (Last changed from “bullish” on 31-Jul-2025)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent and on BlueSky at @humblestudent.bsky.social. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real time here.

 

Nosebleed Valuations

The S&P 500 ended September trading at a forward P/E of 22.8, which is the highest level this century. Other valuation indicators are also showing elevated readings compared to their long-term averages. How worried should U.S. equity investors be? 

The full post can be found here.

How Miran''s Can Opener Transforms the Fed

The September FOMC meeting concluded with the Fed opting for a quarter-point rate cut. Newly appointed Fed Governor and Trump ally Stephen Miran dissented and voted for a half-point cut. More astoundingly, the dot plot showed an outlier calling for a Fed Funds rate below 3% in 2025, which requires 1.25% in rate cuts over the next two meetings. While the dots are anonymous, the mostly likely source is Stephan Miran.

Fed Chair Powell described monetary policy in a recent speech as “no risk free path” because of the upside risks to inflation and downside risks to employment. How can Miran justify his off-the-charts level of dovishness against this economic backdrop?

The full post can be found here.

Waiting for the Next Market Shoe to Drop

Mid-week market update: Even as the equal-weighted S&P 500 touched another all-time high today, it was a marginal upside breakout.

 

 

Here are the bull and bear cases for the near-term outlook.

 

The full post can be found here.