The Challenges of Narrow Breadth

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.

 

A Magnificent Seven Market

I have heard many concerns from chartists in the past few months about the narrow nature of breadth in the U.S. equity market. Today, the Magnificent Seven dominate market leadership while the equal-weighted S&P 500 lag the cap-weighted index.
 

I am reminded of Bob Farrell’s Rule #7: “Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names”; and Rule #3: “There are no new eras—excesses are never permanent”.

How worried should investors be?
 

The full post can be found here.

Peering into 2026: Prepare for Momentum Tailwinds

My former colleague Fred Meissner revealed a disturbing contrarian warning in a recent weekly commentary: “The most concerning story: recently I was on a panel for the CFA Society of San Francisco. All three analysts had the same outlook, which is my base case – a yearend rally followed by problems in the first part of 2026.”

It seems that everyone is looking for a rally into year-end, followed by weakness in the new year. Here is where I differ from that consensus. I believe the stock market should rally into year-end, followed by continued bullish tailwinds, at least for the first half of the year.

 

My long-term market timing model remains on a buy signal. As a reminder, this model flashes a buy signal whenever the monthly MACD of the NYSE Composite (bottom panel) turns positive and sells whenever the 14-month RSI flashes a negative divergence.

The bull is alive, and it’s helped by three major tailwinds going into 2026, namely a stimulative monetary policy, a stimulative fiscal policy, and strong price and fundamental momentum.

The full post can be found here.

The Real Reason the Market Skidded Yesterday

Mid-week market update: I noted on the weekend that the S&P 500 was at the end of a upper Bollinger Band ride, and such instances usually resolve in consolidation or pullbacks. In the past, the pullback usually ended at the 20 dma, which is roughly where the market is today. In other cases, market weakness continued until the index reached the lower BB.

 

 

Is the pullback over? To answer that question, I turn to the catalyst for market weakness. I woke up Tuesday morning to see a sea of red in equity market indices. The spark was attributable to a decline in the shares of go-go stock Palantir, which reported sales and earnings beats and guided expectations higher. Apparently, it wasn't enough. The market sold off because of Palantir's sky high valuation.

 

I found the explanation vaguely unsatisfying. Here is the real reason.

The full post can be found here.

Prepare for the Year-End Rally!

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.

 

Risk Appetite Normalization

Last week, I observed that the stock market was on the verge of a buy signal. I got that signal this week when the VVIX, or the volatility of the VIX Index, dipped below 100 after a spike. This is a signal of reduced market risk appetite anxiety, which sets the stage for a market advance. In the meantime, the S&P 500 has been rising in a well-defined channel.

The full post can beo fund here.

Making Sense of the Gold Price Retreat

I received considerable feedback to last week’s publication, Ready for the Contrarian Gold Trade? I suggested that while gold remains in a long-term bull market as the market is transitioning to a hard asset cycle, gold prices are due for a multi-month period of consolidation and pullback much like the 2004–2006 episode.

Further discussions with readers prompted us to offer an alternative scenario of a shorter corrective period. Investors may not have to wait 1–2 years before the resumption of a gold bull.

The full post can be found here.

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.

Get Ready to Buy the Dip, But Not Yet

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.

 

Is That All There Is?

In the past few weeks, I have been warning about the short-term vulnerability of the stock market’s advance. I cited numerous cases of negative divergences. Last week, the S&P 500 printed three consecutive red days before reversing on Friday. It’s unclear whether this was the start of a correction, as the equal-weighted S&P 500 remains above resistance turned support. However, the pullback briefly left it oversold on the NYSE McClellan Oscillator (NYMO). 

You can nevertheless feel the tone of market psychology changing. Enthusiasm over the prospect of further Fed rate cuts has moderated, and geopolitical risk premium has risen in the wake of Ukrainian strikes on Russian oil facilities and European threats to Russia. If this is the long-awaited pullback, is that all there is? How bullish or bearish should investors and traders be?

 

The full post can be found here.

The Climate Change Threat to Productivity

This is the third in a series of the opportunities and threats to productivity. This week, I address the issue of climate change (also see AI Productivity and the Promised Land and Will America get old before it becomes Great Again?).

The World Health Organization recently issued a joint report with the World Meteorological Organization that quantified the effects of extreme heat on productivity. It warned that “Extreme heat is fast becoming one of the biggest threats to workers’ health and livelihoods…worker productivity drops by 2 to 3 per cent for every degree above 20°C (68°F). The health consequences are wide-ranging, including heatstroke, dehydration, kidney dysfunction and neurological disorders. Overall, nearly half of the world’s population is now experiencing negative effects from high temperatures.”

The Network for Greening the Financial System (NGFS) issued a report that modeled different scenarios of climate change and mitigation policies on global GDP growth. I would make two points about these projections. Investors should approach GDP and productivity forecasts with some humility. Models of temperature change and GDP growth vary wildly, but the general direction of change is down. The higher the temperature, the more growth slows, which equates to a hit to productivity. As well, even though the NGFS report is used by many central banks for scenario planning, the Net Zero in 2050 scenario is totally unrealistic from a practical perspective in light of the voracious power consumption appetite of AI data centres.

 

The full post can be found here.

 

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.  

 

A Market Divided Against Itself

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.

 

 A House Divided

The markets adopted a risk-on tone after the FOMC decision to cut rates a quarter-point. The S&P 500, the NASDAQ Composite, and even the small-cap Russell 2000, reached all-time highs. It is said that there is nothing more bullish than a new high.

On the other hand, Abraham Lincoln also famously said, “A house divided against itself cannot stand”. While I find new highs constructive, especially if they are accompanied by evidence of strong breadth and momentum, that’s not the case in the current circumstances. In fact, I am seeing evidence of breadth divergences. In other words, it’s a market divided against itself, can it stand?

Consider the Russell 2000 ETF (IWM), which staged an upside breakout from an inverse head and shoulders pattern in June with a measured objective of about 248. The price of IWM is nearly at its technical objective, but the small-cap Advance-Decline Line has gone nowhere. Should the bulls be concerned?

 

The full post can be found here.

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.  

 

Will America Get Old Before It Becomes Great Again?

This is the second in a series of the opportunities and threats to productivity. This week, I focus on the effects of labour supply on productivity, (see AI Productivity and the Promised Land). I am grateful for the aid and guidance from New Deal democrat for his help in data sourcing and analysis in the preparation of this report.

The Bank of Japan Governor Kazuo Ueda at Jackson Hole gave a sobering presentation on the macroeconomic effects of Japan’s aging population. In light of the President’s abrupt pivot on immigration policy, Japan’s path could foreshadow what happens to U.S. productivity in the coming years.
 

The accompanying chart shows the evolution of Japan and U.S. total factor productivity shown on a log scale since 1954. Since the peak of Japan’s bubble in 1990, Japanese productivity (blue line) has been flat. By contrast, U.S. factor productivity (red line) rose steadily during that period.

Much of the productivity headwinds can be attributable to age demographics.

 

The full post can be found here.

 

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.  

 

The golden question: Buy or sell the rate cut?

Mid-week market update: Scheduling notice - I will be traveling for the next 10 days. Barring wild market volatility next week, there will be no mid-week market update next Wednesday, but regular commentaries will be published each weekend.

 

It's always tricky to write a market commentary on the day of the FOMC meeting, as price moves can be quickly reversed the next day. Coming into the meeting, the market was expecting a quarter-point rate cut, and there were even whispers of a jumbo half-point cut.

 

A useful barometer of Fed policy from a cross-asset perspective is gold. Gold recent staged an upside breakout to an all-time high. While it's sensitive to many factors, such as unexpected inflation and geopolitical risk, it's also sensitive to changes in real interest rates.

 

 

The full post can be found here.

Twilight of the AI Bull?

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.

 

Punching Below Its Weight

Is the red-hot artificial intelligence investment theme stumbling? Even AI cheerleader Sam Altman, the head of OpenAI, sounded a warning: “Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes.”

Even as the tech-heavy NASDAQ 100 grinds upward to new highs, it’s showing signs of punching below its weight. Its relative performance (middle panel) is exhibiting lower lows and lower highs. Historically, NASDAQ 100 relative performance has been inversely correlated with the 10-year Treasury yield because of its high-duration characteristic, but it hasn’t been able to lead the market despite weakness in the 10-year yield. The weakness in relative breadth (bottom panel) is another warning of stumbling relative strength. All of this is occurring against a backdrop of a rollover in Bitcoin prices, indicating a retreat in the market’s animal spirits.

 The full post can be found here.

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.  

 

AI Productivity and the Promised Land

This is the first in a series of the opportunities and threats to productivity. I begin the series with a focus on the productivity effects of AI adoption.
 

There has been a lot of excitement over the productivity-enhancing promise of artificial intelligence. From a policy perspective, productivity is important as it defines the rate of non-inflationary growth potential of an economy. 
 

The accompanying chart shows the evolution of U.S. total factor productivity during the post-war era, shown on a log scale. I focus on two periods, the PC revolution and the internet revolution. The IBM PC was introduced to the market in the early 1980s, though the technology was known to hobbyists in the 1970s. It wasn’t until the mid to late 1980s that they became ubiquitous and the economy began to see productivity gains from the PC revolution. Two black lines on the chart estimate the range of effects of PC revolution, which only produced relatively minor gains. The lower line is not much different from past trend growth, though the higher and steeper line shows the upper band of the productivity gains from this innovation. The internet revolution was different, as depicted by the solid red line, which shows a much steeper rate of growth that began in the early 2000s. I drew a dotted red line with the same slope as the internet revolution and superimposed it over the PC revolution period to show how much more the internet affected productivity during that period.

 

Looking forward, no one can accurately forecast the productivity gains from AI adoption. While different analysts can produce point forecasts, the error terms on the forecast are enormous. Will it be like the PC revolution, the internet or even better?

 

The full post can be found here.

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.  

 

25 or 50 Next Week?

Mid-week market update: The combination of the Quarterly Census Employment and Wages (QCEW) weakness and a soft PPI report has moved the market to expect to at least a quarter-point rate cut at the FOMC meeting next week. There are even whispers that the Fed may even move by a half-point, though the odds is only 10%.

 

  

New Deal democrat came to the dismal conclusion that QCEW may be signaling that there was no job growth at all this year. While bad news is good news for the bond market, is it good news or bad news for the stock market?

The full post can be found here.

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.  

 

Seasonal Weakness Ahead?

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.

 

Seasonal Weakness Ahead

The market is entering a period of seasonal weakness for risk assets. While I see no explicit warnings of bearish triggers, there are plenty of risks. Here are some steps that investors and traders can take to guard against unexpected volatility.

 

The full post can be found here.

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.  

 

Waller's Gambit

In the wake of the August Payroll Report, let’s review the Fed’s dilemma and the views of Fed Governor Chris Waller, one of the frontrunners to be the next Fed Chair.
 

Is monetary policy restrictive? Yes, by a number of measures. The Cleveland Fed recently published a study that estimated r-star, or the neutral rate of interest, and concluded: “The model estimates the implied (medium-run) nominal neutral interest rate to be 3.7 percent, with a 68 percent coverage band ranging from 2.9 percent to 4.5 percent. Given that the effective nominal federal funds rate is currently in the range of 4.25 percent to 4.5 percent, this model estimates with a high level of certainty (77 percent probability) that the policy stance is in restrictive territory.” In addition, the 2-year Treasury yield, which is the market’s estimate of the terminal rate, has been falling.
 

Will the Fed cut rates at the September meeting in response to labour market tensions? Most likely. Fed Chair Powell pivoted to emphasizing the Fed’s full employment mandate in his Jackson Hole speech. Fed Governor Waller has been making the rounds pounding the table about labour market weakness. The weak August Payroll Report makes a September rate cut a virtual certainty.

What about the Fed’s price stability mandate? Inflation indicators are rising in the short run in response to the imposition of tariffs. There is some dispute about whether inflation expectations are well anchored or rising.

What follows is an examination of Governor Waller’s view on monetary policy and the implications for Fed independence. What is his economic case for rate cuts and is it based on sound data, theory and solid judgment?

 

The full post can be found here. 

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.