When I wrote my last Market Report last Friday, the 10-year Treasury note was at 4.99%. Today it's at 5.22%, almost a quarter of a point higher, yet the NASDAQ hit an all time high earlier in the week and the S&P remains above all key technical levels.

So far, the historically weak month of September has played out in the Dow with blue chips down 3% for the month while both the S&P and NASDAQ are higher; a mixed picture but certainly not overly bearish.

Of course the biggest factor in the market is always the bottom line and we're now just a few weeks away from Q3 earnings season. Perhaps traders are giving the market the benefit of the doubt given the strong earnings performance we saw during Q2.

Technically, there's nothing showing any immediate concern. Two of the three major indexes remain above all key averages; the $VIX remains near the low end of the range; option activity remains mostly neutral; nothing the bears can point to that gives them any edge.

The bulls still have work to do if they hope to get the S&P back above its August 13 all time high of 7816. It looked like that might happen earlier in the week before we saw some profit taking. To the downside there should be technical support at the 50 day, currently at 7635 and if that goes there is price support just above 7500.

Tom will be back with his Weekly Market Report on Monday.

At your service,

John Hopkins

Small caps (IWM) have struggled with the rising rates, however, as this asset class now resides more than 7% off its all-time high. So not all U.S. stocks have escaped. The IWM is trying to carve out a potential short-term bottom, holding onto key support from early June:

The daily PPO is very weak, so any bounce, if one occurs, is likely to be short-lived. Perhaps we could see a bounce from here back to test the now-declining 20-day EMA. Money is rotating towards large-cap stocks, while smaller companies are mostly distributed.

8 of 11 sectors are down on the session. Communication services (XLC, +1.19%) is bucking the trend. One component industry, internet ($DJUSNS) is leading this sector and threatening a breakout:

The daily PPO on internet stocks is rapidly accelerating, a very bullish development. If it were any other month besides September, I'd be pounding the table on this group. It tends to lead secular bull markets, so rotation could certainly favor this group in Q4.

The poor absolute performance in defensive sectors, especially consumer staples (XLP), utilities (XLU), and real estate (XLRE) suggest to me that this market is going HIGHER in time. Wall Street is NOT moving into more cautious areas, so neither should we.

Patience will pay off for the bulls, in my opinion.

Happy trading!

Tom

• Futures were down overnight and our major indices gapped lower
• The 10-year treasury yield ($TNX) is soaring, up 15 basis points today to 5.12%, the highest level since 2007
• While yields are surging, there's been no major hedging against inflation by moving into gold ($GOLD, -1.16%) or real estate (XLRE, -1.14%)
• After a big recent drop, crude oil ($WTIC, +1.51%) is up today and back near $92 per barrel
• Utilities (XLU, -1.76%) typically suffer from rising treasury yields and the past few weeks have been no different
• Meanwhile, energy (XLE, +1.01%) is benefiting from the rebound in crude oil and is 1 of 2 sectors higher on the session
• Industrials (XLI, +0.20%) also have gained ground
• Cryptocurrencies are weak today, with bitcoin ($BTCUSD, -2.55%) nearing 84000
• It's now been a week since the Fed rate hike and over the past, semiconductors ($DJUSSC) have been the best industry group, outperforming the S&P 500 by nearly 7%
• Software stocks ($DJUSSC, +1.00%) are bucking the trend, with CrowdStrike Holding (CRWD, +4.47%) leading the S&P 500

Market Outlook

Well, I talked yesterday about the recent improvement in our major indices. But I also discussed needing to see a breakout. Otherwise, we have sideways consolidation on our hands and nothing more. Right on cue, futures weakened overnight and sellers regained control of the action today. Until we make a definitive breakout, it's this type of back and forth, whipsaw action that we'll need to be prepared for. Here's the same chart I showed yesterday, but this time I've shortened the time period from 6 months down to 3:

The only annotation I added were the two gap support lines, both at the top and bottom of the gap. Today's intraday low tested the top of gap support. Note that the rising 20-day EMA now falls between both of these gap support lines. So I'd view the S&P 500's very near-term support range to be the gap support zone, from 7650.50 to 7692.83. That 20-day EMA falls in this range at 7671.

If you're looking for further short-term downside, you'll need to see this support range give way. It may or may not happen. I will say, however, that the 10-year treasury yield ($TNX) is up 15 basis points (!!!) today to 5.12%. If there are reasons to see a significant short-term selloff in U.S. equities, the shock of rapidly rising rates above 5.00% would be one of them, in my opinion. So let's see how the S&P 500 finishes the day.

Sectors/Industries

Specialty retailers ($DJUSRS) have been weak, but the weekly chart suggests that more strength could be just ahead. As the group approaches a key support level, you can see that the weekly PPO has turned considerably higher. This means that another price low would very likely result in a positive divergence on the weekly chart, a sign of slowing selling momentum:

That bottom panel shows a very poor group, one that displays awful relative strength. But that's not uncommon when a bottom forms with a positive divergence.

ChartLists and Trading Strategies

I looked at our Seasonality ChartList (SEASCL) for September to see if any of the stocks there are worth entering or keeping an eye on. One that stood out is Ulta, Inc. (ULTA), a leading specialty retailer. It's actually showing improving relative strength, but just can't seem to clear overhead price resistance and its peer group, as explained earlier, hasn't yet turned the corner. ULTA is trending higher over the past 3 months, however, and currently shows a bullish ascending triangle continuation pattern, so if it can clear 570, there's a chance we could see further upside acceleration:

Specialty retailers ($DJUSRS) have been struggling, but ULTA has been strengthening on a relative basis. If it can clear 570 and the AD line confirms with a breakout, I'd grow much more bullish near-term. An improving industry gorup would only add to the potential bullishness. Keep an eye on this one.

Upcoming Earnings

Upcoming Earnings and Upcoming Earnings Relative Strength ChartLists are produced for EB.com members to track upcoming earnings reports and provide them to you via ChartLists throughout earnings season. We will begin producing Upcoming Earnings ChartLists again on a weekly basis when Q3 earnings season begins in mid-October.

Economic Reports

September PMI manufacturing: 57.0 (actual) vs. 53.5 (estimate)

September PMI services: 58.7 (actual) vs. 55.7 (estimate)

Happy trading!

Tom

• Futures were higher overnight and our major indices gapped up
• The Dow Jones has retreated, is losing ground currently, and has lagged the other indices; 6 of the 7 top-weighted stocks in the Dow are lower today
• Meanwhile, the NASDAQ 100 ($NDX) is threatening an all-time high breakout
• Materials (XLB, +1.77%) is today's leading sector; technology (XLK, +0.74%) is having another strong session
• Energy (XLE, -1.02%) is among today's worst-performing sectors, as crude oil ($WTIC, -0.60%) falls further from its recent high of $106 per barrel
• Cryptocurrencies are mostly flat after a solid run higher, though XRP is up more than 5% today
• The 10-year treasury yield ($TNX) is slightly higher to 4.97%, still threatening that key 19-year high at 5.00%
• Semiconductors (SOXX, +2.23%) are gaining momentum again, with Sandisk (SNDK, +7.29%) and Micron Technology (MU, +4.83%) among the S&P 500 leaders

Market Outlook

I talk a lot about "primary" and "secondary" signals. For me, there is NOTHING more important than actual price and volume action. And I like to use the benchmark S&P 500 and then compare everything else to it.

Right now, the S&P 500 is trending up again, but we do still need to clear important price resistance established during August:

Resistance has not been cleared, so we remain range bound between price support at 7507 and price resistance at 7807. The action this week has felt bullish, but we've seen no breakout. Recently, the action felt bearish, but we remained above the lows established in June and July. The low last Wednesday now establishes another key level of price support, in my opinion.

Note also the behavior of the RSI. During uptrends, the range is usually from 40 to 70+. During downtrends, the range is usually 30 and below up to 60. The black arrows mark tops at 60 and bottoms at 40. The RSI can't make up its mind if we're in an uptrend or downtrend. I'm treating it as sideways consolidation, until proven otherwise.

Sectors/Industries

I've been watching a few of the interest-rate-sensitive areas since the Fed rate hike announcement last Wednesday. If Wall Street believed this was a "one and done" rate hike, I think we'd have seen a very bullish reaction in small caps (IWM), regional banks (KRE), homebuilders (XHB), and transports (IYT). Instead, what we've seen is further deterioration in the relative strength of each of these areas:

Based on this chart alone, I'd say there's a very good chance that we're going to see at least one more rate hike. When money begins to rotate heavily into these groups, there's a much better chance that we'll get better news ahead on the interest rate front.

ChartLists and Trading Strategies

The technical signals since the Fed rate hike last Wednesday have been very encouraging. Money has rotated in mostly "risk on" fashion, which suggests that it's very unlikely that we'll see any type of extended selling, if we see any at all. Interest-rate-sensitive areas of the market remain under performers, but that's to be expected when rates are raised and expected to go even higher.

As always, I'd focus on minimizing risk. That could mean trading ETFs instead of individual stocks. It could also mean being more vigilant about only buying stocks at or very near support. It could mean smaller position sizes.

While not a primary indicator, I still do worry this time of year, given the long-term tendency for market weakness in late summer into early autumn.

I ran a scan against Raised Guidance ChartList (RGCL) using RSI between 39 and 44 and a SCTR score > 75. It returned the following stocks:

CNC, FA, SPT, INTA, JHX, BOX, CPAY, VAC, BAX, EAT, SJM, SLG, PRGS, RS, CSCO

A few of these are testing their 50-day SMAs, like SPT, INTA, BOX, SJM. Here's a chart of the first two:

SPT

A recent negative divergence warned of slowing momentum and so I'd typically look for a 50-day EMA test, which is what we're getting today. I've drawn two gap/price support lines as well.

INTA

INTA showed a similar negative divergence and it, too, has fallen back to test its 50-day SMA. INTA's PPO has returned to centerline support as well. Throw in the test of key gap/price support and I like the reward to risk here.

Disclosure: I bought shares in INTA today. I'll sell on a close beneath 35.

Upcoming Earnings

Upcoming Earnings and Upcoming Earnings Relative Strength ChartLists are produced for EB.com members to track upcoming earnings reports and provide them to you via ChartLists throughout earnings season. We will begin producing Upcoming Earnings ChartLists again on a weekly basis when Q3 earnings season begins in mid-October.

Economic Reports

None

Happy trading!

Tom

Everything is stacked against the market. Higher interest rates. Higher oil prices. Continued inflation. Continuing international conflicts. Increased skepticism of AI's virtues. Worst month historically for the market. A pretty impressive list of negatives. Yet, the bulls haven't been willing to throw in the towel as we prepare to close out another trading week.

We saw the $VIX spike when the market sold off hard on the Fed interest rate decision but it has since settled, showing that initial fear was more knee-jerk than anything else. 

One thing I've noticed is that the bulk of the recent selling has mostly been confined to blue-chip stocks with the Dow back below both its 20- and 50-day moving averages while the NASDAQ remains above all key technical levels. In other words, there is renewed interest in tech stocks which I see as a positive.

One has to wonder if higher interest rates and stubbornly higher oil might take their toll on the market at some point. It's very possible but not evident yet.

Right now the S&P is sitting just above its 50 day moving average, currently at 7616. A close below that level could result in a retest of Wednesday's low of 7507. We're still only 2.5% away for the all time high of 7816 but the bulls will have to work super hard to get back to that level in the face of challenging headwinds.

Tom will be back with his Weekly Market Report on Monday.

At your service,

John Hopkins

• Futures were very strong overnight and saw gap ups across our major indices
• Initial jobless claims fell back below 200,000, supporting the Fed's view that the U.S. economy is strong enough to handle higher rates
• 10 of 11 sectors are higher on the session, led by technology (XLK, +2.21%)
• Consumer discretionary (XLY, +1.33%) is also quite strong, while communication services (XLC, -0.51%) is the clear laggard
• A strong semiconductor group ($DJUSSC, +3.30%) is lifting the NASDAQ 100 ($NDX, +1.65%) to outsized gains vs. the other major indices
• The 10-year treasury yield ($TNX) is down 6 basis points to 4.95%, despite the bullish initial jobless claims data out this morning
• Crude oil prices ($WTIC, -0.62%) are down slightly and just below $102 per barrel
• Other commodities are mostly higher, including silver ($SILVER, +1.47%)
• Cryptocurrencies, a "risk on" asset class, is rebounding today, with bitcoin ($BTCUSD, +0.96%) rising after hitting a 4-week low on Wednesday

Market Outlook

The short-term market action is playing out similar to how I described it might on Tuesday. Here were my remarks then:

"Max pain was beneath the price action on our major indices as we closed out last week, but the weakness this week has eliminated the downside risk. In fact, if stock prices drop as a result of the FOMC decision tomorrow afternoon, don't be surprised to see a quick counter rally as max pain would then favor the longs."

We saw an immediate drop in stock prices after the FOMC announcement, but we began recovering in the final 30-60 minutes and this morning's strength, for the most part, wiped out the afternoon selling on Wednesday after the rate hike:

Thus far, it's a net ZERO. The S&P 500 is up about 0.3% from where it was when the 25-basis point hike was announced.

In the bigger picture, nothing has really changed on the S&P 500:

I still see the S&P 500 in a short-term downtrend that doesn't change unless it's able to rise and clear the recent reaction high at 7677.02 on September 11th. Meanwhile, a new recent post-rate-hike low was established at 7507.77 and is a level I'd now view as short-term price support.

Sectors/Industries

I provided a look at our 9 aggressive and defensive sectors in yesterday's DMR. I find it interesting that while our major indices are having a strong session, we've not seen ANY of our sustainability ratios (S&P 500 3-Month chart shown above) clear key resistance and not ANY of our defensive sectors lose recent price support.

In other words, offense is not winning right now.

Let me also add that, according to a Yahoo Finance article today, the S&P 500 has seen an average 4% drop over the 6 weeks following the start of a new rate-hiking campaign by the Fed. First, I want to point out that I have not verified this information, so I'm literally just passing along what I read. Second, if it is true, the 6-week period would end on October 28th, which is THE DAY that our most bullish seasonal period of the year begins. Coincidence? Maybe.

By the way, a 4% decline from the S&P 500 level at 2pm yesterday (7613.32) would be 7308.79. The key July low was 7313.92. It's certainly possible. I think it's important to remain open-minded in the near-term, with thoughts of higher prices after that. At least that's how I'm viewing it at the moment.

ChartLists and Trading Strategies

This the first day of trading after the Fed initiated a fresh rate hiking campaign. The Fed has indicated that it's likely there'll be one more 25-basis point increase in the fed funds rate in 2026. I believe we need to give U.S. stocks a bit of time to fully process the likely impact of this more hawkish Fed view. There's nothing wrong with trading stocks in the near-term, but I do expect the level of whipsaw action to increase, perhaps stopping out a higher percentage of trades.

Upcoming Earnings

Upcoming Earnings and Upcoming Earnings Relative Strength ChartLists are produced for EB.com members to track upcoming earnings reports and provide them to you via ChartLists throughout earnings season. We will begin producing Upcoming Earnings ChartLists again on a weekly basis when Q3 earnings season begins in mid-October.

Economic Reports

Initial jobless claims: 196,000 (actual) vs. 207,000 (estimate)

August housing starts: 1,300,000 (actual) vs. 1,300,000 (estimate)

August Philadelphia Fed Business Outlook Survey: 37.8 (actual) vs. 34.0 (estimate)

August pending home sales: +0.3% (actual) vs. +0.5% (estimate)

Happy trading!

Tom

All of our major indices are higher today, but still trading within recent ranges. The 10-year treasury yield ($TNX), after moving above 5.00% each of the past two days, did close below 5.00% both days as well. Today and at last check, the TNX is at 4.96%, down 3 basis points. I still believe that a big spike above 5.00% could spook the S&P 500 on a short-term basis. On the flip side, if the TNX is topping currently at 5.00%, that could help propel the benchmark S&P 500 back towards its all-time high. Honestly, the short-term direction is a coin flip to me. I have no strong feelings either way. Longer-term, I see U.S. stocks moving higher.

Leading up to today's announcement, small caps (IWM), regional banks (KRE), transportation (IYT), and homebuilders (XHB) have been among the hardest hit and victims of the "sell on rumor" (of rate hike) strategy. One thing to watch is that once the announcement of the actual rate hike hits, will these 4 groups see a big "buy on news" rally - a relief rally of sorts? I don't know, but as a trader, it's something I'd at least consider.

Let's see what the Fed has to say and go from there....

Happy trading!

Tom

There's no way to predict how the bond market will interpret everything that's happening right now and what's likely to happen later in 2026 and into 2027, so we'll just have to keep watching the charts.

In the meantime, with the Fed on deck with a likely 25-point rate hike tomorrow at 2pm ET, I found it very interesting to see several sector ETFs at key price support. Let's check them out. First, let's start with all of the aggressive sector ETFs:

I see 3 of the 5 aggressive sector ETFs (XLK, XLF, and XLI) at or fairly near key gap support. One thing I'd keep in mind is that industrials (XLI) have entered their favorite 6-month stretch of the calendar year. Here's a seasonality chart of the XLI:

During the September through February time period, the XLI has outperformed the S&P 500 in 5 of these 6 months since 2013. When March hits, it's had the tendency to struggle, losing ground vs. the S&P 500 in 5 of the 6 months from March through August over this same period since 2013.

Seasonality tells us that the XLI is becoming more and more attractive as it tumbles.

I also found it interesting to see communication services (XLC) finally breaking out above price resistance near 114 that's held it back on 5 different occasions since early June.

Now let's look at the defensive sector ETFs:

The consumer staples (XLP) and real estate (XLRE) sectors both seem to have hit key price support. The XLP has bounced a bit, while the XLRE is literally trying to bounce today. The utilities sector (XLU) definitely is hurt by a rising TNX and you can see the big drop and breakdown in the XLU in September as the TNX has risen to just above 5%. Should the TNX pull back at some point, I'd certainly expect to see money rotate back into the XLU. But as long as the TNX is rising, I'd stay away from the XLU. Those seeking income typically enjoy the solid dividend payouts of utilities companies, but if the TNX rises enough, many of these income-oriented investors will shun utilities and move to the safer treasury market.

I'm not providing a chart on energy (XLE) or materials (XLB), but the XLE is clearly dependent on the uncertainty of the US-Iran war and elevated crude oil prices ($WTIC). The XLB did reverse earlier today as it approached its recent price support level near 50 (July lows).

Max pain was beneath the price action on our major indices as we closed out last week, but the weakness this week has eliminated the downside risk. In fact, if stock prices drop as a result of the FOMC decision tomorrow afternoon, don't be surprised to see a quick counter rally as max pain would then favor the longs.

Happy trading!

Tom

Data from the past two days shows inflation persists with bond yields continuing to rise but traders have decided to take advantage of lower prices with all major indexes higher as we get ready to close out another trading week.

The 10 year treasury bond yield, closing in on 5%, has not been this high since 2007. With the PPI and CPI readings there is now a 90% chance the Fed will raise rates when they meet next week. One might think this would be a reason to worry but the $VIX is down sharply today, showing traders have been expecting this for some time now.

In fact, the S&P looked like it was getting ready to break through its 50 day moving average to the downside yesterday but held and in fact is trying to close back above its 20 day, currently at 7668 which should be considered bullish. And its worth noting that the S&P is less than 2% from its all time high in spite of increased rates, climbing oil prices and persistent inflation. In other words, traders remain bullish on stocks.

Of course things could look different when the Fed meets next week and reveals its interest rate decision but again, the market is already bracing for an increase. We should also remember that overall corporate earnings remain strong and as long as that continues traders will mostly ignore what otherwise might be considered negative news.

Bottom line: the bears have failed to make a case that stock prices should be lower. And as long as the S&P holds above its 50 day, currently at 7607, we have to give the bulls the nod.

Tom will be back with his Weekly Market Report on Monday.

At your service,

John Hopkins

• Futures were weak overnight and all of our major indices gapped lower at the open
• The S&P 500 is down 0.62% and may lose key price support at 7609.78, while the small cap Russell 2000 (IWM, -1.13%) is trading at a 3-month low
• 9 of 11 sectors are down today, with technology (XLK, -1.36%) among the hardest hit
• Communication services (XLC, +0.50%) and consumer staples (XLP, +0.18%) are the only two sectors gaining ground on the session thus far
• The 10-year treasury yield ($TNX) has surged 11 basis points to 4.95%, threatening a two-decade high of 5.00%
• The surging yield comes despite better-than-expected August PPI data earlier
• Bitcoin ($BTCUSD, -1.62%) is testing its rising 20-day EMA for the first time since it spiked higher in mid August
• Crude oil ($WTIC, +6.32%) has jumped back above $102 per barrel, adding inflationary pressures and potentially raising the likelihood of a Fed rate hike
• Most other commodities are lower today, including gold ($GOLD, -1.55%), which is a bit surprising if you're anticipating inflationary pressures

Market Outlook

The August PPI was released this morning and the headline number came in as expected, with a rise of +0.4%. If we strip out food & energy, the Core PPI was +0.2%, slightly better than the +0.3% forecast. That didn't seem to matter to the bond market folks, however, as bonds were sold, resulting in a spike in treasury yields. The 10-year treasury yield ($TNX) has surged to 4.93%, up 9 basis points today, despite the better-than-expected PPI data. This is telling me that the bond market may have already made up its collective mind that the Fed is going to raise the fed funds rate by a quarter point.

So why would the Fed want to raise rates if the August PPI isn't any hotter than expected? In fact, the core PPI number actually was weaker than expected, so what's the deal? Well, I think it all comes back to the mandate of THIS Fed. Fed Chief Warsh has said on numerous occasions that THIS Fed will not tolerate inflation. Period. They want to squash inflation. I believe the Fed is watching crude oil prices ($WTIC) accelerate back above $102 per barrel today and is realizing that they do not want to wait for stubbornly-high inflation to embed itself in our economy. I believe they're going to act to hike rates. To a large extent, I believe it's built into prices. That's good news as this is nothing that will catch Wall Street by surprise. The odds of a rate hike have now jumped above 70%, despite the better-than-expected inflation numbers. I found that quite telling.

Listen, the August CPI, due out tomorrow morning, still could sway the Fed. The Fed doesn't want to raise rates unnecessarily. There's no benefit in doing that. Given the rise in crude oil prices, however, I see a rate hike coming, unless the August Core CPI comes in below, perhaps way below, consensus estimates. Currently, the expectation is for a +0.2% increase in the Core CPI. A flat reading might sway the Fed to hold rates steady until the next meeting, but any positive reading may not convince the majority to hold rates steady.

I believe a rate hike is coming and the 10-year treasury yield is pricing it in. We've moved very close to 5.00% and there's still a good chance that this treasury yield spike could weigh on U.S. equities, even if it's just a near-term issue. First, let's look at the latest on the TNX:

This scenario is playing out almost EXACTLY as I've discussed in recent weeks. A spiking TNX is my biggest near-term concern. Losing key price support on the S&P 500 at 7609.78 is the technical price breakdown that COULD trigger further selling. It's September and we know what that means from a seasonal perspective. Here's the current look at the S&P 500:

The good news, if there is any on a potential price breakdown, is that the selling occurred mostly at the opening bell. A big selloff this afternoon would add to the short-term bearishness, especially if that August Core CPI number on Friday morning shakes traders/investors.

Now is a very good time to be cautious as a short-term trader. None of this bothers me from a long-term perspective. I still see fresh, new all-time highs coming in Q4 and/or 2027.

Sectors/Industries

As I've mentioned recently, the 10-year treasury yield can move higher for one of two reasons. The first is simply a strengthening economy, which results in higher S&P 500 profits and expanding PE multiples, lifting U.S. stocks. The alternative, however, is higher inflation or the possibility of higher inflation. In this case, a higher TNX would normally translate into a S&P 500 selloff with growth stocks being hit particularly hard.

If inflation persists and market participants believe that we're in for a lengthy inflationary battle, then inflation hedges like gold ($GOLD) and real estate (XLRE) should see TONS of rotation into these asset classes. Yet, as I look at the following chart, I'm just not seeing that:

I think if we look at this chart from an unbiased perspective, we see a rising TNX that's accompanied by a rapidly-weakening real estate group (rotation AWAY from this more defensive and value-oriented group) and very little relative strength in gold. In fact, we're seeing money rotate AWAY from gold over the past couple weeks as discussions have intensified about inflation and higher interest rates. None of this makes any sense if Wall Street truly had long-term concerns about inflation. Therefore, and in my opinion, this interest rate spike has more to do with the likelihood that a strengthening economy could be awaiting us in 2027.

Now let me also say that cyclical areas of the market that should be performing well during a strengthening economy, or a widely-expected strengthening of the economy ahead, like many consumer discretionary areas and transports ($TRAN) are not strong either. So this isn't a slam dunk analysis.

I will be watching the next significant advance in the stock market to see the makeup of such an advance. I believe that's where the truth will lie.

ChartLists and Trading Strategies

The S&P 500 is currently trading beneath its initial key price support level of 7609.78 and beneath its 50-day SMA for the first time in 6 weeks. Personally, I don't believe this is a good time to be taking on more risk. As a trader, I have significantly lightened my risk in this current market environment.

Upcoming Earnings

Upcoming Earnings and Upcoming Earnings Relative Strength ChartLists are now available on our website and we'll continue to track upcoming earnings reports and provide them to you via ChartLists throughout Q2 earnings season. We will no longer produce Upcoming Earnings ChartLists on a weekly basis until Q3 earnings season begins in mid-October.

Economic Reports

Initial jobless claims: 206,000 (actual) vs. 205,000 (estimate)

August PPI: +0.4% (actual) vs. +0.4% (estimate)

August Core PPI: +0.2% (actual) vs. +0.3% (estimate)

August existing home sales: 4,000,000 (actual) vs. 4,000,000 (estimate)

Happy trading!

Tom

I just wanted to send out a quick update on where the market stands as we approach two key economic reports - the PPI to be released tomorrow morning and the CPI to be released on Friday morning.

The 10-year treasury yield ($TNX) spiked to near 4.86% earlier today, rapidly approaching critical yield resistance at 5.00%.  As a reminder, the 10-year treasury yield serves as a proxy for mortgage rates.  There's a variable gap between the two, usually between 1.5% and 2.5%, but generally speaking, as the 10-year treasury yield moves, mortgage rates tend to move in the same direction and by about the same amount - again, with an additional variable spread.

The 10-year treasury yield last moved above 5.00% in 2007, so nearly two decades ago.  And, in our recent past, spikes in the TNX to the 4.75%-5.00% range have triggered periods of selling in U.S. stocks.  Therefore, it wasn't too surprising that the S&P 500 and NASDAQ 100 sold off earlier with the TNX spike, and then started to rally a bit when the TNX fell back from that earlier high.  Still, at last check, the TNX was 4.835% and has me super cautious in the near-term with U.S. equities. The S&P 500 has key price support at 7609.78, so that's the first important level to watch. Currently, the S&P 500 is trading at 7642, down over 100 points from last Thursday's close, but still above support.

As you might suspect, the rising TNX is having a negative effect on the Dow Jones U.S. Home Construction Index ($DJUSHB) as it's on the verge of a significant breakdown:

The bottom panel shows that this group has already lost relative support, so absolute support may be just a formality at this point. This group could be among the most volatile over the next week as the key inflation reports, along with the Fed decision will have a direct impact here. The AD line continues to spiral downward, so I'm not getting a warm and fuzzy feeling about this group right now.

We haven't seen the TNX break above 5% yet, and we haven't see the DJUSHB break down on an absolute basis, so all of this is pure speculation at this point, but it's important to prepare for what may lie ahead.

I'll be back tomorrow with a look at the PPI report and the market's reaction.

Happy trading!

Tom

The jobs report from this morning far exceeded expectations with over 160,000 jobs added during August and a low unemployment rate of just 4.1%. So far reaction to the numbers has been negative with all of the major indexes lower we get ready to close out another trading week.

A few observations:

First, earlier in the session the 10-year government bond hit its highest level since October 2023. It's since come off the day's high but remains at a level that has traders on edge. Next, despite the negative market reaction, the $VIX is actually lower, dipping into the 13s earlier in the session—a level not seen since December of last year. Hardly market panic. And, all of the major indexes remain above key technical levels.

If you set aside the notion of higher interest rates, the bulls can point to the strong job numbers and a resilient economy. It's a trade off for sure but worries would likely be much greater if the jobs numbers were bleak.

We should keep in mind that we are right at the beginning of the most challenging market month of the year. This could keep a lid on stocks for a while. On the other hand, the bears haven't made a credible case to avoid equities with the range on the S&P currently 7816 to the upside and 7600 a level the bulls would like to hold.

Tom will be back with his Weekly Market Report on Monday.

At your service,

John Hopkins

The September Seasonality stocks have been selected and a ChartList will be posted on the website today, if it's not already posted. But to let you know, there were 14 stocks included as follows:

• Large cap (5) - ULTA, DELL, VST, NKE, LULU
• Mid cap (4) - NTNX, THO, FIVE, HQY
• Small cap (5) - AEO, INSW, QDEL, SIG, HCC

September is not a strong month, so there aren't a lot of stocks that have established a solid track record in September. I'd be interested in the above stocks if they show other bullish characteristics. I typically DO NOT buy any stock based solely on historical tendencies.

Executive Summary

• Futures were mixed overnight, but did improve this morning
• Our major indices opened higher and they've continued trending up throughout today's session thus far
• Small caps (IWM, +0.33%) and mid caps (MDY, +0.70%) are lagging a bit, as both the Dow Jones ($INDU, +1.10%) and NASDAQ 100 ($NDX, +1.01%) gain more than 1%
• 9 of 11 sectors are higher, so we're seeing fairly wide-spread participation
• Consumer discretionary (XLY, +1.68%) and financials (XLF, +1.26%) lead the way
• Automobiles ($DJUSAU, +6.28%) are having a big day as Tesla (TSLA, +6.97%) has jumped nearly 7%
• Among financials, investment services ($DJUSSB, +3.30%) is attempting to break to a new all-time high
• Cryptocurrencies are flying as bitcoin ($BTCUSD, +4.97%) surges back above 81,000; dogecoin ($DOGEUSD, +9.69%) gains nearly 10%
• Commodities are jumping too with crude oil ($WTIC, +1.10%) reaching $92 per barrel
• The 10-year treasury yield ($TNX) has fallen 4 basis points to 4.76%, thus far failing at key overhead yield resistance - more on this below
• Snowflake (SNOW, +20.68%) posted excellent quarterly results, and the stock has now more than tripled since mid April
• The August nonfarm payrolls will be released tomorrow morning in pre-market

Market Outlook

The 10-year treasury yield's ($TNX) drop back beneath 4.80% is likely providing U.S. stocks a bit of relief today. Whether it lasts may be another story. One of my biggest short-term fears is a continuing uptrend in the TNX to threaten 5.00%, which is the highest level that we've seen in the past two decades. There's a big FOMC meeting in 2 1/2 weeks that could shape the S&P 500's short-term direction. And I believe the stock market could take its cue from the bond market and the TNX. Here's where the TNX currently stands:

I don't want to try to paint a picture that the S&P 500 will do opposite of whatever the TNX does. You can look at different periods above and see that that is not the case. However, there is some precedence that when the TNX shoots up quickly, it can have a detrimental short-term impact on stocks. If the TNX can stay below 4.80%, then I think any short-term stock weakness will be relatively contained. A move in the TNX above 4.80% and I believe the odds are greater of a bigger Sept/Oct selloff.

Sectors/Industries

Yesterday, in our Live Trading Room, I discussed software and one of its more heavily traded ETFs (IGV). Software had been sold off hard in the past few sessions and IGV retreated back to test its 20-day EMA:

The bounce today is nice, timely, and encouraging for software bulls. Another area of the market that has just tested key support is transportation stocks. A popular ETF to track this group is the IYT. After breaking above its 82.50-83.00 resistance level, the IYT moved up to 90, but printed a negative divergence (lower PPO with higher price). That led to ensuing weakness and I realize the PPO centerline breakdown and price action below its key moving averages (red circles) look somewhat bearish, but keep one thing in mind. NOTHING is more important than price support and I believe the biggest price support on the IYT chart is at that 182.50-183.00 level.

ChartLists and Trading Strategies

Personally, I like trading strong stocks that have pulled back, particularly those that appear to have experienced a false breakdown. That's a tactic used by market makers to accumulate shares. After all, if a stock is breaking below price support, what trader is going to buy the stock? Just about every successful trader I know will sell a stock when it breaks below support. So intraday breakdowns beneath support create supply for market makers to accumulate shares for their institutional clients. Breakdowns generally create more volume, because traders using risk management strategies want to minimize potential losses. A temporary, intraday breakdown is a great way for market makers to accumulate a larger inventory.

Having said all of this, I look for leading stocks on our ChartLists that display this characteristic. One stock today that looks like it MIGHT have seen a temporary, intraday breakdown is Arista Networks (ANET). Check this out:

If you've been burned countless times chasing stocks after huge rallies, buying those same strong stocks after false breakdowns might be a strategy to incorporate. ANET appeared to lose recent price support AND its 50-day SMA early in today's session, before rallying strongly off the low. This very well may turn out to be a very important low on ANET's chart.

Upcoming Earnings

Upcoming Earnings and Upcoming Earnings Relative Strength ChartLists are now available on our website and we'll continue to track upcoming earnings reports and provide them to you via ChartLists throughout Q2 earnings season. This is the final week of Upcoming Earnings ChartLists until Q3 earnings season begins in mid-October.

Economic Reports

Initial jobless claims: 206,000 (actual) vs. 205,000 (estimate)

August PMI services: 56.5 (actual) vs. 56.2 (estimate)

Happy trading!

Tom

• Futures were mixed overnight with most indices higher, while the NASDAQ was the exception
• The ADP employment report showed jobs slightly weaker than expected, but still positive; the more closely-watched nonfarm payrolls will be out on Friday
• After beginning the day in negative territory, the NASDAQ has turned positive, though it trails the other major indices
• The small cap Russell 2000 (IWM, +1.20%) is the best-performing index
• The 10-year treasury yield ($TNX) is flat today at 4.80%
• Materials (XLB, +1.81%) and communication services (XLC, +1.48%) lead all sectors
• Meanwhile, real estate (XLRE, -0.57%) is the lagging sector, while it's still notable that technology (XLK, -0.10%) remains weak
• Crude oil prices ($WTIC, +0.68%) are approaching $91 per barrel as energy (XLE, +0.73%) extends to yet another all-time high
• Dell Technologies, Inc (DELL, +13.95%) reported strong quarterly results and currently sits atop the S&P 500 leaderboard

Market Outlook

The S&P 500 bounced EXACTLY where it needed to on Tuesday, holding key short-term price support at 7610, which is clearly illustrated in this 3-month chart:

Price and volume are ALWAYS my primary indicator. So a nice rebound off of price support is BULLISH. However, check out the AD line at recent price lows. It's a crack in the bullish foundation. Then there's September, which we know isn't great for U.S. stocks historically. My sustainability ratios are not particularly strong either.

The takeaway, for me, is that the S&P 500 acted bullishly yesterday and currently trades in a 7610-7807 range. Let's see which way this breaks. IF it's to the downside, that is when those "cautious" secondary indicators become a bit more problematic and increase the odds of further short-term selling.

Sectors/Industries

Consumer finance ($DJUSSF) is an area that looks very interesting to me on a chart. Check this out:

The last time that the DJUSSF reached 840, it was the start of 2026. Unfortunately, the group had been mired in a significant and lengthy relative downtrend vs. the benchmark S&P 500. This time the group looks a bit healthier on a relative basis as it approaches 840 again. A breakout would be bullish.

ChartLists and Trading Strategies

If we want to trade leading stocks on pullbacks, then here would be one to consider from the Strong Earnings ChartList (SECL):

RBRK:

RBRK is now trading back to a key gap support zone, while simultaneously testing its 50-day SMA. Just four days ago, RBRK was above 107 and today it neared 86, roughly a 20% decline. This is a potential trade for AGGRESSIVE traders.

Upcoming Earnings

Upcoming Earnings and Upcoming Earnings Relative Strength ChartLists are now available on our website and we'll continue to track upcoming earnings reports and provide them to you via ChartLists throughout Q2 earnings season. This is the final week of Upcoming Earnings ChartLists until Q3 earnings season begins in mid-October.

Economic Reports

August ADP employment report: 38,000 (actual) vs. 47,000 (estimate)

July factory orders: +0.9% (actual) vs. +0.7% (estimate)

Beige book released at 2:00pm ET

Happy trading!

Tom

So I expanded my research back to 1999, when the sector ETFs first began trading. The results are rather amazing. In order to more clearly see previous signals and their success/failure, I've broken down the XLP cumulative chart into 6 separate periods, as follows:

June 30, 1999 - December 31, 2003

Some of the most significant accumulation in the XLP occurred during year 2000, just prior to one of the most significant market tops in U.S. history. Money poured into the XLP intraday in the 30 days leading to May and November. Wall Street "luckily" (sarcasm) got it right just before one of the biggest S&P 500 declines in my lifetime.

It's also interesting that one of the lowest readings of this period occurred in late-July 2002, coinciding with the first of two fairly-equal lows that marked the bottom of the first part of the secular bear market. Wall Street "luckily" saw the bottom forming as well as the top.

January 1, 2004 - December 31, 2008

Well, we didn't see the crazy rotation into consumer staples prior to the second major selloff of the 2000-2012 secular bear market. But it was still formidable as readings topped the key 106 level on at least 3 different occasions from April through October. The major top occurred in the second week of October.

We did see a bit of rotation into staples during Q4 2024 and Q1 2006 with readings approaching 109, prior to some weakness, though I wouldn't say those signals were overly powerful. Still, the market did struggle a bit after each of these high readings.

January 1, 2009 - December 31, 2013

This period was characterized by rallies following a nasty secular bear market. There were plenty of false signals with our staples signal touching 106 without a lot of subsequent selling. However, signals above 106 did trigger prior to both of the two weakest periods from 2009 to 2013. In late Q1 2010, the XLP signal moved above 106 and the S&P 500 did top within a month. The signal in late April 2011 coincided with that key top. That April 2012 warning was timely as well.

One other point. Though this exercise isn't really looking for readings below 94 to market bottoms, such readings did do a great job in marking major bottoms throughout this period.

January 1, 2014 - December 31, 2017

I feel like the warning signals throughout this period were mostly spot on. The reading at 109 in October 2015 came just prior to a significant drop to close out 2015 and begin 2016. The reading near 106 in July 2016 printed before a 5% late-summer dip. The November 2014 signal didn't signal any type of major top, but the S&P 500 really struggled to tack on any meaningful gains in 2015.

The one key reading of 94 in February 2014 happened to coincide with an important market low.

January 1, 2018 - December 31, 2022

There were two significant market tops during this period. The first was the pandemic top in February 2020. This was the only major top since 1999 that we saw almost zero rotation into consumer staples leading up to it. We were slightly above 100, but not close to the key 106 level. I would not have expected major accumulation by Wall Street prior to a pandemic, however, as it would be very difficult to see the extent of the selling ahead of time.

When the S&P 500 topped at the beginning of 2022, just prior to a 20%+ cyclical bear market, this XLP signal was above 106 and it hit the 110 level in early January. Low XLP readings (94 and below) proved to be quite useful during this period.

January 1, 2023 - August 31, 2026

The soaring readings above 106 in early 2025 and early 2026 both provided excellent warnings ahead of S&P 500 weakness. 94 continued to mark key S&P 500 lows as well.

Conclusion

As I look back at these XLP signals over the past 27 years, I believe the readings above 106 and below 94 provide us exceptional market clues. Like every other signal that we use, the XLP signal does not provide us a guarantee. Not every reading above 106 precedes significant market weakness. Not every reading below 94 marks a bottom. BUTTTTT, every major market top since 1999 saw an XLP signal at or above 106 very close to that market top. The only exception was in 2020 and I don't believe we should have expected a high reading prior to such an unpredictable health scare.

There could be an even better timing signal if I include intraday performance of consumer discretionary stocks (XLY), and I'll keep working on that. But I intend to continue to publish this XLP signal in our Weekly Market Report for the foreseeable future.....and for good reason.

Happy trading!

Tom

It's Jackson Hole day with Fed Chairman Warsh giving his speech and so far the market seems pleased, with all major indexes higher.

It's pretty much good news all around for the bulls with all major indexes above all key moving averages, and the $VIX hitting its lowest level since December of last year earlier in the session. In other words, traders are feeling pretty confident.

Should gains hold into the close it would be a good sign with only one trading day left in August as we prepare to head into the toughest month of the year. 

The bulls still have some work to do to reach the recent high on the S&P of 7816. Should they succeed in clearing that level the next key level of resistance would likely be 7900. If for some reason we were to see profit taking there should be technical support just below 7680 and price support right around 7630. 

I want to wish everyone a restful weekend and Tom will be back with his Weekly Market Report on Monday.

At your service,

John Hopkins

In the meantime, Salesforce.com (CRM, +20.68%), CrowdStrike Holdings (CRWD, +17.83%), and Okta (OKTA, +26.93%) not only beat both revenue and EPS estimates, but also raised revenue and EPS guidance for the next quarter AND fiscal year.

Needless to say, technology (XLK, +2.34%) is having a very strong day and leading the NASDAQ 100 ($NDX, +0.95%), in particular, higher on the session. The S&P 500 ($SPX, +0.59%) is bouncing nicely off its recent 20-day EMA, staving off the seasonal bears - at least for now. The Dow Jones ($INDU, +0.32%) and small cap Russell 2000 (IWM, +0.27%) are up more modestly.

Bonds and commodities are mostly flat today, while cryptocurrencies are higher on the day. Solana ($SOLUSD, +10.61%) is the big winner, while bitcoin ($BTCUSD, +2.44%) moves back above 80,000.

While the strength in technology feels good, the other 10 sectors are all lower today, so this is not what I'd consider a strong day at all. Utilities (XLU, -1.21%) are the worst-performing sector and approaching its double bottom from early June (42.83) and last week (42.77). Meanwhile, consumer staples (XLP, -0.53%) are lower, but that weakness was at the opening bell as the XLP gapped lower. It's since been gaining ground and may end up adding to some of the worries I've been discussing in recent days.

We'll keep taking it one day at a time and keep you posted on what we're seeing.

Happy trading!

Tom

Executive Summary

• Futures were mixed overnight and all of our major indices opened fairly close to the flat line
• We saw initial strength in the first half hour, but then selling kicked in
• After an afternoon rally, the majority of key indices and sectors have turned positive
• Technology (XLK, +0.84%) is back on top today with software ($DJUSSW, +0.99%) strengthening into a few key earnings reports after the bell
• Crowdstrike Holdings (CRWD, +2.99%), Salesforce.com (CRM, +0.00%), and Veeva Systems (VEEV, -0.02%) will all report after the bell
• NVIDIA Corp (NVDA, -0.97%) is the truly big report, however, and will likely have a significant impact on trading on Thursday
• Cryptocurrencies are seeing some profit taking with XRP down close to 6%
• Commodities are mostly lower with crude oil ($WTIC, -0.40%) hovering just above $82 per barrel
• The 10-year treasury yield ($TNX) gained 2 basis points to 4.66% after the Core PCE came in slightly higher than expected (+0.2% vs +0.1%)

Market Outlook

There are slight negative divergences on the weekly chart of both the S&P 500 and the small cap Russell 2000 (IWM), which argue for potential September weakness. Negative divergences, many times, will result in losses of 20-period EMA support and movement instead down towards 50-period SMA support. This is what that would like on both of these key indices:

S&P 500:

Russell 2000:

The pink arrows highlight previous PPO centerline tests and/or 50-week SMA tests. I've also provided pink arrows that show where a potential decline could end in September (or possibly October). The purpose of these charts is NOT to guarantee a market decline, but rather to lay out one possibility as we head into the historically-bearish month of September.

You can absolutely remain 100% long here, and I'd be in favor of that, especially if you're a long-term investor. I do not see enough bearish signals to move to cash from a long-term perspective. However, I would suggest considering a move to cash (or more to cash) as a short-term trader IF we begin to see technical deterioration of our major indices. Examples would include failure to hold 20-day EMAs for multiple consecutive days and/or loss of key price support like 7610 on the S&P 500.

Smaller position sizes this time of year make more sense to me as well. Also, consider trading more outside the usual technology suspects. We need to gain some clarity as to technology stocks, especially semiconductors ($DJUSSC), before becoming overly aggressive. There is plenty of strength in other sectors, particularly energy, materials, and health care.

Sectors/Industries

Consumer discretionary (XLY) has obviously been weaker than I'd like. When discretionary stocks are performing well, it's generally a very bullish signal regarding the S&P 500. Unfortunately, there are too many industry groups within this sector that just can't seem to get going.

Two industries at key pivot points right now are apparel retailers ($DJUSRA) and home improvement retailers ($DJUSHI). Both are relative laggards, compared to the S&P 500, but the former is challenging key support, while the latter is closer to key resistance:

DJUSRA:

DJUSHI:

Before the XLY can begin to repair itself technically, it's going to need to see more bullishness out of more of its industry groups, on both an absolute and relative basis.

ChartLists and Trading Strategies

I like trading stocks with bullish patterns as patterns can provide us measurements and, thus, targets. From the Raised Guidance ChartList (RGCL), Hinge Health (HNGE) raised its guidance on August 5th, significantly raising its revenue guidance. The company lifted its fiscal year revenues by nearly 5% and that started the right side of a bullish cup:

The depth of the cup (92 minus 72, or 20) is the measurement. On a breakout above 92, the measurement of 20 is added to set an initial target at 112. I can use a close beneath the 20-day EMA as a stop, risking about 6.00, while looking to make 20.00. That's more than a 3 to 1 reward-to-risk ratio. Buying HNGE on the 20-day EMA is the best strategy, minimizing the risk and increasing the potential return.

HNGE is a leading stock in the improving software industry ($DJUSSW). Another relative breakout by the DJUSSW in the bottom panel would provide me much more confidence in the trade and is one thing I'd look for.

Upcoming Earnings

Upcoming Earnings and Upcoming Earnings Relative Strength ChartLists are now available on our website and we'll continue to track upcoming earnings reports and provide them to you via ChartLists throughout Q2 earnings season.

Economic Reports

July durable goods: +1.1% (actual) vs. +0.5% (estimate)

Q2 GDP (2nd estimate): 1.5% (actual) vs. 1.5% (estimate)

July personal income: +0.4% (actual) vs. +0.2% (estimate)

July personal spending: +0.2% (actual) vs. +0.1% (estimate)

July Core PCE: +0.2% (actual) vs. +0.1% (estimate)

Happy trading!

Tom

• Futures were higher overnight and our major indices gapped higher
• The 10-year treasury yield ($TNX) is retreating for a 2nd straight day, falling 6 basis points to 4.64%
• Crude oil ($WTIC, -3.41%) is approaching $82 per barrel as energy shares (XLE, -0.80%) lag, along with consumer staples (XLP, -1.17%)
• Meanwhile, technology (XLK, +0.67%) and communication services (XLC, +0.53%) are showing relative strength
• Aluminum ($DJUSAL, +2.23%) is today's leading industry group
• Earlier, bitcoin ($BTCUSD, -0.07%) hit 81,218, nearly testing its May high, before reversing; other cryptos are mixed
• Moderna (MRNA, +13.14%) is jumping again to 157, though its key resistance is now 174.38
• NVIDIA Corp (NVDA, +1.72%) is rising slightly ahead of its quarterly earnings report, which will be released on Wednesday after the closing bell
• There will be a number of key earnings released tomorrow including CrowdStrike (CRWD, -2.51%), Salesforce.com (CRM, -1.43%), Synopsys (SNPS, +2.55%), and Veeva Systems (VEEV, -1.32%)

Market Outlook

Last week in our Wednesday DMR, I indicated that I was researching a new market signal based on the intraday trading of consumer staples (XLP) over a 30-trading-day period. I've actually taken those 30-day values and put them in a User-Defined Index (UDI) at StockCharts.com. I use the 100 value as a "centerline" of sorts, where there's no significant intraday accumulation or distribution of the XLP. Historically, based on the data analyzed, a reading of 106 or higher becomes quite significant and suggests that caution be advised regarding the S&P 500. On the opposite end of the spectrum, a reading of 94 or lower would indicate significant distribution of the XLP and should be considered as a bullish signal. I started this analysis in November 2021, so the first 30-trading-day reading actually occurred on January 4, 2022, which is where this chart begins:

There are 10 red-dotted vertical lines that coincide with the most significant S&P 500 tops over the past 5 years. The largest ensuing drops occurred at or just after this signal moved above 106.

Meanwhile, there are 6 green-dotted vertical lines that coincide with significant bottoms in the S&P 500. EVERY one of them saw a signal reading of 94 or below. In other words, during a significant selloff, we probably don't want to consider a major market bottom until the distribution in the XLP reaches that 94 level on a 30-trading-day basis.

It's an interesting study to say the least and it's, quite honestly, what I expected to find when I began the study. I'm a firm believer that major market declines do not happen randomly. The big Wall Street firms KNOW it's about to go down and position accordingly.

Currently, this reading is on the rise and at 103.74 as of Monday's close. An upcoming reading at 106+ with September on the horizon would be an ominous sign for short-term traders. Again, I'm not bearish long-term and I believe any selling, if it does occur, will be short-term in nature and that we'll likely see new all-time highs later in the year - or at least a rally.

Sectors/Industries

Technology (XLK) is leading U.S. stocks higher today, and there's no questioning their leadership in 2026. However, if we use a bit of perspective, it wouldn't be a horrible thing for the group to pause and regroup before a possible push higher into year end. Below is a 5-year weekly chart that highlights a key support area if the group does weaken in September:

We seem to be following the pattern we saw back in 2020. We had a huge rally off of a significant March low and proceeded to struggle (red circles) after peaking in the summer months. The selling back in 2020 may not look like much, but the XLK fell from a high near 61 to a low a few weeks later just above 52. That represented a quick 14-15% decline. In 2026, the XLK topped at 198.49 in June and reached a low of 166.46 the very next month. That represented a drop of approximately 16%, similar to the 2020 decline.

Technology still represents more than 36% of the S&P 500, so how goes technology is likely how goes the S&P 500. If selling in the XLK accelerates in September, then we could see a 10% correction on the S&P 500 back to 7000. At this point, I'd say the odds do NOT favor that, but things can change, which is why we watch the signals that we watch.

ChartLists and Trading Strategies

When you pull up a ChartList at StockCharts.com in "Summary" form, you can select the columns that you want to show. One choice is RSI, so I can go to our Bullish Trifecta ChartList (BTCL), which currently has 85 companies on it, and sort them by RSI reading, lowest to highest. The BTCL is one of my favorite ChartLists to trade off of, because it combines the elements of the Strong Earnings, Raised Guidance, and Strong AD ChartLists, including only companies that appear on each of these 3 key ChartLists. So it really narrows down my focus. Here's how that BTCL looks if sorted by lowest RSI to highest:

An RSI reading below 50 is typically a good time to look at charts of uptrending stocks to see if there are corroborating indicators suggesting entry. You can see there are a lot of technology stocks on this list, but there are stocks in other sectors, if you want to steer clear of technology for now.

For instance, check out Progyny, Inc. (PGNY), a health care provider ($DJUSHP) and Timken Co. (TKR), an industrial machinery company ($DJUSFE):

PGNY:

I like the relative strength of health care providers. I see that as a big positive here. Also, when PGNY gapped down with its earnings results in early August, buyers were lined up and we saw a massive hollow candle print. That indicates a lot of buying interest near the 25.00 level. I'm expecting PGNY to bounce from here and, if it doesn't, a fairly tight stop could be used. There are definitely other health care providers that are currently performing better, but given the group's strength, I believe support holds here. We'll see.

TKR:

TKR is clearly downtrending and it's below its 20-day EMA, which is also below its 50-day SMA. This is not a great look and I admit that. However, TKR showed tremendous relative strength vs. its peers at its recent high and is likely going through some sort of short-term profit taking before a significant bottom is found. I like the price and gap support area around 120-122 as a potential turnaround level. Note the hammer that printed at gap support back in May. A similar reversing candle in this 120-122 range could be an argument for a trading position with a tight stop.

TKR easily surpassed both revenue and EPS estimates back on August 4th and then proceeded to raise both its revenue and EPS guidance. The fundamentals appear quite strong and now TKR has pulled back with an RSI at its lowest level in 11 months. I'm just waiting for the right set up, but I'd keep this one on your radar.

Upcoming Earnings

Upcoming Earnings and Upcoming Earnings Relative Strength ChartLists are now available on our website and we'll continue to track upcoming earnings reports and provide them to you via ChartLists throughout Q2 earnings season.

Economic Reports

June Case-Shiller home price index: +0.5% (actual) vs. +0.1% (estimate)

July new home sales: 607,000 (actual) vs. 615,000 (estimate)

Happy trading!

Tom

Dear Members.

First, a reminder that Tom will conduct a webinar tomorrow morning, "Four Critical Market Signals, One Verdict," which you are all invited to attend. You will receive room instructions prior to the event. Also, as usual, the webinar will be recorded in case you are unable to attend the live session.

There's been some relief today following recent selling with all major indexes higher as we wrap up another trading week.

The move higher today has occurred despite rising yields and stubbornly high oil prices and as monthly options expire at today's close.

If traders are nervous it's not wholly evident; the $VIX is still on the lower end of where it has been throughout the year. In fact, the S&P is lower by just over 1.5% from its recent all time high; traders are still attracted to stocks in spite of higher bond yields.

We're definitely seeing more headlines suggesting a more substantial correction is near. That may prove to be the case. But right now there's no evidence that a doomsday scenario is about to unfold. If we see signs that become more ominous we'll let everyone know.

Tom will be back with his Weekly Market Update on Monday.

At your service,

John Hopkins