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“Remember, Hope is a good thing, maybe the best of things, and no good thing ever dies.” – Stephen King
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Stocks are kicking off the week on a positive note with the S&P 500 indicated to gap up 0.7%, as the Nasdaq rises over 1%. The only real drivers of the gains are a drop in oil prices and Treasury yields. These days, that’s all it takes, as equities have consistently taken their cue from the Energy and debt markets, which are basically the same lately. Gold prices are fractionally lower, and Bitcoin is breaking out above $85K to its highest level since January.
It was a positive start to the week in Asia, even with Japanese markets closed for today’s session and the next two. Chinese stocks rallied more than 1%, while South Korea was up 1.7%. Besides lower oil prices and yields, markets are optimistic ahead of this Thursday’s meeting between Presidents Trump and Xi. On the economic front, South Korean exports for the first 20 days of September increased 78.3% y/y, driven by the AI boom.
Europe has also got off to a strong start this week, with the STOXX 600 up over 1%. The positive tone is broad-based, with every major country index up over 1%, led higher by Italy. Like Asia, there’s little in the way of news specific to the region driving the gains. While not market-related, the US and Denmark announced a deal over Greenland this weekend. Under the terms of the agreement, the US will have the ability to develop military assets and bases in Greenland, while non-NATO countries will be prohibited from building any military bases.
In the US today, the only report on the calendar is the Chicago Fed National Activity Index, but the UN General Assembly meeting will be taking place all week, so be on the lookout for any geo-political headlines especially related to the Middle East.
This morning’s rally in the Nasdaq 100 has that index at a critical level in early trading. Based on where QQQ is trading in the pre-market, that index is on pace to trade above the trend line that has been in place since the late spring highs. That would still put it more than 2.5% below its recent high, but it’s a start at least.
Whether QQQ can stay above the current downtrend line will depend in large part on semiconductors. Unlike the Nasdaq 100, which is less than 3% from a high, the Philadelphia Semiconductor Index (SOX) remains in a much deeper hole. On Friday, the SOX closed 19% from its former high, but it did manage to close above its 50-day moving average for the first time since August 17th and just the second time since July 10th. Friday’s strength also came as the SOX successfully tested support at the 11,000 level for the second time earlier last week. Again, hardly a breakout but trending in the right direction.
QQQ and the SOX will be driven by the performance of some of the market’s largest stocks, but at the other extreme, the S&P 500 Equal Weight Index as proxied by RSP looks like a much different picture. RSP hit a new high less than a month ago but has weakened a lot over the last few weeks. On Friday, it closed just above support around the $210 level, and the 50-day moving average is now starting to roll over. Will this be another baton shift from one leadership group to the other, or will both extremes of leadership (megacaps vs. broadening) start to trade in unison?
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