Big News For Stocks Under The Bond Market

---

 

Last week, stocks (SPY) got off to the bullish start we were looking for, but then the roller coaster of news events took over.

Click here for the live SPY chart

 

The most impressive part of stocks’ Monday and Tuesday (above) was that it flew in the face of surging Treasury yields (falling TLT – below).

 

The bulls were helped by moderating oil prices on Monday and into Tuesday’s open (below).

Click here for the USO chart live

 

However, on Wednesday, hawkish Fed minutes revealed that most officials expect another rate hike this year as inflation remains stubbornly high.

Thursday, a Financial Times report questioning OpenAI's revenue outlook rattled semiconductor stocks. This, along with another oil spike, sent stocks lower.

Then Trump stepped in and announced productive talks with Iran and pledged no military strikes before the November elections, sending oil prices lower late Thursday.

Finally, Friday brought another twist as Trump announced a Russian diesel supply agreement.

For many investors, it probably looked like the same old story - oil was shaking up stocks and bonds, and Trump was doing his best to stoke the bullish narrative for stocks with news to push oil and diesel prices lower.

But last week’s Market Outlook suggested you focus on three questions to avoid getting swept up in the news flow.

1. Are bonds finding a bottom?
2. Is the equal-weight S&P 500 (RSP) finding a bottom?
3. Are the big cap tech stocks and SMH continuing to lead higher?

 

The Important Moves

Last week was threatening for the SPY and QQQ, but both still have very bullish charts if they break higher. “If”.

The big news for the bulls was in bonds. You need only to look at the big green candles from last week, one from a new low for the move to see that there was something different about last week.

The big news, however, wasn’t the green candles, but rather the fact that both the 10-year and 30-year bond auctions were very well received on Wednesday and Thursday, and the TLT market responded with big rallies both days.

A strong bond auction won’t calm the media's focus on headline inflation, but more importantly, it showed demand for US bonds from foreign and domestic investors.

If bonds can find a level of support here, stocks have a good chance of moving higher, assuming earnings season doesn’t create new problems

 

The Broad Market Finds A Bottom

The table below shows the ranking of the key markets by WTD performance. RSP tops the list. It’s not a raging bull indicator, but it’s the market rotation investors want to see when SMH is getting hit, and SPY is pulling back

In the table above, I highlighted the short-, intermediate-, and long-term ratings with colors that represent how I’d rate their total score. The best news, perhaps, is USO as neutral. The chart of USO could go either way, but neutral suggests it may struggle if it heads higher. Let’s hope that’s the case.

 

Next Week: The News Changes

Next week, earnings season kicks off with the banks. While earnings are the key driver of this market, the key indicators are still the same 3 questions posed above.

We’ll also get inflation data, but how much that matters will be answered by the same questions – do the bonds maintain a bottom here?

The news will change, that narrative hasn’t, and your focus shouldn’t either.

 

Want More MarketGauge?

If you’re an individual investor or an advisor, and would like help navigating the ever-changing dominant themes in the market with strategies, tools, automated trading systems or professional advisory services, contact us:

• For individual traders or those who want access to professional-grade models: marketgauge.com/call, and ask Rob how to join our Active Investing Edge program
• If you’re an asset manager or RIA seeking algorithmic systems: email Ben at [email protected]
• Use Big View (a lot of it is free!)

Best wishes for your trading,

Geoff Bysshe
Co-Founder
(Connect on LinkedIn)

 

---

 

Every week we review the big picture of the market's technical condition as seen through the lens of our Big View data charts. The bullets provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral.  The video analysis dives deeper.

---

Summary: Market conditions showed meaningful improvement this week, with stronger breadth, recovering market internals, and low volatility supporting a cautiously bullish outlook despite mixed index performance. However, neutral risk gauges, uneven sector participation, potential topping action in semiconductors, and weakness in international equities suggest some uncertainty remains, making continued improvement in market breadth and support in the major indexes important for sustaining the recovery. 

Risk On

• Major U.S. indexes were mixed with SPY up over +1% and QQQ digesting recent gains, down -0.85%. We are seeing some basing action around the 200-Day Moving Average in DIA and IWM. It's important that they hold these levels.  (+)
• Market internals saw a big improvement this week with the McClellan Oscillator turning positive  (+)
• New high new low ratio seems to have bounced from very over-sold levels. (+)
• Volatility is under its key moving averages and around its lowest levels for the year. (+)
• The percentage of stocks above key moving averages saw a jump off the lows and a big improvement on the week, signalling a potential bottom. (+)
• Growth remains in a bull phase. Momentum in value has been weak, but showing some mean reversion at the lows. (+)
• Seasonal trends tend to strengthen into October and strength in the last part of the year. Gold tends to have a positive seasonal trend during this period as well. (+)
• Risk gauges moved to neutral with weakness in SPY/XLU ratio, though it may not be related to risk-off reading. (+)

Neutral

• Volume patterns were mixed, with no accumulation days in the S&P while QQQ was the strongest with 4 accumulation days and only one distribution day. (=) 
• Sectors showed some broadening participation with most sectors up and technology taking a little breather. (=)
• The color charts (moving average of stocks above key moving averages) are showing improvements on the short time frames. (=)
• The modern family is mixed. Biotech and retail improved. Semiconductors potentially have an island top. (=)
• Soft commodities pulled back off their highs, dipping below its 50-Day Moving Average. Copper is consolidating and compressing at high levels. (=)
• Gold went from looking heavy to more of a neutral reading. Oil is maintaining a bullish stance, but could break below its 50-Day Moving Average. (=)
• The dollar is at its highest levels since April, 2025. (=)
• Rates rebounded slightly off historic lows. May be overdone on a short-term basis and saw a little mean reversion from oversold conditions on momentum. (=)

Risk Off

• EEM and EFA are both now in warning phases despite a big move in Brazil /Latin America. China could quickly change the picture if it has bottomed. (-)

 

---

Actionable Trading Plan

Maintain a cautiously bullish stance while looking for confirmation that improving market breadth and internals can support a sustained recovery. Favor selective exposure to growth and other sectors showing improving relative strength, while monitoring semiconductors for signs of a potential top that could signal broader weakness in technology. Watch DIA and IWM closely as they attempt to establish support around their 200-day moving averages, and look for continued improvement in market internals and risk gauges before increasing overall equity exposure. Remain cautious on international equities, particularly emerging markets, until they show signs of stabilization. With volatility near yearly lows and seasonal trends becoming more favorable, look for opportunities to add exposure on constructive pullbacks while maintaining disciplined stops and appropriate cash reserves to manage downside risk.

 

---

Keith's Weekly Market Analysis Video