It was a bullish month for equities, SPX +114pts (2.0%) to 5762, with the Transports +250pts (1.6%) at 16294. WTIC declined by -$5.38 (7.3%) to $68.17. Copper climbed +34cents (8.1%) to $4.55. The USD weakened by -86bps to DXY 100.76. The US 10yr yield fell by -12bps to 3.79%. The US 10yr/2yr spread climbed +16bps to settle at +14bps.
SPX, monthly
The tenth monthly gain of eleven, having printed a new hist’ high of 5767. Monthly momentum ticked upward, and is on the VERY high side. RSI 72s is overbought, but there is zero sign of a m/t ceiling/turn. Another monthly settlement above the key 10MA (5267) as the m/t trend remains comfortably bullish.
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Trans, monthly
The fourth month higher of five, if broadly stuck since mid 2021. Bullish (to be decisive) >16800. Bearish <15K. Considering subdued oil/energy prices, its arguable the transports are under-performing.
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WTIC, monthly
Oil declined for the fifth month of six, having fallen from the $87s to $65s. Monthly momentum continued to weaken, settling on the marginally negative side. Lower energy prices are bullish for literally everything – especially the transports, except the energy companies themselves.
The concern to the Fed and equity bulls, should be even a return to the $80s before year end. That’d not merit any hysteria, but it would be a pressure on the already broken US/global consumer.
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Copper, monthly
A second monthly gain for Dr Copper, although price action was pretty dynamic, swinging from $4.04 to $4.79, and settling at $4.55. Monthly momentum remains marginally positive. The PBOC was largely responsible for late September upside. I’d accept m/t bullish, unless back under psy’$4.00.
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USD, monthly
The dollar weakened for the fourth month of five, having repeatedly tested the psy’100 threshold. Monthly momentum ticked lower, and is on the moderately low side.
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US 10yr yield, monthly
The 10yr yield fell for a fifth consecutive month, settling at 3.79%. Monthly momentum is on the very low side. Mr Market is arguably pricing in another 100bps of rate cuts into spring 2025.
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US 10yr/2yr spread
The first positive monthly settlement since June 2022. The sustained uninversion is a distinctly bearish signal for equities, if a little less than a rate cut.
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Miscell ‘things
Sachs remains one of the best out there.
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Looking ahead
Tuesday will see PMI/ISM manu’, construction, JOLTS, vehicle sales
Earnings:$PAYX $MKC $AYI $UNFI $NKE $LW $RGP
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October Surprise
We should expect at least a few surprises of some size within October. Why would anyone not expect another maniac to try to take a shot at Trump or even Ms. Harris?
The middle east continues to worsen, with tensions between NATO/Russia arguably higher than even during the height of the cold war.
Frankly, I’ll be pleasantly surprised if we make it across October without something truly ‘crazy’ happening.
Goodnight from London