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Good morning partner,
Few things to cover this morning:
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Yesterday’s Session
A broader equity risk-on day to say the least, as most of the market’s sectors ended up in the green with very little resistance to speak of.
The tech-heavy NASDAQ made a new all-time high while the S&P 500 is looking to match that milestone this week as well, on what turned out to be a strong Services PMI print.
What I believe is happening is a broadening of the rally in terms of breadth, as manufacturing also gave us reason to bid some of the real economy names that were characterized as “coiled springs” for a few weeks now.
I’m personally looking forward to this sort of price action as portfolios and ideas get built around these emerging themes, some of which already made it to the portfolio yesterday.
Two things to keep in mind as we attempt to hold the new highs:
Bond Yields
Energy prices
There’s a lot of tail risk going on right now in bonds and fuel products like diesel and crude, both of which would trigger the release of these coiled springs if they get fixed back to a normalized level.
Later today, you will receive my Services PMI breakdown to expand on the watchlist derived from manufacturing so be on the lookout for that.
And in the meantime,
Let’s take a look at yesterday’s leaders and laggards:
Real Estate, Communications, Utilities.
If you’re part of premium, you know yesterday marked a great opportunity to buy into housing as one of the coiled springs.
Price action in some of those companies are beginning to move ahead of some indicators like building permits and housing starts, which in my view could trend aggressively higher once mortgage rates (through 10-year yields) come lower.
Recall from my manufacturing PMI breakdown that wood products had the highest composite score over the past quarter.
Should this price action hold, it would trigger me to expand on that portfolio and include more than just wood products, leaning on assets like REITs and other players involved in the industry.
Comms and utilities in my view are a bid for an easier environment pushing the data center and AI complex buildout into further highs, where both of these sectors benefit.
Here’s what I liked the most though…
Energy fell as crude prices remain below $90 for another week, boosting the odds of profiting from our diesel spreads trade idea in select long/short names.
I may add some more risk to that trade this week as well.
New Ideas
Services PMI Trends & Historical Percentiles, Offside Capital
After Manufacturing PMI data proved what industries are worth taking a further look into…
We just got confirmation of what’s really happening in the economy from yesterday’s Services PMI report.
One industry in particular stood out to me, and two others are also starting to build what seems to be a renewed bull run.
Usually,
The data turns, and we begin to see beneficial price action within a month.
Which means we’re right on time to start digging into the report’s specific developments, and drilling down to the filtered industries that come out the other end.
I am dropping this research later today, and you will see why inflation coupled with rising bond yields may continue to be a pain point for the markets.
More importantly,
A brand new watchlist will be added to the mix, with the names worthy of keeping an eye on as the year ends.
Just like the fresh list of names I sent over the weekend from my manufacturing PMI analysis.
And, in case you haven’t gone over it yet…
News
Trump Announces Diesel Aids through limits on tax-exempt products, his latest attempt to pare fuel prices ahead of the midterms, and a direct benefit to my diesel long/short equity spread trade.
Brazilian Asset Prices Spike after Bolsonaro won the first election round, one more to go and we will be prompted to finalize due diligence on a Brazilian basket of attractive high-growth companies.
Sam Altman called Cerebras a close partner yesterday, as faster AI needs faster chips to keep compounding on its growth trajectory, suspicious knowing NVIDIA is a backer in both companies.
Bank of America Warns the easy money made in the AI boom may no longer be available as the market now becomes more selective on who it rewards, a divergence we’ve been covering in these morning digests.
Movers & ES Levels
Nu Holdings 📈 Rose by over 13% after a new wave of buyers came to Brazilian equities on better election prospects, a theme we’ve been mentioning recently for that Latam market.
SpaceX 📈 Gained 7.6% after Morgan Stanley upgraded the stock, arguing that it looks cheap relative to future milestones. In my view, this is still a highly speculative company where a lottery ticket approach could better serve you.
Intel 📉 Fell by 2.6% after Elon Musk confirmed he is choosing TSMC for its chip manufacturing venture over Intel, showing that rising competition is in fact a growing concern in the industry, such is the evidence from Micron’s earnings as well.
Lennar 📉 Lost 6.7% following some accusations about off balance sheet dealings and aggressive mortgage rate buydowns, I like to see this as a new catalyst to start playing the rebound in housing and the cleanse of the industry.
Now let’s get into some ES levels for today.
Looks like we managed to ram through the sellers at $7,800-$7,810 yesterday.
Which leads me to the next range of $7,850 to $7,800-$7,810 now as a tradable balance for the week.
Aggressive buyers remain closer to $7,800 right now and that makes for a level sellers will want to attack right now, so play it carefully if you’re looking for longs around that area.
Aggressive sellers remain around $7,850 so buyers will do everything they can to ram through that trap, especially as a $770 call wall was taken out of the SPY ETF this week.
For now I remain bullish, what changes my mind is a close at or below that $7,800-$7,810 range.
Portfolio
We remain rangebound between 7-9% in the net portfolio performance since June 2026.
I am highly confident the new watchlist derived from the PMIs will bring additional performance spikes this month and quarter, as the signals are some of the cleanest ones I’ve seen all year.
Portfolios are being built around these signals and will be pitched out to members as we finish our due diligence and choose to execute on them.
Expiration Friday is approaching for our options portfolio, where a new roll of memory put spreads will show you just how beneficial it is to have this strategy in your trading account.
Don’t be surprised to see a few trade alerts come out this week.
Here’s the positioning update for today’s premium members:
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