Market Update & Signals 9/29/26
Good morning.
Treasury market stress continues to rise: TLT hit new all-time lows. Bond volatility is approaching March highs (when VIX was above 30, now 16). Credit spreads are widening. The 10-year yield is approaching June 2007 levels at 5.30%. TLT closed with an indecision candle and rising share volume and put volume. Rate-hike odds for the two remaining 2026 FOMC meetings are at 70% and 85%, respectively. Four hikes are now priced for the next 12 months.
Equity breadth is still deteriorating badly: The average S&P 500 stock is down ~5% in September while the index is flat. Equal-weight RSP is tied for its longest weekly losing streak since inception (*the only other 7-week decline was Q2 2022). The advance-decline line is falling vs. indices near highs.
A MAJOR ETF is now front and center on my screens. Will be updating this one very closely.
As I wrote in “The Hard Trade”: it’s time to watch key signals and be on the lookout for any shift in market conditions.
I want to be ready as each signal fires…
Looking through the tape:
1. Themes On Watch.
🟢Japan had a successful bond auction: JGB 40-year notes saw the strongest demand since 2020.
Bloomberg: “The Ministry of Finance’s latest 40-year JGB auction, which was very well received, comes just ahead of Japan’s Sept. 30 fiscal half-year balance-sheet close, when life insurers, trust banks and pension funds typically reassess duration needs. With yields above 4.2%, investors have one of the most attractive opportunities in years to lock in long-term returns and reduce asset-liability mismatches. Trust banks, often viewed as a proxy for pension demand, recorded around ¥642 billion of net purchases of super-longs in August. Life insurers also remained net buyers, albeit at a more moderate pace, purchasing about ¥300 billion. That contrasts with the heavy net selling seen earlier this year and points to improving domestic demand at current yield levels.”
🟢Bond Veteran Jim Bianco Turns Bullish for First Time Since 2020 (BBG)
Jim Bianco is turning bullish on US Treasuries for the first time in six years after benchmark yields surged to two-decade highs.
Bianco said yields above 5% across most maturities make the risk-reward of owning bonds increasingly attractive, and he increased interest-rate exposure in an actively managed index.
Bianco views the rise in yields as a return to historically normal levels, rather than a sign of economic distress, and sees an opportunity to gradually add exposure to bonds.
🟢NVDA announced a record share buyback and an industry-wide initiative for cybersecurity.
🟢Reuters reported Anthropic’s IPO prospectus showed a net loss of $42bn in 2025, and plans to spend $518bn on cloud, computing and infrastructure obligations in the coming years.
*What happened to existential risk for humanity / slowing down AI?
Better get that IPO out the door soon...
🟢China Signals Stimulus Coming to Counter Worsening Slowdown (BBG)
China’s government has promised to introduce new measures to support the economy and study policies to stabilize the property market.
The State Council will “put in place a package of practical and effective additional policies” to safeguard this year’s economic goals.
Policymakers will study fresh measures to stabilize the property market, promote employment and boost household income, and will adjust monetary policy tools “in a timely manner”.
2. Precious Metals.
Gold fell sharply yesterday.
Gold and Silver broke their 50-day, a tactical concern.
Below, GDX undercut support and could be in a shakeout. Note the 0.618 retracement was also tested. Critical to stabilize here:
*I want to see how this trades over the balance of the week, especially since we are entering a turn window for Bonds and geopolitical news volume is getting active.
Important not to lose sight of the big picture here, if USD/Rates build a turn, metals are among the prime candidates for leadership, and a stock rotation could be in full view as well. Just have to see how this plays out near-term.
3. Stocks.
SPY remains in a range defined by the lower gaps and bull flag channel. No change in view for now.
QQQ relative strength continues:
MAGS and SMH still holding well:
Looking at the oversold groups:
A MAJOR ETF is now front and center on my screens.
Utilities are the worst-performing U.S. sector in Q3, and I’ll just throw it out there — I think the group is approaching a major bottom.
First, the daily chart is at critical levels:
The weekly chart has massive support just $1 lower:
Even more important:
These are extreme conditions — aligned with major historical bottoms:
The Utes are approaching levels seen at the depths of S&P Bear Markets (2002, 2008, 2023), while the S&P itself is 1% from the high.
I want to take a step back and think about the big picture for a moment:
If the Utes bottom, what does it mean?
Maybe there are enough oversold groups to justify SOME shift in allocation from AI/Tech, into beaten-down Cyclicals/Rate-sensitives?
At the end of the day, as investors our job is to think about portfolio diversification.
One of our MAIN goals for Q4 will be to focus on minimizing the margin of error, by looking for new diversification options.
Maybe the Midterms will lead to an “everything up rally” and all is well.
Or maybe, a bit of diversification — at the right price — could lead to better outcomes?
To this goal, I’ll be looking to shift exposure gradually over the coming weeks.
In the meantime, I will be watching Bonds and Utes closely.
Lastly:
A lot comparison have been made between the fractured market today vs. 2000.
But here’s one comparison no one has made… an actual BULLISH one.
I think it’s highly worth mentioning:
XLU, XLF, and XLP rallied FIFTY percent in 2000, even with the market rolling over:
Who wants to buy any of these ETFs today?
This is one of the reasons I want to watch these beaten-down groups so closely.
Taken together, maybe they’ll be a big Buy opportunity.
It doesn’t have to mean the “end of AI” — it could just be a classic rotation.
Either way, I’m interested in building exposure around these soon.
Which brings us back to…
4. Rates.
The picture could be aligning perfectly:
Bottom 2-percentile — and on pace to 1-percentile by Friday.
At this rate, Bonds and XLU could likely bottom together.
What will be the catalyst?
Have a nice day ahead,
-MC
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