Market Update & Signals 10/1/26
Good morning.
September and Q3 are in the books:
What stood out:
✅ Stocks ignored September seasonality, with Tech leading the tape.
✅ Strength led to more strength…
✅ Not many areas did well, but those that did were extremely impressive.
Another big vote for following trends…
At the beginning of September I said it was likely to be a “very choppy month”.
Overall:
Q3 and September were a mine field, but patience and discipline kept us mostly out of trouble.
October and Q4 are underway:
Who could win the final stretch of the year?
Will momentum continue?
- Tech leadership is in full view again this morning…
- Nasdaq futures are leading higher, after Micron’s results boosted tech sentiment.
- Alphabet shares are higher after it began rolling out Gemini 4 Argon, its long-awaited flagship AI model.
- Technology stocks also led gains in Asia, with the Nikkei up nearly 3%.
Other markets aren’t faring so well...
*FRANCE-GERMANY 10-YEAR YIELD SPREAD WIDENS 4BPS TO 131BPS
*UK 30-YEAR BOND YIELD CLIMBS TO 6% FOR FIRST TIME SINCE 1998
*US 10-YEAR YIELD RISES TO 5.33%, HIGHEST SINCE 2002
I continue to follow my plan, which has served well so far, while looking to make NEW adjustments.
We’ll explore two big new trades today.
As before — I want to be ready as each signal fires.
Looking through the tape:
1. Stocks.
NKY is the leading chart this morning:
*Aligned with my tactical view on Tech, think there’s room for this to extend to new highs for the month of October:
Other markets aren’t faring so well…
Europe is visibly weak, with rates beginning to cause real problems:
CAC is extremely oversold and in a full-blown panic:
Moving to the U.S.:
If Breadth goes any lower, it will hit levels last seen at (1) the 2022 Bear Market bottom, (2) the Q4 2023 bottom, and (3) the April 2025 panic bottom:
Sector damage is widespread — with no reversal yet:
Lastly, an interesting comment on investor flows:
JPM published a note showing investors have pulled back sharply from stocks (*last time was in late 2023):
*What’s the catalyst to bring these buyers back?
2. Rates.
Today we’ll get ISM, and tomorrow NFP…
Bond sentiment is at 1.3 percentile — on pace to sub-1 by Friday:
Remember:
After similar oversold conditions, Bonds just needed to stabilize for rate-sensitive markets to rip higher. A lot of markets currently fit the profile.
Speaking of which…
3. EURUSD.
Over the last decade, every single time EUR sentiment hit these levels, it staged a sharp countertrend rally OR formed a major bottom:
This breakdown looks like a classic setup for a bear trap reversal:
*Note EUR also broke down in March/June each time for two days — and the second day was the bottom. Then it rallied 4 figures over the next 1-2 months. A similar pattern would bottom tomorrow and target the 1.16 range by November-December (a massive move). With sentiment at extreme, a reversal could come at any moment.
4. Brazil.
One market I’m quite interested in watching here.
The recent pullback held nicely, though yesterday’s gap up isn’t ideal:
Overall, this is in good position for a roll-up in the next week or so.
Maybe a bit more chop in this range as it builds the turn.
Ultimately: Brazil could have significant upside AND be largely uncorrelated to the broader portfolio.
It would fit nicely with the diversification framework.
Flows are starting to recover — after a big reset:
This sets up a nice chase higher into year-end and 2027…
*Added Brazil to the Portfolio Holdings page, on watch for entry — will update.
Have a nice day ahead,
-MC
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