A market caught between two forces
The market is in a tug of war. On one side sit the macro headwinds: higher rates, higher oil, and lasting uncertainty about the Fed. On the other side sits a still solid economy and earnings backdrop, which has likely stopped deeper losses in stocks.
Fed Chair Kevin Warsh said the Fed is not in the business of giving forward guidance, which markets did not want to hear. Without that guidance, investors will grab onto any data point and any Fed message, and that can make trading more choppy. Even so, I stay constructive on stocks. The headwinds will bring some choppiness, but earnings expectations for the next year remain strong, and companies keep posting solid profits.
Right now stocks are in an earnings blackout period, which tends to be bullish. From the unofficial start of earnings season with JPMorgan (JPM) through Walmart (WMT), S&P 500 earnings rise more than 70% of the time. The next earnings do not come until October 13th, so the next several weeks should stay choppy.
The technical picture
The technicals agree with that view. The S&P 500 so far has printed a failed breakdown below key support around the 50-day moving average and a prior price shelf near 7,600. The index spent the last couple of weeks consolidating below declining highs, which showed sellers could not hold the recent break lower. In technical analysis, failed moves can lead to fast moves the other way. Next week likely marks an important decision point.
Volatility is coiled tight. The Bollinger bandwidth is squeezing to some of the most compressed levels seen all year. Historically, low volatility shifts to volatility expansion, and those expansions can bring price breakouts in either direction, so traders should watch for that. Despite some breadth washouts under the surface during a seasonally weak period, price has stayed resilient, buyers keep stepping in, and the market appears to be digesting the crosscurrents through consolidation rather than a breaking trend.
Calm on top, churn underneath
The index-level calm is striking. The S&P 500 has gone 35 straight trading sessions without a 1% drop. The last big down day was July 29th, which was the prior Fed day. That kind of streak had not appeared since October 2025, per Bloomberg data. Under that calm surface, there is heavy rotation in and out of tech - the constant hot and cold of the AI trade.
I upgraded energy as a hedge against the geopolitical tension, with added strength from earnings and higher oil prices. I took a more cautious view on communication services, where tech concentration is becoming a problem, especially as AI leaders point to worries about excessive spending.
Copper and long-term yields
One of the more interesting intermarket links right now is the strong correlation between copper and the 30-year Treasury yield. The rolling three-month correlation has climbed to roughly 75, near a three-year extreme. When correlations hit extremes, they usually unwind, with one asset reaching a decision point.
Copper recently broke below the lower boundary of a rising wedge, then quickly reversed back into the pattern - another possible failed breakdown, or a bear trap, where sellers run out. If prices keep rising, traders may look toward the upper end of the range near 6.9. This ties to the macro picture: copper is often a barometer of industrial demand, and long-term Treasury yields reflect growth and inflation expectations. Both moving higher together suggests markets may keep pricing in resilient nominal growth and lasting inflation pressure.
