Market Backdrop
The week centered on rising interest rates and Treasury yields. The market is repricing risk assets to fit higher oil prices, heavy company spending, and inflation that stays high for a stretch. This is a rational readjustment. Companies will borrow at higher costs, so prices need to reflect that. The base for continued economic growth and stock market gains is still there, just recalibrated for slightly higher rates and hotter inflation.
Costco (COST)
Costco reports earnings September 24th. Worries about Walmart (WMT) and a squeeze on consumers point to shoppers turning value-oriented, which helps COST. The company has strong customer loyalty; much of its revenue comes from that loyalty, and its inventory turns over fast, so it is somewhat shielded from short inflation shocks. The main risk is a high multiple and rich price. In a world of higher rates, higher inflation expectations, and heavy data center spending pouring capital into the economy, COST is a more defensive place to hide. BJ's (BJ) posted a good report this morning, a possible read-through for COST. Shares rose about 1.4% on the session, near 946.22. COST is up year to date but trailing the broader market.
Charts: The high was 1096.50, set before earnings. Since then, price has been rangebound and sideways with volatility, mostly between 994 (resistance) and 900.7 (lows), after a sharp drop from the highs. Downside levels: recent relative lows near 926, another low near 917. Upside: a gap fills near 956, then highs at 979 and 988. The pattern is a symmetrical triangle from converging highs and lows, and price broke to the downside. The 5-day and 21-day exponential moving averages meet near 949-950, lining up with the old trend line for a confluence resistance point. RSI is moving lower with a downward trend line and sits below the 50 midline, but may recross above it. Volume profile: point of control near 945, main node 935 to 960, a downside node near 912, an upside node near 1,000.
Berkshire Hathaway (BRK/B)
The most defensive of the three picks. New CEO Greg Abel is shifting the investment strategy, with headlines on exited positions, bigger stakes, and new companies. Repositioning out of pure growth names fits a higher-rate world. The core business sits around insurance and reinsurance, plus railroads and an oil infrastructure play. If growth stays firm and inflation runs high, that is tricky for growth names but a strong period for BRK/B, a company built to weather any pricing environment. Still tied to Warren Buffett despite the leadership change. Shares are roughly unchanged on the year, up about 2% over the past 251 days.
Charts: Highs of 537.74 mostly evaporated after earnings. A sharp rally came off a repeated floor near 486. A small gap formed near the lows around 499. Resistance levels: a high at 507, another near 515. A trend line and a downward sloping trend line are both in play, and price is on the verge of pushing past. The 5-day EMA (dark blue) and 63-day EMA (gold) meet at 498 to 500, a support area. Below that, the 251-day (orange) sits near 490. Above, the 21-day (teal) is at 505, near the downward trend line. RSI broke below its green trend line and sits under the 50 midline, but today the red downward trend line looks broken; watch for a push above 50 and new RSI highs. Volume profile: most trading between 490 and 505, point of control near 497.
Caterpillar (CAT)
The most cyclical pick, tied to AI infrastructure spending and tracking semiconductor stocks. The difference from hyperscalers and chipmakers: CAT does not depend on having the best chip or a winning large language model. It is a picks-and-shovels play. As long as spending continues, and it keeps rising, companies must build data centers and buildings, move dirt, and run big machines that CAT is one of few to supply. CAT is also gaining traction in power generation and turbines, key to the data center buildout. It does not matter to CAT whether China has a better model or someone misses a benchmark; what matters is that these companies keep spending and investing, and every indication over the past year shows they are and believe in this future. CAT is up close to 100% over 52 weeks. Shares traded about 0.5% higher on the session at 819.11. Momentum held steady through July, then faded under pressure.
Charts: Highs at 1073, with a downward sloping trend line still in play. A gap formed at recent lows, and a mild upward trend line still holds. Horizontal levels: 776, then the gap at 752 to 727. A repeated floor sat near 665. To the upside, a floor near 850, muddier now but still watched, plus highs and subsequent lows near 933. The 5-day, 21-day, and 63-day moving averages all point downward and are pulling apart, which says the trend has not turned back up. The 5-day EMA (dark blue) at 828.55 is the next resistance; the 21-day lines up with the trend line near 852. RSI is below 50, no clear short-term trend; watch for a cross above 50 for bulls or a push below 30 for bears. Volume profile is choppy with distinct nodes near 815-820, one to the downside between 750 and 775, and a larger one from 860 to 915.
