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US Dollar breaking down to join Treasury yields while Emerging markets bounce back

Near-term trends are bullish for SPX, and I anticipate a sharp rally to finish the month of October after an interesting period of sector rotation in recent weeks.  Industrials, Consumer Discretionary, and Small-cap stocks have begun to show notable strength this week, while Financials look close to also turning higher.  Meanwhile, “Magnificent 7” hasn’t been so magnificent over the last month, and looks more like the “Lag 7” than the “Mag 7” with notable underperformance lately out of $AMZN, $NFLX, $META, $MSFT, while even $NVDA has begun to lose momentum. Meanwhile, IWM has just successfully broken out above SPY, going back since 2021, which bodes well for continued near-term outperformance by Small-caps.  Overall, the combination of time-based indicators and Elliott-wave structure seems to project higher to late October/early November before a possible peak. Bottom line, Treasuries, Equities, and Cryptocurrencies still have a good likelihood of pushing higher into late October, while the US Dollar is likely to pull back sharply into November before bottoming.  Regarding SPX, until trends turn down, I’m skeptical that “Tariff talk” or a Government Shutdown will do much to derail this rally.

In the short run, the rebound favors market bulls, and I suspect that a rally back to new highs is probable. Thursday brought about a breakdown in the US Dollar index, while Treasury yields fell further with $TNX finishing the session at the lowest levels since April after its own break of near-term support at September lows.

Despite some minor consolidation apparent in short-term trends, I don’t suspect that 6555 will be broken in $SPX over the next couple of weeks, and a coming push back to 6800 and potentially over this level looks possible between now and early November.

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