Note: There will be no video today as I am out of the office. Thank you for your understanding.
All eyes are on the US Dollar as well as US Treasury yields and both have pulled back along with US equities as the Polymarket estimates the threat of a govt. shutdown to be roughly 80%. I do view an eventual breakdown in DXY and TNX in October to be likely, so a prolonged shutdown could be a possible catalyst to watch for in the weeks to come. As Tom Lee and Ken Xuan have reminded us, Govt Shutdowns dont’ tend to be too problematic for the stock market. Yet, i do see the possibility of DXY and TNX extending declines in the weeks to come. Under 97.45 would be problematic for Dollar bulls and should kick off a decline to test and undercut September lows.
U.S. Dollar Index
Crude oil has backed off sharply in the last couple of days on evidence of another meeting set to hike output, and Bloomberg News cites that demand remains an issue. However, it’s tough technically to make the case of an immediate decline in WTI Crude after last week’s minor breakout, and more needs to happen to think this is underway. In the short run, there looks to be ample support near September lows at $61.45, and until this is breached, pullbacks should serve as opportunities to play for further strength in Crude in October. Yet the larger cycle does show weakness developing in November, which should take Crude down to the low $50’s at a minimum, so I’m mindful that this cycle might be getting started early. At present, barring further weakness to break support in WTI Crude, I still view last week’s strength as being a more important short-term positive than the negatives of price activity of the last couple of days.
Light Crude Oil Futures
As ^SPX enters the final day of September and the end of Q3, we see that this September could prove to be the best month of returns for September in over a decade. Despite the threats of Govt. Shutdown, tariffs, or inflation rearing its ugly head again, SPX is set to achieve nearly a 7% return for the quarter and has risen nearly 200 points for the month into Tuesday’s session, or nearly 3%, far outpacing normal averages. As discussed, it’s arguable that either sentiment or positioning has become extreme, and I expect that a minor 1-2 pullback likely should cease as October gets underway, leading back to new all-time highs. Key levels for SPX lie at 6626 as key support, while any move back up over 6677 argues that the continuation higher has begun. Overall, I view SPX as a good risk/reward and expect a rally back up to near 6730, then possibly 6800 into mid-October, and don’t feel like the weakness early this week is all that meaningful. This hourly SPX chart helps to put some of the recent price action into perspective.
S&P 500 Index
This Crude seasonal chart does show quite negative seasonality trends for WTI Crude in the back end of most years. Yet, it’s tough technically to argue for a breakdown just yet, and I expect this will be more evident in late October/early November into year-end. Then heading into 2026, there’s a high likelihood of positive prices in the first half of the year, which we’ll discuss in greater detail in my annual Outlook for 2026.
Crude Seasonal Chart
Chinese Equities have rebounded again after having found brief resistance just under $42 in FXI, the China Large Cap ETF. I expect to see FXI rise to near $42.64 and would consider lightening up exposure into this area into October (or utilizing a 5-period moving average on a daily chart, where any daily close under the 5-day m.a. would constitute a short-term sell. Importantly, there could be a time heading into next week where both daily and weekly DeMark TD Sequential “13 Countdown” signals could unite, but i am still expecting a final push above $42 technically which might reach resistance between $42.50-$43 (ideally 42.64) before stalling out. While i’m bullish on FXI as the US Dollar starts to pull back to new lows, i do anticipate an upcoming initial stalling out into October.
China Largecap Ishares ETF – FXI
