Friday closed the week with a relief rally. The S&P 500 gained 0.86%, the equal-weight index 0.80%, the Dow added 508 points or 0.98%, the Nasdaq 0.96% and the Russell 2000 0.45%, after the announcement of a GCC-Iran meeting in Oman on Monday, the first since the war began. The August CPI came in a little firmer than expected on the core services side, and the market now prices 50 basis points of hikes for the year with roughly 90% odds of a move on September 16. The 2-year yield jumped 4 basis points on Friday while the 10- and 30-year were about flat, after a week in which yields had spiked on the CPI, the PPI and the $5,000 dividend idea from Washington. Brent pulled back about 2.5% to $104.85 on the diplomacy news, even as Saudi Arabia shut its East-West pipeline as a precaution. Gold rose 0.65%, silver 1.2%, bitcoin was flat. Under the surface the AI hardware names led, memory and security software lagged, and the Michigan survey showed year-ahead inflation expectations up to 4.6%. The Fed decides on Wednesday.
The CPI week has done its clearing work on the ceiling side. Three alerts we carried through the summer left the board this week, each with at least a first price answer. The wheat exit flagged on Sunday at -93, deep in the model’s topping range, did its work, the price gave back 5% from Tuesday’s rebound, and the momentum signal has now expired with the score easing to -80 with neutral momentum. The financials maximum of September 2 closes its episode at -33, back outside the alarm range, with the sector about 2% below the high it set the day after the alarm, a modest answer, on the record. The DAX’s second alarm expired at -38 after the index closed below the 25,839 we had named as the first confirmation level, a 1.8% dip from Sunday’s reading and no more, so the second half of the April round trip has a first step and no verdict. A new round trip opens at corn. The +100 floor call of June 26 near 413 has paid 29% to Friday’s 532, and the model now posts a bull exit at -61. The buyers step back and the rise no longer carries, and that reading opens the ceiling half of the trip.
The day’s thesis is that the summer’s ceiling alerts have cleared with the price on the model’s side, and the floor side has hardened at the same time. The S&P 500 industrials hold the bullish maximum of +100 with a bear exit, the decline has lost its drive and appears to be turning, and the backing has grown from four cycles on Tuesday to six, the broadest on the board. That keeps them the Chart of the Day. The PHLX Semiconductor index stays at +99 with a bear exit beside them, a point below the industrials, gold re-enters the zone at +63 on four cycles, and the euro futures hold +80, well inside the zone, on four. The rates alert has been re-armed by the week’s spike. The 10-year is back at -87 on Thursday’s data, close to the bearish maximum, with a bull exhaustion, the bulls are in an overshoot and the upward move is overstretched, and the Fed meeting on Wednesday is the next referee.
Our daily analysis filters roughly 45 markets through a cycle consensus engine. Each asset receives a Consensus Score from -100 to +100, the model’s summary reading for a possible turn, where positive values mark potential cyclical bottoms (a time window where a decline could end) and negative values potential cyclical tops (a window where a rise could stall or reverse). Readings beyond ±60 enter the critical zone, a critical reading at which the cycle model raises the alarm for a possible turn. Let’s take a closer look.
