This week was all about rotation. Despite the S&P 500 and NASDAQ finishing flat, volatility surged as traders repositioned ahead of Nvidia’s earnings. The Russell 2000 lagged, down 2%, showing that underperformers are still struggling to catch up with the “Fabulous 7.”

• Momentum unwind: Goldman Sachs’ momentum index fell 12.5% from Monday to Friday, highlighting sharp reversals in high-flying names.
• Global picture: Europe held up well, currencies stayed flat, while crypto sold off hard.
• Commodities: Gold and copper both gained +2% on the week.

  

   

💹 Sector & Industry Rotation

The week-to-date industry performance showed dispersion:

• Winners: Healthcare, energy, materials, consumer staples.
• Losers: Semiconductors, nuclear, consumer discretionary (Tesla slipped below 400).
• Defensive tilt: Gold miners and staples outperformed, while high-beta sectors struggled.

  

   

💰 Macro & Rates

• 10Y Treasury yield: Hovered around 4.15%, with inflation expectations creeping higher.
• Fed expectations: December cut odds dropped from 95% a month ago to ~40%.
• Data backlog: Due to the government shutdown, October’s economic data will not be released. September NFPs, CPI, and PPI are coming this week.
• Volatility: VIX remains elevated at 20, signaling macro uncertainty and consumer weakness.

  

   

📊 Technical Picture

• S&P & NASDAQ: Both bounced off their 50-day moving averages. Traders are watching closely—closing below could trigger a bigger sell-off.
• Bitcoin: Fell to 95,000 (-8.5%), with next support around 91–92k.
• Healthcare (XLV): Strong bounce driven by Eli Lilly, back to the 200-day MA.
• Consumer Staples (XLP): Defensive strength continues relative to SPY.

🚀 Momentum & AI Theme

Since early 2023, AI has driven 60–80% of S&P EPS growth. The Goldman Sachs momentum index surged from 400 to 580 (+40%) before this week’s pullback. Even with a 12% correction, the long-term trend remains strong.

🏦 Nvidia Earnings – The Big Catalyst

All eyes are on Wednesday after the close:

• Expected move: Options pricing a ±6.5% swing.

  

   

• Revenue forecast: ~$54B (+55% YoY, +18% QoQ).

   

  

   

• EPS growth: Also +55% YoY.
• Trend: Revenue beats are shrinking (from +5.8% to +1.5% over the last four quarters).
• Market impact: Could drive a ±2% weekly move in the S&P, with NASDAQ more sensitive due to higher beta.

   

🛡️ Mentoring Highlight – Defensive Trade Idea

One mentee identified Procter & Gamble (PG) as a defensive play:

• EPS growth: 5–6%
• Free cash flow: ~$17B
• Valuation: P/E below market average
• Trade setup:
  • Long PG vs. XLP with tight stop-loss (4–5%) and upside potential (~30%) → 6:1 risk/reward
  • Alternative: Call spread into June 2026 to reduce idiosyncratic risk

  

   

📅 What’s Next

• Macro data: September NFPs & retail sales (Thursday), CPI/PPI backlog.
• Fed: FOMC minutes Wednesday, multiple Fed speakers.
• Earnings: Walmart Thursday, Nvidia Wednesday.
• Seasonal catalysts: Thanksgiving, Black Friday, Cyber Monday → US consumer check-up.
• December: FOMC meeting + year-end options expiry.

  

   

📝 Final Thoughts

This week’s rotation highlights the tension between defensive positioning and AI-driven momentum. Nvidia’s earnings will be the defining catalyst—setting the tone for year-end trading.

Stay nimble, manage risk, and keep an eye on both macro data and sector dispersion.

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Have a good Trading Week!