Welcome back to Your Next Trade. This week’s edition explores one of the most important turning points of the year: the FOMC’s expected 0.25% rate cut and the powerful, broad risk-on rally that has unfolded over the past two weeks.

Below, you’ll find a full breakdown of what’s driving markets, the key technical levels across major asset classes, and the catalysts to watch as we head into the final stretch of the year.

🔍 Market Overview — A Two-Week Risk-On Frenzy

Expectations for a Fed rate cut have surged from 30% to over 90% in just two weeks—and the impact has been immediate.

Equities have climbed virtually in a straight line, with only one down day in the past 10 sessions. Volatility has been crushed from 26% to 15%, allowing volatility-control funds and systematic strategies to increase exposure.

What’s notable:

• Tech continues to dominate.
• Retail traders have returned, pushing up anything high-beta and high-short-interest.
• Market breadth remains weak—a troubling sign beneath the surface.
• Crypto is still underperforming (BTC & ETH both saw a sharp dip on Friday).
• Commodities mixed: Copper & silver strong, WTI steady around $59–60.
• Brazil and the UK lag—political risk & currency strength weigh.

💡 The Macro Backdrop — Why the Rally Looks “Hawkish”

Despite the risk-on mood, yields haven’t fallen, with the US 10-year holding around 4.14%.

Two forces are at work:

1. Governments Are Running Large Fiscal Deficits

US, Europe, and Japan all continue aggressive deficit spending.
More deficit → more bond issuance → investors demand higher yields.

2. Inflation Remains Sticky

The latest PCE print came in at 2.8% YoY, still above target.

This means the coming Fed cut may be hawkish in tone—offering support, but not turning fully dovish.

📈 Asset Class Breakdown

Equities

The S&P 500 and Nasdaq futures are now within 1–2% of all-time highs.
Price action resembles a VWAP-driven grind, typical when large institutional programs are active.

Leaders:

• Non-profitable tech
• High-beta retail favorites
• Short-squeeze names (e.g., Carvana entering S&P 500)

Laggards:

• Utilities (hurt by higher yields)
• Healthcare
• Consumer Staples (PG flagged weak low/mid-income demand)

Crypto

Crypto remains decisively out of favor:

• BTC and ETH underperformed sharply last week
• Crypto is no longer leading risk assets
• Market prefers AI, tech, and short-squeeze plays

FX

• USD/JPY pushing toward 160—trend remains strong
• EUR/USD consolidating but upward bias remains
• Brazilian Real struggled due to geopolitical tensions

Rates & Volatility

• Yields stable above 4%
• VIX crushed to ~15%
• Systematic buying likely to continue into next expiry (two weeks)

📊 Technical Setups

Apple (AAPL)

• Making new highs with no major news.
• Market increasingly prices Apple as an AI beneficiary.
• Partnership with Google Gemini seen as a long-term positive.

Oracle (ORCL)

• Major volatility around earnings expected this Wednesday.
• Key concern: ORCL’s deep investment in AI infrastructure and whether OpenAI monetization will justify it.
• Stock rebounded off the 200 level but remains fragile.

Indexes

• S&P Futures: strong uptrend, single red day in 10 sessions.
• Nasdaq Futures: similar structure; watch 27,000 resistance.

🧨 Macro & Earnings Catalysts This Week

1. FOMC Meeting — The 0.25% Cut

Market expects:

• A cut,
• But muted market reaction.
  Last 4 FOMC meetings moved markets less than 0.1%.

This week’s implied range: ±1.5–2%, signaling confidence.

2. AI-Era Earnings

Three critical AI-linked names report:

• Oracle (Wed)
• Adobe (Thu)
• Broadcom (Thu)

These earnings will heavily influence the market’s AI narrative.

3. Costco (Thu)

Key insights into the US consumer, especially low/mid-income pressure:

• Recent monthly sales slightly below expectations
• Valuation remains rich at ~35–40× forward earnings

4. Macro Data Backlog

With the US government reopened, expect daily data drops, especially from October.

5. Bond Supply

Over $100B+ of new issuance hitting the market this week.
Expect yield volatility around auctions.

📺 Big Corporate Move: Netflix Acquires Warner Bros

One of the largest M&A announcements in years:

• Estimated value: $80 billion+
• Expected combined free cash flow (2026): $15–20B
• Massive $58B bridge loan secured

This cements content + data synergies as a major competitive moat.

📌 Bottom Line — What Traders Should Watch

We’re in a compressed-volatility grind-up, supported by:

• Systematic flows
• Retail momentum
• Rate-cut expectations
• Strong tech leadership

But beneath the surface:
Breadth is weak, yields are sticky, and macro risks remain.

This week, focus on:

✔️ FOMC language (tone > cut)
✔️ AI earnings and their forward guidance
✔️ Yield reaction to bond supply
✔️ Whether crypto finds a bottom
✔️ Market breadth & tech dependency

🧭 Stay Connected

Want to dive deeper or join the community?

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Contact: greg@duponttrading.com

Have a good Trading Week!