Weekly Newletter #49

S&P 500 Extends Winning Streak with New Record

It was another historic week for U.S. equities as the S&P 500 Index climbed to a fresh record high, closing the month of October on a strong note despite a crowded calendar of events. The benchmark index ended Friday, October 31, at 6,840.20, up 0.71% from 6,791.69 a week earlier. On Wednesday, October 29, the index touched a new all-time high of 6,920.34, marking yet another milestone in a year defined by resilience, liquidity, and investor confidence.

chart courtesy of stockcharts.com

A Week of Opening Gaps

Every trading day last week began with an opening gap:

• Monday: gap up +53.77 points

• Tuesday: gap up +22.58 points

• Wednesday: gap up +20.06 points

• Thursday: gap down –30.09 points

• Friday: gap up +56.83 points

In technical terms, an opening gap occurs when the day’s opening price differs from the previous day’s close. Gaps often signal heightened conviction - or confusion - about the direction of the next move. Traders study these gaps closely because they can be breakaway gaps, where prices continue trending in the same direction, or exhaustion/fill gaps, which quickly reverse.

This week’s repeated pattern of gaps reflected a market digesting major policy news, corporate results, and macro headlines simultaneously. For short-term traders, the intraday volatility offered opportunities; for long-term investors, it highlighted the difficulty of timing entries at record levels.

Fed Cuts Rates by 25 Basis Points

The Federal Reserve was at the center of attention last week, cutting the federal funds rate by 25 basis points as widely expected. The decision marked another step in the Fed’s gradual shift from restrictive to a more accommodative policy, aimed at cushioning the economy without reigniting inflation.

Fed Chair Jerome Powell’s comments at the post-meeting press conference were consistent with prior guidance but carried a slightly more cautious tone. He emphasized that the December rate decision is not a done deal, reinforcing the idea that future policy will remain data-dependent.

Markets initially interpreted the statement as slightly less dovish than anticipated, tempering expectations for an immediate follow-up cut. However, despite the nuance, equity investors seemed reassured by Powell’s steady tone. The S&P 500 briefly sold off mid-week after the statement but recovered somewhat as traders refocused on corporate earnings and the improving global backdrop.

U.S.-China Trade

Adding to an already busy week, the U.S. and China met to discuss a trade deal, signaling renewed diplomatic momentum after months of tension. The deal followed talks between U.S. President Donald Trump and Chinese President Xi Jinping - their first in-person meeting since Trump began his second term. The resumption of dialogue eased market jitters over global supply chains and further supported risk appetite.

Trade optimism, combined with ongoing central-bank easing across major economies, provided a favorable environment for equities. The S&P 500’s ability to push through prior highs reflected not only the macro environment but also investors’ willingness to look beyond short-term policy uncertainty.

Earnings: Big Tech Steals the Show

Last week also featured one of the heaviest earnings calendars of the quarter, with Big Tech once again setting the tone. Overall results were solid, underscoring the sector’s financial strength and strategic importance within the index.

• Apple and Amazon both beat earnings expectations, driven by strong consumer demand and efficient cost management.

• Meta and Microsoft posted earnings above consensus but faced investor pushback over aggressive capital-expenditure plans, particularly in AI and infrastructure, where returns will likely take time to materialize.

• Alphabet (Google’s parent) also delivered a strong quarter, with both revenue and earnings surpassing forecasts. The stock surged after results, helping to stabilize market sentiment later in the week.

Notably, all five of the “Big Tech” giants exceeded their quarterly estimates, though the market’s reaction diverged depending on forward guidance and tone. The disparity underscores the fact that while earnings remain robust, valuations are demanding and expectations extremely high. Investors are scrutinizing growth trajectories rather than backward-looking metrics.

Valuations and Market Leadership

By historical standards, the S&P 500 remains expensive, trading well above its long-term price-to-earnings average. Yet the mega-cap technology leaders - with their balance- sheet strength, cash flows, and dominant market positions - continue to justify a premium. Their collective weight in the index gives them disproportionate influence, both mathematically and psychologically. When these names rally, the entire index benefits; when they falter, even strong breadth elsewhere struggles to offset the drag.

This dynamic explains why each quarterly update from these companies can move trillions in market capitalization. It also highlights the need for sector rotation if the bull market is to broaden and sustain momentum into year-end.

Government Shutdown

Complicating the macro picture, the ongoing government shutdown has disrupted the flow of key economic statistics. With limited new data on employment, inflation, and consumption, policymakers face a challenge. The Fed’s “data-dependent” approach depends on precisely the information that is now difficult to obtain. That uncertainty adds another variable to the December meeting and leaves investors parsing corporate guidance and market indicators for clues about underlying growth.

Still, financial markets have taken the data blackout in stride. As long as liquidity remains abundant and earnings do not materially deteriorate, investors appear content to maintain exposure - even at elevated valuations.

Commodities and the Dollar

In commodities, gold experienced a less violent week than the previous one. It dipped below the key psychological threshold of $4,000 per ounce and closed on Friday at $3,997.10. The metal’s pullback likely reflected continued profit-taking after months of steady gains and a modest rise in real yields following the Fed meeting.

Meanwhile, WTI crude oil traded within a $3 price range and stabilized over the past week. The spot cash market crude closed at $60.88 per barrel, reflecting a period of steady prices after earlier declines. Traders appeared to be balancing geopolitical risk and mixed demand signals with optimism over improving U.S.-China trade relations.

The U.S. Dollar Index weakened slightly on the rate cut, while Treasury yields edged lower across most maturities, maintaining a supportive backdrop for risk assets.

Looking Ahead

The S&P 500’s record high at 6,920.34 marks a critical point of reflection for investors. The trend remains positive, supported by policy easing, earnings growth, and global cooperation. Yet the rapid ascent also raises questions about sustainability. Markets have priced in a soft-landing narrative and further rate cuts, leaving little margin for disappointment.

Next week’s focus will turn to additional corporate results and any signals from Fed officials about the December meeting. Traders will also watch whether recent gap patterns persist - a potential sign that uncertainty remains elevated despite the market’s strength. For now, momentum favors the bulls. The index’s ability to absorb heavy news flow, volatile intraday swings, and mixed corporate reactions - while still closing higher on the week - suggests that, for now, the path of least resistance remains upward.

This past week demonstrated, even in a strong market, gaps can appear suddenly - and get filled just as fast.

Trading Perspective

My High-Time-Frame (HTF) model, which analyzes daily data, is currently in BUY mode. The uptrend is ten days old with moderate strength. The model is trading both sides of the market - long and short – using short-term trend following and gap-specific strategies.

On the Low-Time-Frame (LTF):

• BUY: 2- , 5-, or 15-minute bars triggered by upward 5/20 SMA crossovers, followed by an SMA bounce. Bar size will be determined by volatility and the prevailing trading range.

• SELL: 2- , 5-, or 15-minute bars triggered by downward 5/20 SMA crossovers, followed by an SMA bounce. Bar size will be determined by volatility and the prevailing trading range.