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THIS WEEK: 1st MIXED-Risk week after 1 Risk-OFF week.
US Stocks MIXED, Foreign Stocks MIXED, Bonds UP and Gold DOWN
#1 ASIA-PACIFIC Firms at Support--
AAXJ rose 0.5% this week, after gaining 0.4% last week. That left it very bullish and ranked 1 globally and more attractive than cash. The index is down 1.0% for the quarter (13 weeks), but up 40.4% for the year (52 weeks).
#2 US SMALL-CAPs Settle Lower--
IWM fell 1.4% this week, after losing 1.7% last week. That left it bullish and ranked 2 globally and more attractive than cash. The index is up 2.1% for the quarter (13 weeks), and up 27.1% for the year (52 weeks).
#3 JAPAN Edges Higher—
EWJ rose 0.7% this week, after losing 3.1% last week. That left it very bullish and ranked 3 globally and more attractive than cash. The index is up 4.4% for the quarter (13 weeks), and up 33.8% for the year (52 weeks).
#4 LATIN AMERICA Treads Water—
ILF fell 0.1% this week, after gaining 3.2% last week. That left it bullish and ranked 4 globally and more attractive than cash. The index is down 0.6% for the quarter (13 weeks), but up 36.5% for the year (52 weeks).
#5 EUROPE Maintains Upward Trend—
IEV fell 0.8% this week, after gaining 0.3% last week. That left it very bullish and ranked 5 globally and more attractive than cash. The index is up 4.3% for the quarter (13 weeks), and up 22.9% for the year (52 weeks).
#6 US LARGE-CAPS Meander Higher—
SPY rose 0.5% this week, after losing 1.4% last week. That left it very bullish and ranked 6 globally and more attractive than cash. The index is up 2.8% for the quarter (13 weeks), and up 20.6% for the year (52 weeks).
#7 CASH Yield Rises—
The 3m-10y yield curve flattened to a slope of 99 bps this week, as the 3-month cash yield rose to 3.73% and the 10-year US Treasury yield fell to 4.72%. Cash rose 0.1% this week, after gaining 0.1% last week. That left it very bullish and ranked 7 globally. The index is up 0.9% for the quarter (13 weeks), and up 3.8% for the year (52 weeks). The cash yield is 10 bps above the Fed overnight rate (3.625%). Meanwhile, the two-year Treasury is yielding 4.35%, up 11 bps this week and a 73 basis-point premium to cash.
#8 GOLD Tests 200-day-- GLD fell 3.4% this week, after gaining 5.4% last week. That left it bullish and ranked 8 globally and less attractive than cash. The index is up 0.1% for the quarter (13 weeks), and up 28.6% for the year (52 weeks).
#9 LONG US T-BONDS Rally on Data--
EDV rose 1.9% this week, after gaining 0.1% last week. That left it very bearish and ranked #9 globally and less attractive than cash. Long bonds are down 2.7% for the quarter (13 weeks) and down 1.2% for the year (52 weeks) as yields have risen.
US DOLLAR Rallies on Inflation Concerns—
UUP rose 1.0% this week, after losing 0.7% last week. It is currently bullish—up 2.4% for the quarter (13 weeks), and up 2.5% in the last year (52 weeks).
COMMODITIES Dip on Oil Weakness—
A CRB fell 1.5% this week after gaining 4.2% last week. That left commodity prices up 0.3% for the quarter (13 weeks), and up 39.7% for the year (52 weeks).
Crude Oil Drops Below $85—
The broader oil complex (USO) fell 3.7% this week, following last week's gain of 6.4% and currently very bullish. That leaves US oil prices down 9.0% for the quarter (13 weeks), and up 73.7% for the year (52 weeks).
SEE MOOSECALLS PDF FOR CHARTS AND DETAILS
THIS WEEK: 1st MIXED-Risk week after 1 Risk-OFF week.
US Stocks MIXED, Foreign Stocks MIXED, Bonds UP and Gold DOWN
The best regional alternative over the last six months this week is AAXJ, but its technical and PMO scores continue to lag. The regional model sticks with incumbent #1 US small-caps (CI second place) which are technically bullish with a positive but deteriorating PMO. Equities are still the best place to be, but a month-long decline in the Dollar after rate hikes in Japan and Europe has induced a rotation from US (dollar-based) assets into foreign assets and gold. The recent US-Japan joint foreign exchange intervention to smooth out “disorderly Yen movements” and last week’s Treasury action to double bond buy-backs fostered the rotation by weakening the Dollar more. This week, hawkish Fedspeak out of Jackson Hole raised the odds of a rate hike September 16 and strengthened the Dollar.
AAXJ and IWM are the best performing regional choices YTD. IWM, however, is less volatile. Japan has shown life lately, thanks to the US-Japan joint foreign exchange intervention, but that would appear to be temporary until stabilization is realized. Among international equities Emerging markets (EEM) are outperforming Developed (EFA).
(SEE PDF FOR REGIONAL GLOBAL ASSET CHARTS AND WEEKLY PERFORMANCE NOTES)
Below we rank 27 major US equity sectors according to their momentum and technicals. We also identify what sectors are working now and have been for awhile. There is no specific sector model to time the group as the ETFs involved may be thinly traded, extremely volatile, and require daily monitoring to avoid disasters. The rankings are more useful for longer term swing trade investors.
This week’s US equity sector momentum expands and remains broadly positive -- 89% of our sectors are buy or hold (L81%) with BUYS down at 41% (L44%) and HOLDS up at 48% (L37%). Avoids are down at 11% (L19%). Top performers this week: Software, Internet, Capital Markets. Week’s Worst: Semiconductors, Aerospace, Utilities, Homebuilders.(Performance *working off a stop-loss, **working off a buy-stop.)
Below we show the top 10 US stock sectors by latest 2 week return. We also identify how well those sectors are working in the last 2, 13, 26,, 39 and 52 weeks, and over 3 years. Ranking is based on momentum over about six months (26 weeks). It is necessary to monitor more recent returns to make sure a high momentum reading does not mask a sudden weakness in price.
Indications remain neutral for the global economy.
An international shipping measure and proxy for current global trade, the Baltic Dry Index is at 3186 this week, up from 2841 last week and down -5% after 13 weeks, a negative signal. (After opening 2026 at 1882, BDI is still well below its 2010 peak @4640.)
Meanwhile, another proxy for world activity, WTI oil price is at $84.92 this week, down 3% in the latest quarter, a negative economic signal. (Oil remains below its 2022 peak ($130), but well above the 2020 Covid low ($10).)
Our proxy for global construction, copper is 6.64 this week, and up 4% this quarter, a positive signal.
Domestically, the 10Y US bond yield is at 4.72% this week, up 27 basis-points over the past 13 weeks, and a positive bet on the largest world economy.
US ECONOMY: AUG.28.2026
OVERALL: July PCE Warms, Incomes Up, Spending Less So
PRODUCTION:
(-) WEEKLY EIA Crude Oil Inventory (+0.10M) build slips as WTIC oil prices fall to $84.
(-) JUL Industrial Production (+0.2%) below prior and below consensus.
(+) JUL Capacity Utilization (76.3) above previous in line with expectations.
(+) JUL S&P Global U.S. Manufacturing PMI – (53.2) expanding, DOWN from previous.
(+) JUL S&P Global U.S. Services PMI – (56.8) expanding, UP from previous.
(+) JUL ISM Manufacturing Index (55.6) expanding, above prior and consensus.
(+) JUL ISM Services Index (54.1) expanding, up from prior but less than expected.
CONSTRUCTION: JUL New Home Sales Down
(-) JUL Housing Starts (1239K) well below consensus and previous.
(+) JUL Building Permits (1443K) above consensus and prior.
(-) JUL Existing Home Sales (4.06M) below previous and consensus.
(-) JUL New Home Sales (607K) DOWN from prior and forecasts.
(-) JUN Construction Spending (-0.1%) below prior and expectations.
INFLATION: JUL PCE Warmer
(+) JUL CPI (+0.1%) cooler than prior and consensus. (+3.4% y-o-y)
(+) JUL Core CPI (+0.2%) cooler than prior and forecasts. (+2.5% y-o-y)
(+) JUL PPI:(+0.0%) cooler than prior and consensus. (+4.7% y-o-y)
(+) JUL Core PPI (+0.2%) cooler than prior and forecasts. (+4.2% y-o-y)
(-) JUL Import Prices (-0.4%) cooling but still hot. (+5.9% y-o-y)
(+) JUL Export Prices (-1.3%) cooling, but still hot. (+8.2% y-o-y)
(-) JUL PCE Prices (+0.2%) warmer than prior and expected. (1yr 3.7% up.)
(-) JUL PCE Prices – Core (+0.2%) warmer than prior and expected (1yr 3.3% up.)
JOBS: Claims Lower
(+) Weekly initial Claims (203K) BELOW previous and expectations.
(+) Weekly Continuing Claims (1778K) BELOW previous this week.
(-) BLS lowered US job estimates by 79K for 12 months through March 2026.
(-) JUL ADP Private Payrolls (44K) Down from previous more than expected.
(-) JUL Nonfarm Payrolls (-23K) unexpectedly contracted from prior; well below consensus.
(+) JUL Unemployment rate (+4.1%) down a tick due to shrinking labor force participation.
(-) JUL Average Hourly Earnings (+0.1%) weaker than previous, and below expectations.
(-) JUL Average workweek (34.3) unchanged.
(-) JUN JOLTS Job openings (7.359) DOWN from prior below revision lower.
CONSUMPTION: Durables, Income Beat; Consumer Confidence, Spending Lag
(-) AUG Consumer Confidence (89.4) DOWN from prior and below consensus.
(+) JUL Durable Orders (+1.1%) BEAT prior and consensus.
(+) JUL Personal Income (+0.4%), ABOVE consensus and prior.
(-) JUL Personal Spending (+0.2%) BELOW prior in line with consensus.
(+) AUG Michigan Consumer Sentiment (51.7) positive, ABOVE consensus and prior.
(+) JUL NFIB Small Business Optimism (99.8) strong and above prior (97.4).
(-) JUL Retail Sales (-0.6%) unexpectedly contracted.
(-) JUL Trade Deficit (-$118.8) WORSENS from prior.
(+) JUL Federal Budget (-$432.3B) in deficit and worse than June.
GDP & RELATED DATA: Q2 Deflator Hot
(+) Q2 GDP – 2ndEST (+1.5%) in line with previous and consensus.
(-) Q2 GDP Deflator – 2ndEST (+6.4%) hotter than previous and forecasts.
Q2 Employment Cost Index (+0.9%) hotter than consensus and previous.
(-) Q2 Productivity – (+0.3%) revised weaker than prior and consensus
(-) Q2 Unit Labor Costs – Warm (+1.3%) in line with previous but below consensus. Cooler than inflation.
(-) Q1 Current Account Balance (-$226.8) deficit greater than previous quarter and consensus forecast.
US ECONOMY: FEDERAL RESERVE
Week of AUG.28.2026
RECESSION THREAT: MINIMAL, FALLING
US recession chances one year out: 15.19% (JULY 2027) per NY Fed. The Fed model’s chance of recession has been below 30% (the threshold signaling a recession one year out) and falling since 2025. It reached a recent low of 15 in MAY 2026. The risk of recession was the highest in 40 years in May 2024, but it was avoided amid three years of massive Federal deficit spending and historic data falsification at the Bureau of Labor Statistics.
ATLANTA FED: US Q3 GDP NOW up to 4.6%
Atlanta Fed Current GDP Model (08/26/2026): Q3 Annualized 4.6% (Last week: Q3 Annualized +4.0%)
US ECONOMY: FEDERAL RESERVE
Currently, the Fed’s balance sheet is $6.746T, unchanged in the latest week 8/26/26. The Fed Funds Rate was lowered 25 BPS to 3.50-3.75% at the DEC10 FOMC meeting. No change since at the January, March, April, June or July FOMC meetings.
The next FOMC meeting is September 16. The new chairman since May 22, Kevin Warsh, chaired his first FOMC meeting June 17. No near-term rate hikes were expected or delivered but a more hawkish tone suggests supply-side inflation pressures brought on by the war with Iran may eventually force two rate hikes by year-end. The odds that rates will go up at the next meeting have risen from 40 to 60% after Warsh’s Jackson Hole address this week in which he remarked that the US economy is at “full employment” but inflation figures “are more concerning”.
The Fed Check at 85% turned hawkish (below 95%) as of 1/30/2026 (tighter monetary policy needed to combat global inflation pressures.) The US 2-Year yield at 4.35%, however, is now 73 bps higher than the Fed overnight rate (3.625%), implying near-term US domestic conditions make a Fed rate hike increasingly likely.
The 3m-10y yield curve flattened to a slope of 99 bps this week, as the 10-year US Treasury yield fell to 4.72 and the 3-month cash yield rose to 3.73. Intermediate term the curve is positive and steepening. (The curve was inverted from 11/22 through 12/24 but has been positive since.) The 30d-10y median yield (4.23%) is above its 200-day 3.99%. A rising median yield and a steepening yield curve are generally positive for the economic outlook and bullish for stocks.
3-month SOFR yield is 3.64, while the 3-month T-bill is 3.73. That puts the SOF-T spread at -9 basis points, below its 200-day average of 3 bps. A falling SOF-T spread signals a safer, more comfortable short term funding environment.
FED OVERALL THIS WEEK: SLIGHTLY MORE HAWKISH
FED CHECK: TIGHTENING INDICATED
RATE POSTURE: STEADY
BALANCE SHEET: STEADY
FED SPEAK: HAWKISH
Latest FOMC Assessment (2026.7.29) The Federal Open Market Committee approved the following statement for release by a 9 – 3 vote: The Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent, in support of the Federal Reserve's dual mandate. The Committee is continuing its policy of maintaining ample reserves in the banking system. Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little. Inflation remains elevated relative to the Committee's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The Committee will deliver price stability. (Next Meeting: 9/16/2026)
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