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THIS WEEK: 2nd MIXED-Risk week in a row.
US Stocks FLAT, Foreign Stocks MIXED, Bonds DOWN and Gold DOWN
#1 ASIA-PACIFIC Pops Higher--
AAXJ rose 2.3% this week, after gaining 0.5% last week. That left it very bullish and ranked 1 globally and more attractive than cash.
#2 US SMALL-CAPs Bounce Off Stop-Loss--
IWM rose 0.1% this week, after losing 1.4% last week. That left it bullish, ranked 2 globally and more attractive than cash.
#3 JAPAN Tests Recent High--
EWJ rose 2.5% this week, after gaining 0.7% last week. That left it very bullish, ranked 3 globally and more attractive than cash.
#4 US LARGE-CAPS Await More Data--
SPY rose 0.1% this week, after gaining 0.5% last week. That left it very bullish, ranked 4 globally and more attractive than cash.
#5 EUROPE Drops to 50-day, Bounces--
IEV fell 0.3% this week, after losing 0.8% last week. That left it bullish, ranked 5 globally and more attractive than cash.
#6 LATIN AMERICA Breaks Higher--
ILF rose 4.1% this week, after losing 0.1% last week. That left it bullish, ranked 6 globally and more attractive than cash.
#7 CASH Yield Rises—
The 3-month cash yield rose 3 ticks to 3.76% and the 10-year US Treasury yield rose 6 to 4.78%, steepening the slope of the 3m-10y yield curve to 102 bps. 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 1.0% for the quarter (13 weeks), and up 3.8% for the year (52 weeks). The cash yield is 13 bps above the Fed overnight rate (3.625%). Meanwhile, the two-year Treasury is yielding 4.37%, up 2 bps this week and a 75 basis-point premium to cash.
#8 GOLD Drops Below 200-day--
GLD fell 0.5% this week, after losing 3.4% last week. That left it neutral, ranked 8 globally and less attractive than cash.
#9 LONG US T-BONDS Give Some Back--
EDV fell 0.6% this week, after gaining 1.9% last week. That left it very bearish, ranked #9 globally and less attractive than cash.
COMMODITIES Break Out on Oil Strength--
A very bullish CRB rose 3.6% this week after losing 1.5% last week. That left commodity prices up 8.2% for the quarter and up 43.6% for the year.
CRUDE OIL: The broader oil complex (USO) rose 9.5% this week, following last week's loss of 3.7% and is currently very bullish. That leaves US oil prices up 10.0% for the quarter and up 91.4% for the year.
US DOLLAR Drops on BoJ Hike Bet--
UUP fell 0.4% this week, after gaining 1.0% last week. It is currently bullish—up 1.3% for the quarter and 2.0% in the last year.
SEE MOOSECALLS PDF FOR CHARTS AND DETAILS
THIS WEEK: 2nd MIXED-Risk week in a row.
US Stocks FLAT, Foreign Stocks MIXED, Bonds DOWN and Gold DOWN
Equities are still the best place to be, beating cash, bonds, and gold, but which equities? The best regional alternative over the last six months per CI is Asia-Pacific, but its technical and PMO scores continue to lag. US large-caps have the highest Technical Strength (TS), but the best regional PMO among those more attractive than cash is Japan. Incumbent #1 US small-caps (CI second place) are still technically bullish with a positive PMO but have eroded over the last 3 weeks due to growing worries about a September Fed rate hike. A Fed rate hike would help the Dollar and pressure US equities, especially small caps.
If, however, there is no Fed rate hike 9/16, and as expected there are European (9/10) and Japanese (9/17) rate hikes, US equities (IWM, SPY) could rebound, but the Dollar will fall, increasing the attractiveness of international stocks (EEM) to US dollar investors, particularly emerging markets (EEM). The recent US-Japan joint foreign exchange intervention to smooth out “disorderly Yen movements” and Treasury’s ongoing action to double bond buy-backs would continue to put pressure on the Dollar as well. Next week’s CPI inflation data will clarify likely monetary policy decisions.
(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 slows but remains broadly positive -- 82% of our sectors are buy or hold (L89%) with BUYS down at 30% (L41%) and HOLDS up at 52% (L48%). Avoids are up at 18% (L11%). Top buys this week: Oil & Gas (2), Technology, Biotech, Pharma, Health Providers. Week’s Worst: Medical Devices, Gold Miners, Retail, Defense
GLOBAL OUTLOOK: POSITIVE (3 of 4)
Indications are increasingly positive for the global economy.
An international shipping measure and proxy for current global trade, the Baltic Dry Index is at 3528 this week, up from 3186 last week and down 1.18% 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 $91.48 this week, up 1% in the latest quarter, a positive economic signal. (Oil remains below its 2022 peak ($130), but well above the 2020 Covid low ($10).)
Our proxy for global construction, copper is 6.68 this week, and up 6% this quarter, a positive signal.
Domestically, the 10Y US bond yield is at 4.78 this week, up 24 basis-points over the past 13 weeks, and a positive bet on the largest world economy.
US ECONOMY: SEP.04.2026
OVERALL: Global Expansion Proceeds, US Jobs Rebound
PRODUCTION: Global Expansion in Manufacturing & Services
(-) 8/29 WEEKLY EIA Crude Oil Inventory (-4.45M) DRAW appears as WTIC oil prices fall ($83).
(-) JUL Industrial Production (+0.2%) below prior and below consensus.
(+) JUL Capacity Utilization (76.3) above previous in line with expectations.
(+) AUG S&P Global U.S. Manufacturing PMI – (53.9) expanding, UP from previous.
(+) AUG S&P Global U.S. Services PMI – (56.5) expanding, UP from JUN
(-) AUG ISM Manufacturing Index (54.6) expanding, BELOW prior and consensus.
(+) AUG ISM Services Index (55.4) expanding, BEAT prior and consensus.
CONSTRUCTION: Spending Contracts
(-) 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.
(-) JUL Construction Spending (-0.5%) below prior and expectations.
INFLATION:
(+) 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: August Recovery After July Debacle
(-) Weekly initial Claims (206K) ABOVE previous and expectations.
(-) Weekly Continuing Claims (1779K) ABOVE prior this week.
(-) BLS lowered US job estimates by 79K for 12 months through March 2026.
(-) AUG ADP Private Payrolls (38K) DOWN more than expected from previous.
(+) AUG Nonfarm Payrolls (+162K) blowout BEAT of prior; well ABOVE consensus.
(+) AUG Unemployment rate (+4.1%) in line with prior, BEAT consensus.
(+) AUG Average Hourly Earnings (+0.3%) BEAT consensus and prior.
(+) AUG Average workweek (34.4) unchanged.
(-) JUL JOLTS Job openings (7.271M) BELOW consensus; ABOVE prior revised lower.
(+) AUG Challenger Job Cuts (52.9K) UP from JUL but DOWN from a year ago. Lowest AUG since ’22.
CONSUMPTION: Trade Deficit Deepens
(-) 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 (-$88.6) WORSENS from prior, better than expected.
(+) JUL Federal Budget (-$432.3B) in deficit and worse than June.
GDP & RELATED DATA:
(+) 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 – (1.4%) revised in line with prior and consensus. Up more than labor costs.
(+) Q2 Unit Labor Costs – revised (+1.2%) a tick lower than previous and consensus. Cooler than inflation.
(-) Q1 Current Account Balance (-$226.8) deficit greater than previous quarter and consensus forecast.
US ECONOMY: FEDERAL RESERVE
week of SEP.04.2026
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 4.7%
Atlanta Fed Current GDP Model (09/03/2026): Q3 Annualized 4.7% (Last week: Q3 Annualized +4.6%)
US ECONOMY: FEDERAL RESERVE
FED BALANCE SHEET ($6.74T); FFR @ (3.50-3.75%)
Currently, the Fed’s balance sheet is $6.737T, down 0.009T in the latest week 9/2/26. The Fed Funds Rate was lowered 25 BPS to 3.50-3.75% at the DEC10 FOMC meeting. No change since 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 of a rate hike at the next meeting have improved to 59% after the latest payroll report.
The Fed Check at 84% turned hawkish as of 1/30/2026 (tighter monetary policy neededto combat global inflation pressures.) The US 2-Year yield at 4.372 however, is now 75 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 steepened to a slope of 102 bps this week, as the 10-year US Treasury yield rose to 4.78% and the 3-month cash yield rose to 3.76%. 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 4.27 is above its 200-day 3.99. A rising median yield and a steepening yield curve are both bullish for stocks.
3-month SOFR yield is 3.66%, while the 3-month T-bill is 3.76%. That puts the SOFR/T-Bill (SOF-T) spread at -1 basis point, below its 200-day average of +3 bps. A falling SOF-T spread signals a safer, more confident money market system.
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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