9/21/26 - Weekly Market Prep & Analysis

The calendar is pretty light this week. The only thing I have on the docket right now is Weekly Jobless Claims at 8:30 AM ET on Thursday. That gives us some room after what was a much more eventful week, because FOMC is finally behind us and the Fed raised rates for the first time in roughly three years. The target range is now 3.75%-4.00%, and the September projections showed that most Fed officials expect at least one more increase before the end of the year. (federalreserve.gov)

To me, this is helpful. I can go into the next few weeks expecting the market to remain a little pessimistic about things without having to constantly speculate about whether the Fed will actually pull the trigger. They did. The cloud of “will they/won’t they” is gone, and now the market gets to decide what tighter policy actually means for price. Interestingly enough, $SPY did not exactly fall apart after the announcement. The initial reaction took equities lower, but those losses were recovered the following session as buyers got more aggressive, and we saw another recovery from weakness on Friday. The S&P 500 gained 1.14% on Thursday and finished Friday higher as well despite another volatile session. (reuters.com)

This is probably a good place to explain my style of analysis because it will make these publications much easier to follow going forward. I use a top down approach. I observe the macro conditions first, then I look at how the broader market has actually responded to them, what is leading the moves, where the consensus sits, and where the herd is more likely positioned. After that, I work my way down into the chart, the important areas, and eventually the intraday trade. This has always been my approach, and as you get familiar with it, I think it can help with your own analysis as well.

This is not inherently a contrarian style. I do not look for whatever everyone else believes and automatically take the opposite side. If everyone is bearish and price keeps going down, they are right. What I care about is knowing what the market already expects and then watching whether price behaves accordingly. If traders have every reason in the world to sell and price still refuses to go down, I want to know that. If everyone expects higher prices and the market cannot make any progress despite several tailwinds, I want to know that too. Consensus matters because it gives us something to measure the actual response against.

On the macro side, I refer to the pressures surrounding equities as headwinds and tailwinds. I use those terms because none of these things dictate direction by themselves. A headwind simply makes it more difficult for price to move higher, while a tailwind makes that path easier. The Fed raising rates is a headwind. Yields moving higher can be a headwind. Inflation cooling can become a tailwind. Yields falling can become a tailwind. None of those things mean I blindly buy or sell $SPY because they exist.

That distinction becomes especially important for a day trader because I can trade in either direction. I am not writing these plans because I want to make some heroic prediction about where $SPY will finish a month from now. I want to understand the environment, prepare for several scenarios, and then combine that information with risk management, intraday rules, and the setups we already know. If we understand the larger picture, we can sometimes recognize what price is doing faster, but the trade still has to prove itself on the chart.

We also cannot discuss equities right now without talking about bonds. This was a major part of the previous letter, so I want to carry forward the pieces that still matter. Bonds and yields move in opposite directions. When investors become more aggressive selling Treasuries, bond prices fall and yields rise. The 10-year Treasury yield is especially important because markets use it as one of the major benchmarks for pricing money throughout the economy. Mortgages, corporate borrowing, other debt, and the valuations investors place on stocks all feel the effects when that benchmark moves substantially higher.

That creates a very simple problem for equities. If an investor can earn somewhere around 5% in a Treasury, stocks suddenly have more competition for capital. The investor now has to decide whether taking additional risk in equities offers enough potential return to justify passing on that yield. Higher yields also raise the discount rate on future earnings, which can become especially important for growth stocks whose valuations depend heavily on what investors expect them to earn years from now. This is why bonds can sell off on one side of the market and eventually create pressure somewhere completely different.