The Week Ahead 10/5/25
Hello All,
I hope you’re all enjoying the weekend and getting some time away from the screens & I wish you all a successful remainder of the year as we nearly round off ‘25 with just Q4 ahead.
Looking back at this past week, we had a slight pickup within events / economic data but the ‘biggest’ news of the week was the Govt. having been shutdown for the time-being which put a pause on all economic data coming through after we initially had somewhat mixed / softer than expected data earlier on in the week, but nevertheless, that still didn’t stop the pattern of shallow dips continuing to be bought as the indices all went on to make yet another new ATH, with Small-caps being the best performing of the indices, closing higher by 183bps, whereas the remainder of the indices all essentially traded inline & closed higher by around 110bps on the week.
- Economic Data for the Coming Week:
In regard to economic data into the upcoming week, with the Govt. being shutdown for the time-being, all economic data will remain on pause but it’s expected to be a quieter week regardless with just FOMC minutes & Powell expected to speak on the week & then *potentially the release of NFP #’s *if the Govt. reopens.
- STD Channels on Indices for Perspective: Weekly TF
- SPY
- QQQ
- IWM
- DJIA
Since starting this Substack back in June of ‘23, between individual names / tactical trades / baskets, we have netted a 163.57% return whilst in the same period, the Q’s have returned 68.66% / Spooz has returned 59.03% / Dow has returned 44.07% & Small-caps have returned 39.99%, so nice outperformance against all the indices whilst having a 82.4% win rate, averaging a 25.97% return on realized gains / winners & a 13.86% loss on realized losses / losers.
Looking forward to the future as we nearly round off ‘25 & get ready to head into ‘26.
Earlier on in ‘24, a series we had started was ‘Educational Pieces’ with each including a wide variety of topics, some even suggested by you all & we’ve finally decided to release Part Trois.
Nevertheless, for those whom may have missed the first educational piece along with the subset of topics included:
General background / knowledge on all option strategies
In-depth talk on risk / reversals & how to go about expressing / utilizing them
Options Structuring
When to used naked calls / puts vs. spreads
Choosing expiration dates
Identifying key pivots / supports / resistance zones
General briefing on stock gaps
What to look for in regards to fundamentals
Implementing fundamental / macro / technicals into a trade
Hedging
Creating risk/reward setups
Taking profits / managing losses
Overall Process
Book recommendations
I include a link here to the original.
And given the amount of positive feedback we had received on the first educational piece & how helpful it was for many, we decided to release Part Deux earlier on in ‘25 & for those who may have missed, a link to Educational Piece Part: Deux can be found here.
And then FINALLY, a link to the latest part of the series, Part Trois (for now), can be found here.
Psychology is the silent driver of performance & your edge often comes not from knowing more but from managing yourself better.
Before we jump into the week ahead, looking back at this past week, as we had mentioned earlier but the same general pattern / theme continued on with dips continuing to remain shallow & bought as the indices essentially remain within this slow churn / grind higher as new ATHs were once again made across the board, but jumping into economic data earlier on in the week, the August JOLTS report showed job openings at 7.23 million, roughly in line with expectations and slightly above the prior month, whilst the quits rate eased to 1.9% and the layoffs rate held steady at 1.1%, thus signaling a cooler labor market & overall, not much has necessarily changed but we’re still within a slow to hire & slow to fire job market (Call it stagnation).
Another ‘gloomy’ datapoint on the week was the decline within Consumer Confidence #’s following a sharp deterioration in consumers’ views of the current economic situation… Again, don’t think this should necessarily be of too much surprise either as Main Street had a few days to their name this year as Wall Street has instead been prioritized by the administration.
And finally, the ‘last’ datapoint of the week given the Govt. had remained shutdown was ADP #’s which ended up coming in softer than expected at -32k & ended up being the largest decline dating back to March ‘23 during the brief regional banking crisis & although ADP hasn’t necessarily been a good predictor for NFP #’s, the bigger signal here is that the continued weakness within the private sector as ‘Main Street’ continues to suck wind in the economy remains.
And following the recent softness in data this past week, odds for an October rate-cut jumped higher to just over 96% & *if NFP #’s were to come in softer than expected (Whenever the Govt. reopens), it seems like we’ll be right back to the debate on whether or not the Fed should be cutting 25bps as an insurance cut & or 50bps to try & get ahead before the labor market cracks / deteriorates even further.
With economic data have been capped off midweek following the Govt. being shutdown, that still didn’t stop ‘interesting’ & or standout headlines from materializing:
- TRUMP: YOU GROW YOURSELF OUT OF DEBT
Earlier on in the year, despite the administration’s attempt at austerity, we were still clear skeptics as it just didn’t seem plausible that the administration would actually make a dent in trying to cut spending let alone have the pain tolerance to endure the attempt at austerity & sure enough following the April decline, the administration completely shifted the prioritizing Main Street view right back to Wall Street as instead of trying to commit to austerity, Bessent made it clear that the ‘new’ plan was to run growth hot to try & outpace spending in order to reduce the deficit-to-GDP (From 6.3% to 3% was the stated ‘goal), & Trump re-emphasized the point this past week with the following quote above…
Growing yourself out of debt can only be done with attempting to ‘Run it Hot.’
And it’s not just the U.S. that is ‘running it hot’ either… it’s a fiscal race between the U.S. / China / Europe & now even Japan following the election of the new Prime Minister which is very Dovish / Pro-fiscal & easy-policy…
Moving along into the indices, the most interesting dynamic that continues to play out is the continued rotations under the hood which has more or less helped keep the indices bifurcated & a pretty clear example of that is despite all of the indices making yet another new ATH this past week, the % of stocks above the 20D still sits at just 51% which more so points toward a market that isn’t necessarily entirely overbought in the shorter-term & instead remains at more ‘neutral’ conditions & the main reasoning in terms of why this is happening is because one day, Small-caps / Cyclicals are outperforming & then the next day it’s Tech & or the AI-trade & the day after that it’s rotation back to Small-caps & Cyclicals & so on… general point being, the distortion is more so due to the continued dispersion / underlying rotation within the indices rather than ‘everything’ rallying all at once.
And in speaking about the indices, as we rounded off September this past week, the feared & ‘treacherous’ seasonality just didn’t hold true:
And even with indices continuing to slow churn / grind higher to new highs despite ‘weak’ seasonality, it’s continued to be met with doubts as GS recently reported yet another negative equity sentiment reading which makes it the 3rd longest stretch of negative readings since ‘15…
In terms of why this positioning standpoint matters, well, we’re in the final stretch of the year with Q4 finally in action & in terms of seasonality, October can be mixed although leans positive whereas as we near November through December, that’s when positive seasonality really picks up. Again, why does this all matter? Well, with institutional investor positioning STILL remaining relatively LIGHT & again, this is the 3rd longest streak on record in regards to consecutive negative readings in the history of the Sentiment Indicator data set which dates back to ‘15, in taking a simplistic view, how will clients of these Institutions / HFs feel if they find out they’ve been not only UW equities but also under-performing the indices on the year (Whilst paying a fee)? Again, it seems clear that if there is no material pullback to derail the recent & continued pattern of the indices slow churning / grinding higher to new highs, pressure is going to start to mount through year-end & the potential Q4 chase could be another tailwind for equities. And in terms of what CAN derail the potential chase, again, I’d argue to break the pattern of dips remaining shallow & bought, we’d have to see a correction more than the standard 3-5% range & it likely would have to be attributed to slowing growth concerns instead turning into recessionary fears & or the derailing of the AI-trade (But you could then argue capital will just flow to other sectors / areas within the market thus still allowing for the indices to remain bifurcated).
