The Week Ahead 8/24/25
Hello All,
I hope you’re all enjoying the weekend and getting some time away from the screens & I also hope the year has treated you well so far, and I wish you all a successful remainder 2H of ‘25 as we nearly round off into Q4.
Looking back at this past week, despite the general spurts of volatility following the initial degrossing of crowded longs / momentum names earlier on in the week as rotation towards small-caps & cyclicals continues to play out, it generally ended up being a quieter week & the bigger news of the week was Powell’s Jackson Hole speech in which hawkish expectations were quite high but the speech instead ended up being perceived as dovish as the Fed once again continues to choose growth over inflation with Powell also having acknowledged inflation as a one-time price shock / essentially transitory expectations which ignited the animal spirts into Small-caps & Cyclicals on Friday thus leading IWM to close out the week higher by just over 330bps on the week whereas the Q’s ended up being the worst performing of the indices due to the general rotation factor & instead ended up closing out the week lower by just over 90bps.
- Economic Data for the Coming Week:
In regard to economic data into the upcoming week, it’s a relatively lighter week ahead with the biggest event of the week being PCE #’s on Friday along with some sporadic datapoints in between, but in general, expect focus to continue to shift towards the August employment report in September given the weakness in the past report along with the 90% downside revisions for the months of May & June so expectations in general remain quite high for this report (Confirmation of labor market continuing to weaken or just a post-Liberation Day blip being the ultimate question).
- 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 147.22% return whilst in the same period, the Q's have returned 61.92% / Spooz has returned 53.55% / Dow has returned 40.33% & Small-caps have returned 33.21%, so nice outperformance against all the indices whilst having a 82.2% win rate, averaging a 23.89% return on realized gains / winners & a 14.79% loss on realized losses / losers.
Looking forward to the future as we continue to progress through ‘25.
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.
To jump right into it, this past week was a relatively lighter week in respects to economic data / headline driven news with the week initially having kicked off with the Trump & Zelenskyy meeting following the meeting of Trump & Putin from the prior week, but the bigger event of the week as we all know ultimately came down to Jackson Hole & Powell’s speech on Friday. Leading up to the event, there was an initial brief ‘shakeup’ within the indices as there was degrossing of crowded longs / momentum names in which capital instead flowed to under-owned names (Small-cap & Cyclicals) thus driving a further continuation of the recent underlying rotation that has been taking place.
And because of that rotation, Spooz in itself ended up closing out the week only +29bps whereas RSP for example closed up the week just shy of 200bps whilst also having finally made a new high after failing in 3-prior instances & having not made a new high since the initial new highs were made back in this past November.
And speaking of rotation, since RSP/SPY found a bottom within the second week of August & posted a breakout out of the downtrend in which originally kicked off towards the end of April earlier this year, RSP/SPY has risen by just over 220bps.
Further continuation of the recent breakout would essentially suggest further outperformance of Equal-weight over Spooz thus driving a continued broadening of breadth instead of the prior narrow-rally.
Another example of showing the recent underlying rotation is the recent rally & breakout within IWM/QQQ which has now risen by just over 7% in just under 3-weeks… of course amplified by Powell’s recent perceived dovish speech at Jackson Hole, but last Summer for those whom recall, IWM/QQQ rallied 20% within the span of 3-weeks so a much more violent magnitude compared to the recent breakout these last few weeks.
With the recent rotation within the indices (Small-cap & Cyclical outperformance), it’s finally led to the % of stocks above the 20D to have surged above 70% after remaining in oversold / neutral territory for the last few weeks & the bigger amplification, again, came from Friday following Powell’s perceived dovish speech which we’ll talk about more later.
