“Healing Needs to be Done” in SPX, Factors Keeping RUT in Downtrend

space. It's looking pretty mixed today, but a nice day for ta Welcome back to Morning Trade Live. It's time now for the big picture. Let's welcome in Nate Peterson dr of derivatives Analysis Schwab Center for Financial Research. Good morning Nate. So we got some relief today with this cooler expected PCE print. We also got a nice healthy upward revision to GDP two. Obviously we've reclaimed 7700 on the S&P. Just walk us through the l you're watching right now. Yeah. Good morningYeah. So we've got this market of course over the past six weeause the r, you know, sent market breadth,u, you know, so significantly. And what that means is, you know, a lot of the money flow is looking for that relative safety. It's going towards tech. We saw a new high in the Nasdaq Composit last week. S&P 500 market weight is holding in there nicely held that 7600 level. If you look at the Sox, if you look at the Nasdaq 100 comp you know the the technicals there look very healthy. However, if you go over to the S&P equal weight, the Russell 2000 is almost down at its 200 day simple moving average, which is just reflecting the money is looking for that relative safety. That's noing to be hit so much by interest rates. There has been, you know, som negative revisions to EPS estimates, you know, within real estate and those types of interest rate sensitive sectors. So we have that bifurcated market.ve been here before, Sam. We're down to levels on the marke bren the S&P 500. We saw back in March when the war was announced. So that's kind of the technical backdrop. S&P market cap looks good. Tech looks good. Semiconductors look goo elsewhere. There's some healing that needs to be done.eah. I mean speaking of rate sensitive parts of the market, I was looking the 30 year fixed rate at 730 this morning. That highest since November 2023. Mortgage apps fell down last week. But so long September. And thaat Id to talk to you about because obviously we're coming to month end, quarter end here. I was looking Morgan Stanley seeing roughly $38 billion worth of equity supply fromnsioe be in for some volatility towards the closing here. Oh absolutely. You know so it's you know the aro this time period because of the quarter end you get the combination of that. But the October it's not just, you know, part of October is not a stranger to getting, you know, . So that potentially could be in the cards. Now as we get to the nt of October, as you start to get earnings from big banks mid October, and potentially you get some positioning and anticipation of what looks to be a really good io look a lot better. But absolutely Sam here you know over the you know week or so it would not surprise me to see some of that up and down volatility. VIX is kind of come back a l bit to life because it's doing that doing so in responseo yields which are still relatively buoyant. IE report that we got. And right now yields on the ten year are higher. Now I know there was a you know that's a little bit odd to me. Chicago PMI. I know it came in better than expected. Buthere's where are the buyers. They're not stepping in on this PCE report. So there's still a lot of buoyancy in those yield levels. Yeah. You raise really interesting point that caught my eye as well. Just as we were starting to talk hehat the ten year had actually been down about 3 or 4 Bip off the back of that PCE, we're now up again, 5.26. Obviously, we saw that curve steepening following the data print, a rally on the front end, the two year s down about three basis points. But as you say that ten year picking up. you wonder exactly what's going on here. The 30 year not budging a wholet levels since you know 2002 we haven't seen tha What else are you watching right now. Because you did mention the Russel 2000. I mean small caps have had a pretty tough ride lately. I'm just wondering, you ass the bears view, what sort of damage is looming underneath the surface right now and whether there's enough to sort of offset that. Do you think Q3 earnings would be the catalyst? Well, you know, gosh, I want to say it's still going be about the trajectory of yields and and oilces. Most importantly, you know, if oil if WTI can stay aroun low 90s up until the midterms, I don't think the Bullsave aroblem with that at all. But when you're loo at, know, making new cycle highs almost every day on the ten year and the 30 year, you just have toitt of conviction to have that money come, come in off the sidelines and say, hey, let's get ready for earnings. When there' evidence of those buyers stepping in. So like the mean, yeah, you can point in bearish technical indicators. You can look at MacD cross the fast line moving below the the slow line back in mid August. You can look at a breach of the 50 day SMA. You can look at the S&P both the Russell and the. And I believe a fresh three months low yesterday.y're in Downtrends. And I think that's just refle that this March higher in yields. I mean there's that correlation that is there. So if you're a bull if you're looking at the ell youe bears say you have this underneath the surface deterior in market breadth, which is hiding basically some weakness within, you know, so, so much of the rest of the omy, u want to see some stabilization in yields. You want to see those buyers step in. You like to see someullish reversal patterns come on the charts on the S&P equal weight and the Russell 2000. But while it's in a downtrend y know you really don't want to step into that. And it gets a little bit batedre okay interest rates are going up. Get me out of that and then get me in back into AI where the EPS growth rates look the most sble. Oh yeah. Absolutely. I mean, the technicals as you're saying looks bullimean particularly when you look at some of the large big cap market cap type of companies because they have very muchesta. It feels like. But I suppose the next big test is going to be micron afternoon. So we'll have to wait and see. Nate, always appreciate you joining us. Thanko much fo