A New Record, Built on Defense

The S&P 500 made a new record on Tuesday. It traded to 7,845 and closed at 7,819, finally clearing the August high it had chased for eight weeks. The breakout most people doubted happened. The index finished the week at 7,812, up 1.2 percent.

Look at who carried it, though. Small company stocks fell almost 1 percent in a record week. The best sectors were energy, consumer staples and utilities. Technology fell. A record led by the safe corners of the market is a narrower kind of record. Fewer stocks are doing the lifting.

That puts this week in an odd spot. The trend is up and the record is fresh. But the market stalled right above the old high, and Wednesday brings the inflation report on a 10 year yield that touched its highest level since 2002 just six days ago. The first week after a breakout tells you whether it was real.

The Record Came as Planned. Gold Hit Its Mark. The Euro Bounce Never Showed.

Last issue said the chart slightly favoured a push through 7,782 into a marginal new record between 7,790 and 7,830, with a close above 7,755 as the early tell. Monday closed at 7,774, and Tuesday broke the record and ran to 7,845. The direction was right. The top went about 15 points past our range. We also said a new record should be treated as a place to take profits, not a base to build on. So far that has held: the market spent the rest of the week below Tuesday's close.

Gold was the cleanest call again. We named 4,133 as the level it would reach and said a drop into it that reversed quickly was the setup for the next bounce. Gold passed 4,133 on Monday night, bottomed at 4,091 on Wednesday, and rallied to 4,234 by Friday. The euro was wrong for the second week running. We expected a bounce toward 1.1323. Instead it closed below 1.1220 on Monday, the line we said would mean the decline had resumed, and fell to 1.1166. The fallback level worked. The main call did not.

Rates Blinked, and Stocks Took the Opening

Monday started badly for bonds. A report on service businesses showed the prices they pay jumped to the highest level since July 2022, with fuel the most cited reason. The 10 year Treasury yield closed at 5.31 percent, the highest since April 2002. The 30 year closed at 5.67 percent, the highest since May 2002. Then yields fell for the rest of the week, and the 10 year finished at 5.24 percent. The record came on Tuesday, the day yields first backed off. That link is the clearest driver on the tape right now.

The Fed did not help the bond rally. Minutes from the September meeting showed every official backed that hike, and most expect another one before year end. Markets shrugged. The odds of a hike at the October 28 meeting sit near 20 to 25 percent, down from over 70 percent before the weak September jobs report. The market is betting the jobs miss bought time. The Fed has not said so.

Underneath, the consumer is weakening. The University of Michigan sentiment index fell to 46.3, and its gauge of current conditions hit the lowest reading on record. People expect prices to rise 4.7 percent over the next year. Delta cut its profit forecast for the year by about a quarter and blamed fuel for all of it. This is how an energy shock reaches stocks: first fuel costs, then profit forecasts.

The dollar stayed firm. The dollar index closed Wednesday at its highest level since April 2025 and finished the week at 102.21. USD/JPY sits near 158.30. Gold rose 1.3 percent to about 4,216 anyway, because falling long term yields matter more to gold right now than a strong dollar. Brent rose 2.4 percent to 104.72 and WTI rose 0.8 percent to 91.85.

A Fresh Record, and One Line That Tests It

The S&P 500 sits at 7,812, just below the record at 7,845. Since Tuesday it has held a tight range between 7,731 and 7,821. The line that matters most this week is 7,728, last Monday's low. A close below it would be the first lower low since the breakout, and it would say the record is being rejected rather than built on. Above the market, a close over 7,871 says the advance is extending, with 7,886 to 7,891 next and then 7,966 to 8,000.

Below 7,728 the support zone is 7,697 to 7,704, where the average price of the last 50 days sits. Under that, 7,617 is the early October low, and 7,498 is still the line that would say the advance since March has broken. It has not moved in five weeks and now sits 4 percent below the market. If the decline the timing windows point to does come, the destination is still near 7,300 by late October, where the average price of the last 200 days should sit. That is about 6.5 percent below Friday's close. Nothing confirms it yet.

Gold looks like it found its low at 4,091 last Wednesday and has started a new advance. The pullback zone to buy is 4,163 to 4,195. A close above 4,259 confirms the turn and opens 4,273. A close below 4,129 changes the near-term picture and puts 4,091 back in play. The euro is sitting on equal lows at 1.1166 and 1.1168, with resistance at 1.1279. Equal lows tend to get taken out. A quick drop below 1.1166 that snaps back is the setup for a bounce. A drop that holds below it opens 1.1100.

No Strikes Before the Election, but the Tankers Are Under Fire

The chart has the market at a record that is still being tested. Geopolitics will not decide the test, but it will supply the story. President Trump said last week the United States will not attack Iran before the November 3 midterms. Talks are stuck: Iran sent a revised offer, then called the American reply insufficient. That promise takes one risk off the table for October and puts a date on the next one, just after the election.

The risk that is live right now is at sea. Iranian attacks on tankers near the Strait of Hormuz hit a record, and crude flows through the strait are about 30 percent below pre-war levels. Hurricane Isaias shut most US Gulf of Mexico crude output late in the week. Brent above 100 dollars keeps inflation sticky and keeps the dollar supported, which is a headwind for stocks at a record and for the euro near its lows.

Inflation on Wednesday, Banks All Week

Monday is Columbus Day. Bonds are closed and stocks are open. JPMorgan reports Tuesday and opens bank earnings season. Wednesday brings the September inflation report, with prices expected to rise 0.6 percent in one month, and Bank of America reports. Thursday packs producer prices, retail sales, jobless claims and the Philadelphia Fed factory survey into one 8:30 window. TSMC and ASML also report, a direct read on spending for artificial intelligence. The Fed meets October 27 and 28.

Here is the if/then. Most of a 0.6 percent headline would be fuel, so the number that matters is the core reading without food and energy. If core comes in hot, the 10 year has a reason to go back toward 5.31 percent, and that is the main threat to the record. If core comes in soft, yields keep easing, and the path to 7,886 and beyond opens up. Listen to the banks too. With consumer sentiment at a record low for current conditions, what they say about credit card losses matters more than their profits.

Two Ways This Week Resolves

Scenario A, which the chart slightly favours. The market makes one more run at the record, somewhere between 7,833 and 7,845, and fails there. Then it closes below 7,728, which opens the 7,697 to 7,704 zone, then 7,617. That fits the narrow leadership and the timing windows, which point to a low in the second half of October. Each step adds weight: below 7,728 the breakout is being rejected, below 7,617 it has failed, below 7,498 the advance since March is in question.

Scenario B. A soft inflation report pulls yields lower, and the market closes above 7,871. That says the breakout is extending, with 7,886 to 7,891 next and then the 7,966 to 8,000 zone, where a round number and several measures line up. If that happens, the October decline gets pushed out, not cancelled. A run to 8,000 is the kind of spike that tends to come before a sharp drop, not after one.

The counterweight to both. This market has spent four weeks proving the bears early. The trend is up until 7,498 breaks. Scenario A is a trade setup, not a reason to sell everything.

What to Do With This

Watch 7,728. Above it, the record stands and 7,871 is the upside trigger. Below it, the pullback has started and 7,697 to 7,704 is the first stop.

Watch the 10 year on Wednesday. It touched 5.31 percent last Monday. If CPI sends it back there, stocks feel it fast. If it keeps falling, the record has room.

Gold likely made its low at 4,091. Buy pullbacks into 4,163 to 4,195, not strength. A close above 4,259 confirms the turn.

The euro is on equal lows at 1.1166. Wait for the sweep and the snap back before buying. The dollar is still strong.

A final thought. Last week the market did exactly what the setup called for and made a record. But it made it with defensive sectors in front and small stocks falling. Respect the trend, take profits into strength near the record, and let 7,728 tell you which way the week goes.