Good Afternoon Traders, I hope everyone is enjoying the weekend and preparing for the week ahead. Another week has passed without me fully moving into my new place. This delay is my fault. I have continued going back and forth between my old home and the new one instead of completing the transition. This week should be the final stage of the move, allowing me to return to full market reports—although the reports will have a different and more focused style.
The Challenge
The immediate challenge is accepting that my new life needs to begin in an unfamiliar area. The neighborhood is cool and somewhat relaxed, but it is much different from the area where I grew up. I do not yet know where everything is—the grocery stores, restaurants, running routes and other places that become familiar after living somewhere for years.
This discomfort is not evidence that I made the wrong decision. It is the normal uncertainty that comes with beginning a new stage of life. The only way the new place will eventually feel like home is for me to stop moving between two lives and fully step into the new one.
The More Serious Challenge
Constant life events have pulled my attention away from trading and toward solving real problems. A few weeks ago, I was facing the possibility that my dog, Max, would not recover from his illness. Receiving a call from the veterinarian recommending euthanasia shattered me. His condition was touch-and-go, and we believed we might have to follow through with the recommendation.
I prayed about it, but the outcome remained uncertain because Max is sixteen years old and has several medical conditions. Miraculously, he began eating again. His appearance, energy and overall condition noticeably improved. He has recovered from the immediate crisis, although his other ailments remain. He is eating consistently and has even begun gaining weight. I am relieved and grateful that I will have more time with him.
The woman who left still has not returned months later, and the way the connection ended was ugly. It affected me deeply because I believed I had invested in something real. Watching the connection remain unresolved has been difficult, but I am handling it better than I did before. I have continued to grow, improve my life and move forward.
I cannot control whether that connection is ever renewed. What I can control is whether I remain stuck waiting for an answer. I feel better knowing that regardless of the eventual outcome, I did not allow the loss to stop my progress.
The Present
My trading account remains fully funded, but I have not placed a live trade during the past few weeks. I recently saw what appeared to be a setup and felt motivated to enter it. However, I had not tracked the charts throughout the week, developed a complete plan or identified the conditions that would invalidate the trade. Instead of risking real money, I placed a paper trade.
That decision represents a major difference from how I previously operated. In the past, I would have entered the live market first and dealt with the consequences afterward. This time, I recognized that seeing a possible setup was not the same as being prepared to trade it.
Paper trading allows me to regain my footing without paying the market for information I could have collected for free. Everything is positioned for me to return, but having capital available does not mean I am required to deploy it. My return should be earned through preparation.
The Optimal Future
The best future I can imagine includes Max’s health continuing to improve, fully settling into my new place, and eventually rebuilding the connection with the woman who left. This outcome is not promised or destined. It is simply the best-case scenario.
The part of that future under my control is returning to trading with discipline, following my rules and refusing to risk money when I have not completed the required preparation.
The Reality
Everything remains uncertain, just like the markets. My responsibility is not to predict every outcome correctly. It is to remain open to what happens, recognize when conditions change and maneuver accordingly.
Market Outlook
Markets entered the week already reconsidering the Federal Reserve’s rate path following Chairman Kevin Warsh’s Jackson Hole speech. Warsh did not promise a rate increase, but he made it clear that the Fed still has “work to do” if officials cannot gain confidence that underlying inflation is returning toward 2%. The speech increased the probability of a September hike, but the decision remains dependent on incoming inflation data.
Friday’s employment report strengthened the argument for tighter policy. The economy added 162,000 jobs in August, far above expectations near 55,000, while unemployment remained at 4.1%. June and July payrolls were also revised upward by a combined 55,000. The report did not show an economy falling into recession. Instead, it showed that the labor market remains resilient enough for the Fed to concentrate on inflation.
The other labor reports were less decisive. July job openings increased slightly to 7.27 million but remained subdued compared with the post-pandemic period. ADP reported only 38,000 private-sector jobs added during August. The difference between ADP and the official payroll report is another reminder that no single labor indicator should control the entire thesis.
Business surveys produced a clearer inflation warning. The ISM Manufacturing PMI remained in expansion at 54.6, while its Prices Index stayed elevated at 71.1. The ISM Services PMI strengthened to 55.4, with new orders rising to 60.9. More importantly, the Services Prices Index climbed to 72.6, its highest reading since August 2022. Growth remains positive, but businesses continue reporting significant cost pressure.
Treasury yields responded to the stronger data and changing Fed expectations. The two-year yield ended near 4.37%, the 10-year near 4.79%, and the 30-year near 5.25%. Friday produced a bear-flattening move because the policy-sensitive two-year rose more aggressively after payrolls. Across the entire week, however, the curve’s movement was more mixed than a clean bear flattening.
The two-year is approximately 74 basis points above the 3.63% effective federal funds rate, showing that the market expects policy to become tighter over time. The 10-year is testing the important 4.80% area while the 30-year is approaching the 5.30% region.
Credit has not confirmed a broad financial-stress event. Investment-grade spreads remained near 81 basis points, high-yield spreads near 265 basis points, and the VIX closed at only 14.53. That combination suggests markets are treating the current move primarily as an inflation-and-rates repricing rather than the beginning of a credit crisis. However, tight credit and low volatility also leave room for a faster adjustment if inflation surprises higher.
Crude oil remains the most important intermarket risk. Brent gained approximately 7.6% during the week to $96.28, while WTI rose nearly 10% to $91.48 as fighting between the United States and Iran intensified. Higher oil prices first affect headline inflation, transportation and shipping costs. A more persistent shock would eventually threaten consumer spending and corporate margins.
Around the World
Euro-area inflation accelerated from 2.9% to 3.3% in August, primarily because energy inflation jumped to 14.3%. Services inflation actually eased from 3.3% to 3.0%, while inflation excluding energy remained at 2.2%. Therefore, there is not yet enough evidence to describe the report as broad pass-through inflation.
Producer prices increased 1.6% during July, led by a 5.6% monthly increase in energy. Excluding energy, producer prices were unchanged. Retail sales fell 0.6% during July, showing the pressure higher living costs are placing on consumption. The ECB meets Thursday, with its deposit rate currently at 2.25%.
Japan’s industrial production increased only 0.1% in July after rising 1.9% in June, while the services PMI improved to 52.5. Household spending fell 3.6% from a year earlier, and real household income declined 3.8%. The division is clear: AI-related external demand is supporting parts of the corporate economy, while inflation continues to pressure households.
Expectations for additional Bank of Japan tightening have strengthened the yen and pushed Japanese government bond yields higher. Japan’s 10-year yield briefly reached 3% for the first time since 1996. Higher Japanese yields can also pressure global bonds if domestic investors reduce foreign-bond exposure or leveraged investors unwind yen-funded carry trades. Japan releases revised second-quarter GDP on Tuesday.
China continues to present a mixed picture. The official Manufacturing PMI improved to 49.8 but remained slightly below the expansion threshold. The private-sector RatingDog Manufacturing PMI rose to 51.5, while its Services PMI increased to 51.4. This suggests parts of the private and export-oriented economy are expanding even though domestic demand and the property sector remain weak. China releases August consumer and producer inflation this week.
This Week
The market’s focus will be inflation and central-bank policy. China releases inflation data, Japan releases revised GDP, the ECB announces its rate decision Thursday, and the United States releases PPI Thursday and CPI Friday.
For SPY, the bearish trigger is hotter inflation combined with the 10-year holding above 4.80% and the 30-year breaking through 5.30%. That combination would strengthen the case for put spreads, especially if credit spreads widen and volatility confirms the move.
The bullish trigger is softer inflation followed by the 10-year falling back below 4.70%. That would weaken the rate-hike thesis and favor call spreads. If yields remain trapped and SPY holds its range, butterflies become the better structure.