Good Afternoon Traders, I hope everyone is enjoying their weekend and preparing for the week ahead.
For me, these last few weeks haven’t inspired me to return to trading because there has been a lot going on. I still have some things bothering me that make it difficult to approach the market with a clear mind. In other words, I’m distracted. I know how much attention trading requires, and right now, my attention is in several places.
However, I’ve continued working on my trading skills by creating a site through ChatGPT. The site mimics a live trading arena, with pages for yields, commodities, sectors, and options. I have 73 bars to trade through each day, and each day builds on the last. There are fictional news events and surprise announcements that change the market while I’m trading.
Before placing a trade, I must complete an assessment of trading conditions. The AI connected to the site looks at the simulated market and asks ten questions. After answering, I’m allowed to place the trade. At the end of the day, it provides a simulated senior trader review. I get to see another assessment of my understanding, trade selection, and whether my view matched what the market was showing.
It’s helped a lot because I’m learning to look at everything together. I haven’t given up on becoming a master trader, and I believe I can do it once this dark cloud comes from over me. A lot is on my mind, including a mortgage for a home I haven’t quite settled into, a woman who continues to maintain space, a dog who requires constant care, and a job that keeps giving me more things to do and more responsibility.
Taken together, these are distractions I didn’t have before. Learning to manage my spending with a mortgage has been difficult because any slipup could mean dipping into savings. I make enough to cover my expenses, but over the last two months, I haven’t saved much because I’m still getting used to everything. It seems like bills are always rolling around.
Sometimes I feel trapped because my group gets more overtime than many other groups. If I leave, I don’t know what another group’s work culture would be like or how much overtime would be available. That makes the decision harder because the extra money helps, especially now.
My position is also basically a dead end when it comes to moving up. There isn’t a lead or supervisor position for what I do. They would have to create a position, or I’d have to study and become an engineer. I’m thankful for my job, but getting more responsibility without a clear way to move up gives me something else to think about.
The woman who left has, for the moment, decided that space is easier than confronting what happened. A complex situation got a complex ending. In fact, there wasn’t an ending, just an argument and then space. It’s an open-ended situation, and I haven’t closed the door because I’m not willing to. Whatever it was went that deep, and I’m still dealing with what that means.
And while my dog has recovered from his latest bout of pancreatitis, he’s still aging. He can walk and is eating, which I’m extremely thankful for. He’s a senior dog who requires a lot of care and love. Sometimes he wakes up in the middle of the night, and unfortunately, I’m usually unable to go back to sleep. Even without those interruptions, I’ve been getting close to five hours of sleep most nights, six if I’m lucky.
Now onto the markets.
Long-term yields remained under pressure this week. The ten-year approached 5.30% before finishing around 5.26%, near levels last seen in the early 2000s. The important part for me was that weaker employment data didn’t bring lasting relief to yields. The market became less certain about another Fed hike, but longer-term borrowing costs stayed high.
The jobs report showed only 29,000 jobs added in September, and the previous two months were revised lower. Unemployment remained around 4.2%. Companies aren’t adding many workers, but that doesn’t yet mean widespread layoffs. For now, stocks can welcome weaker hiring if it keeps the Fed from raising rates. Eventually, though, weaker hiring becomes a concern for spending and earnings.
The PCE report gave the market some relief, with core prices rising 0.2% for the month. However, inflation remains above the Fed’s target. Consumers also increased their spending after inflation, while their income after inflation was flat. People are still spending, but I’m watching how long spending can keep growing faster than income.
High-yield spreads also moved above 300 basis points in the latest report I reviewed. That alone doesn’t mean serious trouble, but continued widening would tell me investors are becoming more concerned about lending to companies. When Treasury yields and credit spreads rise together, companies face higher borrowing costs from both sides. That can affect hiring, expansion, and eventually earnings.
Oil remains another concern. Higher fuel costs leave consumers with less money for other purchases and raise costs for companies transporting goods. Even when oil falls for a few days, that doesn’t immediately undo the pressure. For SPY, I’d want to see oil ease while credit spreads settle down, rather than assuming a single decline means the problem is over.
Abroad, manufacturing improved in the Euro Area, but inflation rose to 3.8%. That puts the ECB in a difficult position. Production is improving, but higher prices keep pressure on consumers and leave less room for lower rates. Stronger activity helps, although companies still have to deal with the cost of producing and financing that growth.
In Japan, manufacturers became more confident, but nonmanufacturers were less confident, and industrial production fell unexpectedly. The Bank of Japan is dealing with higher prices alongside uneven growth. A weaker yen makes imports more expensive. However, a stronger yen could pressure exporters and affect investors who borrowed in yen to buy assets elsewhere. That’s why I’m watching the currency along with Japanese yields.
In China, both the official and private manufacturing reports showed expansion, helped by improving production and demand tied to AI. However, the official reading was only slightly above 50. Manufacturing is showing improvement, but I’d want to see that carry into consumer spending and property before saying the broader economy has turned around.
Returning to the U.S., the Nasdaq gained for the week, while the S&P and Dow declined and the Russell finished slightly lower. Technology is still helping hold the market up, but strength isn’t spreading evenly. That leaves less room for disappointment if expectations for AI spending or earnings begin to weaken.
This week, I’ll be watching yields, credit spreads, and oil. If spreads continue widening while volatility rises and more stocks weaken, I’d become more concerned about SPY holding near its highs. If yields ease, spreads stabilize, and more sectors move higher, that would give me a reason to reconsider.
My personal view is that markets are close to correcting hard, but there still isn’t enough evidence to confirm it. Until then, I think it’s best to remain cautious, keep positions small, and avoid getting ahead of what the market is actually doing.