Note: I’m out of the office attending the Future Proof conference, so I’ll be publishing fewer notes and videos than usual this week. Thank you for your understanding.
The FOMC’s 25 bp hike of the Fed funds rate today was largely anticipated by the market, with the swaps market having priced in a 95% probability for today, and the FOMC median forecast still shows one more hike priced in for 2026. Given that 16 voting members called for one more hike this year, I think it’s reasonable to suggest that today’s hike might not be the “one-and-done” that many had suspected. US equities had bounced ahead of today’s decision but remain largely range-bound over the last month. However, given that ^SPX is lower by just 2.6% from all-time highs on 8/13, US equity markets remain incredibly resilient in the wake of recent weakness in Treasuries along with crude having rallied over $100. Near term, it’s still hard to argue that a low is yet at hand, but near-term wave structure suggests some post-FOMC weakness would help to complete the short-term pattern, setting up a more attractive buying opportunity between today and end of week. Meanwhile, my expectations are that long-term Treasury yields likely don’t face much more upside movement, and a coming long-term peak in bond yields might be in place within a month. Overall, it remains prudent to position long on any weakness post-FOMC meeting, as I anticipate a coming low which could be in place between now and Friday for ^SPX.
The bigger technical development worth monitoring lies in the Treasury market, where monthly DeMark-based exhaustion signals are nearing completion at a time when positioning has grown crowded on the short side. If long rates begin a peaking process in the weeks ahead, that combination would remove a fairly large headwind that equities have faced since the summer, and this week’s expected post-FOMC gyrations should be viewed within that constructive larger framework. Dips in equities remain buyable for those with timeframes of more than a few days.
^SPX: A brief post-FOMC undercut of 7,572 into 7,550–7,565 would complete the pattern and set up this week’s low
Ahead of today’s FOMC decision, ^SPX attempted a mild bounce which reached 7,626 before pulling back ever so slightly post-Europe’s close. Technically, more will need to happen to argue for any kind of low being at hand, but ideally, my expectations are for mild weakness into Thursday/Friday before a possible bottom in this minor pullback.
The area between 7,550 and 7,565 would ideally be the area to buy, as it represents not only a 50% retracement of the rally from 7/29 up to 8/13 but would also provide a completed three-wave decline from the 8/13 highs. On the upside, the two areas I’m watching lie at 7,677, followed by 7,720 — each level being exceeded would provide greater confidence of a possible low being in place.
S&P 500 Index (^SPX, daily) — Range-bound consolidation holding above the 50% retracement at 7,566, with 7,677 and then 7,720 the key upside levels to watch
Financials’ pullback has reached intermediate-term trendline support, and stabilization looks likely
Financials have weakened lately, but it’s hard to turn too bearish on this recent underperformance, as the equal-weighted Financials ETF (RSPF) has pulled back to levels right near intermediate-term trendline support, marked by the uptrend from the April lows.
In the next few weeks, I expect Financials should stabilize and start to turn back higher. Near term, however, stocks like BAC, CBOE, HOOD, and COIN have all shown losses of -7% or greater over the past five days, so some selectivity is warranted while this group finds its footing near support.
Invesco S&P 500 Equal Weight Financials ETF (RSPF, daily) — Pullback into intermediate-term trendline support from the April lows should give way to stabilization
^TNX: 4.88% needs to be broken to expect a deeper pullback in yields, with 5.01% now resistance
^TNX showed some minor weakness ahead of today’s rate decision, and that weakness is holding post-FOMC rate hike as the yield curve is flattening along with a rise in the US dollar. This seems encouraging and could be a signal that markets are confident today’s move might be helping to restore some credibility.
Overall, it’s hard to make much of any minor pullback in ^TNX until 4.88% is broken at a minimum. While 5% remains an area of technical resistance, JP Morgan’s recent survey showed clients piling into short positions at the fastest pace since 2019 — the kind of one-sided positioning that often precedes reversals.
Technically, my expectations are that long-term yields likely don’t face much more upside pressure, and a coming long-term peak in bond yields might be in place within a month.
In the near term, today’s pullback in yields into today’s FOMC decision requires more downside pressure to claim that yields could weaken more substantially: support for yields lies near 4.88%, while 5.01% is resistance for ^TNX.
US Government Bonds 10-Year Yield (^TNX, daily) — Tuesday’s reversal from just above 5% needs to break 4.88% to argue yields weaken more substantially
TLT’s monthly DeMark signals suggest a prominent reversal in long-term yields could arrive as early as next month
TLT (the iShares 20+ Year Treasury Bond ETF) is on an early watch list for a possible monthly TD Buy Setup and TD Combo “13 Countdown” buy signal following recent weakness, and these could be in place as early as next month.
Thus, while many investors have had concerns about long-term interest rates trending higher, my interpretation of this indicator is that a monthly buy signal combined with a completed TD Buy Setup could likely spark a fairly prominent reversal in long-term yields — which would likely be seen as bullish for risk assets.
Similar signals shown on this monthly chart from November 2023 and May 2025 both coincided with gains in TLT, and my expectation is that a peaking process might be in store for US long-term yields as early as next month.
iShares 20+ Year Treasury Bond ETF (TLT, monthly) — TD Buy Setup and TD Combo “13 Countdown” could be complete as early as next month, as similar signals were in November 2023 and May 2025
Overall, this week’s setup looks constructive beneath the surface: ^SPX’s resilience in the face of higher yields and $100 crude is impressive, and the pattern from the August peaks needs just one more brief flush to complete, which would likely test the 50% retracement level of the bounce from late July. Meanwhile, the Treasury market is showing early evidence of exhaustion in both positioning and DeMark terms. A post-FOMC undercut of recent lows would be the buying opportunity, not any sort of material breakdown. Thus, it’s right to use weakness between today and end of week to add exposure ahead of the expected turn back higher. Stay tuned.
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