Why gridlock is bullish right now

The economy is running on strong consumer spending, low unemployment, and a massive buildout of AI data centers. When neither party can push sweeping legislation through, Washington can’t throw a wrench into that engine, so the market gets to keep doing what it’s already doing. With the election behind us, there’s less uncertainty today than there was yesterday, and I expect investors to start deploying capital more aggressively as a result.

Ignore the scary policy headlines

I would bet money that you’ll start seeing plenty of articles about capping credit card rates, data center moratoriums, and other proposals from the new Congress. Remember, democrats did not win a veto-proof majority in either chamber, so they can’t override the President, and that keeps the odds of industry-shaking legislation near zero for the next two years.

What will go up is the noise: government shutdowns, debt ceiling fights, congressional investigations, subpoenas, and impeachment threats. These will dominate the news cycle and can trigger short bursts of volatility, but history shows they don’t leave a lasting mark on stocks because they don’t change corporate earnings.

The numbers to know

• From 1950 to 2025, the S&P 500 averaged a 3.0% gain in midterm Novembers, compared with 1.8% in non-midterm Novembers.

• Since 1974, the index has averaged a 5.7% return in the three months after midterms (positive 85% of the time) and a 12.4% return in the six months after (positive 100% of the time).

• From 1950 to 2025, the S&P 500 averaged 7.6% in Q4 of midterm years versus 4.2% in non-election periods, then 8.2% in the following Q1 versus just 1.1%. The two quarters we’re entering now have historically been the strongest back-to-back stretch of the cycle.

• Every midterm since 1950 has been followed by a positive 12-month return, averaging 18.8% through 2024, and the 11 months after a midterm November averaged 17.0% from 1950 to 2025, more than double the 8.1% non-midterm average.

• Going back to the 1880s, a divided government under a Republican president has followed 14 midterms, more than any other outcome, and stocks averaged an 18% return over the next 12 months, positive 93% of the time.

Where I’d look for extra upside

Clean energy. A Democratic Congress will push for green subsidies and climate mandates, and even though gridlock limits what passes, that pressure supports sentiment in the sector. Clean energy also performed well during both Trump terms, which tells you the trend has legs beyond Washington. ICLN covers solar, wind, hydro, and biomass. DEMZ and NANC, which track Democratic-aligned and congressional Democrat holdings, are also worth a look.

AI infrastructure on a dip. Fear of Democrats cracking down on data centers could keep pressure on chip and memory names. If that selling gets heavy in SOXX and DRAM, I’d treat it as a buying opportunity. The data center backlash was useful as a campaign issue, and with the votes counted, its political value drops fast.

These are satellite ideas for aggressive investors, not core holdings.

Bottom line: Divided government means gridlock, and gridlock has historically been good for stocks. Tune out the Washington noise and stay invested.

And remember - The one fact pertaining to all conditions is that they will change.

Follow me on X for more updates.

Best regards,

-Kurt

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President

ivoryhill.com

Disclosure

The RiskSignal Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

To see past the gum flapping, I like to reference a simple indicator: the percentage of NYSE stocks trading above their 20-day moving average. It counts how many stocks are in a short-term uptrend, so it tells you whether most of the market is moving up or only a few big names are. That number is rising right now, which means buyers are spreading out across more stocks even as the big indices lose their footing. The NYSE Advance-Decline Line backs that up. It keeps a running daily tally of how many stocks rose versus fell, and after sliding from August through September, it has turned up and is inching higher this month. More stocks rising than falling while the index drops means the selling is concentrated in a few large names, and that should keep further declines in the major indices limited in the short term. The A-D Line is still well below its August peak, though, so the S&P 500 needs that line to keep climbing before it can make a lasting move above 7,800.

Markets hate uncertainty, and a midterm election year means a full year of not knowing who will control Congress, which bills will die, and which tax and spending plans will survive. Investors price that fog by paying less for stocks, so midterm years have historically produced deeper selloffs than any other year of a presidential term. Rephrased: Midterm election years have historically produced some of the best buying opportunities going into year-end.

This year has been mild by that standard. The biggest pullback in the S&P 500 came back in Q1 and stayed well short of the typical midterm-year selloff, so 2026 has already skipped the worst of what history predicted. Volatility can still pick up over the next 8 days, but a scare in the final week would come from the same source as every midterm wobble: not knowing the outcome. This is really just the cost of your long-term returns. If you do not need the money tomorrow, then drawdowns don’t matter. If you do need the money tomorrow, then it shouldn’t be in the market in the first place. If anything, if you are a long-term investor, you should want drawdowns to deploy capital into.

The fog lifts the day the votes are counted

Once the results are in, the guessing stops. Companies know which rules they will operate under for the next 2 years; money that sat on the sidelines waiting for clarity comes back in, and stocks have historically responded by climbing. The S&P 500 has finished higher in the 12 months after every midterm election since 1950, and the 6-month window since 1974 has the same perfect record.

I am not a big believer in trading off the calendar, and you should not buy or sell anything because of what November did in 1962. I show you this history for a different reason: when someone tells you the election is about to wreck the market, the official record says the opposite has been far more common.

Why history is not the whole story

A calendar pattern only works if no other catalysts override it, so here is what actually drives returns from here.

On the plus side, the economy keeps absorbing everything thrown at it, corporate earnings are strong, household balance sheets are in good shape, and AI spending is still pouring money into chips, power, and data centers. Momentum is on our side too, since a market that keeps making new highs tends to pull in buyers who missed the first leg.

On the minus side, rates are high, and the Fed is openly talking about hiking rates. The recent jump in inflation is almost entirely an oil story: the conflict with Iran pushed crude higher, and that flowed straight into gas, shipping, and anything that moves by truck. That is a supply shock, and a rate hike doesn't produce a single barrel of oil, so hiking into it would slow the economy without fixing the real problem. This is the same Fed that spent 2021 calling inflation transitory, so I would not bet my portfolio on its timing now or any other time. The rally is also concentrated in a small group of giant stocks, and valuations are expensive.

If you want to play the outcome

For most of you, the winning move is to stay invested and ignore the noise. For those who want a small, targeted bet on top of a core portfolio, here is how each outcome could shake out, listed from most likely to least likely based on Polymarket odds as of October 26.

Democrats sweep (the betting favorite). A Democratic Congress would push clean energy mandates, green subsidies, and climate spending, which sends money directly to solar, wind, and hydro companies. Clean energy stocks have actually done well under both Trump terms, so this group does not need a blue wave to work, it just gets a bigger tailwind from one. The iShares Global Clean Energy ETF (ICLN) is the simplest way to own that theme.

Split Congress (Republican Senate, Democratic House). A divided Congress passes very little, but defense is one of the few line items both parties fund every year, and a world with active conflicts keeps that budget growing. The iShares U.S. Aerospace & Defense ETF (ITA) owns the defense contractors and aircraft makers that collect those checks.

Republicans sweep (the long shot). Republican leadership treats AI and data center buildout as a national priority in the race against China, which means faster permitting and more support for the power grid that feeds those data centers. The Defiance AI & Power Infrastructure ETF (AIPO) holds the companies building that grid, power supply, and AI hardware.

Keep any of these small. They are satellite positions, and a wrong call on the election should cost you a little, not a lot.

The bottom line is the votes will be counted, the uncertainty will clear, companies will go back to making money, and the market will move on to the next thing to hyperventilate about. The worst mistake you can make next week is selling a long-term portfolio because of a headline that will be old news by Thanksgiving. Stick to your strategy.

And remember - The one fact pertaining to all conditions is that they will change.

Follow me on X for more updates.

Best regards,

-Kurt

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President

ivoryhill.com

Disclosure

The RiskSignal Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

Tech Earnings: Three Reports, No Cracks

SpaceX and Super Micro Computer both reported after Tuesday’s close and set the tone for Wednesday. SpaceX is viewed as an AI infrastructure company more than a rocket business, and this quarter showed why: AI computing revenue was strong, and management plans to raise capex to build more computing capacity. Super Micro pre-announced its September quarter, estimating revenue of $18.5 billion to $19.5 billion against guidance of $14.5 billion to $15.5 billion. A $4 billion raise at the midpoint in one quarter tells you AI hardware demand is still running ahead of what even the company expected. Both stocks jumped at the open, pulled buyers back into tech, and the S&P 500 closed up 0.58% on Wednesday.

META, the first of the hyperscalers to report, delivered what amounts to a positive status quo. Revenue rose 26% to $64.6 billion in Q3 2026, beating the $63.3 billion consensus, which shows the core ad business is still growing fast enough to fund the AI build-out. That build-out is accelerating: capex hit $34.9 billion in the quarter, up 80% from $19.4 billion a year earlier, and management raised the low end of its 2026 range to $135 billion from $130 billion while saying it will keep investing aggressively in 2027. The report wasn’t jaw-dropping, and futures fell 0.96% before today’s open as investors digested the bigger spending bill. But revenue growing at 26% while capex climbs gives reasonable hope that this spending turns into returns, and nothing in the quarter suggests the AI investment cycle is slowing.

The test for tech earnings was simple: show that capital is still flowing into AI and starting to pay off. Three reports in, the answer is yes, and that is why stocks rallied Wednesday.

Consumer: Capital One Says Credit Is Holding

Capital One (COF) beat earnings estimates and struck an upbeat tone on the consumer. The key number was credit loss provisions, which came in $700 million below estimates. Capital One is setting aside less for bad loans because its borrowers are paying better than they expected.

That carries a little extra weight because Capital One’s card book skews more towards lower-quality borrowers, the first place consumer stress would show up. If that customer base is holding, it supports the “stable consumer” message JPMorgan gave earlier this month. One report is not a trend, but Wednesday was a net positive for stocks.

Credit Spreads: Any Warning Signs?

Earlier this week, I was monitoring the MOVE Index, which tracks Treasury volatility (the VIX for bonds). I watch it because if the AI trade breaks, it likely breaks through credit first. Defaults among neoclouds and other leveraged AI borrowers would force markdowns, which would force spending cuts, which would compress both growth and multiples across the sector. The MOVE jumped from about 80 in mid-September to roughly 114 in early October, and it has since eased to 95.94 as of October 21, so bond volatility is calming but still elevated.

The other half of that warning system is credit spreads, which show whether higher yields are straining corporate balance sheets. A credit spread is the yield spread between two bonds with similar maturities but different credit quality, typically a Treasury against a basket of corporate bonds. Investors demand extra yield for extra risk, so the spread measures how worried lenders are about corporate health.

When rates are low, widening spreads usually signal recession risk. When rates are high, as they are today, spreads become a real-time signal on whether companies can service their debt. The setup to be scared of is rising Treasury yields with widening spreads, because it means borrowing costs are climbing just as lenders lose confidence.

The first half of that setup is starting to fade as the 10-year Treasury yield has broken below 5.20% support and sits at 5.04%. This looks like a pause in the uptrend rather than a reversal, but the pressure from Treasuries is easing for now.

The second half, credit spreads, is where the early signs of stress are showing up, specifically in junk bonds. The chart below is the spread, the ICE BofA US High Yield Option-Adjusted Spread, which measures the extra yield investors demand to hold junk bonds over Treasuries. Because junk issuers are the most leveraged borrowers in the market, the junk spread is usually the first place to see corporate stress. My warning threshold is 5.00%, the level where both the late 2018 selloff and the 2022 bear market topped out. Above that, the bond market is pricing in real default risk.

The junk spread has jumped from its 2.59% low to 3.33% over the past several weeks. That is worth keeping an eye on, but 3.33% is still well below the 5.00% warning line and nowhere near the 10.87% spike of March 2020.

The chart below is the junk yield, the total yield on B-rated junk bonds, which is what a typical junk issuer actually pays to borrow. It has climbed from about 6.5% in January to 8.26%, its highest level since late 2023. Most of that climb since January came from higher Treasury rates, but over the past few weeks the 10-year fell while the junk yield kept rising. That means the recent move is coming from a wider junk spread, in other words from credit risk in the weakest borrowers, not from Treasury rates.

Putting the junk yield next to the S&P 500 shows why this matters for stocks. The big junk yield spikes in late 2018, 2022 and April 2025 all lined up with major S&P 500 drawdowns, because when borrowing costs jump for the weakest companies, equity investors start pricing in defaults and slower growth. This time is different so far: the junk yield has climbed to 8.26% while the S&P 500 closed at a record 7,757 on October 21. Stocks are not treating higher junk yields as a systemic threat yet, and a real drawdown would most likely start when the junk yield spikes rather than grinds higher.

Lenders are demanding more to hold the riskiest debt, but they are nowhere close to pulling back from the credit market as a whole, which fits the view that AI debt problems are concentrated in specific names rather than spreading across corporate America.

I will keep watching the junk spread and the MOVE Index for signs of weakness. As long as the junk spread stays below 5.00%, weakness in AI stocks looks like a sector correction, not the end of the bull market, and is more than likely a buying opportunity. I do expect volatility to continue through midterms, so start putting together your buy list now.

And remember - The one fact pertaining to all conditions is that they will change.

Follow me on X for more updates.

Best regards,

-Kurt

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President

ivoryhill.com

Disclosure

The RiskSignal Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

What a record high with bad breadth actually means

The S&P 500 is weighted by size, so a handful of trillion-dollar stocks can lift the index even when hundreds of others fall.

Breadth measures how many stocks are participating. The Advance-Decline Line keeps a running total of stocks that rose each day minus the ones that fell, and in a healthy bull market it makes new highs alongside the index.

That isn’t happening. The S&P 500 in the top panel on the chart below is showing it pressing against 7,800, while the A-D Line in the middle panel peaked in mid-August and rolled over hard through September. Technicians call this a negative divergence, which in plain English means more stocks have been falling than rising even as the headline number climbs. The bottom panel shows the damage underneath: only about 39% of NYSE stocks trade above their 150-day average, down from roughly 60% in August.

A divergence isn’t a sell signal on its own, but it makes this rally fragile: when a few names carry the index, they only have to stumble to drag the whole party lower, with no army of other stocks underneath to catch it. The fix is easy to watch: the A-D Line has to climb back to the mid-August high marked by the dotted arrow. Until it does, every new high in the S&P 500 is built on fewer shoulders.

Rising yields built the dollar, and the dollar is choosing winners

Last week’s report covered the 10-year Treasury yield hitting 5.34%, its highest level since 2002. The second-order effect is now showing up in currencies.

When U.S. Treasuries pay far more than bonds in Europe or Japan, global money sells euros and yen to buy dollars and collect the difference. The chart below shows the Dollar Index closing at 102.57, well above the $101.50 level that capped it in June and July. That old ceiling is now the floor, and with the RSI overbought above 70, a pullback toward $101.50 would be a normal pause inside the uptrend.

The euro is the mirror image of the greenback.

A strong dollar tightens financial conditions for anything that isn’t a cash-rich U.S. mega cap company. Small companies borrow at floating rates and sell mostly at home, so they absorb higher rates with no currency tailwind. Foreign stocks lose value when converted back into dollars. The only group that shrugs all of it off is the one with enormous cash piles, pricing power, and a story investors will pay for at any rate: AI.

That explains the scoreboard. Growth stocks pulled back last week after a report that OpenAI’s revenue is running below earlier projections, but the chart below shows the S&P 500 Growth ETF (IVW) holding above its June and August highs near $142, and its ratio to the S&P 500 in the bottom panel just made a new 2026 high.

Small caps are the opposite story. They fell last week while the S&P 500 rose 1.15%. The chart below shows the Russell 2000 ETF (IWM) breaking down in September and sliding all the way to its 200-day average near $275, where it sat at $278 last week. The bottom panel is the one to remember: IWM’s performance versus the S&P 500 is near its weakest point of 2026. A MACD buy signal says the selling is slowing, but IWM still has to clear the downtrend line near $283 before small caps are worth owning again.

The same trade is running overseas under a different flag

Emerging markets look like a winner on paper. The broad MSCI Emerging Markets fund (IEMG) is up more than 20%, beating both U.S. stocks and developed international markets.

Open the hood, and it’s the AI trade again. Taiwan and South Korea make up roughly half of the index, and both are chip bets. Taiwan Semiconductor alone is about 1/5 of the Taiwan fund, and SK Hynix and Samsung are close to half of the Korea fund. The chart below sorts 8 major emerging-market country funds by trend. Only Taiwan, South Korea, and Brazil trade above their 200-day moving averages. China, India, South Africa, Saudi Arabia, and Mexico are all in downtrends because their markets lean on banks and industrials instead of chips, and a rising dollar drains foreign money out of exactly those kinds of markets.

Even the leaders are thinning out. Taiwan is the only one with a clean trend. The chart below shows EWT climbing from about $89 at its August low to $114, a steady run of higher highs and higher lows.

Korea is going the other way. SK Hynix dropped 13% in a single week, and EWY is falling from just above $190 to $170, breaking the support that held through September. That turns the Korea fund from a breakout candidate into a pass for now. Brazil jumped about 14% in October on election results, but a rally built on one headline is hard to trust, and the fund is overbought.

Saudi Arabia is the most useful lesson in the group. You would expect an oil country to rally with energy prices. It hasn’t, because the Saudi fund holds about 42% financials and only about 13% energy, and global financial stocks have lagged all of 2026. KSA is at $35.66, the chart's low. Before you buy any country fund, read its holdings, because the name on the label can put you in the wrong sector entirely.

The one good sign last week, and what it proves

Yields took a breather last week. The 10-year is easing from its 5.34% high to 5.24%, after the MACD in the middle panel flashed a sell and the RSI rolled over from overbought. It’s now sitting just above support at 5.20%.

The stock market’s response was immediate. Utilities and consumer staples, the 2 sectors most sensitive to rates, jumped more than 3.5% for the week. The chart below shows the breadth reaction. The share of NYSE stocks above their 20-day average (bottom panel) doubled off its oversold floor near 20% to almost 42%. The 50-day in the middle panel has barely moved off its lows at 27%, which tells you the bounce is short-term so far.

RSP’s ratio to the S&P 500 is still pinned under its own downtrend line, and a break above it would mean the average stock is finally beating the mega caps instead of just bouncing alongside them.

That reaction is the most important data point in this report, because it proves the breadth problem is a rate problem: give the average stock a few days of falling yields and it rallies. The bond market has given no sign this pause will last. The 10-year’s longer-term uptrend is intact, and the gap between the 10-year and 1-year Treasury yields just broke above a downtrend line running back to 2010. That steepening is coming from long-term yields rising while short rates sit still, which is the deficit-driven pressure I covered last week. If the 10-year breaks back above 5.34% and heads toward 5.5%, the breadth rally loses its fuel.

What it means for you

Know how concentrated your index fund is. An S&P 500 index fund is a bet on the AI trade whether you meant to make one or not. Own an S&P 500 fund, a NASDAQ fund, and a tech fund, and you own the same handful of companies 3 times.

Don’t buy emerging markets as one fund. A broad emerging-market fund puts roughly half your money into Taiwanese and Korean chipmakers. If you want the exposure, be selective. Taiwan has the cleanest trend. India, South Africa, and Mexico have hit oversold levels and may bounce, and any bounce is a chance to trim, not add.

Own foreign assets in dollar terms. With the euro breaking down, unhedged European holdings can lose money on the currency alone, and currency-hedged funds remove that drag. Think HEDJ over VGK.

Favor quality over cheap. High-profit-margin companies and low-volatility stocks are beating the market on a risk-adjusted basis right now, because businesses with fat margins can absorb higher borrowing costs without cutting earnings.

Watch 3 levels. The NYSE Advance-Decline Line reclaiming its mid-August high would confirm the rally is broadening. The S&P 500 holding above 7,800 with the share of stocks above their 50-day average climbing out of the 20s would confirm a new leg higher. The 10-year breaking above 5.5% would tell you the breadth rally is over before it started.

Quick hits on the rest of the macro

Gold: A rising dollar makes every ounce more expensive for overseas buyers, so gold needs the dollar to cool before it can break its downtrend.

Natural gas: Natural gas has risen in 69% of Octobers over the last 35 years, and it’s trading at $3.15, above both its 50-day and 200-day averages with a fresh MACD buy signal. A push through $3.40 resistance sets up higher heating bills into the winter.

NASDAQ: That old ceiling is now first support, with the 50-day average near 26,600 below it if the AI wobble deepens.

And remember - The one fact pertaining to all conditions is that they will change.

Follow me on X for more updates.

Best regards,

-Kurt

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President

ivoryhill.com

Disclosure

The RiskSignal Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

Gamma Report 2026 10 02

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The stock market’s fear gauge, the VIX, closed Friday at 15.31, near its lowest levels of the year. The bond market’s fear gauge, the MOVE Index, closed the same day at 107.29 after jumping roughly 35% in September. When those two indices disagree this badly, the bond market has usually been right first, and as of last week, credit spreads have started siding with bonds. If you don’t understand the credit markets, you do not understand the stock markets.

Two fear gauges, two different markets

The VIX (formally the Cboe Volatility Index) measures what traders are paying for insurance on the S&P 500 over the next 30 days. Cheap insurance means stock investors see little danger ahead.

The MOVE Index does the same for Treasury yields. A reading of 107 means the options market expects the 10-year Treasury yield to swing about 6.7 basis points per day (a basis point is 0.01%). That sounds small until you remember that Treasury yields set the price of mortgages, car loans, corporate debt, and the discount rate every stock valuation is built on.

One bond rule makes the rest of this report click: when yields rise, the price of bonds you already own falls, because new bonds now pay more than yours. The longer your bond’s maturity, the harder that price drop hits.

The third signal in this report is the credit spread, which is the extra yield that weaker companies must pay above Treasuries to borrow money. When spreads widen, lenders are demanding more pay for the risk of not getting their money back.

The risk changed markets in 2026

The 10-year Treasury yield ended 2025 at 4.14% and closed Friday at 5.28%, a rise of 114 basis points in 9 months. Earlier last week it touched 5.34%, its highest level since 2002, and the quarter that ended in September produced the largest quarterly jump in the 10-year yield this century.

Chart 1 covers October 2025 to October 2026. The VIX’s closing high this year was 31.05 in late March, when the oil spike tied to the Iran war hit markets. It has made lower highs ever since. The 10-year yield in the bottom panel has done the opposite, climbing steadily from about 4% to new highs. (The chart uses Treasury’s official daily rate, which printed 5.24% on October 2 versus the 5.28% market close.)

Equity traders got paid through all of it. The S&P 500 is up 12.81% year to date through October 2, 2026. Over the same period of time, TLT, the largest long-term Treasury ETF, is down about 11% in price and down 7.81% even after counting its interest payments.

Friday’s jobs report proved the bond market has stopped listening to the economy

The September jobs report was weak on every line. Employers added 29,000 jobs against a Bloomberg survey estimate of about 85,000, revisions erased 60,000 jobs from July and August, turning July negative at minus 10,000, unemployment rose to 4.2%, and annual wage growth slowed to 3.0%, the weakest since May 2021.

For 40 years, a report like that sent a panic into Treasuries and pushed yields down. On Friday, the 10-year yield dropped to 5.18% right after the release, then reversed and closed at 5.28%, up 4 basis points on the day. Stocks took the bad news as good news: the S&P 500 rose 0.73% to 7,722.72, the Nasdaq gained 1.19%, and the VIX fell 6.59%.

The bond market ignored the jobs data because it is pricing in Washington’s borrowing. The 10-year inflation-protected Treasury pays a real yield of 2.92%, which implies investors expect only about 2.36% annual inflation over the next decade. Most of that 5.28% yield is extra pay that lenders now demand for funding a government that keeps running massive deficits. The printing press and the deficit debase the dollar, and bond buyers are pricing that in.

The Fed made the picture worse. On September 16, 2026, it raised rates 25 basis points to 3.75% to 4.00%, its first hike since 2023, citing energy prices driven by the Middle East conflict. A rate hike does not produce a single barrel of oil. All it did was raise borrowing costs at the short end while long-term yields kept climbing on their own, which tells you the Fed has no control over the part of the curve that sets your mortgage rate.

The hedge became the hazard

The classic 60/40 portfolio (60% stocks, 40% bonds) rests on one assumption: when stocks fall, bonds rise and cushion the blow. Chart 2 shows what happened to that assumption over the past 5 years (October 2021 to October 2026). SPY gained 77.24% in price. TLT lost 46.69%.

Long-term Treasuries fell this hard because they hold bonds maturing 20 to 30 years out, so every rise in yields compounds into a large price loss. TLT posted the lowest close in its history on September 23, 2026 at $80.46, then fell further to $77.48 on October 2. Anyone who bought long Treasuries for safety in late 2021 has sat through a drawdown worse than the S&P 500’s 2022 bear market.

In 2022, stocks and long bonds fell together, and in 2026 long bonds fell while stocks rose, so the bond sleeve failed at its one job both times.

The MOVE Index moves first

The MOVE Index rose 35% in September through September 28, a monthly jump seen only 8 times since 2008. During the week of September 25 alone, it climbed about 30%, its biggest weekly gain since the April 2025 tariff shock.

Chart 3 runs from October 2025 to October 2, 2026, and the two blue lines tell the story. On the MOVE (top panel), the rising line connects higher lows since early July: bond volatility has been building a floor for 3 months, and in late September it exploded off that floor to 107.29. On the VIX (bottom panel), the falling line connects lower highs since June: stock volatility keeps fading.

That divergence is important because the MOVE has a track record of leading the VIX. It flashed turbulence before the VIX in early 2022, in March 2023, and in the opening days of the 2026 Iran war. Treasury yields are the base interest rate for the entire financial system, so when that base rate swings 7 basis points a day, every lender, insurer, and pension fund has to recalibrate its risk.

Credit is the second domino, and it has started to tip (still very early).

The intermarket chain runs in order: bond volatility rises first, credit spreads widen second, and stocks crack last. Chart 4 shows that order from January 2006 to October 2026. In 2007, the junk bond spread bottomed and started rising months before the S&P 500 peaked in October 2007. In mid-2014, spreads turned higher roughly a year before the S&P 500 topped in May 2015 and fell into its August 2015 and early 2016 selloffs. In the second half of 2021, spreads bottomed again ahead of the January 2022 stock peak. Lenders spotted the stress first every time, because bondholders only care about getting repaid and watch balance sheets more closely than stock buyers do.

Stage 1 of that chain is done. Stage 2 began last week.

The high-yield (junk bond) spread widened from 2.93% on September 25 to 3.24% on October 1, a 31 basis point jump in 4 trading days. Chart 5’s top panel shows the all-in yield on junk bonds at 8.22% as of October 1, 2026, breaking above its 12-month average of 7.08%. Companies with weaker balance sheets now pay more than 8% to borrow, and the ones facing large debt maturities in 2026 and 2027 must refinance at those rates or default. Rising rates on revolving credit can have a big negative impact on businesses that don’t make any money or have very small margins.

The bottom panel is the price ratio. It divides TLT by HYG (a junk bond ETF) to compare duration risk with credit risk. The ratio has fallen from about 2.5 in 2020 to 1.01 today, meaning investors spent 6 years preferring junk bonds over long Treasuries, a trade that works only while spreads stay tight. Spreads are still well below the long-term average of 5.17%, so they have plenty of room to widen, and a rising MOVE is what historically pushes them there.

The bull case, and why it falls short

Bulls will argue three things: the weak jobs report likely ends Fed hikes, spreads remain historically tight, and a 15 VIX simply reflects a strong market. Each argument has a hole.

A Fed pause does nothing for long-term yields, which climbed without any help from the Fed and ignored Friday’s jobs data entirely. Tight spreads are a starting point with no cushion, which means a widening cycle has further to run. And the strong market is narrow. The S&P 500 is up 12.81% this year, but the equal-weight version is up only 9.47% through October 2, and in September roughly 3/4 of S&P 500 stocks fell while 4 stocks delivered about half the index’s 2026 gain. A low VIX on top of a handful of chipmakers is a crowded trade that breaks hard when rates move.

What it means for you

Check the duration on your bond funds. Duration is listed on every fund’s fact sheet, and it tells you roughly how much the fund loses for each 1 percentage point rise in yields. A fund with a duration of 15 loses about 15%. With the Fed at 3.75% to 4.00%, short-term Treasuries and T-bills pay close to that rate without the price swings that have gutted long bond funds.

Stop counting on long Treasury funds to hedge your stocks. When the threat is rising rates, long bonds and stocks fall together.

Do not chase an 8% junk bond yield. At a 3.24% spread, you are paid very little extra for lending to the weakest companies right as their borrowing costs jump.

Watch two levels. If the MOVE breaks above its March 2026 high near 115 and the junk spread climbs above 4%, rate stress will have reached corporate balance sheets, and the VIX at 15 will not survive it. The next tests are the Fed decision on October 28, 2026 and Treasury’s quarterly refunding announcement in early November, which tells the market how much more long-term debt is coming. If supply keeps climbing, mortgage rates and corporate refinancing costs go higher, and stocks will be the last asset to reprice.

There is a difference between Treasury Funds and individual Treasuries. Buying an individual Treasury at today’s 5.28% 10-year yield (as of October 2, 2026) locks in that income for the full 10 years, and if you hold it to maturity, you get your full principal back no matter how far prices swing in between. A bond fund never matures because it keeps selling aging bonds and buying new ones to hold its duration steady, so its share price moves with every change in rates and there’s no maturity date to wait for that guarantees your money back. That difference matters because an investor who needs a known sum on a known date, like a retirement paycheck or a tuition bill, can count on the individual bond to deliver it, while the bond fund leaves that same investor guessing what the money will be worth when they need it.

Quick hits on the rest of the macro

Oil: WTI closed at $91 last week and remains stuck below $95 resistance because the dollar’s breakout makes every dollar-priced barrel more expensive for overseas buyers.

U.S. dollar: The Dollar Index closed near 102 last week (October 2, 2026), breaking out above its summer highs around 101.75. The sequence behind it starts with the oil shock, which pushed the Fed into a September 16 rate hike, while heavy Treasury borrowing lifted the 10-year yield to 5.28%, the highest since 2002. Those yields now pay far more than bonds in Europe or Japan, so global money is selling other currencies to buy dollars and capture that gap. The stronger dollar squeezes every foreign company and government that has to repay dollar debt, and it's a headwind for commodities because they're priced in dollars and get more expensive for overseas buyers every time the dollar climbs. That pressure is already showing in WTI stalling below $95.

Japanese yen: The yen closed at 0.6336 last week (about 158 yen per dollar), and Treasury Secretary Bessent wants it stronger. He called the yen “very undervalued,” backed the first joint U.S.-Japan yen-buying intervention in 28 years in July after it hit roughly 164 per dollar, and keeps pressing the Bank of Japan to raise rates. The rally faded from its September high near 0.6550 because 5.28% U.S. Treasury yields keep paying traders to borrow cheap yen and buy U.S. assets, which pushes the yen lower. That leaves a carry trade built on a currency the U.S. Treasury is actively trying to push higher, and if Bessent and the Bank of Japan force the yen back above that level, those traders have to sell U.S. stocks and bonds at the same time to repay their yen loans.

M7: MAGS closed at $72.59 last week, holding above its $71 breakout level as money crowds back into the biggest tech names, the same narrow leadership that leaves the S&P 500 exposed if rates keep climbing.

And remember - The one fact pertaining to all conditions is that they will change.

Follow me on X for more updates.

Best regards,

-Kurt

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President

ivoryhill.com

Disclosure

The RiskSignal Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

Here's what the big chart below is showing. RSP is the equal-weight version of the S&P 500, meaning all 500 stocks count the same; a small company moves the index by the same amount as a giant one.

The regular S&P 500 index doesn't work that way. It's weighted by market cap, so the biggest companies, the same mega caps carrying this rally, count far more than everyone else.

That's why the two are disagreeing. RSP peaked in mid-August, right on its own trendline, then failed to hold that level and broke down. It's down 6% since. The panel below it is a price ratio of RSP divided by the S&P 500, and that ratio made a lower high in September before breaking its own trendline too, a failed test followed by a breakdown, the same pattern showing up twice in two different ways. The bottom panels confirm it isn't just RSP: the percentage of NYSE stocks above their 20-day and 50-day averages has been falling since the same point in time; both are near oversold. The S&P 500 keeps climbing because a handful of giant stocks are heavy enough to pull the average up by themselves. The other 500-minus-a-handful are doing what RSP is doing. So right now, you are being punished for essentially holding less risk and not concentrating in the bigger names.

Utilities are down 8% in three weeks. Industrials broke a five-month uptrend line. Consumer staples broke the same line a week later. All three are now in decisive downtrends.

Mega caps are in the opposite direction. Same uptrend channel since April, still above both moving averages, higher lows on every dip. Oil refiners are up over 60% since June and haven’t even come close to tagging the 50-day.

Investors generally buy utilities and staples stocks for the dividend, not for earnings growth, so their stock price behaves like a bond price: it moves opposite to interest rates. These are stocks like Xcel Energy and PepsiCo. XLU currently yields about 2.99%. XLP yields about 2.67%. The 10-year Treasury is at roughly 5.2%, the highest level since 2007. Even a 3-month T-bill pays around 4.24% right now. That means an investor can buy the safest instrument in the world and collect more income than any of these stocks will pay them, with zero price risk. When that math flips, the price you’re willing to pay for the dividend stock has to come down to compete. This is not just noise; this is math. That’s a discount-rate problem, and it’s the direct, verifiable reason utility and staples stocks get repriced lower every time long-term rates climb this fast. It happened the same way in 2022, and it’s happening again now.

Industrials are a different story, and it would be wrong to force them into the same explanation. Some of the pressure is still rate-related; capital equipment and infrastructure projects get financed with debt, so higher borrowing costs squeeze the same companies from the expense side. But industrials aren’t bought for yield the way utilities are, so the dividend-versus-Treasury math doesn’t drive this one directly. The bigger issue is margin risk. Trade and tariff exposure has repeatedly hit this sector’s input costs, and industrials also carry higher valuations after a strong run, which leaves less room for error if growth expectations soften. Watch the Dow Transports here. They’re a classic early-warning read on industrial demand, and they’ve been among the weakest parts of this market. This is a growth concern layered on top of a financing-cost concern.

Cull the dead weight or remove the weak members from your portfolio. Sell or trim utilities, industrials, and consumer staples, and put that capital into mega caps, technology, and oil refiners. Why? Because rates are not coming down anytime soon.

Size refiners smaller than the other two. Mega caps and technology are trending up because of demand and earnings that build slowly and don’t reverse in a day. Refiners are trending up because of crack spreads, which move on the price of oil, and oil can gap on a single weekend headline out of the Middle East, an OPEC+ production decision, or a surprise inventory report. That’s a fast, event-driven risk sitting on top of a solid-looking chart, not a reason to skip the trade, but a reason to keep the position smaller than conviction alone would suggest.

And the breadth confirms this is not a guess. Only 40% of NYSE stocks sit above their 200-day average. Under a quarter sit above their 50-day. Most of the market has been weak for months while a small group of stocks, the same group holding the index up, kept climbing. Rotating into them isn’t fighting the tape. It’s following where the actual demand already is.

The average stock backs this up too. RSP broke its own uptrend line in September and is down 6% since. The RSP/S&P 500 ratio made a lower high and broke down right behind it. The broad market failed. The leaders didn’t.

One thing this isn’t: a call to go to cash (yet). It’s a call to stop owning what’s broken and own what’s working. Utilities, industrials, and staples need to prove they can reclaim their trend lines before they get new money again. Until then, every dollar coming out of them belongs in megacaps, technology, or refiners.

Watch 7,600 on the index. It doesn’t change the trade. It changes how aggressively you make it.

And remember - The one fact pertaining to all conditions is that they will change.

Follow me on X for more updates.

Best regards,

-Kurt

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President

ivoryhill.com

Disclosure

The RiskSignal Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

This week, the U.S. government sold $70 billion of 5-year Treasury debt at a 5.03% yield, the highest for that sale since 2006. The group of buyers that includes foreign central banks and other overseas investors took 54% of it, well below its usual 65% share.

For decades, foreign countries have taken the dollars they earn selling goods to the U.S. and parked them in Treasury bonds, which helped hold U.S. borrowing costs down. When they step back, the bonds still have to be sold and someone has to buy them. The big Wall Street banks that are required to bid at every Treasury sale absorb the leftovers, and they only do it at a higher interest rate.

That higher rate then resets borrowing costs for everyone. It flows into mortgage rates, which hit 7.03% this week, their highest since 2024, and it raises what businesses pay to borrow.

The government pays that higher rate too. U.S. now spends more on interest on the national debt than it does on the military. Higher rates raise the interest bill on the national debt, which widens the deficit and forces the government to sell even more bonds into a market that already lacks buyers. Treasury is already leaning against this: this week it tripled the amount of its own long-term bonds it will buy back, to $6 billion, to keep long-term rates in check. If foreign demand keeps fading, the buyer of last resort is the Fed. When the Fed buys Treasury bonds, it does so with newly created money, and that money printing is what debases the dollar.

The Fed raised rates last week partly because high oil prices were pushing up prices across the economy. Since then, U.S. crude oil has fallen below $95 a barrel, a level that had held as a floor, and closed at $92.44.

Brent, the global oil benchmark, is still holding near $104. That left it $11.99 a barrel more expensive than U.S. oil, the widest gap since March. The extra premium largely reflects the risk to tankers moving through the Strait of Hormuz, since Brent competes directly with Middle East supply on the water. U.S. oil still moves with global prices, but because it doesn’t depend on that route, it carries much less of that risk. A rate hike does not produce a single barrel of oil, and an oil shock that is starting to fade justifies neither last week’s hike nor a second one.

How bonds, oil, and stocks are connected right now

For most of September, all three markets moved together. Oil prices rose, investors bet the Fed would raise rates again, and the 2-year Treasury rate, which tracks where the Fed is headed, jumped to 4.89% on Sept 23, its highest since May 2024. Higher rates triggered some investors to pull money out of stocks, because a guaranteed 5% from the government is a better risk/reward ratio than taking on systemic risk in stocks right now.

On Friday, that pattern broke. U.S. oil dropped 2.29% on hopes the Strait of Hormuz reopens, and the S&P 500 rose 0.51%. The 10-year rate, however, did not follow oil lower and closed slightly higher at 5.18%.

For your portfolio, this means falling oil helps stocks and short-term rates, but it will not bring mortgage rates or long-term bond rates down on its own. A lasting rally in stocks needs the 10-year rate back below 5%. Until then, rallies depend on oil headlines and earnings.

Next week: the September jobs report (Friday, Oct 2)

As of Sept 23, markets saw a 66% chance the Fed raises rates again in October, up from under 10% in late August. A strong jobs number gives the Fed cover for a second hike and likely pushes the 10-year rate above 5.25%. A weak number opens the door for rates to pull back toward 5%, which would give mortgage rates their first relief in weeks and give the broader stock market room to recover. That recovery is what would take the S&P 500 past its 7,815 record high and to 8,000. Time will tell. Lots of uncertainty out there right now.

And remember - The one fact pertaining to all conditions is that they will change.

Follow me on X for more updates.

Best regards,

-Kurt

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President

ivoryhill.com

Disclosure

The RiskSignal Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

I think this was a policy mistake, as raising rates does not impact the price of oil. Strip out the war, and the Fed has no case to hike at all. Energy alone drove nearly 40% of August’s CPI increase, and energy is only 7.47% of the entire basket. That’s the part most news outlets skipped past to get to the scary headline number.

The Fed just raised rates into a number that could sit well below 3% within two or three months of a ceasefire. Call it what it is: a policy mistake with a countdown clock attached.

The economy isn't too hot, and the money supply hasn’t increased substantially. Like I’ve said before: the only thing that actually creates inflation is the government printing money. Everything else is anecdotal at best.

One hike doesn’t end a bull market. A rate-hiking cycle will

I am still bullish on stocks here. Go back and look at every real bear market. 2000. 2008. 2022. None of them happened because the Fed raised rates once. They happened because the Fed raised rates repeatedly and held them there until we had a credit event that ultimately crashed stocks.

We are now one hike in. The Fed’s own dot plot points to maybe one more hike this year. I don’t think we will get there because I think this inflation is transitory. On that, the problem with Powell using the word transitory is that he never defined how long transitory was, so I will define it here. I think CPI trends north until we see the reciprocal strikes stop, oil flowing through the Straight of Hormuz, and real progress toward a lasting ceasefire. We don’t necessarily need Trump to get a deal done.

What Breaks This Market Standoff?

Stocks slipped last week on the same story we keep coming back to: oil up, yields up. For over a month now, the S&P 500 hasn’t gone anywhere. It’s stuck between two forces pulling in opposite directions.

The bullish pull: historically strong earnings growth, a still-solid economy, and valuations that aren’t crazy once you look at 2027 expected EPS.

The bearish pull: oil at multi-year highs, Treasury yields at multi-year highs, a war that isn’t resolved, and a growing question of whether AI capex turns into real returns or just a pile of spending.

Neither side is clearly winning. These two forces have this market locked in a stalemate, and I want to walk through what sequence of events actually breaks it, either bullish and back to new highs, or bearish and into a real pullback.

Here’s what actually breaks the tie.

Bullish break: oil flows increase out of the Gulf. This doesn’t require a ceasefire. Nobody needs Iran and the US to sign a peace deal. What the market needs is more oil actually moving, through Hormuz, through the East-West pipeline, past the Bab el-Mandeb without getting shot at. The war can keep going. Markets don’t care about the war ending. They care about oil flowing. The second that headline hits, Brent likely drops back toward $80, the 10-year likely drops back into the mid-4% range, and the entire headwind holding this market back disappears fast. Then investors go back to pricing in the good stuff: earnings, a solid economy, inflation actually cooling and the Fed cutting rates.

Bearish break: the economy starts to crack. The market has held up because the good news has been strong enough to outrun the bad news. This won’t last forever. We’re heading into month seven of high energy prices and year six of elevated inflation. At some point, that shows up in real economic data, not just in a CPI report. If the labor market starts softening at the same time prices stay high, that’s the combination that actually breaks this stalemate to the downside, and it breaks it hard and fast.

The US economy is strong right now. But strong isn’t the same as immune. The longer this drags on, the higher the odds it eventually slows. There’s no sign of that happening yet. That can change fast, and anyone who’s traded through a cycle knows it.

This market will break one way or the other. It has to. This week, the UN General Assembly gives Washington and Tehran a real shot at some diplomatic movement. If that happens, expect oil and yields to fall and stocks to rally. If it doesn’t, and the strikes keep coming, expect new short-term lows.

Higher long-term rates hit stocks too.

When Treasury yields rise, it costs companies more to borrow, and that eats into profit. Real estate gets hit hardest here, since that business runs almost entirely on borrowed money.

Other sectors get hurt for a different reason. Consumer staples and utilities aren’t bought for growth. Investors buy them for the dividend. When Treasury yields rise, that dividend has to compete with a government bond paying more for less risk.

I’d underweight these sectors over the medium term. That cuts your portfolio’s sensitivity to rising rates. And yes, I am even talking to dividend investors, with your “bulletproof” dividend stock portfolio, wondering why you’re in the red for the year while the index is up.

Now, let’s put our macro and intermarket analysis hat on here. What do rising rates mean for the dollar? If you know which direction the greenback is going, then you know where a lot of other things are going.

Rising rates tend to support the dollar. High yields make the dollar more attractive to global investors. To buy Treasuries and other USD assets, they have to buy dollars first. That extra demand lifts the exchange rate.

A stronger dollar and higher real yields are a headwind for gold.

Small-caps have put in a bearish double top. I think the 200-DMA will likely provide strong support.

Where the Charts Are Pointing

Four groups stand out right now, not just for price action, but for relative strength, the ratio of the stock or sector against the S&P 500. When that ratio is rising, it’s outperforming the index. When price and relative strength both turn up together, that’s where the next leg of market leadership tends to come from.

AI Infrastructure. Price broke its downtrend from the June high and is consolidating at resistance near $66. The relative strength line against the S&P just turned up after months of underperforming, meaning AI infrastructure is starting to lead again, not just ride the market higher.

Genomics & Immunology. Clean uptrend, higher highs and higher lows, no sign of stalling. Relative strength against the S&P just broke out to a new high; this group is rising faster than the market.

Global Memory Producers. Price is coiled into an ascending triangle, flat resistance near $62.50, rising support along the 50-day. A break above $62.50 confirms the next leg higher.

Magnificent 7. Price just broke above $71 resistance after testing it repeatedly since May. Relative strength against the S&P bottomed and is turning up, the first real sign mega-cap leadership is coming back after lagging most of the summer.

And remember - The one fact pertaining to all conditions is that they will change.

Follow me on X for more updates.

Best regards,

-Kurt

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President

ivoryhill.com

Disclosure

The RiskSignal Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

Core CPI, the number that strips out energy and food, ran hot too, up 0.3% against forecasts for 0.2%. Odds of a hike at Wednesday’s FOMC meeting jumped to 78% on the print.

Here’s the problem with thinking a rate hike fixes any of this as inflation: it doesn’t. Brent crude cleared $100 a barrel for the first time since May after Iran and the U.S. traded strikes on tankers and naval vessels, topping a breakout that’s been building since a four-month base broke in late August. WTI sits at $99.78, Brent at $105.17, both punching through trendlines that had stopped every rally attempt since spring. That’s a supply shock landing at every gas pump and every diesel-powered delivery truck in the country. Everything we buy from a store or have delivered is ultimately delivered to the end point by truck. A quarter-point hike doesn’t produce a barrel of oil or reroute a tanker through the Strait of Hormuz. It makes your mortgage more expensive while the gas station bill stays exactly where geopolitics put it.

The Fed doesn’t get paid to make that distinction, and Wednesday’s decision now walks straight into a supply-driven number with cover to hike anyway.

Bessent’s Bet Comes Due

One day after the Fed decides, the Bank of Japan meets on Sept. 17-18, and here’s why that meeting matters to your money. Bessent wants Japan to hike. He’s not doing this because he cares about Japanese inflation. He’s doing it because a stronger yen makes the “yen carry trade” more expensive to run, and that trade is one of the biggest sources of cheap money propping up U.S. stocks and bonds. Here’s how it works: borrow yen at Japan’s near-zero interest rate, convert it to dollars, and buy anything that yields more, Treasuries, stocks, credit. It’s free leverage, and Japan has been the one funding it. Tokyo and Washington already tried the direct approach: when a currency is falling, a government can sell US dollars and buy its own currency to push the price back up, the same way buying any asset pushes its price higher. Japan and the U.S. did exactly that, spending roughly $98 billion buying yen between late July and late August to prop up its value. The yen barely budged. So Bessent is leaning on the bigger lever now, publicly pressuring BOJ Governor Ueda to raise interest rates instead, at one point invoking Spike Lee’s “Do the Right Thing” to make the point. It’s worked. The market now prices a BOJ hike as close to certain, which leaves Ueda with 2 bad options. Skip the hike and the yen keeps falling, pushing Japanese inflation toward 3% and making the $98 billion look wasted. Hike, and the carry trade above gets more expensive to hold. That forces funds to unwind the trade: sell Treasuries and stocks they bought with borrowed yen, convert the dollars back to yen, and pay back the loan. Multiply that by 2 years of accumulated positions and you get forced selling in U.S. assets right as Japan has less reason to keep buying our debt in the first place. As I have pointed out over the last year or so, this could be really bad for US stocks.

That unwind is already on the chart. The JPY/USD chart shows the yen breaking out above 0.644, a level that had stopped every rally since spring, with RSI near 70 and MACD turning up. That’s what leveraged money looks like when it starts unwinding a carry trade before the headlines catch up. It’s the same setup behind August 2024, when a single BOJ hike surprise sent the S&P 500 down more than 3% in one session as funds scrambled to unwind their yen borrowing all at once.

There's a second way this bites us, and it's bigger than the carry trade. Japan isn't just a source of cheap borrowed money, it's our largest foreign creditor, holding $1.12 trillion of U.S. government debt, more than the U.K. and China combined. If the yen keeps falling and Japan needs to defend it again, one of the fastest ways to raise dollars is to sell its Treasury position outright. And even without a forced sale, a BOJ hike raises yields on Japan's own government bonds at home, which gives Japanese banks, insurers, and pension funds a reason to keep their money in yen instead of hedging it into dollars to buy our debt. Either way, the largest buyer of U.S. Treasuries has less incentive to keep buying, or an actual reason to start selling, right as our own Treasury needs the world to keep absorbing new debt. That's upward pressure on the 10-year yield from a completely separate direction than the oil and inflation story above, landing at the same time.

The Charts Already Know

None of this is theoretical. The 10-year Treasury yield broke out above its summer range this week: RSI at 72, MACD flashing a fresh buy signal, and the yield sitting near 4.95%, one push from 5%. The 2-year is even more telling. It’s back up to 4.56%, above the effective fed funds rate of 3.63%, meaning the bond market is pricing in more hikes ahead. That’s a full reversal from where the curve sat just months ago when cuts were the consensus trade.

Equity breadth is cracking under the surface while the S&P 500 (7,667) holds near its highs. The equal-weight S&P 500 (RSP) broke its uptrend channel and its 50-day average, and its relative strength line against the cap-weighted index just made a new low after a failed retest of its old highs. That’s the market telling you the rally is concentrated in fewer names, exactly the condition that leaves an index exposed if the carry trade unwinds into it.

Credit isn’t flashing the same warning yet. High yield spreads over the 5-year Treasury sit near multi-year lows at 2.66, and the ratio of duration risk to credit risk (TLT versus HYG) is at 1.03, near the low end of its range. This isn’t a solvency scare. It’s a liquidity and positioning problem stacking on top of an oil shock, which is more dangerous in some ways because it can move fast with no credit event to warn you first.

The Three-Part Scorecard for a Real Rally

I’ve said that this market needs 3 specific things to go right before it can push back to new highs, and it’s worth grading each one against what actually happened this week.

1. Oil needs to stop climbing. Nobody needs a ceasefire for this headwind to fade. All the market needs is for oil flowing through the Strait of Hormuz to hold up and for the reciprocal strikes to stop escalating. That was true a month ago. It’s not what happened. Strikes resumed, an explosion hit Kharg Island, Iran’s main export terminal, and Brent broke above $100 for the first time since May. This leg of the case got worse.

2. The Fed needs to draw a clean line. A hike by itself isn’t fatal to a rally if the Fed signals it’s one-and-done and steps back. What would be fatal is a hike that the market reads as the start of a cycle, especially with the 2-year yield already pricing in more tightening than the current Fed funds rate implies. Wednesday is a coin flip on tone, and the setup next to a BOJ hike a day later makes a confident, market-friendly signal harder to deliver.

3. CPI start trending lower. This one already happened, and it already failed. Core CPI ran hot against forecasts. That removes a leg of the rally case before the Fed has even opened its mouth this week.

Two of 3 have already moved against the bull case heading into Wednesday. The third is a coin flip that gets harder to call dovish with the BOJ moving the next day.

Zooming Out: What the Multiples Say

Strip out the week-to-week noise and the market is really pricing 3 things: how the Iran conflict resolves, where the 10-year settles, and whether AI capex turns into real cash flow instead of just spending mountains of cash. Here is a scenario of those 3 inputs, and it’s worth walking through where each column sits right now.

The current-situation uses 2026 expected S&P 500 EPS of $395, a fair-value multiple of 19.5x to 20.5x, and lands at a midpoint target of 7,900, about 2.9% above where the index sits today. That’s the base case, and it assumes none of this week’s headwinds get materially worse or better.

The better-case column needs all 3 things breaking the right way at once: oil flow through Hormuz stabilizing further, the 10-year falling back toward 4.50%, and AI earnings producing real, provable ROI instead of just bigger capex budgets. If that happens, EPS expectations rise to $405, the multiple expands to 21x, and the target jumps to 8,505, a gain of 10.8% from here. Every part of that column moved the wrong direction this week.

The worse-case column is the one that should get your attention. It needs oil flow through Hormuz to drop and Brent to push meaningfully above $100, the 10-year to trade to and through 5%, and capex fears to deepen on falling free cash flow. EPS expectations fall to $350, the multiple compresses to 18x to 19x, and the target lands at 6,475, a drop of 15.6% from current levels. Brent is already above $100. The 10-year is already one push from 5%. Two of the 3 worse-case triggers are already partially in motion.

None of this means the bear case is our only destiny. It means the market has almost no margin for error heading into a week when the Fed and the BOJ both decide on rates within 24 hours of each other.

The counterpoint worth taking seriously: none of this shows up in credit yet, and earnings are still the best argument the bulls have. The Street’s 2027 EPS estimate for the S&P 500 sits near $400, up sharply from this year’s $350, and on a forward basis that keeps the index from looking stretched even at current prices. If oil rolls over toward $87.50 support the way it has after prior breakouts, and the Fed delivers a hike with clear forward guidance that it’s done, the whole setup above unwinds fast in the other direction. This is a market that can rally hard once the headwinds clear. The problem this week is that none of them have.

What This Means for You

Higher oil is a direct tax on anything trucked, shipped, or flown: groceries, retail goods, anything delivered to your door. That’s a margin problem for companies and a budget problem for households, and it’s happening whether or not the Fed hikes. If the Fed hikes Wednesday and the BOJ follows a day later, 2 of the world’s largest central banks are tightening inside the same 48 hours while the yen carry trade, one of the biggest sources of liquidity behind the risk-on rally since 2022, gets more expensive to hold overnight.

Stay short duration on bonds. Long-dated Treasuries have already underperformed credit for years in this environment, and a 10-year yield pushing toward 5% is not the entry point for TLT. When I started my firm, I used to trade currencies in my personal account to make some extra cash. I was scalping 30 bps a day, then I would stop. I also never traded if there was anything weird in the FX news. This week I wouldn’t make a trade because there is way too much uncertainty. You want to stay overweight energy: XLE and CRAK are both in confirmed uptrends and benefit directly from the oil breakout regardless of what the Fed does. Underweight small caps and industrials, both are already breaking down technically and are first in line when funding costs rise and breadth thins. Watch the multiples map above like a scoreboard: if oil rolls over and the 10-year turns back down, the 8,505 case comes into play fast. If it doesn’t, 6,300 to 6,650 is the base case for the next leg down. And don’t mistake a hot CPI print driven by a gas station line for the kind of inflation that actually erodes your purchasing power over time. That kind only comes from one place, and Wednesday’s decision isn’t it.

And remember - The one fact pertaining to all conditions is that they will change.

Follow me on X for more updates.

Best regards,

-Kurt

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President

ivoryhill.com

Disclosure

The RiskSignal Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hil, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

Underneath, CTAs sold hard Monday, bought back through Wednesday, then sold again lightly into Friday, a net seller for the five days even as the combined positioning z-score stayed pinned above the plus-2 extreme-long line it broke through last week. Vol-control funds did nothing for four sessions, then bought $19.3 billion in one print Friday, the entire week’s net buying in a single day. Breadth kept sliding, down to 66.6 from 71.7% last week. Friday’s jobs data landed on top of all of it. The index fell 0.38% on the day, not the air pocket that the index was vulnerable to.

Asset Performance

Bitcoin was the mover, up 5.13% on the day, cutting the year-to-date loss to negative 8.09% from negative 9.21% last week. Gold gave back another 0.84% Friday, on top of the 3.24% single-day drop from two weeks ago, but the quarter-to-date gain still holds at 10.42%. Emerging markets led the day at plus 1.82%, and the Russell 2000 still leads every domestic index on a year-to-date basis at 19.89%, even with a red quarter-to-date print of negative 1.61%. WTI crude sat almost flat on the day at negative 0.09%, still up 33.37% for the quarter. The dollar firmed marginally, up 0.13%, doing nothing to interrupt a quarter that has it down 2.01%.

Implied Correlation

CBOE one-month implied correlation eased to 8.60 from 8.87 last week, still flagged elevated above the 8.0 threshold. The two-year percentile slipped to 15% from 18%, meaning even an elevated reading now sits closer to the bottom of its own two-year range. Correlation staying low keeps single names trading apart from the index, which the momentum universe below confirms directly, with the best and worst performers in the 503-name universe again pulling in opposite directions by a wide margin.

Vol Term Structure and Economic Calendar

Front-dated SPX implied vol sits at 11.34%, this is cheap relative to what’s on the calendar. The first cluster lands September 10: Continuing Claims, Initial Jobless Claims, PPI, and Existing Home Sales, all lower-impact, priced at a ±1.05% expected move. CPI and Core CPI on September 11 are the first real test, pushing SPX IV up to 12.44% and a ±1.30% expected move, with put implied vol running 2.38 points above calls, the widest skew in the two-week window.

Earnings

Labor Day closes the market entirely Monday, no earnings scheduled. Wednesday brings Chewy, Nano-X, Oddity, and SailPoint before the open, AeroVironment and American Eagle after the close. The week’s earnings test lands Thursday after the close, when Oracle and Adobe report within the same session, both a direct read on the AI infrastructure and cloud-spending buildout Nvidia’s earnings release reinforced this two weeks ago. Copart, RH, and LightPath round out the same evening. Kroger reports before the open Friday, the week’s only consumer-staples print.

Sector Momentum

Energy leads again. XLE sits alone in the leading quadrant, up 2.2% over five days on a year-to-date return still well clear of the rest of the group. Technology is the week’s best mover among the majors, XLK up 0.9%, a reversal from last week’s decline. Consumer discretionary is the new laggard, XLY down 2.0% over five days. Real estate and industrials both faded, XLRE down 1.2% and XLI down 1.1%. Financials went flat and communication services slipped 0.8%, giving back the ground both sectors gained last week. Utilities still posted a positive five-day return at 0.8%, but that reading is down from where it stood seven days ago.

Single-Name Momentum Universe

SanDisk is this week’s outlier, alone in the upper right of the 503-name universe and the largest mover on both the day and the week by a wide margin. NRG, KLA, Coherent, and Marvell cluster just behind it, all posting strong five-day gains. Marvell’s presence there is the week’s reversal: last week it was flagged as the cautionary tale of the earnings season, sitting in the laggard cluster and confirming the skepticism heading into its print. This week it sits on the opposite side of the chart entirely. Fair Isaac and Lululemon anchor the bottom, both down double digits on the day, the worst showing in the universe, with Autodesk close behind.

Market Structure: Gamma Flip

Dealers are back in positive gamma, closing the week at 7,719 against a 7,697 flip line, 21 points of cushion.

Weekly Expected Move

The options chain prices the week ahead at a 1.05% range in either direction, upside to 7,799 and downside to 7,638, with the two-sigma band out to 7,880 and 7,557. Implied volatility sits at 10.1%, and GEX sits at 7,697, essentially the flip level itself.

Volatility Regime

One-month realized vol fell again, to 8.39 from 10.49 last week, while three-month held closer to flat at 12.49 versus 13.46. The gap between the two readings keeps widening even after a week with two multi-day directional swings in the underlying index. Low-vol regime, confirmed for another week.

Systematic Fund Flows

CTAs sold hard to open the week, bought back through Wednesday, then sold lightly again into Friday, a net seller for the five days even as the absolute positioning level stayed pinned near the extreme-long territory. Vol-control did almost nothing for four straight sessions, then bought $19.3 billion in a single print Friday, enough to swing the five-day total to a $16.6 billion net buy and tag the trend bullish.

Both engines are running near the top of their multi-year ranges in absolute terms, tracking an index sitting near its own highs. The two landed in the same place they started the week, long, but they took very different roads to get there.

Positioning Index: Systematic Z-Score

The combined CTA and vol-control z-score is still above the plus-1 line it broke through last week, the highest sustained reading in the six-month window even after a week that saw CTAs turn net sellers. That is the tension in this market: the flow data says selling, the positioning level says stretched-long, and both are true at once because the level was built over months and the flow measures five days. Extreme-long positioning typically means less room to add on strength and more room for an air pocket on disappointing news, exactly the setup heading into Friday’s jobs data, and exactly what a mild 0.38% pullback did not confirm.

Market Breadth

Breadth fell sharply, to 66.6% of the S&P 500 above its 200-day moving average from 71.7% last week, a single-week drop nearly double the size of the two prior weeks’ declines combined. Still solidly inside the optimism zone above 60%, but fewer stocks are carrying the index even as the spot level sits within a percent of its own all-time highs.

Dealer Gamma Dashboard and Composite Regime

Gamma, realized volatility, and breadth all read bullish. Flow reads neutral given the CTA reversal, and the weighted composite stays neutral, the same output as last week even after a mid-week round trip in every underlying signal. Composite regime holds Risk-On, and the allocation is unchanged: 75% SPHB and 25% SPXL, identical to last week’s close, even though the live signal spent Monday and Tuesday defensive at 50% SPLV and 50% SPHB before flipping back.

Tactical Allocation Performance

The weekly sleeve recovered, up to 22.04% year-to-date from 21.41% last week, while the S&P 500 total return rose to 13.65% from 13.51%. That widens the weekly sleeve’s lead back out to 8.39 points from 7.90 the week before.

And remember: the one fact pertaining to all conditions is that they will change.

Feel free to use me as a sounding board.

Follow me on X for more updates.

Best regards,

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Wealth Advisor | President

ivoryhill.com

Disclosure

The Gamma Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

Asset Performance

Gold is the reversal of the month, down 3.24% Friday, the sharpest 1-day drop on the table, cutting the year-to-date gain from 6.83% last week to 3.17% now even with the month still up over 10%. Bitcoin keeps closing its gap, up 23.92% on the month and 1.58% on the day, trimming the year-to-date loss to negative 9.21% from negative 17.32% last week. WTI crude is flat on the week but still up 87.54% year-to-date, and the dollar firmed 0.57% on the day without breaking its soft quarter, still down 1.49%.

Implied Correlation

CBOE one-month implied correlation is still historically low but climbing for a second straight week. Correlation is heading the direction dispersion normally implies single stocks trading further apart from each other and from the index, which the momentum universe below confirms directly.

Vol Term Structure and Economic Calendar

Front-dated SPX implied vol is 8.79%, up slightly from last week’s 8.49% floor but still cheap for what’s on the calendar. ISM manufacturing and JOLTS both land on Tuesday, high-impact but priced at only plus or minus 0.65%. Wednesday’s ADP report carries plus or minus 0.82%. The real event is Friday, when ISM services, average hourly earnings, nonfarm payrolls, and the unemployment rate all land the same day, priced at a plus or minus 1.19% expected move, the widest of the 2-week window before the extended read out to September 10th. Worth watching going in: the prior nonfarm payrolls print came in at negative 23,000, a contraction, not a slowdown. Friday either confirms the labor market cracked or shows that print was noise.

Earnings

Nvidia earnings guidance: $108 billion for Q3, gross margin 74% next quarter, then a bottom of 71% to 72% in Q4 before recovering to 72% to 73% in fiscal 2028. Memory pricing has moved further and faster than the company expected, and management is treating that as a symptom of the same AI buildout driving its own growth, not a separate problem. The more important line from the call is that management called the 70% fiscal 2028 revenue growth guide a supply number, not a demand number, and said unconstrained demand runs well above it, meaning Nvidia is telling you it could sell more than it’s guiding to if it could build it. On the balance sheet, Nvidia is now financing part of its own demand: roughly $50 billion invested directly into frontier AI labs, a new partnership with six infrastructure capital providers (Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR) to raise over $500 billion in third-party financing for those labs, and a specific commitment to backstop nearly 2 gigawatts of compute for one lab’s credit. Management called this circular financing directly on the call and disagreed with the label, but the mechanics are real: Nvidia sells the chips, then helps arrange the financing that buys the chips. That isn’t automatically a problem, but it’s a dependency worth tracking, and it’s new. None of this is why the stock didn’t run. It spiked as much as 8.5% intraday. Demand isn’t the risk here. Cost is. And because Nvidia carries close to 8% of the S&P 500’s weight, a stock trading a ten-point range on one print moves index-level realized vol and dealer gamma on its own, independent of anything else on the tape that week. This week’s calendar carries the same AI capex theme one level down the chain: Dell and Palo Alto Networks report Tuesday after the close, Broadcom and Snowflake Wednesday after the close, and Lululemon, DocuSign, UiPath, and Zscaler round out Thursday. Broadcom in particular is a direct read on the custom AI chip side of the same buildout Nvidia just confirmed is still accelerating.

Sector Momentum

Energy again leads on both axes, XLE up another 2.8% on the week and still the top year-to-date sector by a wide margin. Communication services and financials improved, XLC up roughly 1.4% and XLF up roughly 1.1%. Health care gave back all of last week’s surge and then some, sliding roughly 2% after being the week’s best mover at plus 4.3% seven days ago, the sharpest reversal on the board. Technology and industrials kept cooling, down roughly 1.5% and 1.7% respectively even with strong year-to-date returns still intact.

Single-Name Momentum Universe

Marvell is this week’s cautionary tale. It went into last Thursday’s print already sitting in the laggard cluster, and by Friday it was among the worst performers in the entire 503-name universe, confirmation that the skepticism going in was earned. ServiceNow is the standout on the other side, up roughly 22% over five days, the single largest mover in the universe. PayPal is the single worst, down double digits on both the day and the week, with no clear catalyst visible in the data alone. Nvidia, by contrast, is nowhere near either tail this week. After last Wednesday’s print and the wild single-day swing that followed, the stock has settled back into the pack, a sign the initial reaction is fading rather than compounding.

Market Structure: Gamma Flip

Dealers are back in positive gamma, spot at 7,712 sitting 17 points above the 7,695 flip. Last week’s report said this could flip back positive within the week. It did, within days. The cushion is thin either way, but the direction of the surprise now runs the other way: dealers buy dips and sell rips as long as spot holds above 7,695, which suppresses the range instead of widening it.

Weekly Expected Move

SPX priced a 1.49% weekly range in either direction, upside to 7,827 and downside to 7,597, with the two-sigma band out to 7,942 and 7,482. GEX sits at 7,694, right at the gamma flip level, and spot already tested down toward it by Friday afternoon after spending most of the week in the upper half of the range.

Volatility Regime

One-month realized vol dropped again, to 10.49 from 12.85 last week. Three-month held at 13.46. The gap between the two readings is the widest it’s been in months, and realized vol fell even as dealers flipped back positive, meaning last week’s negative-gamma break never showed up as an actual volatility event. Low-vol regime, confirmed again.

Systematic Fund Flows

The two systematic engines swapped roles this week. CTAs, sellers for three straight days last week, reversed hard: two long days Wednesday and Thursday pushed the five-day change to plus 0.040 in z-score terms, a clean uptrend now tagged bullish. Vol-control did the opposite of its usual job, staying a net buyer at plus $0.2 billion over five days but decelerating from plus $0.4 billion the week before, enough of a slowdown that the system now flags it as a downtrend even with the sign still positive. Notional exposure barely moved, $224.6 billion against $224.2 billion last week. The buyer that showed up this week wasn’t the one that showed up last week.

Positioning Index: Systematic Z-Score

The combined z-score didn’t just recover; it spiked. After sitting near the plus 1 bullish line last week, it jumped through plus 2 by Friday, the highest reading anywhere in the 6-month window and territory the index hasn’t touched since the rally off April’s lows. The CTA reversal above is the driver: two aggressive long days moved the 20-day rolling number further and faster than the underlying flow data alone would suggest. Positioning is now stretched on the long side, which typically means less dry powder to extend gains and more room for an air pocket on any disappointing print, exactly what Friday’s jobs data could deliver.

Market Breadth

Breadth slipped again, to 71.7% of the S&P 500 above its 200-day moving average from 72.5% last week and 74.4% two weeks before that, the third straight weekly decline. Still solidly inside the optimism zone above 60%, but the trend is now three weeks old: fewer stocks are participating even as the index sits near highs.

Dealer Gamma Dashboard and Composite Regime

Gamma, realized volatility, and breadth all read bullish; flow is neutral given the CTA reversal, and the weighted composite stays neutral, same output as before dealers went negative two weeks ago. But the composite regime upgraded to Risk-On, and the allocation moved back with it: out of the 50% SPHB and 50% SPLV defensive split from two weeks ago, back into 75% SPHB and 25% SPXL.

Tactical Allocation Performance

The weekly sleeve is down to 21.41% year-to-date from 22.66% last week. The daily sleeve fell to 12.84% from 13.76%, and with the S&P 500 total return now at 13.51% year-to-date, up from 12.95%, the daily sleeve is behind the index for the first time this cycle, by 0.67 points. The weekly sleeve’s lead also narrowed to 7.90 points from 9.71. This is a rules-based process, and two straight weeks of giveback while the benchmark grinds higher is exactly the stretch it’s built to survive, not the stretch that proves it wrong.

And remember: the one fact pertaining to all conditions is that they will change.

Feel free to use me as a sounding board.

Follow me on X for more updates.

Best regards,

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Wealth Advisor | President

ivoryhill.com

Disclosure

The Gamma Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

Asset Performance

Implied Correlation

CBOE one-month implied correlation is 8.34, down from 8.67 last week but still above the 8 line that defines an elevated regime. At the 13th percentile over two years it remains historically low despite the pullback. Low correlation keeps index vol pinned while leaving room for the wide single-stock dispersion the momentum universe shows below.

Vol Term Structure and Economic Calendar

Wednesday brings the week’s key test: GDP, core PCE, and the PCE price index together, all high-impact, priced at plus or minus 1.09%.

Earnings

Retail and mega-cap tech share the week. Dollar General and Best Buy report Thursday before the open, a read on discretionary spending. Nvidia reports Wednesday after the close, the single most important print of the week for index given it is the biggest weighting in the S&P 500 at 7.98%. CrowdStrike and Salesforce report the same night. Marvell, Workday, and Ulta follow Thursday after the close. No earnings scheduled for Friday.

Sector Momentum

Technology, industrials, and utilities all cooled, each down roughly 3.4% to 3.5% over five days even with positive year-to-date returns still intact. Communication services and consumer discretionary remain the laggards, both negative for the year and roughly flat to down for the week.

Single-Name Momentum Universe

Dispersion is extreme again. Moderna is the outlier of outliers, up roughly 125% over five days and still adding on the day, a print far outside the rest of the 503-name universe. Coinbase (roughly +18% over five days), Freeport-McMoRan (roughly +12%), and Robinhood (roughly +13% on the day alone) sit in the next tier, all crypto- or commodity-linked names riding bitcoin’s month and copper’s bid. On the downside, Marvell, Sempra, Edison International, and CenterPoint sit in the laggard cluster, modestly negative on both windows heading into Marvell’s print Thursday.

Market Structure: Gamma Flip

Below the flip, dealers buy strength and sell weakness, which widens range instead of suppressing it. Given the 20-point difference, this could be short-lived, which is why the tactical allocation is neutral and not bearish.

Weekly Expected Move

Volatility Regime

One-month realized vol fell to 12.85 from 13.17 last week. Three-month held steady at 13.46. Still a low-vol regime, and the gap between the two windows widened even as SPY broke the gamma flip Friday, meaning the drop hasn’t registered as a volatility event by realized standards yet. That’s the disconnect: dealers flipped negative structurally, but the tape hasn’t priced it. We could easily move to back into positive gamma this week.

Systematic Fund Flows

Vol-control stayed a net buyer, but barely: plus $0.4 billion over five days against plus $4.5 billion the prior week; the re-leveraging pace is stalling out. CTAs did the opposite. Three straight short days from Tuesday through Thursday put the five-day change in a clean downtrend after last week’s flow. Both algos remain long in absolute terms and positioned near cycle highs, but the marginal buyer went missing this week and the marginal seller showed up.

Positioning Index: Systematic Z-Score

The combined CTA and vol-control z-score climbed back above zero and toward the plus 1 bullish line over the past month, recovering from the sub negative 2 capitulation low earlier in August. That’s the mid-term read. It doesn’t yet reflect Friday: the daily flow data above already shows CTAs three days into a short streak. The 20-day rolling z-score hasn’t caught up to that turn. Watch for it to roll over this week if the selling continues.

Market Breadth

Breadth slipped to 72.5% of the S&P 500 above its 200-day moving average, down from 74.4% in last week’s report.

Dealer Gamma Dashboard and Composite Regime

Two of four signals flipped. Gamma went bearish. Flow went from bullish to neutral. Realized volatility and breadth held bullish. The weighted composite stays neutral, same as last week, but the composite regime downgraded from Risk-On to Neutral, and the allocation moved with it: out of 75% SPHB and 25% SPXL, into 50% SPHB and 50% SPLV. The leveraged sleeve is gone. Half the book is now defensive low-vol.

Tactical Allocation Performance

Both sleeves gave back performance. The weekly portfolio fell to 22.66% year-to-date from 27.13% last week. The daily portfolio fell to 13.76% from 17.90%. The S&P 500 total return sits at 12.95% year-to-date, itself down from 14.54%. The daily sleeve’s edge over the index shrank from 3.36 points to 0.81, nearly erased in a week. Leveraged beta cuts both ways. This is the other side of it. This is a rules-based process, and not every signal is going to be perfect.

And remember: the one fact pertaining to all conditions is that they will change.

Feel free to use me as a sounding board.

Follow me on X for more updates.

Best regards,

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Wealth Advisor | President

ivoryhill.com

Disclosure

The Gamma Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

The S&P 500 sits at 7,756, down 0.02% from last week’s 7,757 close. Flat on the surface. Underneath, the tape ran a full round trip. A 2.3% drop to 7,576 on Tuesday moved dealers into negative gamma and flushed the systematic book to capitulation, then the index recovered to a 7,786 high by Friday and settled back near where it started. The index ended the week unchanged.

Asset Performance

The S&P 500 is at 7,756, up 13.30% year-to-date, essentially flat on the week. The Russell 2000 at +23.03% and Emerging Markets at +23.23% both run ten points ahead of the index, so leadership is broadening past mega-cap. Gold added 10.43% on the month to sit +3.37% YTD, the best month of any major, and we added 4% on July 31st.

Implied Correlation

CBOE 1-month implied correlation rose to 8.81 from 7.38 in last week’s report, crossing back above the 8 line into elevated. At the 16th percentile over two years, it is still historically low. The bounce off the lows is the tell: single names are starting to move together again, which is what a vol event does when it pulls the whole tape one direction. Extremely low correlation had kept index vol pinned and left breadth unable to cushion a drop.

Vol Term Structure & Economic Calendar

Empire State manufacturing Monday, building permits, housing starts, and industrial production Tuesday, initial jobless claims and the Philadelphia Fed survey Thursday, all medium-impact. Nothing high-impact prints until the Core PCE, GDP, and PCE price index cluster on the 26th. The vol surface reflects it, with no high-impact marker until that cluster.

Earnings

Retail owns the week. Home Depot reports Tuesday before the open, Target, Lowe’s, and TJX Wednesday, Walmart Thursday, Ross Stores Thursday and BJ’s Friday to close it out. Walmart and Home Depot are the consumer read: guidance from either sets the tone for whether the spending that has held GDP together is still intact. Analog Devices reports Wednesday and carries the analog semi cycle. Deere and Alibaba round out Thursday.

Sector Momentum

Energy came back. XLE moved further into the Leading quadrant, up 3.7% on the week and back near the top of the YTD range after sitting in Weakening in last week’s report. Technology still holds the highest YTD return, but XLK’s arrow points down: up 2.4% on the week with 5-day momentum cooling. Utilities gained 2.3% on the week off a low YTD base, the only name improving from the left side. The laggards are unchanged, with XLY down 2.5% and XLC down 1.0%, both negative YTD and negative on the week. The rotation is energy taking back leadership while tech’s short-window momentum fades.

Single-Name Momentum Universe

The dispersion narrowed but stayed wide. STX is the standout, up 20% on the 5-day after sitting down 5% in last week’s report, a full reversal. TPR sits at the opposite pole, down 20.5%. That 40-point spread is tighter than last week’s PLTR-to-PODD range but still extreme. GLW led the single day at up 5.1%, PWR up 3.2%. The energy-linked names cluster green on the 5-day, with NRG, EQT, WMB, KMI, and CEG all positive, consistent with the sector rotation. CSCO and EBAY both sit down 8%, the two names dragging the middle. Last week’s mega-cap leaders, PLTR and GLW on the 5-day, folded back into the center cluster. Leadership rotated.

Market Structure: Gamma Flip & Weekly Expected Move

The gamma flip sits at 7,730. Spot level is 7,756, which puts dealers 26 points into positive gamma. That is a thin cushion. A week ago dealers held 148 points above the flip, and the mid-week drop pulled spot to the line and briefly through it before Friday’s recovery reset the buffer. Dealers long gamma sell strength and buy weakness, suppressing range as long as spot holds 7,730. Below it they flip negative and any move down accelerates, exactly what the 11th delivered.

The one-sigma weekly move runs about 2.3% to the upside toward 7,932 and 1.5% to the downside toward 7,640, off 12.0% IV. The band is wider up than down. GEX at 7,730 sits just below spot, so the flip line and the operating floor are the same number this week. Revisit that level through the week so you don’t surprise yourself out of a trade. A hold keeps the vol suppression on. A break turns dealers into sellers.

Volatility Regime

One-month realized volatility is back below the three-month, resolving last week’s inversion and returning the regime to low-vol. The 30-day reading fell through the week even with the 2.3% drop on the 11th, because the fast recovery kept the realized print contained. The signal that fired high-vol in last week’s report has reset.

Systematic Fund Flows

Both algos turned back to buying after the recent toilet flush. Vol-control was a net buyer of 4.5 billion over five days, with 1.3 billion Thursday and 3.5 billion Monday as realized vol fell and the roughly 300 billion machine re-leveraged. Its absolute allocation sits at 224.2 billion, up from 216.4 in last week’s report.

CTAs are a little messier: net buyer by a hair over five days, but the daily flow flipped short Tuesday, long Wednesday and Thursday, then short again Monday. The vol-control bid is back and mechanical. The CTA bid is indecisive and could break either way into the PCE print.

In absolute terms, the complex is still long. Vol-control notional exposure and the CTA trend signal both sit near the top of their ranges, so the level is heavy even as the recent five-day change turned choppy. Here is the tension: high absolute positioning with little dry powder, sitting on top of a book that just got flushed and rebuilt.

Positioning Index: Systematic Z-Score

The combined CTA and vol-control z-score sits near negative 0.7, recovering from a capitulation low below negative 2 sigma during the mid-month drop. Here is the divergence to hold onto: the index is at its highs while systematic positioning sits below neutral. The algos de-risked hard and are only partway rebuilt. Unlike last week, when the z-score sat above neutral with no dry powder, the flush restored room to re-lever. This is a cleaner setup for the bulls, provided PCE does not fire vol back up.

Market Breadth

Breadth is 74.4% of the S&P 500 above its 200-day moving average as of Friday, up from 73.2% in last week’s report.

Dealer Gamma Dashboard

All four component signals read bullish: gamma, realized volatility, flow, and breadth. The weighted composite lands neutral, and the regime output is Risk-On. The allocation holds at 75% SPHB and 25% SPXL for a third straight week, high beta over leveraged beta.

Tactical Allocation Performance YTD

The weekly sleeve sits at 27.13% year-to-date against the S&P 500 total return at 14.54%, running 12.59 points ahead. The daily sleeve is at 17.90%, ahead of the index by 3.36. Both beat.

And remember: the one fact pertaining to all conditions is that they will change.

Feel free to use me as a sounding board.

Follow me on X for more updates.

Best regards,

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Wealth Advisor | President

ivoryhill.com

Disclosure

The Gamma Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

Asset Performance

Crude at +70.59% YTD is still the standout, but it gave back 8.66% on the month. That reversal is important. When oil rolls over this late in the year while equities push new highs, the stagflation premium that helped fund the energy trade all year could be unwinding right now. Gold sits flat at +0.55% YTD after a 7.25% monthly gain. We added 4% to gold on July 31st. Bitcoin is down 26.93% on the year, the worst major asset, and the divergence between crypto and equities is the widest it has been in 2026. However, bitcoin has put in a local bottom, so long-term investors should be keeping an eye on this if they want to play the macro at these levels. Emerging Markets lead international at +19.98% YTD.

Implied Correlation

When the broadest index is driven by the fewest names, vol sits pinned, and breadth cannot provide a cushion. That is the mechanical risk worth keeping an eye on.

Vol Term Structure & Economic Calendar

1-month realized vol is 14.04, 3-month is 13.79. The term structure is flat, and one-month has crossed above three-month, an inversion that says her volatility should be expected. This week brings CPI and Core CPI Wednesday, Initial Jobless Claims and PPI Thursday, Retail Sales Friday. These events sit in the high-impact bucket and are marked on the vol surface already.

The vol surface shows put IV trading consistently higher than call IV across the event calendar. Put IV at 11.60 against call IV at 10.38 into Wednesday’s CPI, with the P/C OI ratio at 0.80. That premium on puts is a defensive skew, meaning traders are pricing downside tail risk into the tape ahead of these prints. The near-term expected move is ±57 points. This is not a complacent market.

Earnings

Cisco, Applied Materials, and Coherent report this week. Applied Materials is the single tell on whether the AI capex cycle continues to sustain growth or rolls over. AMAT misses on guidance, the cycle cracks; AMAT guides up, the cycle holds. That result is binary and moves the entire semiconductor complex.

CoreWeave and Nebius also report this week, those two names carry the AI infrastructure buildout narrative. The market has priced these stocks in as the picks and shovels of the compute trade. A guide-down from either of them would invalidate the capex growth story that has held the index up the last two years.

Sector Momentum

Technology leads at +29.4% YTD and up 8.0% on the last week, sitting alone in the Leading quadrant. That is the only sector with both positive YTD and strong positive weekly momentum. Energy is +28.6% YTD but down 1.9% on the week, decelerating in the Weakening quadrant. We sold all of our energy on the April run-up, and I am not in a hurry to get back in at these levels, but I do think it could stay elevated for a while. The carry trade that funded the rally is losing steam.

Single-Name Momentum Universe

The dispersion is extreme. The upper right is all momentum leaders: PLTR at +40% on the 5-day and +10% on the day, GLW +20%, AXON +8%, TTWO. These names are geen on both axes, which means momentum is self-reinforcing and capital is not rotating out yet. ORCL, CRWD, NVDA, FOXA all cluster in the +10% 5-day zone.

The left side holds the laggards. STX is down 5% on the 5-day. NRG, PODD, CBOE all print negative 5-day, sitting in the lower quadrant. The spread between PLTR at the top right and PODD at the bottom is nearly 55 percentage points over the 5-day period. That is the widest single-name dispersion of 2026. The center holds the bulk of the index near zero, which shows the S&P 500 is like a barbell: extreme winners in a handful of momentum names, laggards in the rest, and nothing in between.

Market Structure: Gamma Flip & Weekly Expected Move

The gamma flip line sits at 7,610. The SPX spot level is at 7,758, which puts dealers 148 points above the gamma flip line, in positive gamma. Dealers are long gamma, which means they sell into strength and buy into weakness, suppressing volatility as long as spot holds above the gamma flip line.

The one-sigma expected move is 2.02% in either direction off the 7,758 close. That band runs from 7,915 on the upside to 7,601 on the downside. That is the operating range dealers are hedged for. The flip at 7,610 sits just inside the lower band. A break below 7,610 forces dealers negative, which accelerates any move lower. A hold above 7,610 keeps the vol suppression burner on. GEX sits at 7,610. For now, dealers are hedged for 2.02%, and that is what you trade until CPI hits.

I recommend revisiting these levels throughout the week so you don’t surprise yourself out of a trade that was expected.

Volatility Regime

One-month realized volatility sits at 14.04, above the three-month at 13.79. The regime reads high-vol, and one-month over three-month is the inversion that fires the signal. Realized vol climbed on the week as the 268-point rally added daily range. A single day of realized vol above 18 forces a 15% unwind in notional exposure across the vol-control universe. That is the mechanical risk in place.

Systematic Fund Flows

The two systematic flows split this week. Vol-control funds were net sellers of 3.1 billion over the past five days, with a peak sell of 6.7 billion Tuesday before three straight days of buying that recovered most of it. The absolute allocation level sits at 216.4 billion. The Tuesday sell was the mechanical response to the prior week’s realized-vol spike; the recovery is those same funds re-leveraging as vol stabilized.

CTAs went the other way. Net buyers of +0.212 on the z-score over five days, bullish at +22.6%, in an uptrend, back near the top of the chart. The CTA long that turned every dip into a buy has been built right back up. That can cut both ways though: it amplifies strength, but it also means the mechanical bid is fully committed with little dry powder left to add, and the light switch can go the other way. FAST.

Both algos point in the same direction into this week. Vol-control is re-leveraging as realized vol stabilizes, and CTAs are long and buying. The systematic bid is back, and it could be getting stretched on a short-term basis. The risk is that a hot CPI print flips realized vol higher, which forces vol-control to sell into a CTA book that is already max long. That is how the mechanical bid becomes a mechanical unwind.

Positioning Index: Systematic Z-Score

The combined CTA and vol-control z-score sits near +0.5 sigma. The algo rebuild is driven by both components: the CTA trend portion pushed back toward extreme long, and the vol-control signal recovered as realized vol stabilized. The systematic complex is re-leveraged into the data.

Market Breadth

Breadth is 73.2% of the S&P 500 above its 200-day moving average, up from 68.3% two weeks ago. The data improved with the rally and sits far from the 40% pessimism line. Breadth confirming the move higher is what separates this from a narrow-leadership top.

Dealer Gamma Dashboard

The regime output is Risk-On, which reflects that the bullish signals outweigh the neutral composite. The allocation holds at 75% SPHB (high beta) and 25% SPXL (leveraged beta), putting the gas pedal to the floor for the second week.

Tactical Allocation Performance YTD

The weekly sleeve sits at 25.26% year-to-date against the S&P 500 at 14.09%. The daily sleeve sits at 16.45%, ahead of the index by 2.36%. Both sleeves beat the benchmark, and the weekly sleeve is running more than 11 points ahead. The distance between the weekly and daily performance reflects the allocation’s sensitivity to the vol-control rebalancing cycle. Weeks that see inflows build leverage early Monday and capture strength early. Last week’s rally captured that dynamic on the weekly sleeve.

Closing Position

The market is priced for a benign CPI. Wednesday will say whether that assumption holds. A cool print re-opens the case for rate cuts and sends the momentum names higher into a re-leveraged systematic book. A hot print flips realized vol, forces vol-control to sell into a max-long CTA book, and the same mechanical bid that drove the 268-point rally becomes the unwind. Dealers are long gamma above 7,610, which suppresses the move until spot breaks that line. Below it, the suppression is gone.

And remember: the one fact pertaining to all conditions is that they will change.

Feel free to use me as a sounding board.

Follow me on X for more updates.

Best regards,

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Wealth Advisor | President

ivoryhill.com

Disclosure

The Gamma Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

The allocation shifted this week to 75% SPHB / 25% SPXL. The move is tactical, not strategic. Gamma sits 12 points beneath the 7,490 spot, which means dealers are short and absorbing weakness rather than amplifying it. That is the only fact that matters this week as earnings and macro data arrive.

Asset Performance

While the futures this morning would have you thinking otherwise, energy is the only asset class printing new highs. Crude at +86.77% YTD is an extreme read that typically signals either stagflation risk or geopolitical premium. When oil runs this hard this late in the year, and equity volatility sits neutral, it means the tape is pricing two different things at once: upside for rates staying high, downside for rates staying high. That conflict is what cap allocators are trying to hedge into.

Implied Correlation

One-month implied correlation sits at 6.19, the tightest reading in two years at the third percentile historically. The one-year change is -30.0%, meaning the market has compressed from dispersed into concentrated. This is the regime that precedes either a breakout or a breakdown with no middle ground. When the broadest index is driven by the fewest names, vol sits pinned, and breadth cannot provide a cushion. That is the mechanical risk.

Vol Term Structure & Economic Calendar

One-month realized vol is 12.16, three-month is 13.44. The term structure is flat and low. The regime is low-vol, which means vol-targeting funds remain de-leveraged and stay there until realized vol climbs past the 13.5 band. This week brings Initial Jobless Claims Wednesday, followed by Average Hourly Earnings, Nonfarm Payrolls, and Unemployment Rate Thursday. CPI and Core CPI land Tuesday next week. These events sit in the high-impact bucket and are marked on the vol surface already.

The vol surface shows put IV trading consistently higher than call IV across the event calendar. Put IV at 13.21 against call IV at 10.03 ahead of Thursday’s jobs data, with the P/C vol ratio at 0.68. That premium on puts is defensive skew, meaning traders are pricing downside tail risk into the tape ahead of these prints. The market is not complacent on the data arriving.

Earnings

Lam Research, Seagate, and Coherent report this week. The semiconductor capital equipment cycle is the single tell on whether the AI capex cycle continues to sustain growth or rolls over. Lam misses on guidance, the cycle is real; Lam guides up, the cycle holds. That result is binary and moves the entire sector.

Three weeks running the earnings calendar brought execution misses in hardware and storage names. This week’s reports will answer whether those misses were cyclical or structural. The market has been building out 2026 guidance at 7.5 to 8% earnings growth. A rollover in capex spending invalidates that entirely.

Sector Momentum

Energy sits at +33% year-to-date but momentum is stalling. XLE is flat on the 5-day at -0.1%, which means the carry trade that funded the entire rally is losing steam. Tech is +22% YTD but also rolling over 5-day at -0.3%. Both leaders are decelerating into the data week ahead, which is bearish for anyone long strength.

The real move is discretionary. XLY is the worst-performing sector year-to-date at -2.8% but up 6.1% on the 5-day, a massive reversal. Communications XLC is down 8.1% YTD and up 1.0% on the 5-day, also recovering. That mean reversion is the only thing working. Utilities are the only true break. XLU is down 4.2% on the 5-day despite being up 3.9% for the year, which signals defensive positioning is not working and capital is fleeing safety. Materials XLB is a structural disaster at -11% YTD with no 5-day bid. Industrials and real estate are both rolling over from YTD strength, confirming that breadth is cracking fast.

Single-Name Momentum Universe

The dispersion is extreme and structural. The right side is all mega-cap cloud and software: CTSH at +22%, AMZN +15%, GOOGL +12%, DXCM +15%. These names are positive on both 1-day and 5-day, which means momentum is self-reinforcing and capital is not rotating out.

The left side is a semiconductor graveyard. NXPI, SNDK, MU, QCOM all trade with red X indicators showing they are momentum shorts. NXPI sits at -15% 1D and -17% 5D. SNDK is -12% and -15%. MU is -5% on the day but -12% on the 5-day, which signals capitulation is playing out in slow motion. CTVA is -10% on both axes. The entire hardware complex that powered the first half is now in the bottom-left corner with no bid.

The center holds the bulk of the index at zero, which means the S&P 500 itself is a barbell: extreme winners in software and mega-cap cloud platforms, extreme losers in semiconductors and capital equipment, and nothing in between. That barbell breaks when the leaders stop levitating. The moment AMZN or GOOGL rolls over, the gap below them is 25% down, and there is no support to catch it.

Market Structure: Gamma Flip & Weekly Expected Move

The gamma flip sits at 7,476. The spot level is 7,490, which puts dealers 14 points short of the flip line. Positive gamma is currently +14M notional, showing in the weighted gamma exposure chart as a modest cushion above spot.

The one-sigma expected move is 1.76% in either direction off the 7,490 close. That band runs from 7,621 on the upside to 7,358 on the downside. That is the operating range dealers are hedged for. The gamma flip sits at 7,476, which puts us 14 points inside the one-sigma band on the downside. A break below 7,476 forces dealers negative, which accelerates any move lower. A hold above 7,476 keeps dealers short and neutral.

The two-sigma band (roughly 3.5% in either direction) extends to 7,753 on the upside and 7,226 on the downside, which is where the true tail risk lives. That wider band is the “if the data breaks hard” scenario. For now, dealers are hedged for 1.76%, and that is what you trade until data arrives.

Volatility Regime

One-month realized volatility sits at 12.16, well beneath the three-month at 13.44. The regime reads low-vol and keeps vol-control funds allocated. Realized vol fell further on the week as price swings compressed and intraday ranges tightened. The low-vol regime has persisted for eight weeks now, which means vol-targeting programs remain leveraged to the downside. A single day of realized vol above 18 forces a 15% unwind in notional exposure across the vol-control universe. That is the mechanical risk in place.

Systematic Fund Flows: The Situational Awareness Unwinding

Vol-control funds were net sellers of 11.6 billion over the past five days, marking the largest five-day outflow since the March selloff. The selling accelerated Tuesday and Wednesday, hitting a peak sell of 7 billion Thursday before a partial recovery Friday morning. The absolute allocation level sits at 224.5 billion, roughly 75% of the 300 billion pool, which means the formula has keyed off the higher of one-month and three-month realized vol. That binding is what persists until realized vol falls further.

CTA positioning is the more interesting tell. The vol-normalized signal dropped from near the top of its range toward flat, and the combined systematic z-score moved from +2 sigma two weeks ago to +1 sigma now. The mechanical long that turned every June dip into a buy is half gone. That cuts in two directions: less forced selling if this week breaks, and less forced buying if this week holds.

What happened here matters because it is not random. Leopold Aschenbrenner’s Situational Awareness fund managed close to 45 billion at its peak, running a 1,000% cumulative return since launch and 439% gains in the first half of 2026 alone. The fund carried massive leverage on a concentrated long equity portfolio targeting AI hardware and semiconductor capex beneficiaries. When the AI stock rotation began in mid-July, the feedback loop was vicious: mark-to-market losses on leveraged positions forced margin calls. On July 29, those margin calls came. By July 30, Citadel acquired roughly 16 billion worth of Situational Awareness’s public equity holdings at a substantial discount in a brief “bidding” process. Assets under management collapsed from 45 billion to 10 billion in hours.

That forced liquidation is exactly what you see printed in the vol-control daily flows chart. Tuesday through Thursday is the mechanical consequence of a large leveraged long equity book being liquidated into existing volatility. The chart shows a baseline allocation level around 1 billion, then a pause of 50 basis points on Tuesday as the selling began, then three days of net selling hitting 4 billion on Wednesday and 9 billion on Thursday before a partial recovery Friday. That recovery is Friday’s AI stock rally, which itself was triggered by the news that Situational Awareness kept its private portfolio of AI companies intact, including a significant stake in Anthropic valued at 965 billion in a Series H round in May.

The vol-control flows did not move randomly. They moved because a single highly leveraged fund’s liquidation force-fed mark-to-market losses into a formula-driven seller that has no discretion and no ability to absorb sudden capital flows. CTA positioning normalized at the same time, meaning the mechanical long that had been amplifying every bid since June is now neutral, reducing the upside amplification on any further strength but also reducing the downside amplification on any breakdown.

Both flows signals improved Friday into the close, but both are bearish on a five-day basis. The vol-control fund sits at absolute levels that mean any further decline in realized vol will force additional rebalancing higher into what could be a declining market. The CTA sits at neutral, meaning it is neither pushing nor pulling into Friday’s close or into the data next week.

Positioning Index: Systematic Z-Score

The combined CTA and vol-control z-score sits at roughly -1 sigma against near +2 sigma two weeks ago. The vol-normalized signal is the primary driver of that drop, with the CTA trend portion normalizing from extreme long readings.

Market Breadth

Breadth is 68.3% of the S&P 500 above its 200-day moving average, down from 70.5% two weeks ago but still solidly in optimism territory and far from the 40% pessimism line. The reading is stable and leaves room for either reversion higher or a gradual drift lower without signaling panic.

Dealer Gamma Dashboard

The individual signals remain bullish across gamma, realized vol, flow, and breadth. The weighted composite lands Neutral because those four signals carry different conviction levels and the weighting caps the combined read at the zero line. The regime output is Risk-On, which reflects that the four bullish signals outweigh the neutral weighted composite. The allocation reflects that ambiguity: 75% SPHB (defensive beta) and 25% SPXL (growth beta), a tilt toward safety within the risk-on framework.

Tactical Allocation Performance YTD

The weekly sleeve sits at 15.01% year-to-date against the S&P 500 at 10.14%. The daily sleeve sits at 6.92%, trailing the index by 3.22%. The gap between weekly and daily performance reflects the allocation’s sensitivity to the vol-control rebalancing cycle. Weeks that see outflows force defensive positioning late Friday and keep damage light. Weeks that see inflows build leverage early Monday and capture strength early. This week’s early selling pressure will reset that dynamic.

Closing Position

The market is priced for a benign data week. Thursday and Friday will say whether that assumption holds. A beat on jobless claims or a miss on Core PCE re-opens the case for rate cuts that the Fed closed on July 31. A miss on claims or a beat on PCE keeps the case for cuts closed and rates at current levels indefinitely. The vol surface is not overextended in either direction and leaves room for a 2 to 3% move in spot level without breaking the technical picture.

And remember: the one fact pertaining to all conditions is that they will change.

Feel free to use me as a sounding board.

Follow me on X for more updates.

Best regards,

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Wealth Advisor | President

ivoryhill.com

Disclosure

The Gamma Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

The allocation stays 50% SPLV / 50% SPHB, Neutral for a second week. SPX sits 61 points beneath the 7,465 flip line, so dealers amplify weakness rather than absorb it.

Signal Dashboard

Gamma stayed bearish, flow improved from bearish to neutral, and realized volatility and breadth stayed bullish. The weighted composite lands Neutral for a second week, and the allocation did not change.

Market Recap

Last week, the flip line was 7,533, with the market 75 points below it; this week, the flip is 7,465, and Monday’s spot is 7,404, 61 points below.

Weekly Expected Move

The bands locked at 7,521 and 7,303, ±1.47% around a 7,412 midpoint. Spot has since drifted to 7,396, which is why the upside now reads +1.68% and the downside -1.26%.

Cross-Asset Performance

Implied Correlation

One-month implied correlation is 7.39, up from 6.38 last week and 3.44 the week before. Two straight weeks higher and now within 0.61 of the 8 line that separates dispersion from an index that trades as one thing. Last week I called this the tell to watch; it is still climbing and still below the line.

Earnings

Economic Calendar & Short-Dated Vol

Thursday is the print: Core PCE and GDP together, with jobless claims, personal income and personal spending alongside. Friday brings the Employment Cost Index.

Sector & Single-Name Momentum

Energy leads at roughly +30% on the year, up 1.8% on the week and alone in the leading quadrant. Technology is at +20% and falling, off 1.5%.

Underneath, the split is not technology against everything else. It is AI hardware against everything else. SanDisk, Coherent, Lumentum, Western Digital, Seagate, Intel, Lam Research, KLA, Applied Materials, AMD, Marvell and Corning occupy the bottom-left corner of the momentum universe together.

The top right is Workday, Adobe, Accenture, Cognizant, Gartner, SLB, International Paper, Digital Realty, AT&T and Verizon. Money is leaving the picks-and-shovels trade for software, services and yield. Lam Research, KLA, Corning and Seagate all report this week, and the market marked them down before they opened their mouths.

Volatility Regime

One-month realized volatility is now well beneath three-month at 12.78, which keeps the regime low-vol and keeps vol-control funds allocated.

Systematic Fund Flows

Vol-control implied allocation sits near $235 billion, roughly 78% of the $300 billion pool, because the formula keys off the higher of one-month and three-month realized vol, and three-month at 12.78 is what binds. Realized vol falling further adds no exposure from here until the three-month window follows it down.

CTA trend positioning is the bigger change. The vol-normalized signal dropped from near the top of its range toward flat, and the combined systematic z-score is now roughly +1σ against near +2σ two weeks ago. The mechanical long that turned every June dip into a buy is half gone. That cuts both directions: less forced selling if this week breaks, and less forced buying if it holds.

Market Breadth

Breadth fell to 65.3% above the 200-day from 68.5%, still optimism territory and still nowhere near the 40% pessimism line.

Tactical Allocation

The allocation is 50% SPLV and 50% SPHB, unchanged. The weekly sleeve is +16.23% on the year against the S&P 500 total return at +8.98%, and it gained ground while the index lost it. The daily sleeve is +8.05% and slipped behind the index.

And remember: the one fact pertaining to all conditions is that they will change.

Feel free to use me as a sounding board.

Follow me on X for more updates.

Best regards,

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Wealth Advisor | President

ivoryhill.com

Disclosure

The Gamma Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

The model cut all leverage on Friday’s close and moved to 50% SPLV / 50% SPHB, down from 75% SPHB / 25% SPXL. It did not wait for a Monday gap; the composite dropped to Neutral the moment the tape lost the line. The structure weakened even as realized volatility fell and breadth rose, which is why the book stayed half in high beta. The risk is timing: beneath the flip line, low volatility is the fuel for the next move, and it meets positioning already stretched near extreme long, days before the heaviest earnings and month-end prints of the quarter.

Signal Dashboard

Gamma turned bearish and flow turned bearish, while realized volatility and breadth stayed bullish, so the weighted composite lands Neutral, down from Risk-On last week.

Market Recap

Last week the flip line was 7,497 with the market 78 points above it; this week the flip line is 7,533 and the market fell to 7,458, and the two crossed on Thursday. It rolled over on its own weight, grinding to 7,572 Wednesday before losing the line and closing Friday at 7,458, down 1.54% on the week and back to +8.94% on the year. Above the line dealers buy weakness, below it they sell it, so the cushion that held the tape through June is gone right as tech earnings hit.

Weekly Expected Move

The chain prices a symmetric week, +1.56% to 7,574 and -1.56% to 7,341, on 12.4% implied vol, with the flip line at 7,533 just above spot. In negative gamma the downside band fills faster, because dealer hedging pushes in the same direction as the move.

Cross-Asset Performance

The index gave back 1.5%, and the month-to-date column tells the story the year-to-date hides: the Nasdaq is down 2.65% and emerging markets 7.48%, while oil is up 18.69% on the month and 43.66% on the year. Leadership has narrowed to energy on a crude spike, with gold at -7.23% and Bitcoin at -26.33% for the year.

Implied Correlation

One-month implied correlation is 6.38, still a dispersion regime in the fourth percentile of two years, but it nearly doubled off last week’s 3.44. When it lifts off the floor in the same week the tape loses the flip line, names stop trading on their own stories and start moving together; it is not there yet, but it is the tell to watch.

Earnings

This week the market weight reports: Tesla, Alphabet, IBM, ServiceNow, and Texas Instruments Wednesday after the close, Intel and SAP Thursday. Technology is the largest index weight and it broke down into the exact week it has to report, so on a short-gamma tape a miss has no cushion and a beat squeezes.

Economic Calendar & Short-Dated Vol

This week is quiet on data, with only jobless claims Thursday and housing Friday. The event is the month-end cluster: Core PCE and GDP on July 30, the Employment Cost Index on July 31. Short-dated SPX implied vol is 11.36%, and the term structure ramps into those dates, with the options-implied move widening from ±1.36% around Thursday’s claims to ±2.59% by the ECI print.

The positioning underneath the calendar is skewed to the downside. Put implied vol sits above call implied vol across the curve, and the put-to-call volume ratio jumps to 2.12 into the July 31 print from 0.82 around this Thursday. The market is not paying for this week; it is buying downside protection for month-end, and with crude up 18.69% on the month the PCE print is the one that can move it. This is where negative gamma concentrates the risk: short-dated vol is where dealer hedging bites, and it is rising into the two prints that matter.

Sector & Single-Name Momentum

Energy led the week, up 4.7% and sitting alone at +31% on the year, while technology fell 5.5%, the worst move on the board and from the highest perch. Money did not leave the market, it left the biggest thing in it and crowded into the one sector levered to $82 oil, and rotations out of tech leave a mark because nothing is large enough to replace it.

The damage was concentrated in the right names to worry about: Synopsys, Cadence, Lam Research, Applied Materials, and Texas Instruments deep in the red, Netflix down hard, and Intuitive Surgical off 15%, the week those highest-multiple names have to defend them.

Volatility Regime

Realized volatility fell, one-month at 11.64 below three-month at 12.96, a low-vol regime that greenlights vol-control funds and kept the composite from going defensive. Above the flip line that calm is self-reinforcing, because dealers suppress every move; beneath it, with no dealer bid leaning against the first real move, low volatility can expand quickly, and 7,533 decides which way it breaks.

Systematic Fund Flows

Vol-control funds bought $10.0B Tuesday, $3.4B Wednesday, and $1.1B Thursday, then sold $2.7B Friday, and CTAs ran the same path from long to short on the day the tape lost the line. For six weeks the systematic bid was the story; that money is now in, and when it flips from buyer to seller in negative gamma it stops being a tailwind and becomes an accelerant.

Market Breadth

Breadth improved while the index fell, to 68.5% above the 200-day from 66.9%, which tells you the selling stayed inside the top-heavy tech names while the rest of the market held. The structure weakened this week, but participation is broad and the 40% pessimism line is nowhere close.

Tactical Allocation

The book is now 50% SPLV and 50% SPHB, down from 75% SPHB and 25% SPXL; I cut the 3x leverage on Friday’s close. Both sleeves still lead the index on the year, and the discipline is to carry beta when the regime pays for it and cut it the moment it stops, which is what the model did Friday.

Bottom Line

• Dealers are short gamma below the 7,533 flip line. Above it they cushion, below it they amplify, and we sit below it into tech earnings.

• Realized vol is low at 11.64, and beneath the flip line that is energy waiting to release once a move starts.

• Systematic flows bought all week and sold Friday, and positioning is near extreme long. The mechanical tailwind is spent.

• Breadth is 68.5% and rising, so participation is still broad while the structure weakens.

• Tech broke 5.5% into the week it has to report, and energy leads on $82 crude.

The allocation is 50% SPLV, 50% SPHB. Neutral, by design.

And remember: the one fact pertaining to all conditions is that they will change.

Feel free to use me as a sounding board.

Follow me on X for more updates.

Best regards,

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Wealth Advisor | President

ivoryhill.com

Disclosure

The Gamma Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

Pre-0500 Look.

• S&P 500 futures are down slightly, with crude up 4%, after fresh US strikes on Iran, right into this Tuesday’s CPI, Warsh’s testimony, and the start of bank earnings, kicking off earnings season.

• The US hit 140 targets in Iran overnight into Sunday; Iran fired back at Jordan and the Gulf; and Tehran says it closed the Strait of Hormuz, the shipping lane off Iran’s coast that carries a fifth of the world’s oil.

• Oman hosted talks Saturday and drafted a plan to reopen the strait, then Iranian drones struck Oman on Sunday, the same country brokering the deal.

  ---

Market Recap

Last week, I gave you 7,475, and the price never closed below it. Geopolitics drove dramatic swings throughout the week. On Monday, markets opened positively with tech leading, but the mood shifted quickly on Tuesday when Iran's Revolutionary Guard Corps fired missiles at commercial vessels in the Strait of Hormuz, striking a Qatari LNG tanker. The US Treasury Department revoked a general license authorizing Iranian oil sales, and semiconductor stocks sold off globally following disappointing preliminary results from Samsung Electronics. The SPX did slip under the flip line on Wednesday (as President Trump declared the US-Iran ceasefire "over" during a NATO summit in Turkey, and US Central Command struck 80 Iranian military targets), but took it back on Thursday, then rose to 7,575 on Friday. S&P 500 now sits +78 above the 7,497 flip line, positive gamma is deeper, and dealers are still buying dips. Up 0.5% on the week, 0.5% under the June 2nd high of 7,610. At this rate, we could hit 8,000 on the S&P 500 this year if earnings season delivers.

Asset Performance. Crude, commodities, emerging markets and small caps still lead the year, all near double the S&P 500’s +10.66%. Bitcoin is the worst-performing major asset, at -26.44%, even after a +9.93% July bounce.

Implied Correlation. One-month implied correlation fell to 3.44, a two-year low. Names are trading on their own stories, not in lockstep. META +15% on the week while Moderna fell 15%. That dispersion lets the index grind up on small gains.

Economic Calendar and Vol Term Structure. CPI Tuesday is the event, high-impact, June data. Options price just ±0.74% on that expiration, and near-term SPX IV sits at 10%. The market walks into an inflation print with almost no fear priced in. My call has not changed: headline CPI below 4.0%, and no Fed hike into an oil-driven CPI spike.

Earnings season starts this week. Goldman, JPMorgan, Bank of America, Citi, Wells Fargo Tuesday, then Morgan Stanley, BlackRock, J&J, ASML Wednesday, and Netflix, TSMC, UnitedHealth Thursday. The banks set the tone for CPI, PPI, and Retail Sales the same week.

Sector Momentum. Last week’s cyclical rotation reversed. Tech +2.9% and Energy +3.5% led the week and the year. Materials, health care, staples, and industrials all went red. Leadership narrowed back to tech and energy. That is risk-on.

Single-Name Momentum. Led everything, +6% on the day and +15% on the week. Semis and storage behind it: Seagate, Sandisk, Nvidia, AMD. The clue is the reversal: Moderna went from +22% last week to -15%, CrowdStrike +13% to -3.5%.

Weekly Expected Move. The options chain prices a symmetric week: +1.92% to 7,721, -1.92% to 7,430. Last week was lopsided to the downside at -3.07%. The crash premium drained as the gamma flip line held. GEX 7,497 is the line to hold.

Volatility Regime. One-month realized fell to 14.73 from 17.29, the drop positive gamma is supposed to produce. Fast vol is closing on slow vol at 12.91. As soon as fast vol closes in on slow vol, volatility control funds will be forced to buy.

Systematic Fund Flows. CTAs and vol-control both turned net buyers. CTAs printed long every session, vol-control bought $23.8B over ten days, including a +$34B day on Wednesday. Mechanical money is adding fuel.

Positioning Index. Systematic positioning climbed off its late-June capitulation low but remains net short on a tape near the highs. Under-positioned money chasing a market that keeps holding. This headwind is turning into a tailwind.

Market Breadth. 66.9% of the S&P 500 trades above its 200-day MA, flat for the week and firmly in optimistic territory. The 40% bearish line is nowhere close. This tells us that this is sector rotation inside a bull market.

Dealer Gamma Dashboard. Gamma and breadth Bullish, realized vol and flow Neutral. Composite Regime still Risk-On. Allocation stays aggressive: 75% SPHB, 25% SPXL.

Tactical Allocation. Weekly proxy +21.91% on the year, daily +14.71%, S&P 500 +11.36%. Both beat the index this week. Fully invested always, so read it as a beta and regime barometer rather than just a performance metric.

And remember - The one fact pertaining to all conditions is that they will change.

Feel free to use me as a sounding board.

Follow me on X for more updates.

Best regards,

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Wealth Advisor | President

ivoryhill.com

Disclosure

The Gamma Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

The noise is deafening right now. Iran is flaring back up. AI capex is suddenly in question, and the memory names are getting torched. The dollar is ripping on a Fed that won’t cut, which is dragging the yen to the floor and putting the whole carry trade back on watch for an unwind. Pick any one of these, and it can hijack a whole week.

But does any of it really matter right now?

You know I lean into technicals and quant signals, and I watch flows more closely than most. That is my wheelhouse. When the tape gets this loud, though, I find it valuable to take five big steps back and look at plain, boring fundamentals.

Earnings backfilled the rally

July’s Market Multiple increased, and for once, it did so for the right reason. Earnings did all the work. But the setup that got us here leaves absolutely no cushion. Everything now hinges on two variables, and both have to keep moving in the right direction.

The bigger of July’s two changes runs through earnings. FactSet’s 2026 S&P 500 consensus jumped again after May results, from $320 to $340 a share. That’s a long way from the $305-$310 the Street penciled in at the start of the year. Aren’t Wall Street predictions so helpful? Not. So the market sits near 22X forward earnings. That’s a rich number, and the underlying earnings growth is keeping it honest.

Why does this matter? AI data center demand is pushing earnings expectations up quickly, and those higher numbers are backfilling the valuation gains. Higher estimates absorbed the run-up, so the multiple held roughly flat while the index climbed. That happened again last month.

The second change. Geopolitics came off the board as a market influence. Oil fell back to, or just under, pre-war levels, which tells you investors have stopped pricing a reescalation out of Iran or Ukraine. Remember, Ukraine? With oil lower, the tape has narrowed its focus to the two influences that actually drive it right now.

Two influences, and no room to be wrong on either

AI and data center spending is first because it drives both economic and earnings growth. Inflation and rate-hike expectations are second, because a Fed hiking cycle is one of the few events that can pull the multiple lower on its own.

The news on both came in mixed, which is exactly enough to hold a stretched market in place and nothing more.

On the AI side, the infrastructure names fell in June, with memory and semis leading the drop. Nothing foundational broke. Every major player reaffirmed its buildout intentions, and the selloff looks like profit-taking after an unsustainable run. As long as spending intentions hold, treat the dip as consolidation inside a rising market. This is essentially a privately funded economic stimulus package.

On inflation, the news was skewed positive. The Warsh Fed carried a more hawkish tone than the market is used to, but it held rates steady, and Warsh himself sounded measured at the ECB’s Sintra conference. Some leading inflation indicators rolled over from last month’s peak, which aligns with the idea that lower oil prices take pressure off prices.

Add it up, and you get a market positive enough to hold a historically high multiple, and stretched enough that a bad surprise on both influences at once could take 5% to 10% out fast. That’s what a market does when it prices perfection and gets handed less.

The three scenarios and where they sit on the chart

All three targets moved up this month, and every bit of that came from higher earnings. The multiples held steady. The S&P opened the week within 20 points of the current-situation upper bound at 7,480 and has traded sideways just above it since.

Current Situation. Data center spending is holding up earnings and growth. Inflation is still high, though lower oil and softening price indicators hint that the pressure is easing. One hike this year is about the ceiling here. At $340 in EPS and a 21X to 22X multiple, that’s a range of 7,140 to 7,480, with a midpoint of 7,310, up 6.3% from June. The midpoint is the level that matters. It lines up with the summer support that’s held through every dip, and the 13-week moving average sits right on top of it just under 7,325. The Fed is not going to raise rates in 2026. Inflation is about to print downwards over the next two months.

Better If. Q2 earnings reaffirm the growth path, and inflation metrics have fallen enough to ease fears of a hike. More of a good thing. On $350 in EPS and a 22.5X multiple, the target is 7,875, a fresh record and up 3% from June. There’s no price history up there yet, though two separate measured moves off recent pullbacks split the difference within 10 points of that number. If stocks stabilize and push back to the highs, 7,875 comes into play, and 8,000 stops look ambitious.

Worse If. AI spending intentions start getting cut, which hits earnings and growth at the same time, and inflation refuses to recede. This reverses the exact reasons stocks have rallied since April and drives the multiple toward 20 and below. On $310 in EPS and an 18X to 19X multiple, the range is 5,580 to 5,890, midpoint 5,735. That zone has the deepest price memory on the chart, running straight through the middle of the H1 2025 trade, so it should catch a real selloff. Lose it, and a downside measured move points at an even 5,000.

The multiple is high because the earnings are supportive for now. That’s the good news. It’s also the entire problem. 22X, prices zero disappointment, and this rally is now leaning on only two influences that both have to keep cooperating. I’m not short this market. I’m not going to overpay for it either.

And remember - The one fact pertaining to all conditions is that they will change.

Follow me on X for more updates.

Best regards,

-Kurt

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President

ivoryhill.com

Disclosure

The RiskSignal Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hil, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.

This morning’s report ran late because of a data issue that took me a few hours to resolve. Positive gamma is back, and it came back fast. The S&P 500 closed last week at 7,535, up roughly 2.5% from last week’s 7,354. It reclaimed the flip line on Monday, the 29th, and has closed above it every day since.

Last week I gave you two paths. A hot payroll number breaks 7,197, and 7,040 comes next. A soft number hands the short crowd a reason to cover and squeezes the tape back toward 7,450. The squeeze won, and it did not stop at 7,450. It ran through the flip line, held, and never looked back. This is why this level is so important to watch.

ASSET PERFORMANCE

Emerging markets lead at +24.27% year to date and the Russell 2000 at +21.65%, both more than double the S&P’s 10.18% and well ahead of the Nasdaq’s 12.46%. That spread is the same dispersion trade the correlation chart flagged, index returns carried by breadth rather than a narrow handful of names. Bitcoin is still the worst major at -27.06%, though it opened July up 9.00%, and gold is the only other major in the red at -3.53%.

IMPLIED CORRELATION: THE DISPERSION SIGNAL

When correlation falls this hard while the index climbs, money is separating winners from losers again, not dumping everything at once.

THE ECONOMIC CALENDAR AND VOL TERM STRUCTURE

This week is thin. ISM Services this morning, Trade Balance Tuesday, jobless claims Thursday. The event that matters is CPI on the 14th (next week), high impact, with the options market pricing a ±1.74% move on that expiration. The Fed lifted its inflation forecast to 3.6% last month, so a hot June print confirms that view, pushes the next cut further out, and hands the short crowd its excuse to fade this squeeze. A cool print and the cover-to-buy chase extends. Everything between now and the 14th is positioning drift under positive gamma.

EARNINGS

Another slow week. Delta reports on Friday before the open and unofficially starts the earnings season, providing a read on travel demand and the consumer. PepsiCo Thursday before the open is the Staples check, Levi Strauss Wednesday after the close covers apparel, and Penguin Solutions Tuesday. None of this will move the market this week. Price trades off positioning and the CPI setup.

MOMENTUM PULSE CHECK

Last week, Financials ran +4.7% on the week, Communication Services +3.5%, Consumer Discretionary +3.1%, all pushing up into Improving and Leading. The defensives that led the fear trade gave it back: Health Care -2.0%, Real Estate -2.2%. Technology stopped falling and added +1.4%, still the best sector of the year, near 28%. Capital rotated straight back into the cyclicals, and high-beta it ran from just a week ago.

The single-name board says it louder. The semis that were the worst names on the screen last week are back on the right side. AMD ran +6.5% on the day, Arista +7%, with NetApp, Texas Instruments, Qualcomm, and Microchip all reclaiming green. Axon leads the five-day board up 32%, Moderna +22%, Robinhood +18%, CrowdStrike +13%. The staples that took in capital last week, Constellation, O’Reilly, Tractor Supply, and Kraft Heinz, are the red names now. The “expect more downside” rotation I flagged a week ago unwound completely.

WEEKLY EXPECTED MOVE

The options market prices an asymmetric week: +1.86% to 7,669 on the upside, -3.07% to 7,298 on the downside, outer floor at 7,112. The -1σ floor reset to 7,298, up from 7,197 last week, so the higher-low pattern that broke into the quad-witch is back on. Hold 7,475, and dealers keep suppressing volatility. Lose it, and negative gamma returns with 7,298 as the next test.

VOLATILITY REGIME

One month is still above three-month. The tape moved more violently over the past month than the past quarter, and the spread widened even as the price rallied because the rally itself was fast. Positive gamma should pull realized vol lower from here, but it has not happened yet.

SYSTEMATIC FUND FLOWS

Both CTAs and vol control funds turned. CTAs printed long every session this week and flipped to net buyer with the trend signal back in an uptrend, the same crowd that was short six of seven sessions a week ago. Vol-control sold $2.2 billion on the 30th, then paused for two days and turned to a buy on the latest print, exposure back near $178 billion and rising off the lows. The mechanical sellers that pulled support out from under the spring rally are stepping back in as buyers, foot off the brake rather than flat on the gas. That flow is the fuel behind the reclaim of positive gamma.

SYSTEMATIC POSITIONING INDEX

The combined positioning score sits below the -1σ Bearish line, deeply unwound from the Extreme Long peak in mid-May. The crowd fully de-risked and flipped net short right into the reclaim. That is the setup that squeezes: under-positioned money forced to chase a tape moving against it. The daily flows above show the chase already started, and as the 20-day rolling measure catches up to this week’s buying, this score turns from headwind to tailwind.

MARKET BREADTH

67.1% of the S&P 500 trades above its 200-day average, up from 64.5% a week ago. Breadth rose while the index rose, so the bounce reached past the semis and into the average stock. The 40% line that signals a regime breakdown is nowhere in sight. Breadth is the reason this is a rotation and a positioning unwind, not a market top, and it is the reason the bullish regime has legs.

DEALER GAMMA DASHBOARD AND COMPOSITE REGIME

Gamma, Flow, and Breadth all print Bullish; Realized Vol is Neutral. The weighted composite still reads Neutral, but the Composite Regime flipped to Risk-On the moment the price closed back above the flip.

TACTICAL ALLOCATION PERFORMANCE

Weekly proxy 18.48% on the year, daily portfolio 12.60%, S&P 500 9.98%. The daily model gained on the week but trailed the index, and the weekly proxy gave back ground from last week.

What was a ceiling at 7,450 for two weeks is a floor at 7,475, and the tape holds above it with dealers long gamma, CTAs buying, vol-control turning, and correlation in the basement. Breadth at 67.1% says the rally is broad, not a handful of names. The one caution is that the options market is still pricing more room down than up, into realized vol that has not yet calmed down.

And remember - The one fact pertaining to all conditions is that they will change.

Feel free to use me as a sounding board.

Follow me on X for more updates.

Best regards,

Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Wealth Advisor | President

ivoryhill.com

Disclosure

The Gamma Report is published by Ivory Hill, LLC. All opinions and views expressed in this report reflect our analysis as of the date of publication and are subject to change without notice. The information contained herein is for informational and educational purposes only and should not be considered specific investment advice or a recommendation to buy or sell any security.

The data, models, and tactical allocations discussed in this report are designed to illustrate market structure and positioning trends and may differ from portfolio decisions made by Ivory Hill, LLC or its affiliates. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.

Ivory Hill, LLC, and its members, officers, directors, and employees expressly disclaim any and all liability for actions taken based on the information contained in this report.