October 2025 DDD

[ducati916]

• It's all about positioning - always.
• It's rush hour for stocks right now.
• "Don't fight Papa Dow."

During market corrections, prices of major indexes, sector ETFs, and individual stocks often trade below overhead supply.

In plain English, that means there's still a ton of stock for sale at higher prices - more sellers than buyers.

Every time prices try to bounce, that leftover supply comes in and knocks them right back down.

That's what makes it tough for markets to move higher. It's not about earnings or economic data - it's about positioning. Always has been.

And right now, the list of stocks stuck in traffic under overhead supply keeps growing. Welcome to bull market rush hour.

So what does that mean for this cycle? How long does this slowdown last?

No one knows for sure. But the market leaves clues. And if we can identify the key levels that define this current regime, we can trade accordingly.

Small-Cap Russell 2000 Hits Resistance​

Here's the iShares Russell 2000 ETF (IWM) bumping right up against last year's highs. There's a ton of overhead supply in the 240s - more sellers than buyers:



How quickly small-caps can absorb that supply and break out to new all-time highs will tell us a lot about the market's underlying strength.

A fast recovery here would be impressive. But more likely, this takes time - and how much time will say a lot about the health of this bull market.

Now, here's the concern: Regional Banks just broke to new 52-week lows relative to the S&P 500.

This is not something you typically see in strong, healthy markets:



There are more than 250 Regional Banks in the Russell 2000. When a group that large - and that important - is hitting new relative lows, it acts as a drag on the whole index.

A quick rebound in Regional Banks could go a long way toward helping small-caps recover.

On the brighter side, Biotech continues to shine. The equally weighted SPDR S&P Biotech ETF (XBI) just closed the week at new multi-year highs.

Remember, there are more than 200 Biotech stocks in the Russell 2000 - this matters:



For now, the path of least resistance for Biotech is still higher.

But if XBI starts to fail up here - and falls back below its 2024 highs - that would hand the bears another data point in their favor.

Where Do Things Get Worse?​

During market corrections, our job is to identify two things:

• what could happen to end any overwhelming weakness in equities; and
• what could make things worse and drag this out longer.

Let's start with the Dow Jones Industrial Average. You've heard me say it before: "Don't fight Papa Dow."

That mantra has kept us on the right side of the trend - not just over the past six months, but for the past couple of years.

If the Dow starts to lose that 45,000 level, though, this "pullback" probably isn't just a quick breather anymore. That's when it turns into a real correction that could take time to work through:



On the flip side, if the Dow can stick this landing - holding above those November '24 and January '25 highs - that would be an impressive sign of underlying strength. But we need to see it hold.

Now, another key chart to watch is the ratio of Consumer Discretionary to Consumer Staples.

You know the saying: "Dance with the date who brung ya." This rotation into Discretionary - especially relative to Staples - has helped keep us on the right side of the trend.

So we'll keep dancing as long as the music's playing. But if this ratio breaks back below those November '21 and January '25 highs, that's when problems start stacking up for this market:



The beauty of the market is that nobody knows what's going to happen next.

But what we do know is that asset prices trend - and that's what we've been following. When those trends shift, our job is to recognize it and adjust.

Yes, a few cracks are starting to show. But cracks are not collapses.

Every major correction starts with a small pullback... but not every small pullback turns into a major correction.

So let's keep it in perspective. Let's stay open-minded. Let's keep weighing the evidence as it comes in - one day, one chart at a time.

This Week in Everybody's Wrong​

On Monday, I shared how much I love it when people forget we're in the middle of a raging bull market.

Sector rotation is alive, it's relentless, and it keeps proving bears wrong.

Here's why we should all be grateful for that.

On Tuesday, we went deep on a simple question.

Have you ever studied how bull markets actually work?

People who are consistently wrong share the same mistake...

On Wednesday, we saw Gold rip past $4,000 per ounce for the first time ever.

We're long metals and mining stocks, so we're smiling.

Here's what record-breaking precious metals prices mean for the market.

On Thursday, we asked a more complex question.

It's about what's real, what's not real, and what's flashing fear, and what's flashing strength.

So, is your bubble in the room with us right now?

On Friday, we named potential culprits, where weakness will show up before any big roll-over.

"Breadth deterioration" has preceded many of history's worst sell-offs.

But, over the past six months, breadth has been making new cycle highs...

On Saturday, we joined up with Sam Gatlin again as his overseas journey continues.

Sam's just back from Dubai.

Of course he learned some fun facts about Energy... and he met a living legend too.

Have a great Sunday.

We'll see you Monday morning...

What happened last week

Monday: There were no S&P 500 earnings reactions to write about, so we covered another healthcare stock that has our attention, Tarsus Pharma. $TARS. The company's flagship drug, XEMVY, has grown its net sales from $1.7M in Q3 2023 to over $102M in Q2 2025. This fundamental growth is being translated into the technicals as the stock is resolving a massive base and making new all-time highs.

Tuesday: Again, there were no S&P 500 earnings reactions to cover, so we highlighted a Bitcoin miner, which has recently transformed itself into a high-power computing company. This is Cipher Mining $CIFR. Since the April lows, CIFR has been the single best-performing stock in the entire Russell 3000 Index, outpacing nearly every other company in the U.S. market. When you zoom out, this run could just be getting started. The price is breaking above the post-SPAC highs from 2021 for the first time, entering a brand-new primary uptrend.

Wednesday: On Tuesday, the $25B beer, wine, and spirits company, Constellation Brands $STZ, rallied 1% after reporting a double beat after Monday's closing bell. We also received an update from one of the world's largest providers of spices and condiments, McCormick $MKC. They posted a double beat, but suffered a -3.9% post-earnings reaction.

Thursday: There were no S&P 500 earnings reactions on Wednesday, so we dove into one of our favorite precious metals stocks. This is Coeur Mining $CDE. Over the past two years, CDE has delivered positive earnings reactions in nearly every quarter, most recently rallying by more than 20% after its May earnings report. This is being driven by explosive growth in the company's fundamentals.

Friday: Before Thursday's opening bell, we heard from the $198B producer of Pepsi and Cap'n Crunch, PepsiCo $PEP, which beat its headline expectations and had a +4.2% post-earnings reaction. Despite the short-term improvement in fundamentals, the stock is still in a long-term downtrend. We also received an update from one of the world's largest airlines, Delta Air Lines $DAL. They posted a double beat, and shareholders were rewarded with a +4.3% post-earnings reaction.

What's happening next week

​

Next week is the opening scene for the new earnings season. As always, the banks will headline the opening week. We'll be focused on JPMorgan $JPM, Goldman Sachs $GS, and Bank of America $BAC. In financials, we'll also be watching: The brokerage giants Charles Schwab $SCHW and Interactive Brokers $IBKR. The asset management behemoths BlackRock $BLK and State Street $STT. Two of the largest healthcare stocks in the world Johnson & Johnson $JNJ and Abbott Laboratories $ABT. And the bellwether semiconductor stock, Taiwan Semiconductor $TSM. It'll be an exciting week for readers of the Beat Report, so make sure you don't miss a beat. Now, let’s dive into the top setups heading into next week.

Here's the setup in JPM ahead of Tuesday's earnings report

​

JPMorgan is expected to post $45.47B in revenue and EPS of $4.85 before Tuesday's opening bell. The stock has been in a strong uptrend since the April low, rallying over 50% in a near-vertical line. However, the trend has been losing steam recently. On Friday, the price closed below a key shelf of former highs, and it looks vulnerable to further downside next week. As the largest and most important bank in the world, all eyes will be on 305 next week.

Here are the past 3 years of earnings results & reactions for JPM

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As you can see, JPMorgan has delivered strong revenue and earnings growth over the past three years, consistently rewarding shareholders. This changed last quarter when the company reported negative top and bottom-line growth, and snapped a streak of three consecutive positive earnings reactions. With this negative fundamental change and the previously mentioned technical breakdown, there's a significant risk that JPM will be punished for its earnings report on Tuesday.

Here's the setup in GS ahead of Tuesday's earnings report

​

Goldman Sachs is expected to report $14.12B in revenue and EPS of $11.02 before Tuesday's opening bell. Heading into the report, the price is in a tight coil below a key Fibonacci extension. Zooming out to the April low, the stock has been even stronger than JPM, rallying over 80%. It looks to us like the bulls want to make another run higher if the company delivers in its earnings report. On the upside, the 161.8% extension of the prior drawdown is the key level to watch. If the buyers can clear that level, it'll shift the path of least resistance higher toward the next Fibonacci extension level. If the company fails to deliver, GS could be vulnerable to a swift retest of the February peak around 672.

Here are the past 3 years of earnings results & reactions for GS

​

Since the beginning of 2024, Goldman Sachs has been reporting strong revenue and earnings growth, and Mr. Market has rewarded them for it nearly every time. The only negative earnings reaction was in October 2024, and it was fake news - the stock had a positive reaction score. In addition to the consistent post-earnings reactions, we've also seen consistent post-earnings drift since the beginning of 2024. This adds to our conviction in the company's fundamentals. Buyers have loved everything about this company for years, and we see no reason for that to change this quarter. We expect GS to be rewarded once again for its earnings report on Tuesday.

Here's the setup in BAC ahead of Wednesday's earnings report

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The market expects Bank of America to report $27.52B in revenue and EPS of $0.95 before Wednesday's opening bell. Ahead of the report, the sellers are taking control of stock and sending the price back below the prior cycle's peak. This has formed a textbook failed breakout, which could lead to a swift move lower as the bulls scramble for the exit. This short-term price action is not a good look before an earnings report, as it elevates the risk of a negative post-earnings reaction. So long as BAC is below 50, we expect the sellers to continue driving the price lower.

Here are the past 3 years of earnings results & reactions for BAC

​

Over the past three years, the revenue and earnings growth for Bank of America have been a mixed bag. There isn't a strong fundamental trend, which is reflected in the inconsistent earnings reactions. The same inconsistency can be said about the pre- and post-earnings drift - there is no trend. This mediocre fundamental has led to the new all-time lows relative to JPM, the industry leader. Based on the lack of trend in the fundamentals and the previously mentioned technical breakdown, we expect the market to punish BAC for its earnings report on Wednesday.

Have we passed peak social media? (Financial Times) Social media may have hit its breaking point. Global data show people are spending less time on platforms as feeds fill with AI-generated “slop” and fewer real interactions. Meta and OpenAI’s new ventures into automated content show how far the medium has drifted from connecting with friends toward total distraction and fighting for shortening user attention spans (except in North America, where screen time is still rising). [Link] MrBeast: AI means it's 'scary times' for YouTube creators (BBC News) MrBeast called the rise of AI-generated video “scary,” warning it could threaten millions of creators who rely on making real content for a living. Tools like OpenAI’s Sora can now produce entire videos from text prompts in seconds, at a fraction of the cost it would take to really produce similar content. While experts say top creators like MrBeast are safe for now, the tension between using AI as a tool and being replaced by it is growing fast. [Link] Our Brains Evolved to Socialize—but Max Out at About 150 Friends (WSJ) Humans can only maintain about 150 meaningful relationships, a limit tied to the size of our brains, according to psychologist Robin Dunbar. His research across primates found a clear link between neocortex size and social group size, suggesting our brains evolved to manage complex social lives. Even in the age of social media, Dunbar says those layers of closeness remain the same. Technology may help people stay in touch longer, but it can’t replace real human connection. [Link] You won’t believe what degrading practice the pope just condemned (The Guardian) Pope Leo XIV urged journalists to resist the use of clickbait, calling it a “degrading” practice that corrodes public trust in media. Speaking to global newswire reporters at the Vatican, he praised frontline journalism and warned against AI’s growing influence over how people receive information. The pope called for transparency, accountability, and integrity in reporting, reminding journalists that truth, not traffic, should guide their work. [Link] Markets & Investing Nasdaq Has Become the Market of Choice for Dubious Penny-Stock IPOs (WSJ) Nasdaq, while known for tech giants, has seen an influx in penny-stock IPOs from obscure overseas companies, many with questionable financials and dramatic post-IPO price swings. Many of these low-priced listings, often tied to China or the Caribbean, have seen wild, short-lived spikes fueled by hype around AI or crypto before collapsing. Regulators are now pressing Nasdaq to tighten its standards after a wave of scams and manipulation. [Link] Meme-stock ETF left for dead gets resurrected for retail crowd (Investment News) Roundhill Investments is relaunching its MEME ETF, betting that retail traders’ appetite for risky, hype-driven stocks is alive and well. The new version will be actively managed, focusing on a smaller basket of volatile names picked through data and online sentiment tracking. Its return signals that speculative energy has crept back into markets, with investors once again chasing the thrill of meme-style trades. [Link] The S&P 500 ETF wars are over — VOO has won out over SPY (Sherwood News) Investors have pulled a record $32.7 billion from the SPDR S&P 500 ETF this year, marking the biggest annual outflow in ETF history and cementing Vanguard’s VOO as the new favorite for long-term investors. VOO’s ultra-low 0.03% fee has helped it overtake SPY and even surpass BlackRock’s IVV in assets, as cost-conscious retail investors now dominate the ETF landscape. [Link] Politics & Crime Exclusive: Federal drug prosecutions fall to lowest level in decades as Trump shifts focus to deportations (Reuters) Federal drug prosecutions have fallen to their lowest point in decades as Trump’s second-term Justice Department moves thousands of agents from long-term cartel and trafficking cases to immigration raids and deportation work. Conspiracy and money-laundering charges, often used to pursue higher-level traffickers, fell sharply, with some fentanyl and cartel investigations stalling outright. [Link] NFIP Becomes Political Talking Point as Shutdown Looms (Risk Market News) The government shutdown began on the first of the month, and Congress is using the National Flood Insurance Program (NFIP) as a bargaining chip, even though hundreds of thousands of families could lose coverage and home sales could grind to a halt if it lapses. Democrats are blasting FEMA’s staffing cuts while Republicans claim they’re defending homeowners, turning flood insurance into a political weapon. At the same time, big insurers like Chubb are ready to scoop up wealthy coastal clients, leaving rural and inland communities exposed. [Link]

Health & Wellness Scientists Finally Reveal Biological Basis of Long COVID Brain Fog (SciTechDaily) A Japanese research team has pinpointed a biological clue behind Long COVID’s “brain fog,” linking the condition to a widespread surge in AMPA receptors, molecules critical for memory and learning. Using a new brain imaging technique, they showed that higher receptor density tracked closely with both cognitive problems and inflammation levels in patients. The discovery not only validates brain fog as a real clinical condition but also opens the door to targeted drugs and diagnostic scans that could finally give patients clearer answers and treatments. [Link] AI & Technology The AI boom will require $7 trillion in global investment, Brookfield says (Quartz) Brookfield says building the backbone of AI will take $7 trillion in investment over the next decade, from massive data centers to new power infrastructure. The firm argues that while these projects could eventually generate $10 trillion in annual productivity, the upfront costs are staggering and outpace what AI companies are currently earning. Consulting firms warn that the mismatch between sky-high infrastructure needs and lower-than-expected revenues could pressure valuations and test how sustainable the boom really is. [Link] AI is not killing jobs, US study finds (Financial Times) New research from Yale and Brookings finds that, despite the hype, ChatGPT and other generative AI tools haven’t had a bigger impact on US jobs than past tech shifts like the internet. Employment data shows no clear signs of mass layoffs or vanishing job categories, even as CEOs warn of looming disruptions. Economists say companies are still figuring out how to use AI, and much of the alarm stems more from hype than actual labor market change so far. [Link] Economic Trends Understanding Consumer Demand for “Buy Now, Pay Later” (New York Fed) While “Buy Now, Pay Later” use is booming, most consumers don’t actually value the standard features enough to pay for them. Demand is strongest among younger and lower-income users, but changes like adding interest sharply reduce appeal. The findings suggest BNPL’s popularity hinges on keeping it free and simple, or risk losing its core audience. [Link] Break-even employment declined after immigration changes (Dallas Fed) The number of jobs needed each month to keep the US labor market in balance has fallen from roughly 250,000 in 2023 to just 30,000 in mid-2025. The drop reflects a reversal in immigration flows and a cooling in labor force participation, both of which slowed labor force growth. This means today’s smaller payroll gains aren’t a sign of weakness but rather evidence that the job market has finally settled into equilibrium. [Link] Assessing the Role of Global Demand and Supply Shocks in the Recent US Inflation Experience Using a Cross-Country Panel Dataset of Professional Forecasts (Atlanta Fed) Using a new dataset of professional forecasts, researchers found that global demand shocks have driven more of US inflation and growth surprises than supply shocks, both before and after the pandemic. Since 2020, though, supply shocks have caught up, now explaining a similar share of inflation surprises. Together, global demand and supply shifts account for the bulk of recent forecast errors in US inflation trends. [Link] The curious death of manufacturing productivity (Financial Times) US manufacturing’s apparent productivity slump since 2009 may not be a slump at all but a measurement problem, according to new research. Economists argue that official price indices fail to fully capture quality improvements in high-tech products, making growth look weaker than it really is. Adjusting for this, they estimate manufacturing productivity has been understated by nearly a percentage point a year, with computers and electronics driving much stronger gains than headline data suggests. [Link] Sports & Entertainment Americans increasingly see legal sports betting as a bad thing for society and sports (Pew Research Center) Public skepticism of legal sports betting is climbing fast. 43% of Americans now call it bad for society, and 40% say it’s bad for sports, big jumps from just three years ago. Even so, betting participation hasn’t dropped. 22% of adults placed a sports wager in the past year, with nearly all of the growth coming from online apps. Young men are the most active bettors. [Link] Business Sharpie Found a Way to Make Pens More Cheaply—By Manufacturing Them in the U.S. (WSJ) Newell Brands revamped its Tennessee factory to bring Sharpie production back to the US, investing nearly $2 billion in automation and worker training. The plant now makes most Sharpies domestically at a lower cost and faster speed without cutting jobs or raising prices. It’s become a model for how American manufacturing can compete with overseas production. [Link] Meet the San Francisco woman who charges $30,000 to name your baby (San Francisco Chronicle) Taylor Humphrey has turned her obsession with baby names into a luxury business, charging anywhere from a couple of hundred dollars for email lists to $30,000 for full-blown packages complete with genealogical research and branding campaigns. Her clients range from celebrities to tech-world elites, all looking for names that are unique but not too outlandish, and she often ends up playing therapist as much as consultant. What started as an Instagram hobby during a rough patch in her life has now made her one of the most in-demand figures in professional baby-naming. [Link] Food Do you think a very clever goat would eat you? (Young Vulgarian) You may know a vegetarian or pescatarian, but the “eye for an eye” diet only allows a person to eat animals that would eat humans if our roles in the world were reversed. So, say goodbye to your steak. Sheep and goats are also spared for their docility, but geese, chickens, and probably pigs make the menu for their more ruthless instincts. It’s a silly but oddly revealing game that turns dinner-table choices into a thought experiment about personality, morality, and appetite. [Link] Energy Global Electricity Mid-Year Insights 2025 (Ember) For the first time, solar and wind power grew fast enough to cover all new global electricity demand in early 2025. Solar alone supplied more than 80% of the increase, helping renewables surpass coal’s share of the world’s power mix and keeping emissions from rising. The data suggest the energy transition has reached a real turning point, with clean power now matching the world’s growing appetite for electricity. [Link] Retail Walmart is reinventing retail, one struggling mall at a time (Washington Examiner) Once a symbol of suburban glamour, Pittsburgh’s Monroeville Mall, opened in 1969 and now plagued by dwindling foot traffic and crime, has been sold to Walmart for $34 million. The retail giant plans to demolish the aging mall and replace it with a mixed-use complex of shops, restaurants, and public spaces by 2029. It marks another step in Walmart’s evolution, turning a relic of America’s mall era into a modern retail and community hub. [Link]

jog on
duc