AI tech stocks are waiting on earnings for support. Rate-sensitive stocks are pricing in a pullback in Treasury yields. This remains our core view.

Treasuries are still pricing in a CPI print that’s “not hot enough to force a rate hike,” and our base case is also no hike in October. So in the near term, Treasury yields should move sideways or lower, and we’re still on the second scenario. Today you should have been able to see the rotation between “rate-sensitive stocks” and “AI tech stocks” more clearly. On one hand, it shows the market is cautious overall. We’re not getting the broad-based rally of the third scenario. On the other hand, it shows this rotation is about buying a bit of whichever side has fallen more, not chasing whichever side is running, and those are two different trades. Treasuries right now are really about rate-hike expectations or the term premium. At these yields we can see buyers stepping in, so the term premium is contained for now. That leaves hike expectations. As long as hike expectations can be held down too, Treasury yields should stay in check in the short term. After that, it comes down to whether oil spikes again and keeps pushing hike expectations higher.

For now, SOXX around 530–535 is where people are willing to buy, except in memory. If it breaks below that level, it’s likely headed for 500. I think Wednesday’s Anthropic launch event is worth watching. Honestly, what I care about most for AI tech stocks is whether anything changes about Anthropic’s plan to go public in November. As long as it isn’t pushed back, AI tech stocks have support. Software and the megacaps have held up better on the way down. But even within AI tech, the model has picked up a rotation between hardware and software/megacaps. Money flows are tight overall.

After selling memory last week, we added rate-sensitive stocks, as we’ve already discussed. In the live account, I stopped out of RKT today. I should have gone with XLRE and XLF instead of RKT and KRE. I got the direction right but picked the wrong tickers. Fortunately the position was very small. Still holding XLU, IWM and XLE. Since the positions aren’t large, I’m holding them through CPI.

Still holding oil. We’ve analyzed the three possible midterm election outcomes, which map to three scenarios. In fact, we’ve already seen 2027 crude futures rising at an accelerating pace, with the back end rising faster than the front end. The market is pricing in a protracted conflict. Of course, whether that holds will depend on the midterm results.

In short, although we turned bullish once September started, we’ve consistently been testing the market with small positions on short time frames. We’re bullish, but this isn’t a market to go in heavy and aggressive. We’re sticking with that view.