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Yesterday I noted I wasn’t seeing a broadening Quad 4 signal. In fact, a lot of sectors remain in bullish TREND, the VIX finished the day flipping to bearish TREND, and AI wasn’t yet at the top end of RANGE. Today it is. There are a couple of sectors worth placing some hedges on, but overall I have more longs than shorts in US equities. The shorts that worked last week were in macro—FX, Gold, and EPHE (or any global equity with a strong signal)—driven by the dollar.

VIX

Volatility is settling, not expanding, though that can change. I still think the key event to get past is the mid-terms to see what this market really wants to do for Q4.

MOVE

Bond volatility is yet again holding bullish TREND but now has a lower high (last touch of the top end of the RANGE) and is at TREND. A breakdown in MOVE is generally bullish for US equities.

HYG

Credit is showing signs of life as it attempts to break bullish TRADE and has held the higher low from the cycle low put in during the September Quad 4 cycle low.

LQD

Investment-grade credit has already flipped back to bullish TRADE TREND. Just because the term Quad 4 is being thrown around doesn’t mean you panic and sell everything. Follow the fractal math.

SPY

SPY has recovered bullish TRADE and shows no sign of immediate collapse in the fractal math.

Sector Signals

We covered all the bullish sector signals in yesterday's post. Here are some shorts that are now at the top end of the RANGE in bearish TRENDs and worth adding SOME short hedges to.

DRAM

AI is first on the list. This is why you have patience—today is the first day the signal is telling you to add short after breaking TREND on October 13th.

KOSPI

KOSPI is confirming the same signal.

JETS

JETS is another one sitting right at the fractal spot to add. Bearish TRADE TREND at the top end of the RANGE.

UFO

UFO being the third US Equity short.

IGV

The sectors to be long—and that have been for the last few months—haven’t changed: IGV, XLE, XLV.

MSFT

Microsoft is one of the stocks to concentrate software exposure with the strongest signals.

XLE

Energy was a buy all the way back in August and has been an outperformer since. Why? The signal said that’s exactly what should happen in bullish TRADE TREND.

XLV

Same setup in healthcare.

XLF

XLF is a new sector recovering bullish TRADE TREND (not a Quad 4 signal—remember we are in Quad 2 until 2027).

V


XLF confirmed the signal yesterday; today V is bouncing hard off the fractal signal buy (low end of the RANGE in bullish TRADE TREND).

XLY

Consumer discretionary is another sector to recover bullish TRADE TREND and is confirming as it holds TREND. Not a Quad 4 collapse signal.

XLB

XLB is another new sector long. There’s plenty to do besides just positioning for 2027 Quad 4. With the Similar Set Signal you know exactly what to do. Make sure to have both longs and shorts, with today giving some excellent shorts to add in US equities.

Macro Markets

DXY

Those macro shorts put on last week that worked out so well—today is the day to take some profits and rotate into US equity shorts like DRAM, JETS, and UFO. When you can see the full fractal picture, the next move becomes obvious.

Euro

Sell some, not all. That’s the process here after shorts work.

EPHE

Same with the Philippines.

TLT

TLT said exit, but not long quite yet after months of riding that short.

Oil

Oil is holding bullish TRADE TREND, signaling inflation isn’t done yet.

GLD

This is why you take profits at the low end of the RANGE—there’s always a next move when you have access to the full fractal math on every ticker.

BTC

Bitcoin has been reduced and I’m waiting to see if we get a spike down to TREND. I have orders waiting at $75K.

Today’s FOMC should be a non-event but could switch things up in macro. The real event is the mid-terms, so to me the real signal will be how the machine looks by the end of next week. As of today I don’t see an imminent Quad 4 collapse. I actually see overall market strengthening underneath, but still have shorts to be played.

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