Our recent call for a rally in the U.S. Dollar Index, a reversal in metals, and more struggles in emerging markets took a Mike Tyson left hook to the chin on Tuesday. A "sweeping" stimulus package from China sent Chinese stocks soaring and Materials stocks to the moon. The iShares China Large-Cap ETF (FXI) spiked 10%, its largest one-day move since March 2022, while the iShares MSCI Emerging Markets (EEM) popped 3.4%. The Materials (XLB) sector was the largest gainer on Tuesday, with a 1.4% gain - but that doesn't tell the entire story. The real action took place within the sector, with nonferrous metals and aluminum bolting higher by 7.6%-7.9%. Copper futures spiked 4%, leading to big gains in Southern Copper (SCCO) and Freeport-McMoRan (FCX). Aluminum was led by Norsk Hydro (NHYDY) and Alcoa (AA). Mining stocks also did well, led by BHP Group, Rio Tinto, and MP Materials. Silver futures surged 4.6% and are back at the top of the range that began months ago. The timing of the stimulus package is interesting. Was it in reaction to the Fed's larger-than-expected rate cut and/or an attempt to front-run a possible increase in U.S. tariffs (which would hurt China's competitiveness in certain markets)? We will let others argue about that, as mixing politics with the equity market is like trying to mix oil and water. It generally doesn't work out very well. The bull rages on and now more fuel has been added to the fire. Some are talking about a melt-up. That action is fun while it lasts, but always ends in big losses on the other side. (Mark Arbeter, CMT)

We have just two words for Wednesday's price action: Hammer Time! A hammer in candle-stick terms is a daily, weekly, monthly, etc., move that resembles a hammer. This pattern occurs when a security trades significantly lower than its opening, but rallies within the period to close above the opening price. Hammer candlesticks typically occur after a price decline and have a small real body and a long shadow, or wick. These can be seen anywhere within the overall market and indicate a potential price reversal to the upside. So now we need follow-through for confirmation that the trend has turned. The hammers on Wednesday also take on more significance because many of them were intraday tests of the recent lows from September 6. The S&P 500 closed up 1.1%, the S&P 100 tacked on 1.4%, and the Nasdaq and Nasdaq 100 both popped by 2.2%. Information Technology was the clear leader, with the XLK surging over 3%. Renewable energy equipment soared 15%, led by big gains in GEV, FSLR, VWDRY, and ENPH. Semiconductors were second, surging 5% and led by NVDA, TSM, AVGO, ASML, and AMD. The S&P 500 (SPX) and S&P 100 (OEX) regained their 50-day averages after losing them last week. The "500" appears to be tracing out a bullish continuous inverse head-and-shoulders pattern, which would be confirmed by a close above 5,660, as would a "V" bottom with a handle. The index completed a smaller bullish ABC reversal on Wednesday. A measured move based on the completed ABC reversal targets the 6,000 to 6,500 area. This area would also be a target based on the "V" bottom. (Mark Arbeter, CMT)

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

On Thursday, we talked about the fact that the decline in mortgage rates, gasoline, heating oil, and natural gas is good news for the U.S. consumer. Taking this one step further, we also note another boost to the economy with the recent decline in the U.S. Dollar Index (USD). The greenback has dropped from just above $106 to $101 over the past four months. The decline in the dollar is a tailwind for multinational companies that do a lot of business overseas. Goods produced in the U.S. become cheaper versus foreign goods when the dollar declines, and it can make a big difference in the overseas competitiveness of U.S. companies. Meanwhile, the COT for the dollar remains bearish, so we could see even more greenback weakness. The dollar is also part of the market's self-adjusting mechanism that we discussed on Thursday. The USD (at $101.05) is approaching the low point of the $99-$107 range that has been in place since late 2022. The slightly rising 200-week average is at $100.28. The greenback is still in a longer-term uptrend that started back in 2009 and 2011. The bottom of the channel comes in near $97 when looking out into the end of the first quarter of next year. A lower dollar and lower yields are a prescription for higher metals prices. The SPDR Gold Shares (GLD) looks like it is tracing out a bull flag and may be poised for a breakout to all-time highs. The iShares Silver Trust (SLV) is a few dollars from its highs in May, but may be tracing out a three-wave ABC bottom. A break over $27.50 for SLV could open the door for new recovery highs above $30. (Mark Arbeter, CMT)