Semi’s enter their strongest seasonal window, higher 19 of 25 years

Large prints came in across some important sectors and levels

KOSPI crashes, will Nasdaq follow?

Defensives might be coming back in Vogue for 2027

I shared this earlier in the week, anyone notice TLT’s price movement of late? Could the 10Y yield have peaked?

Congress sold more stock than they bought over the summer ☀️

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Technical Breakdowns

Amazon and Google are names I like here but the rest I share because they are the top holdings of the S&P500

Final Thoughts

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It’s that time! Time to finish strong into year end and execute what we have been planning for all year. I’m incredibly proud of the team and performance this year. September was a challenging month for many, but the win rate on our option trades were over 70% in the discord alone.

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Expectation is strength in 1st half of October, followed by a window where

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Small Caps

The Russell 2000 has a 100% hit rate for tomorrow. With CPI Wednesday, does this streak come to an end?

This Week’s Seasonal Setups

Each week this data is shared for Pro users, hits the inbox every Sunday. Blackstone, TPL, and Google with the strongest seasonal setups this week.

Weekly Signal Reports

Every Sunday, all paid subscribers get the full report of over 20 market signals like this. Hope you find this valuable and be on the lookout and the Q4 Market Outlook drops in the next few hours. Cheers!

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I had a question come in asking if I still expect volatility to spike this year and that made me realize I need to make sure I am clear on my current market view here and the key reads I’m watching. Let’s dive in.

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1st off, it’s important to know what sectors are favorable in any given month or cycle. Below you will see a sector breakdown for the month of October.

Utilities stand out as favorable as they also have undergone a severe correction combined with strong call flow the past week. I’m positioned long in the sector myself.

Market Seasonality

The S&P has risk, bond market and the USD are signaling risk off, seasonality suggest a low is close historically, but watch out for the flush.

Polycarp Seasonal Stocks

The list of stocks below all have great seasonality in Q4 where I’ll review the typical path they take, and which ones I’m positioned in and the ones without a favorable r/r in my opinion.

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Goldman Sachs- the investment bank powerhouse has pulled back to support and now setting up for a Q4 rally. I like the stock.

What gives it an additional boost is the entire sector has pulled back hard, just in time to be a tailwind for financials across the board potentially.

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The Setups

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Last Week in Review

The market is being carried by a narrow set of leaders while internals are terrible — and the tape still won't break. The good news is the Dow managed to snap a 3 week losing streak on Friday and Bitcoin has come back to life of late with a surge over 80k. The bad news, yields have not cooled off and have only accelerated of late. The key question I’m asking, is the market holding up a sign of resilience or distribution?

The Resilience Case

• The range has held. The S&P 500 has traded in a 4.1% range (7,508–7,817) since Aug 4 and closed at 7,743, 0.7% below its Aug 13 record.

• It absorbed bad news. The range held through the Fed’s rate hike to 3.75–4.00% and a 10-year Treasury yield near 5.2%.

• Dips get bought. The index is up 2.5% in seven sessions since the Sep 16 low.

• Semiconductors are leading

• No sign of fear. VIX is at 14.9 and never went above 18 during the range.

The Distribution Case

• Heavy-volume selling. There were 5 distribution days in the last 25 sessions, all between Aug 31 and Sep 16. A distribution day here is an S&P 500 drop of at least 0.2% on higher volume than the day before.

• Most stocks are falling. Since the record, the equal-weight S&P 500 is down 5.2% and small caps are down 7.1%.

• Weak breadth. Only 27% of S&P 500 members are above their 50-day average.

• Credit is softening. The high-yield bond ETF (HYG) is down 2.4% in price.The traditional read is that credit is warning and equities haven't caught up yet. On a 1–2 week window, though, the signal is noisy, and in today's market much of HYG's drop is rates rather than credit

So what to do with all this information? Where can I find an edge? Well here’s the thing, the details are what matters when it comes to things like flow, positioning, and seasonality. Often we get to general when we need to dive just a little deeper. When reviewing seasonality beyond the front level what can we find?

2nd Term Presidents, during a Mid Term Year, what does it tell us about what may come next? Well, it shows a 100% hit rate for Q4 at +9% and October being the strongest month of the cycle by a large margin.

Just one data point, but a good one to keep in mind.

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Current Picture

That 300-handle box (7500–7800) is the entire September distribution. Call resistance at 7800 = where upside gamma / profit-taking lives. Put support at 7500 = where downside hedges sit and where dip-buyers have already shown up once.

My current lean, be patient and play the ranges for now. Let the market and price dictate while in this range, there are plenty of setups across the board vs trying to figure out the next index move here. As you will see in the seasonality portion of the paper and in the 2nd Term president read I already shared, we are very close to a setup worth waiting for.

Economic Calendar

Want to keep an eye on Wednesday with PCE and MU earnings being key potential catalyst

• Monday: Post Weekend Iran News

• Tuesday: JOLTS

• Wednesday: PCE (Inflation, potential key catalyst), MU Earnings in the afternoon

• Thursday: NKE Earnings

• Friday: September Payrolls, ISM Manufacturing

Seasonality Roadmap

Short Term

The last week of September often has some weakness early and strength Oct 1st and 2nd.

Medium Term

Market often weaker in the 1st half of October before a strong rally into November

Longer Term

The Midterm Year is the year of historically lower returns, we are a few months away from entering the Pre-Election year, averaging over 16% returns. And the real edge? An 11-month election-cycle window opens at the Sep 30 close: 24/4 since 1914, 85% win rate, averaging 19.0%

Key Themes

Bonds

Did we just see the capitulation low I drew out under 80? Time will tell but if the 10Y tops out watch for the reaction from Metals and Small Caps.

Energy

Crude level laid out has so far shown to be a nice topping point, not a bad call huh?

We also got two massive prints in the oil refineries ETF, I think we are close to this whole thing rolling over, this adds to the thesis on yields topping short term. However, a break and hold above these levels would not be a good signal for the overall market.

The Dollar

Keep an eye on this trendline, if the dollar rolls over the end the year expect precious metals and the overall market to do quite well

Bitcoin

Bitcoin breaking above 80k surely isn’t a risk off signal for the market and should be a good sign for whole crypto sector if it keeps up, now entering its strongest month of the year historically.

Earnings This Week

As mentioned, Micron will be key on Wednesday and i’ll be watching NKE on Thursday to see if an opportunity arises.

MU

NKE

Positioning & Flow

Buyback data supports the idea that we could see weakness into the 1st half of October but only one data point.

Final Thoughts

Do not lose sight of the key window upcoming, we are exiting the high volatility seasonal window of the Mid Term Year. Does that mean we won’t crash at some point by end of year? No. What it does mean is that the historical averages start to be more on your side from a seasonal standpoint. Cheers!

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What actually broke

Two legs, and they are not the same story.

Leg one, July 31, minus 20%. The quarter was clean. Revenue $1.34B, up 32%. Members 294K, up 31%. MBR 86.3%, 40 bps better than last year. Adjusted EBITDA $68M on a 5.1% margin, up 48%. They beat the high end of every metric they guide to. The stock got hit anyway because of what was said about the second half: only ~30% of full-year EBITDA lands in H2 versus ~40% a year ago, Q3 EBITDA guided to a thin $20–30M on a “seasonally higher MBR,” “double-digit millions” of incremental H2 investment, a warning that one to three competitors will bid more aggressively for 2027, and, quietly, they stopped disclosing the quarterly star-ratings metric. Full-year guide held at $5.20–5.23B revenue and $145–163M EBITDA. The market read the phasing as a soft pre-announcement.

Leg two, September 15–18, minus 35% on roughly 100M shares. At the Baird conference management put numbers on the pressure: institutional acute-care costs running hot on aggressive hospital billing, disputes and appeals including lagging 2025 bills; skilled-nursing length of stay creeping up; about $6M of unfavorable prior-year development tied to a claims-system transition; and $10–11M of unplanned spend in H2. They called it “operational and temporary.” They did not cut guidance. After July’s phasing warning, nobody gave them credit for either.

On top of that: a former chief transformation officer alleges $8–10M of routine opex was booked as capex in 2024–25, inflating adjusted EBITDA, and a class-action shop is now soliciting plaintiffs. On a ~$150M EBITDA base that is a rounding error operationally. It is not a rounding error for the multiple.

The Setup

This is a fundamental re-rating that has overshot into a technical extreme. Both things are true and you trade them differently.

RSI at 14 on a stock that just did 100M shares in four days is washed out. Volume has already faded from 28M to 12M. The mean-reversion odds from here are good and the first two levels are obvious: $9.20 (where several desks have put near-term fair value and where the selling paused on the 17th), then $10.40, the bottom of the September 15 gap. The 50-day is $14.86 and falling; that is not a target, it is a ceiling for any relief rally until the cost story is resolved.

What the tape is not telling you is whether the cost problem is temporary. That gets answered by two events, not by RSI.

Why I am long anyway

Strip out the noise and you are paying about $1B of enterprise value ($1.66B cap less $693M cash) for a Medicare Advantage plan growing members 30%+ at $5B of revenue. Roughly 0.2× sales. The cohort economics management has shown for years still stand: MLR improves from ~93% in year one to ~82% by year five, and they peg embedded earnings power at $880M against a $640M guidance midpoint. If the H2 problem is hospital billing disputes and a claims migration, which is what they say it is, this is the cheapest quality MA grower in the market.

The moat is stars. 100% of members in 4-star-plus plans two years running, which is the 2027 bonus-revenue funnel. And the 2027 bids were filed “conservatively,” which reads as margin-first. Slower growth with an expanding MBR is exactly what a market that just punished growth-at-a-cost wants to see next.

What has to be true

• Star ratings, mid-October. Plan Preview 2 first, then the official 2027 stars. Hold 4+ on the flagship plan and the first real de-risking event is behind us. Slip below 4 and the 2027 revenue base is impaired. That is the binary.

• Q3 print, early November. MBR has to land inside the implied range. A second prior-period development charge kills “temporary.”

• The whistleblower. If it becomes an audit-committee review or a restatement, the multiple stays compressed no matter how ops look.

• Sector. UNH, HUM and CVS are under the same utilization pressure. ALHC is the high-beta expression of it; a peer guide-down drags this with it.

Playbook

Two tranches. Do not merge them.

Tranche one, now: the bounce. Trading size. Targets $9.20 then $10.40. Stop on a daily close under $7.85, today’s low. If it rips into the 50-day, sell it; you will get another look.

Tranche two, after stars: the investment. You give up a couple of points if October is clean. You avoid owning the full position through the one event that can actually break the thesis. That trade is worth making.

Defined risk for the window. Nov/Dec $8–10 or $8–12 call spreads carry the stars-plus-Q3 window for a fraction of the equity. IV is elevated, so the upper strike is paying for a good chunk of the lower one. No long premium into the Q3 print itself.

What makes me wrong: a star-ratings slip, a second PPD charge in Q3, or management cutting guidance in October after choosing not to cut it in September. That last one is the tell I am watching hardest. Flagging cost pressure while holding the guide is either confidence or a mistake, and we find out in seven weeks.

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Wanted to get this update quickly as several names are hitting some key levels here that will be key for the market. Notice in the chart above that pop after September 20th? Now lets dive into these charts.

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SMH - upside gap filled on semi’s ETF, could be the next leg down soon

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Last week played out as expected with the post FOMC rally but we are now at a point where several indicators and reads are conflicting, creating an environment where having too much conviction on what comes next, a potentially dangerous strategy.

Last Week in Review

FOMC brought enough weakness for the S&P to tag its 20W moving average and bounce. A tip for those newer to technicals, the 20W and 21W moving averages are often great levels during bull markets and often major red flags when broken.

You can see below where the 20W (Blue) was briefly tagged and then got the bounce. Looking back you can see where these levels have bee important and often strong support.

Despite the volatile week we were able to take advantage, catching this bounce with upside trades in a few of our favorite setups.

GLD hit our level, overnight calls ran from 1.80 to over 3.50 by open

BABA calls ran from 1.60 to over 3.10 a contract

Despite the bounce, there is a reason we are locking profit early and often. We are now entering some of the weakest seasonality of the year, especially during Mid Terms. Combine that with the macro risk of energy right now and rates trying to stabilize, there is no reason to get greedy here.

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Market Setup

The chart above shows where we are from a seasonal perspective but that is only one data point of many in any environment. What makes this current market setup more challenging is that despite a risk-off macro backdrop and entering the weakest seasonality of the year, we also have some bullish reads triggering that can’t be ignored.

The Bullish Argument

1. The 20W Moving Average. Bluekurtic shows below where the S&P 500 has a 100% positive hit rate since 2010 when the 20W is broken and recovered intraweek, like it was this past week.

2. The AAII survey shows Bulls falling below 29%. When that happens near highs, it has lead to a positive 1 month return every time.

3. If oil tops, how is that not bullish for the market here?

   

Bearish Argument

1. Buybacks have peaked until middle of October

   

2. Data shows the week after triple witching has only been positive 9 times over the past 36 years!

   

3. Post hike data shows negative returns often follow the 1st rate hike

   

Based off what I am seeing in the market, I am updating my downside targets where the black path I see as the likely outcome if we see more weakness, the blue is positive, and red if things escalate.

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I want to quickly review the data and see where opportunities may arise.

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The Lotto

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With news over the weekend from AI leaders we are seeing futures open to some weakness. This week will be volatile regardless due to FOMC. I think this market remains choppy and continues to be a challenge for traders. Notice Friday I alerted I had sold all my calls without a second thought, got to enjoy the weekend, and now regardless of Monday’s open we are in good shape for the week ahead. Lets dive in.

Yields

The ten year is tagging near 5 overnight here. My lean is we see this topping soon with FOMC this week.

Energy

Same idea here, think we are getting close

Semi’s

The market leader remains a key watch, it likely opens below this downtrend on Monday. I don’t see how the market can sustain new highs unless this breaks out. Above is risk on, below is risk off.

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Catalyst This Week

FOMC is numero uno where we get to see if Warsh raises rates or holds them steady.

Seasonality

You can see this week and the rest of the month risk can remain high from a seasonal perspective.

Across the market really not a lot of strong seasonals over the next 10 trading days.

Final Thoughts

If yields don’t calm down soon, I believe the market could have a nasty correction, but with FOMC this week, I think Warsh tries to calm things down. This is short report this week but I will have a nice deep dive before FOMC. The key strategy I am trying to follow is to stay nimble and patient, let the dust settle during this window, and go out and execute on the other side with plenty of capital. Cheers.

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Index’s

The 4 hour RSI on S&P future has been a good read for bounces the past few months

combine that with strong 9/11 seasonality and this supports the idea of a bounce, how strong or how long it last is the important question

Bond Market

Bonds have been screaming but TLT hit my level today, wouldn’t be surprised though with a scare under 80 still.

Homebuilders

The homies have been a key indicator for the economy and market, but sitting at support here

Energy

Leaning we are close to a top in oil as energy names didn’t really follow strength today and hitting some key levels.

The thing about commodities, especially oil, macro matters.

CPI Setup

I think risk is there to tag the gap fill at 748 tomorrow, but with it being 9/11 my lean is that is a potential buyable dip.

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We remain in the seasonal area where risk could arise at moments notice but have managed to navigate things quite well so far. There are a few really good setups starting to form but the key will be to remain patient and not fall for the many traps currently being set. Lets dive in, starting with a nice trade setup here.

Playing the Averages

Market has been negative the majority of the time the day before Rosh Hashanah (9/11 this year) and so I expect some more weakness tomorrow.

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This creates quite the opportunity, as 9/11 is almost always a bullish day. I think buying the dip sets up a nice win on Friday to start the weekend. At close or near index support on Thursday I want to target 9/14 calls on the index, SPX or XPS my own preferred vehicle.

Catalyst Thursday and Friday

Jobs and PPI on Thursday, and CPI on Friday will be key this week as FOMC is right around the corner. This will have impacts on precious metals, equities, and volatility throughout the market is very possible.

Seasonality This Week

Notice the early part of the week as investors return from Labor Day there is often some profit taking.

Data via Bluekurtic Market Insights

RSI Signals - S&P500

RCL, SYK, looks to be a potential setup I like on the long side with energy names I believe setting up for a top soon as XLE starts to stall despite continued strength in oil.

Index’s

A new upside gap opened today and we are getting very close to the August 4th gap at 758. Watch that level for potential support.

Volatility

We briefly went sub 14 last week and now are back on the move

Shouldn’t be a surprise to anyone

Market Outlook and Favorite Setups

I continue to think being more defensive is the play here, let the market and the dust settle as this is the window where risk can really spike, creating a great buying opportunity if positioned correctly. Here are the key names and potential paths I see the market taking

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I want to show everyone quickly how to find setups like this.

1. Is there a technical edge? Yes, 4 hour RSI showing oversold signal which reads as a possible short term bounce

2. Is it near support or resistance? Yes, 150D SMA

1. Is there a seasonal edge? Yes, September 2nd historically a bullish day for

   

Now lets dive into some more great setups I’m seeing here and reveal the September port.

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Market Update

We have seen weakness this week but for a deep selloff we need volume. People often read low volume as bearish but in reality it takes volume to SELL. You will find this in all corrections. Where is the volume you might ask, it won’t be here until after labor day. Therefore, my thesis is that weakness this week is a buying opportunity short term. Two key levels I am focusing on to execute are

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After a August where key holdings like Gold and Software delivered excellent returns, it is now time to turn to September where it will take a new mindset to navigate properly. The data and price action will be key as always but with Midterms around the corner and the Warsh Era kicking into high gear, staying nimble around different strategies and risk management will be a big focus.

1st, if you want to review how the August write up went, I have opened it up so free subscribers can see how key it was for navigating the past month.

Today’s report will cover the September portfolio build and the key data I am looking at to create an edge to finish strong in a often very volatile Q3.

Speaking of volatility, the data below shows where VIX Futures often start to ramp hard into September and the 1st half of October during a most years.

The Week Ahead

I’m introducing a new format to help us navigate each week with seasonal returns by day for the week ahead. I hope you find it valuable.

The top bar show the monthly and weekly historical returns with the best and worst day from a seasonal standpoint for the upcoming week. The bar below it shows each day and the week as a whole.

Then it shows the typical path for the entire month, in this case it shows all years with the red path being Midterm years.

My favorite data is below the typical path where I highlight key data points, it works as a very nice cheat sheet.

The big catalyst this week will be on Friday where we get the jobs report. My lean is that if the numbers come in weak, it could cause a fade to the rate hike odds for September, which would mean yields come down, TLT / GLD potentially go up.

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Seasonality Guides

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September Market Outlook

I stand by initial thesis laid out in August where we can see some strength and the

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Tomorrow we get the much anticipated NVDA earnings, PCE data, and close the week off with the first Jackson Hole speech from Warsh. Here is what I am seeing in the market and a few of my favorite trade setups here.

But first, I want to highlight the August Report released earlier this month, many of the key idea’s and data points are important here and its a good time to review it (Majority of the report can be accessed without being premium subscriber, just fyi)

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NVDIA Earnings and The Trade Setup

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Nvidia is setting up the path laid out in the August Report, see below where it filled the open gap right at support and now I think there is a good chance it fills the upside gap at 224 and potentially 234 post earnings.

The trade I like is two fold.

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The market had consolidation last week after it hit some initial upside targets and soon might be the time to start scaling back risk before the typical late-Q3 seasonal volatility becomes more dominant. This is especially true in Mid Term Years where historically the best buying window of the cycle is only a few weeks away.

One of my favorite investors, Dan Niles recently shared similar thoughts “With more than 80% of the unwind finished in ~3 weeks, it would imply this should be mostly over by next week…At which point I can go back to worrying about 1) the median 10% drawdown typically seen on the S&P from peak to trough during 7/30 -11/9 in mid-term years since 1990 and 2) related to this, the US Treasury trying to bring down long-term yields and the bond market saying it will not work with yields across the curve now roughly flat to 6 bps above the levels on Tuesday prior to these actions.”

But, with that being said, doesn’t mean I don’t see some nice short term setups here to the long side. Let’s dive in.

Events This Week:

• Bessent to speak on Iran - Monday

• Wednesday has PCE Inflation data and NVDA Earnings

• Warsh to speak at Jackson Hole on Friday at 10AM

Key Earnings This Week

• Tuesday - INTU, ZM

• Wednesday - NVDA, CRM, CRWD

• Thursday - S, IREN, MRVL, AFRM

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Where are We?

We are 10 weeks away from Midterm Elections. The average path below shows how much risk often shows up in September and October.

Jackson Hole (Warsh Era)

Notice the path below and how similar it is to recent price action. The left side shows 15 trading days prior to Jackson Hole and the right side shows the 30 days after. The data at the top shows the average return is negative over that time frame but notice the red path, that is the return during Mid Term Years. (Maybe a hedge isn’t the worse idea)

One last point on this, the chart below from Nautilus compares our current year to historical Mid Term Years. I point all this out not to imply loading puts is the play, just making sure the risk associated with this upcoming window is considered.

Nvidia Earnings

I’ll have a deeper dive on this Tuesday but notice the seasonal pattern for the semi sector shows the recent weakness, rally, and further decline. Keep this in mind, especially if SMH / SOXX / NVDA fill some of those upside gaps this week

Final Thoughts

I’ll be releasing my trade idea’s tomorrow for premium members but I’ll leave you with this. I shared this seasonal chart recently and it has closely followed with recent market movements. I know I shared some risk in the markets earlier but that 1st half of September has been known to lure in some late bulls and also squeeze out aggressive bears before the fall. I think the key is be open minded when it comes to timing and calculate the risk around your trades and when the risk can really spike.

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