InterMarket Analysis Update for Monday October 6, 2025

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Intermarket Analysis Video Update Summary (October 6, 2025)
This weekly video analyzes asset classes beyond the S&P 500 to gauge its direction, while also assessing the S&P's valuation.
Key points:
Market Overview:
Most asset classes remain positive, except for the U.S. dollar index, which is negative.
The markets have been trending upward since April lows, with minimal pullbacks for the S&P 500 below the 20-period moving average.
Despite a government shutdown limiting economic data (e.g., no employment report or jobless claims), the market anticipates no recession, with positive corporate earnings, especially for mega-cap stocks.
The Federal Reserve is expected to cut rates by 25 basis points in October and possibly again in December, not due to economic weakness but to fine-tune growth.
Valuation:
The S&P 500 is overvalued historically and on forward-looking metrics (e.g., Shiller PE ratio at 40.08, well above the 16-17 median). However, valuation isn’t used for timing, as it hasn’t historically prevented market gains.
Mid-caps (S&P 400, PE 16.3) and small-caps (S&P 600, PE 15.9) are more fairly priced compared to mega-caps (PE 30.3) and the S&P 500 (PE 22.6).
Market Trends:
Since August, the markets have shown defensive tendencies, though August and September (typically weak months) were positive this year.
October’s first half is historically strong, but the second half may pose challenges.
Sentiment is neutral, with individual investors slightly positive, suggesting room for further upside as fear of missing out (FOMO) hasn’t fully kicked in.
Sector and Asset Analysis:
Growth vs. Value: Growth stocks outperforming value, though short-term defensive shifts are noted. Small-cap growth-to-value ratios are weakening, risking a "death cross" soon.
Inflation: No major inflationary pressure is evident. The CRB index is stable, and commodities such as aluminum, corn, wheat, and oil are in downtrends or sideways. Inflation expectations remain range-bound.
Commodities: Copper shows improvement, reflecting economic optimism, while gold and silver hit all-time highs, possibly signaling geopolitical concerns ignored by equities.
Currencies: The U.S. dollar is in a downtrend, with the euro and yen outperforming. A weaker dollar is supporting stocks.
Sectors: Tech and semiconductors are strong, while energy, financials, and staples are underperforming the S&P. Utilities and healthcare show recent strength, but real estate is lagging despite lower rate expectations.
Bonds: Bonds are in an uptrend (yields dropping), with high-yield and corporate bonds performing well. Stocks outperforming bonds long-term.
Market Breadth:
Broad market indices (e.g., NYSE, S&P 1500, Wilshire) are hitting all-time highs, with equal-weighted indices showing broader participation.
Transports are lagging, weakening Dow Theory confirmation, but the S&P and NASDAQ align for new Dow Theory signals.
Positive/Negative Factors:
Positive: Most asset classes, broad market indices, and sectors are in uptrends, with strong performances in tech, semiconductors, and emerging markets.
Negative: The U.S. dollar index is the only consistent negative factor.
Conclusion:
The S&P 500 remains bullish, with no immediate recession concerns and supportive Fed policy. However, overvaluation, a weakening dollar, and subtle defensive shifts warrant monitoring for potential pullbacks.

PDF of Slides:
https://drive.google.com/file/d/1PfxzaaqLlqvpV_-o1NGVXSv_N2RYHeZs/view?usp=sharing

DISCLAIMER This video is for entertainment purposes only. I am not a financial adviser, and you should do your own research and go through your own thought process before investing in a position. Trading is risky!