To The Moon

Weekly Report: Key Views

Hello everyone, and welcome to another edition of our Macro Strategy Weekly. Each issue features market strategy insights from selected contributors with relevant professional expertise. We also track how these views perform each week. Here is a preview of this week’s key ideas:

1. Nvidia Straddle Closed for Profit; Lock In Option Gains Promptly: The previously discussed Nvidia straddle has been closed at a profit. Investors still holding the position should consider taking profits promptly. Profitable calls bought at lower levels should also be monetized into the rebound before lower implied volatility, time decay and weaker buying erode returns.

2. US Equity Selloff May Be Near Its End, Creating Conditions for a Rebound: Leveraged ETFs recorded a sharp increase in weekly net inflows, signaling stronger dip buying. Key support lies near the S&P 500’s 120 day moving average at 7,597 and Nvidia at $194. The worst of the selling may have passed, allowing the market to stabilize and rebound.

3. Treasury Yields May Be Peaking, Easing Rate Pressure: Despite persistent CPI pressure, 2 year and 10 year Treasury prices rose after the data release, while yields declined. Expectations for an October rate hike remained subdued. Treasury yields may have reached an interim peak, easing near term pressure on equities.

4. Institutions Cut AI Exposure, Limiting the Scope for a Return to the Previous Rally: Institutional net allocations to AI stocks fell from about 33% to 26.1%. Large sales mainly reflected reductions in long exposure, with limited evidence of new short positions. This signals a shift in allocation strategy. AI stocks may have reached an interim peak, so investors should reduce overly concentrated exposure.

5. AI Earnings Tailwinds Are Fading as Credit Markets Price In Risk: Goldman Sachs expects large data center capital expenditure to contribute 11 percentage points to S&P 500 earnings growth in 2026, falling to 7 points in 2027 and negative 1 point in 2028. Rising depreciation expenses and wider spreads on AI related high yield debt create medium term valuation pressure.

6. Gold Offers Catch Up Potential After a Breakout, While Bottom Fishing in Silver Remains Risky: Limited October rate hike pressure and lower Treasury yields could support a recovery in risk appetite. A gold breakout above $4,242 to $4,259 would target $4,370, while a break below $4,091 would turn the outlook bearish. Silver resembles a bearish continuation pattern, making gold the preferred choice for rebound exposure.

7. Watch Brent at $109 and Maintain the Long Nearby, Short Deferred Spread: Brent spot crude is forming a head and shoulders bottom, with neckline resistance near $109. A breakout could open further upside. Maintain the spread by buying December WTI and selling the following March contract to benefit from wider calendar spreads. Exit if the continuous WTI contract falls below its 10 day moving average.

8. Sell Nvidia Puts While $194 Holds; Shift to Volatility Trades After a Breakdown: Investors could sell deeply out of the money Nvidia puts with strikes below $194 to collect weekly premiums. Exit if the stock falls below $194. If continuous S&P 500 futures break below their 120 day moving average and the decline exceeds expectations, consider buying an at the money QQQ call and put with the same expiry and at least seven days to maturity to capture higher volatility.

This Week’s Report

S&P 500 Pulls Back as Sector Performance Diverges, High Rates Continue to Constrain Valuations

As of October 20, 2026, Beijing time, the S&P 500 ETF (SPY) stood 5.66% above its 200 day moving average, down from 6.51% the previous week. The gap narrowed by 0.85 percentage points, while SPY fell 1.49% over the week. Six of the 11 sectors advanced. Consumer Staples (XLP), Materials (XLB) and Energy (XLE) led the market with gains of 3.32%, 3.05% and 2.71%, respectively. Health Care (XLV) and Consumer Discretionary (XLY) rose 2.13% and 1.95%, while Financials (XLF) edged up 0.02%. Information Technology (XLK) posted the largest decline, falling 5.30%. Industrials (XLI), Communication Services (XLC), Utilities (XLU) and Real Estate (XLRE) dropped 1.46%, 1.22%, 0.65% and 0.60%, respectively.

Overall, the S&P 500 remains above its 200 day moving average, although near term momentum has weakened. More than half of the sectors advanced, but the sharp decline in technology and flat performance in financials indicate uneven market support. Consumer Staples and Health Care gained while Utilities declined, showing divergence within defensive sectors. Strength in Materials, Energy and Consumer Discretionary also suggests that some cyclical sectors remain supported. Investors should watch whether technology stabilizes and the leading sectors sustain their gains to assess whether the index has a broader foundation for recovery.

Valuations: Modest Decline, but Sector Divergence Remains Pronounced

As of October 20, the latest sector valuation data show that Health Care (XLV) traded at 31.35 times earnings, the highest absolute valuation among all sectors. It was classified as elevated relative to its five year history and expensive over both the 10 year and 20 year periods. Information Technology (XLK) traded at 30.13 times earnings. It was fairly valued over the five year and 10 year periods but remained elevated over 20 years. Real Estate (XLRE) ranked third at 29.79 times earnings. It was classified as undervalued over the five year and 10 year periods and cheap over 20 years. All three P/E ratios declined from the October 16 edition, while their historical valuation classifications remained unchanged. This shows that absolute P/E rankings and valuations relative to each sector’s own history reflect different factors. Neither measure alone is sufficient to establish an allocation advantage.

At the aggregate level, SPY’s P/E ratio declined from 24.13 to 23.97. It was classified as fairly valued over five years, while its 10 year classification improved from elevated to fair. However, it remained expensive over the 20 year period. Its 10 year historical average is about 20.54, so the current multiple remains above the mean. The fair classification should therefore not be interpreted as undervaluation. The modest decline in the P/E ratio improved its valuation classification but remains insufficient to confirm a clear valuation advantage. Future support will depend on earnings growth and interest rates.

Rates: Equity Bond Yield Spread Remains Negative as High Rates Continue to Constrain Valuations

Based on SPY’s P/E ratio of 23.97, its earnings yield is approximately 4.17%. This remains below the 5.15% yield on the 10 year US Treasury reported by the US Treasury Department on October 19. The equity bond yield spread stood at about negative 0.98 percentage points, widening slightly from negative 0.96 percentage points in the October 16 edition. The improvement in the earnings yield from a lower P/E ratio remains insufficient to offset the rise in long term rates. Equity valuation support therefore continues to depend on future earnings growth.

This Week’s Community Views

@Ivan_甘灿荣: October Curse Meets CPI Black Swan: Options Strategies to Hedge U.S. Equity Risk

A high CPI environment and further rate hikes have the most direct impact on technology companies that rely on debt to fund capital expenditure. To secure the computing capacity required for future AI development, these companies have signed numerous long term contracts with data center operators. The related investment must be financed through additional borrowing or new share issuance. A prolonged period of rising rates would therefore increase borrowing costs and constrain funding capacity. As a result, the Nasdaq was among the hardest hit indexes following last week’s CPI data.

$Invesco QQQ(QQQ)$ $NASDAQ(.IXIC)$ $Micro E-mini Nasdaq 100 - Dec 2026(MNQ2612)$ $ProShares UltraPro QQQ(TQQQ)$ $E-mini Nasdaq 100 - main 2612(NQmain)$ $CHINA MERCHANTS NASDAQ 100 ETF (QDII)(159659)$ $ProShares UltraPro Short QQQ(SQQQ)$

October has historically been a month when US equity indexes are prone to major turning points. With negative economic data emerging, greater caution is warranted. We previously suggested using the middle Bollinger Band to track the Nasdaq. After last week’s sharp decline, the index found some support at that level. The coming week will be critical. A further decline could confirm that the Nasdaq has already reached its yearly peak, requiring investors to adopt short term hedges.

$S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2612(ESmain)$ $Micro E-mini S&P 500 - main 2612(MESmain)$ $Cboe Volatility Index(VIX)$

Buying put options is an effective way to hedge and protect the value of an equity portfolio. Using Nasdaq futures as an example, at an index level of 30,000, one futures contract represents about $600,000 in notional value. One Nasdaq put option is sufficient to hedge one futures contract. The same principle applies to equity positions, with no need for additional hedging.

$Dow Jones(.DJI)$ $E-mini Dow Jones - main 2612(YMmain)$ $Micro E-mini Dow Jones - main 2612(MYMmain)$ $SPDR Dow Jones Industrial Average ETF Trust(DIA)$ $ISHRS DOW JONES IND AVRG ETF USD (ACC)(CIND.UK)$ $iShares U.S. Real Estate ETF(IYR)$

Strategy Summary

After US CPI exceeded expectations last week, the market reassessed how long the rate hike cycle could persist. This pressured leading technology companies that rely heavily on debt to fund AI infrastructure. The Nasdaq is therefore likely to become more volatile.

1. Last week’s short put strategy on US equity indexes required emergency intraday risk controls after the CPI surprise and ended without a profit. Option volatility has increased significantly this week. Positions should therefore be reduced to half size, with strikes set about 15% below last Friday’s closing level for a wider margin of safety.

2. The medium to long term view that gold will trade between $4,000 and $4,800 remains unchanged. Investors could consider small bottom fishing positions or sell puts with strikes below $3,950.

3. In crude oil futures, investors can continue to monitor the three month calendar spread by buying December and selling March. The position entered last week is already profitable. The spread is now near $5 and has reached its initial target, so I prefer to wait for a new opportunity. A further rise in oil prices could widen the spread, although the risk reward is less attractive than last week. Investors should decide based on their own preferences.

@程俊Dream: October Hike Risk Fades: Risk-On Wave Builds as Gold Eyes a Major Breakout

The latest US inflation data had raised concerns that the Federal Reserve could deliver three rate hikes this year. However, recent CME FedWatch data indicate little risk of an additional hike in October. Combined with the continued decline in Treasury yields, this suggests that risk on trading may dominate in the near term. As the fourth quarter approaches, however, any rally in risk assets could prove to be the “last dance”. Even a sharp advance should not be mistaken for a durable trend.

$E-mini S&P 500 - main 2612(ESmain)$ $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $Micro E-mini S&P 500 - main 2612(MESmain)$ $Cboe Volatility Index(VIX)$

The 10 year US Treasury yield, a key gauge of market sentiment, has failed to make further headway over the past two weeks and pulled back sharply last week and early this week. Although the broader trend shows no clear sign of reversal, a short to medium term correction and normalization appear increasingly likely. Greater stability in the bond market should ease the main macro pressures and support equities, commodities and crypto assets.

$Invesco QQQ(QQQ)$ $NASDAQ(.IXIC)$ $E-mini Nasdaq 100 - main 2612(NQmain)$ $Micro E-Mini Nasdaq 100 - main 2612(MNQmain)$ $Dow Jones(.DJI)$ $E-mini Dow Jones - main 2612(YMmain)$ $Micro E-mini Dow Jones - main 2612(MYMmain)$ $SPDR Dow Jones Industrial Average ETF Trust(DIA)$

Gold deserves close attention this week. Compared with crypto assets, gold has underperformed over the past two months and failed to participate in the broader risk on move. If market conditions improve, gold and other precious metals could have room to catch up.

$Gold - main 2612(GCmain)$ $E-Micro Gold - main 2612(MGCmain)$ $1-Ounce Gold - main 2612(1OZmain)$ $Silver - main 2612(SImain)$ $E-mini Silver - main 2612(QImain)$ $iShares Silver Trust(SLV)$ $XAG/USD(XAGUSD.FOREX)$ $ProShares Ultra Silver(AGQ)$ $100-Ounce Silver - main 2612(SICmain)$ $SPDR Gold ETF(GLD)$

Gold has rebounded from its lows in each of the past two weeks and is showing signs of a potential wedge pattern. This suggests that the rebound could be meaningful in both scale and momentum. The $4,242 to $4,259 resistance zone will be the key focus. A breakout confirming either a small double bottom or a trendline break would imply a minimum target near $4,370. Under a stronger scenario, another move above $4,700 cannot be ruled out.

Strategy Summary

$Bitcoin(BTC.USD.HKCC)$ $Bitcoin(BTC.USD.CC)$ $CME Bitcoin - main 2610(BTCmain)$ $iShares Bitcoin Trust(IBIT)$ $Ethereum(ETH.USD.HKCC)$ $iShares Ethereum Trust ETF(ETHA)$ $VanEck Ethereum ETF(ETHV)$

For Ethereum, half of the short position entered at 2,645 was closed for profit at 2,380. This week, the stop on the remaining position will be lowered to 2,500. The target for the other half remains unchanged at 1,850.

The euro reached another low last week but could rebound this week. A more conservative short entry is therefore preferred. Place a limit sell order at 1.1430, with a stop at 1.1580 and a target at 1.0900.

For crude oil, new limit buy orders are placed at $83 and $75. The stop is set below $67, with a target at $115.

No pending order will be placed for gold this week. However, investors can watch for a stronger rebound following a break above $4,242 or consider gaining exposure through call options.

P.S. Once a trade reaches its first target, the stop will automatically move to the entry price. Any adjustments after execution will be provided in future updates.

$United States Oil Fund LP(USO)$ $Marathon Petroleum(MPC)$ $WTI Crude Oil - main 2612(CLmain)$

@Owen_trading room: The Worst of the Selloff May Be Over: Straddle Profit Taken,Time to Sell Puts💹

Only one question really matters now: has the US equity selloff run its course? I am watching Nvidia, the S&P 500 and the Nasdaq. My view is that the sharp decline could ease this week, with a rebound possible if conditions improve. This creates an opportunity to build short put positions on weakness. Starting with the S&P 500, the key level is its 120 day moving average, currently near 7,597.18.

This level also marks the lower boundary of the previous consolidation range. Applying the same logic to Nvidia, the daily chart shows the stock trading within an ascending channel from $189.80 to $243.37. After reaching $243.37, the stock pulled back and is now trading near $214.
$SPDR S&P 500 ETF Trust(SPY)$ $China A50 Index - main 2610(CNmain)$ $Hang Seng Index - main 2610(HSImain)$ $HSI(HSI)$ $HSTECH(HSTECH)$ $Hang Seng Tech Index - main 2610(HTImain)$

The green horizontal line below the channel sits at $194.53 and marks the floor. The Nvidia trade is therefore straightforward: bet that the stock will hold above $194 this week.

The deeper rationale lies in the political calendar. Trump will likely try to keep the S&P 500 near current levels before the midterm elections and prevent a major market collapse. Unless politically motivated capital deliberately disrupts the market, conditions are likely to remain relatively calm before the election, consistent with the historical pattern. After the midterms, a divided government appears likely, with a Republican president and Democrats controlling both chambers of Congress. Under that scenario, US equities could face a sharp correction as accumulated risks and concerns over political gridlock are released.

Fund flows also support this view. The Philadelphia Semiconductor Index fell more than 10% last week, which would normally spread panic across the market. However, leveraged dip buyers have already started buying. SOXL, the three times leveraged semiconductor ETF, recorded its largest weekly inflow in several years.

$Direxion Daily Semiconductors Bull 3x Shares(SOXL)$

Weekly net inflows into leveraged ETFs reached $9.5 billion last week, the highest level since records began in 2006 and far outside the historical range. Was last week’s CPI report a black swan event? I do not think so. Inflation remained sticky and the broader macro backdrop looked negative, yet the highly rate sensitive 2 year and 10 year Treasuries rose after the release. Their yields also broke below key levels and continued to trend lower. An October rate hike remains unlikely. Treasury yields have therefore probably reached an interim peak. The equity selloff may also be approaching its end. At the very least, the center of the S&P 500’s current trading range should provide strong support.

However, the market has fundamentally changed. Goldman Sachs estimates that capital expenditure by hyperscale data centers will contribute about 11 percentage points to S&P 500 earnings growth in 2026. This contribution is expected to fall to 7 points in 2027 and turn negative 1 point in 2028 as depreciation expenses begin to rise. The sequence of 11, 7 and negative 1 forms a clear downward staircase.

I therefore believe that AI stocks may have reached their peak, while future capital expenditure is likely to decline at the margin. This fundamental outlook will eventually be reflected in share prices. The only uncertainty is how quickly the repricing occurs.

Strategy Summary

My positioning is as follows:

First, Nvidia. Continue selling deeply out of the money puts with strikes below $194 to collect weekly premiums. Exit immediately if the stock falls below $194. This strategy monetizes time decay while using a firm price level to define the risk.

Second, equity indexes. I will not trade them this week. In a range bound market, win rate is the least meaningful metric.

Third, crude oil. This requires close attention. Brent spot crude has formed a head and shoulders bottom, with neckline resistance near $109. It is now making a final test of that level:

A breakout above the neckline would open greater upside while increasing volatility risk. The crude oil calendar spread therefore remains in place. Continue buying the December WTI contract and selling the following March contract to benefit from wider spreads as oil prices rise. Use a break below the 10 day moving average in the continuous WTI contract as the stop for the entire spread position.

If US equities suffer a larger than expected decline, watch for the continuous S&P 500 futures contract to break below its 120 day moving average. Under that scenario, stop out of the Nvidia sell put trade and establish a QQQ straddle. Buy an at the money call and put with the same expiry and at least seven days to maturity to benefit from a sharp rise in implied volatility.

(This article reflects only the individual’s trading record and views and does not constitute investment advice.)

Update on Last Week’s Strategy Results