KR Opinion
The past two days have brought reports on CPI and PPI that continue to boost enthusiasm about inflation trends. While I've argued for several reports now that the markets may be misinterpreting the situation, sentiment is what's driving market movements right now, making the accuracy of their interpretation less immediately important. Any necessary adjustments will come later in the cycle.
What we're seeing is that market expectations have adjusted as inflation seems to be stable or slightly lower, depending on whether you look at year-over-year or month-over-month data. There's no denying the markets' optimism, with most of the recent rally already priced in after Tuesday's CPI figures. The PPI data confirmed these forward-looking expectations.
I often examine the PCE deflator and similar indicators, which provide forward-looking inflation rates that the Federal Reserve should prioritize rather than constantly looking backward at historical numbers. These forward-looking expectations currently range between approximately 2.50% and 2.39% on the downside, placing the Fed precisely where they want to be positioned.
For nearly two years, since the upward cycle in interest rates began, I've consistently argued that once this cycle ends, the short end of the curve will continue to decline. I still expect at least 50 basis points of reduction by the end of the year, which would bring us closer to the numbers I've been supporting for a steeper yield curve. Initially, we can expect some fluctuations, followed by adjustments on the long end as markets stabilize. This normalization process might take a quarter or two to fully unfold, as the bond market's large size means it moves more slowly and needs more time to stabilize.
I often revisit the GDP model, which I'm updating with new factors I want to include. One significant observation is how the Trump administration is changing everything across the entire government, from efforts to reform the Bureau of Labor Statistics to potentially reforming the Federal Reserve itself. I've long argued that the Fed relies on outdated metrics that no longer make sense, focusing only on backward-looking data rather than forward-looking indicators. As I've explained before, analysis that only looks backward is like driving while staring in the rearview mirror—it's fine until you hit a corner. That's why I keep using the analogy that dealing with markets is like driving on a moonless night along a country road, where you're always on the lookout for the next bend.
There may be a curve coming up regarding interest rates. Significant stress exists in the real estate sector and others, although this is more closely related to shortages caused by institutional investments in residential real estate and the artificial limitation of supply compared to regular market patterns.
The last couple of days have at least revealed important market sentiment. Tonight I want to focus on the data sheet I ran on quarterly charts. I haven't had the opportunity this month to examine the long-term aspects of the markets, but I'll post the data sheet for the quarterly analysis along with longer-term chart aspects and algorithmic analysis.
The data clearly shows an 85% chance of reaching 6,615, a 75% chance of hitting 6,832, and a 65% chance of reaching 7,026 within this quarter, which will carry us through September. The analysis also indicates that we are in a parabolic bull run, with PPM statistics at levels never seen before, primarily due to the magnitude of these movements. When looking at these numbers, with probabilities at 44.58, you can move the decimal point to see approximately 0.44, indicating a strongly bullish trend. This setup suggests that the bullish sentiment will likely last into the end of the year.
While I've been discussing the potential for an economic slowdown, several developments keep emerging just as it seems we might see some correction happening. We're seeing more deregulation across energy and other sectors. There are rumors about Trump's Friday meeting with Putin regarding a possible mineral pact. This is connected to why Greenland and Canada have been so prominent in discussions—the extremely rich metal deposits in the north.
On a flight back from Dubai, I flew over the northern tundra in Canada, passing incredibly close to the North Pole. The view revealed vast mountain ranges stretching endlessly. While many refer to fossil fuels, I prefer calling them hydrocarbons, as I don't believe we're just burning "dinosaur juice" in our vehicles. There is most likely an overabundance of every mineral resource imaginable in these regions. There is even talk of constructing a tunnel beneath the water between Russia and the United States. While some of this is hyperbole, the reality is that's where the minerals are located. Russia's vast mineral wealth is well-known, but my point is that as we examine the landscape and review the quarterly charts, the market trajectory looks positive all the way into 2032 and beyond.
These are phenomenal numbers we're seeing. The 7300 handle on the S&P I mentioned recently looks very realistic, and we have the better part of six weeks remaining in Q3 before entering Q4. Whether the Fed lowers interest rates in September will be interesting to watch. Still, sentiment will likely remain very positive because there's literally nothing concerning on the horizon as labor remains stable. We'll receive labor numbers in the morning, but no disruptions are expected.
The trajectory remains very positive. The Trump administration is appointing a new member to the Fed, which will bring a new perspective to the Fed board, and eventually, we'll see Jay Powell replaced, marking a significant change at the Federal Reserve. Scott Bessent is also shaking things up by discussing the foundational reforms needed at the Fed. I've also spoken about this—the idea of relying on backward-looking metrics to manage a forward-looking economy is flawed. We need to start incorporating predictive indicators and forward-looking expectations into our analysis. This will help us get ahead of the curve instead of always being, as Trump calls him, "always late Jerome Powell."
Things are becoming increasingly interesting, and I'm very encouraged by the outlook moving forward. Once again, expectations of a potential economic slowdown materialize without the slowdown actually occurring. This marks essentially year three of continuing positive markets, with the economy remaining on track, reminiscent of the 1980s when we saw an average GDP of 3.1% throughout the entire decade, including one year—I believe 1984—with a GDP growth rate of 6.7%.
To conclude, my expectations for productivity growth are quite high, corresponding to approximately 3% or possibly as high as 4% GDP growth. As we finish this week, we'll receive some labor statistics, and markets look positioned to remain generally positive as we close out the week.
WaveTech Database
A Dramatic Shift to Risk-On Positioning
The WaveTech Database experienced a seismic shift in market positioning yesterday, with an explosive surge of nearly 4,000 new buy signals flooding the system. This represents one of the most dramatic single-day transformations we've witnessed, as four additional sectors triggered buy signals, bringing the total to an impressive eleven out of twelve sectors now positioned long. This near-unanimous sector alignment signals a powerful risk-on rotation that demands our attention.
Examining the current state of the WaveTech models, the daily positioning metrics present a remarkably bullish picture. The Daily 1.2a Long model shows 3,620 current entries against just 95 exits, resulting in a commanding ratio of 38.11 and a firmly bullish sentiment. Similarly, the Daily 3.2a Long model maintains 337 entries versus 59 exits, yielding a ratio of 5.71 with equally bullish conviction. These overwhelming entry-to-exit ratios suggest the momentum behind this move remains intact and potentially sustainable.
The broader market structure within the WaveTech Database reveals extraordinary participation levels across all measured categories. At the sector level, we're seeing 91.67% of sectors positioned long, with eleven sectors bullish and only one remaining neutral. This near-complete sector participation is historically significant and suggests institutional capital is rotating aggressively into risk assets. Moving down to the group level, the database shows 59.80% long positioning with 61 groups bullish against 41 neutral, indicating solid but not yet extreme breadth at this granular level. At the individual symbol level, an impressive 70.03% of the 14,592 tracked symbols are now in long positions, with 10,219 symbols in bullish positions versus 4,373 in neutral positions.
These percentage readings carry critical implications when viewed through the WaveTech Database's established probability framework. The symbol-level reading of 70.03% long has pushed us firmly into what the system identifies as "full investment mode," which typically ranges between 70% to 78%. This zone historically represents periods of maximum market participation and often coincides with sustained upward trends. We're well clear of the 42% threshold that marks sustainable upside bias, and dramatically above the liquidation zones that begin below 42% and intensify at 28%, 22%, and the full liquidation territory below 22%.
The sector-level positioning at 91.67% is particularly noteworthy as it approaches the extreme readings that can reach into the 90th percentile range. While such readings can persist during powerful bull markets, they also warrant attention as potential exhaustion indicators if breadth begins to narrow or momentum wanes. The group-level reading at 59.80% suggests there's still room for expansion, as this metric hasn't yet reached the 62% threshold that typically marks full investment positioning at the group level.
Examining probable near-term developments based on the WaveTech Database readings, several scenarios emerge with varying probabilities. The most likely path appears to be continued upward pressure as the massive influx of new long positions works through the system, potentially drawing in additional symbols and groups that remain neutral. The gap between symbol participation at 70% and group participation at 59.80% suggests we could see further group-level improvement as lagging sectors catch up to the broader market momentum.
The concentration of new entries versus minimal exits in both daily models suggests this move caught many market participants off-guard, forcing rapid repositioning. This type of explosive breadth thrust often has follow-through, but the sheer magnitude of yesterday's move – nearly 4,000 new signals in a single day – is unusual enough to warrant some caution about chase risk at these levels. The WaveTech Database historically indicates that moves of this magnitude often require a period of consolidation to establish a sustainable base for the next leg higher.
Given the current setup, the most likely scenario in the upcoming sessions is continued strength with gradually slowing momentum. This could see group-level participation approach the 62% full investment mark, while symbol-level participation stays in the 70-78% range. Any sudden rise above 78% at the symbol level or unanimous sector participation would significantly increase the likelihood of a near-term pullback to reset oversold conditions and help the market regain momentum for the next move.
S&P 500 Futures
NASDAQ 100 Futures
Gold
Bitcoin
Earnings releases for the week of August 11th
Aug 14
08:30 ET: PPI For: Jul | Trading Impact: High | KR Forecast: 0.2% | KR Cons: 0.2% | Prior: 0.0%
08:30 ET: Core PPI For: Jul | Trading Impact: High | KR Forecast: 0.1% | KR Cons: 0.2% | Prior: 0.0%
08:30 ET: Initial Claims For: 08/09 | Trading Impact: High | KR Forecast: 230K | KR Cons: 228K | Prior: 226K
08:30 ET: Continuing Claims For: 08/02 | Trading Impact: High | KR Forecast: NA | KR Cons: NA | Prior: 1974K
10:30 ET: EIA Natural Gas Inventories For: 08/09 | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: +7 bcf
Aug 15
08:30 ET: Retail Sales For: Jul | Trading Impact: High | KR Forecast: 0.4% | KR Cons: 0.5% | Prior: 0.6%
08:30 ET: Retail Sales ex-auto For: Jul | Trading Impact: High | KR Forecast: 0.1% | KR Cons: 0.3% | Prior: 0.5%
08:30 ET: Empire State Manufacturing For: Aug | Trading Impact: Low | KR Forecast: 1.0 | KR Cons: 0.0 | Prior: 5.5
08:30 ET: Import Prices For: Jul | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: 0.1%
08:30 ET: Import Prices ex-oil For: Jul | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: 0.1%
08:30 ET: Export Prices For: Jul | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: 0.5%
08:30 ET: Export Prices ex-ag. For: Jul | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: 0.5%
09:15 ET: Industrial Production For: Jul | Trading Impact: Medium | KR Forecast: 0.1% | KR Cons: -0.1% | Prior: 0.3%
09:15 ET: Capacity Utilization For: Jul | Trading Impact: Medium | KR Forecast: 77.7% | KR Cons: 77.5% | Prior: 77.6%
10:00 ET: Business Inventories For: Jun | Trading Impact: Low | KR Forecast: 0.0% | KR Cons: 0.1% | Prior: 0.0%
10:00 ET: Univ. of Michigan Consumer Sentiment - Prelim For: Aug | Trading Impact: High | KR Forecast: 62.1 | KR Cons: 61.3 | Prior: 61.7
16:00 ET: Net Long-Term TIC Flows For: Jun | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: $259.4B
Executive Summary – KR Earnings Analysis
Week of August 11-15, 2025
Total Earnings Releases
The week encompasses 768 total earnings releases, distributed as follows:
· Monday: 184 companies
· Tuesday: 176 companies
· Wednesday: 149 companies
· Thursday: 248 companies (peak day)
· Friday: 39 companies
Market Concentration & Sector Analysis
Technology Sector Leadership: Technology emerges as the dominant force this earnings week, with mega-cap tech companies commanding significant market attention. Tencent leads all companies at $659.5B market cap, followed by infrastructure players like Cisco ($276.8B) and Applied Materials ($147.0B). There is particularly strong representation from Asian technology giants.
Geographic Distribution:
· Robust international participation with European financial institutions prominently featured
· Significant Asian market presence, especially Chinese corporations across all reporting days
· Balanced mix of developed and emerging market companies
Sector Breakdown:
· Technology/Software: ~30% of releases (AI, semiconductors, cloud computing)
· Healthcare/Biotechnology: ~25% (predominantly small-cap pharmaceutical firms)
· Financial Services: ~15% (traditional banks, fintech, payment processors)
· Consumer/Retail: ~10% (e-commerce platforms, food companies, retail chains)
· Materials/Mining: ~8% (precious metals, industrial minerals)
· Energy: ~7% (conventional and renewable energy sectors)
· Other Industries: ~5%
Key Findings
1. Market Capitalization Disparity: There is extreme market bifurcation, with mega-cap companies exceeding $100B reporting alongside numerous micro-caps below $100M, demonstrating broad market participation but highly concentrated value.
2. Temporal Distribution: Thursday stands out as the week's busiest reporting day with 248 companies (32% of weekly volume), while Friday shows minimal activity with just 39 companies.
3. Small-Cap Prevalence: Approximately 60% of reporting companies maintain market capitalizations below $500M, with heavy concentration in biotechnology and technology sectors, many projecting negative earnings.
4. Global Market Integration: The analysis shows strong international diversity, with companies from Europe, Asia, and Latin America well-represented, reflecting the increasingly interconnected nature of global earnings seasons.
5. Sector Performance Indicators: There is substantial representation of unprofitable biotech and technology companies, suggesting continued market appetite for growth investments despite profitability challenges. Traditional sectors including mining and utilities demonstrate more consistent earnings expectations.
Conclusion
This week represents a pivotal earnings period, with major technology and industrial leaders reporting alongside hundreds of smaller growth-oriented companies. This comprehensive earnings slate provides critical insights into global economic conditions across all market segments and geographic regions. The extreme range in market capitalizations—from Tencent's $659.5B to numerous sub-$10M companies—illustrates the diverse investment landscape and varying risk appetites in current markets.
Top 5 Companies Reporting by Market Capitalization Per Day
Monday, August 11, 2025
1. Intesa Sanpaolo (ISNPY) - $109.3B
2. Barrick Mining (B) - $39.4B
3. Franco-Nevada (FNV) - $33.0B
4. KE Holdings (BEKE) - $21.0B
5. Companhia de Saneamento (SBS) - $14.0B
Tuesday, August 12, 2025
1. Tencent (TCEHY) - $659.5B
2. Sea Limited (SE) - $87.7B
3. CSL Limited (CSLLY) - $83.7B
4. CoreWeave Inc. (CRWV) - $58.1B
5. Tencent Music (TME) - $37.7B
Wednesday, August 13, 2025
1. Cisco Systems (CSCO) - $276.8B
2. Commonwealth Bank (CMWAY) - $193.6B
3. E.ON (EONGY) - $49.5B
4. Venture Global (VG) - $33.1B
5. KB Financial Group (KB) - $31.5B
Thursday, August 14, 2025
1. Applied Materials (AMAT) - $147.0B
2. Deere & Company (DE) - $137.2B
3. NetEase (NTES) - $83.0B
4. Nu Holdings (NU) - $59.8B
5. JD.com (JD) - $44.3B
Friday, August 15, 2025
1. Compagnie Financiere Richemont (CFRUY) - $174.9B
2. Land Securities Group (LSGOF) - $5.7B
3. Flowers Foods (FLO) - $3.4B
4. China Resources Cement (CARCY) - $1.7B
5. QDM International (QDMI) - $656M
Robert Kendall
Chief Analyst
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