ES at the Turn: The Rally Faces a Breadth Test

ESZ6 recovered into Friday, but thin participation and a run of inflation, manufacturing, and jobs data make last week’s boundaries the trading test.

01 / This Week

What we’re thinking about this week is less about one ES level and more about whether the broader market can start acting like the major indexes. ESZ6 finished Friday at 7805.75 after trading between 7707.25 and 7848.50 for the week of Sept. 21–25, but participation underneath the averages remained thin. Only 28% of S&P 500 constituents were above their 50-day average, while equal-weight, small-cap and mid-cap participation lagged the headline indexes.

We’re also focused on the cross-market pieces. Treasury yields remain a major pressure point for growth stocks, energy is entering an important seasonal window, and volatility is still relatively calm compared with the amount of macro data on deck. Wednesday’s PCE and GDP, Thursday’s ISM, and Friday’s payrolls give the market several chances to reprice rates, growth and risk appetite.

The big question for us is whether stocks, bonds, energy and volatility begin confirming the same story—or whether those markets start diverging from one another. That cross-market relationship is likely to tell us more than ES alone.

02 / Market Moving Catalysts for the Week

All times ET.

Monday, September 28

Dallas Fed Manufacturing — 10:30 a.m.
For us, the bigger test is whether Friday’s rebound can hold as the market positions for the heavier midweek data slate.

Tuesday, September 29

JOLTS + Consumer Confidence — 10:00 a.m.
We’ll be watching Treasury yields and NQ for the first reaction to labor demand and consumer confidence.

Wednesday, September 30

ADP — 8:15 a.m. | PCE, Personal Income + Final Q2 GDP — 8:30 a.m.
This is the first major risk window of the week. Quarter-end flows can exaggerate or reverse the initial rate-driven move, so we’ll care more about the second reaction than the first.

Thursday, October 1

Weekly Claims — 8:30 a.m. | ISM Manufacturing — 10:00 a.m.
We’ll be focused on the ISM inflation and employment components and, more importantly, how yields and technology respond.

Friday, October 2

September Employment Situation — 8:30 a.m.
Payrolls, wages, unemployment and revisions make this the week’s largest scheduled macro test. We’ll be looking past the first burst of price discovery and into how the market settles once the cash session gets underway.

03 / Seasonality Watch

The turn from September into October has several recurring seasonal tendencies worth watching, but the clearest commodity setup for us is in the energy complex.

Natural Gas — The Standout Seasonal

Henry Hub natural gas has historically strengthened through September and October as the market transitions from summer cooling demand toward winter heating demand. Over the most recent roughly 10-year continuous-futures sample, October has produced an average gain of about 8%, making it one of natural gas’s strongest calendar months.

What we’re watching: If natural gas holds its late-September strength and begins accepting above the prior week’s highs, we’ll view the seasonal tailwind as intact. A sharp failure despite cooler-weather expectations would tell us storage, production or LNG flows are overpowering the calendar tendency.

Heating Oil — Approaching Its Seasonal Peak

Heating oil is one of the most seasonally sensitive futures markets. Refiners and distributors typically build supply ahead of winter demand, and the major seasonal price peak has historically tended to develop around September and October. Recent five-year data also show a positive October bias.

Our cross-market read: Strength in natural gas and heating oil together would reinforce the idea that the market is beginning to price the winter energy transition. Weakness in both would tell us current supply and demand fundamentals are overwhelming the normal seasonal pattern.

Equities — Turn-of-Month Support

The final sessions of September and first sessions of October also sit inside the traditional turn-of-month window for equities. For ES, we want that seasonal tendency confirmed by price and participation; acceptance above 7848.50 with improving breadth would matter more to us than the calendar alone.

We use seasonality as context, not as a standalone trade signal. Current weather, inventories, production, rates and macro data can overwhelm the pattern.

04 / Breadth

Friday Improved — The Week Was Still Narrow

Daily Breadth — Friday, September 25

NYSE upside volume finished at 57% with 56% advancing issues. Nasdaq finished at 49% upside volume with 52% advancing issues. Combined, the tape closed with 52% upside volume and 53% advancing issues.

New Highs / New Lows: NYSE 13 / 317 · Nasdaq 96 / 381
TRIN: NYSE 0.96 · Nasdaq 1.10

Weekly Breadth — Week Ending September 25

NYSE weekly upside volume was 45% with only 33% advancing issues. Nasdaq was stronger at 56% upside volume, but just 42% of issues advanced. Combined, the week finished with 52% upside volume and only 38% advancing issues.

Weekly New Highs / New Lows: NYSE 70 / 575 · Nasdaq 323 / 769
Weekly TRIN: NYSE 0.59 · Nasdaq 0.56

What We Take From It

For us, the weekly numbers matter more than Friday’s bounce. Volume was not collapsing, but participation was weak and new lows overwhelmed new highs on both exchanges. That tells us the indexes are still being supported by a relatively narrow group of stocks.

The low weekly TRIN readings are interesting because advancing volume held up much better than advancing issue counts. We read that as money concentrating in fewer, larger names rather than flowing broadly through the market.

What We’re Watching Next

We’re looking for breadth to either confirm the next index move or expose it. If the major indexes push higher and we see stronger upside volume, more advancing issues and a sharp contraction in new lows, we’ll view the rally as healthier. If the indexes make new highs while participation rolls over again, we’ll treat that as an increasingly important divergence.

05 / Technicals

The Bigger Technical Picture

We don’t want to look at ES in isolation here. The technical setup across markets is mixed: the large-cap indexes remain near their highs, internal participation is much weaker, individual investors remain defensive, spot volatility is subdued, long-term valuations are stretched, and the long end of the Treasury market remains an important source of pressure.

Equities

ESZ6 traded between 7707.25 and 7848.50 during the week of Sept. 21–25 and finished Friday at 7805.75. We’re treating 7848.50 as the larger upside reference and 7707.25 as the larger downside reference, but the more important question is whether Nasdaq, equal-weight indexes, small caps and breadth confirm whichever side breaks first.

Sentiment

The latest AAII Sentiment Survey shows 32.7% bullish, 19.2% neutral and 48.1% bearish. Bearish sentiment is well above its long-term average of 31.5%, leaving the bull-bear spread at -15.4 percentage points. We see that as a market with plenty of skepticism still embedded in it. If prices keep rising, that skepticism can become fuel; if prices begin failing, it can look more like investors were correctly cautious.

Volatility

Spot VIX remains relatively calm while the forward curve prices more volatility in October and November. We’re watching that relationship closely. If stocks hold firm and spot volatility stays contained, we’ll view that as supportive. If volatility begins rising before the indexes break support, we’ll treat it as an early warning.

Rates and Valuation

Long-duration assets remain sensitive to the Treasury market, and stretched long-term valuation measures leave less room for rates to move higher without consequences. We’re watching the 10-year and 30-year as closely as any equity indicator this week because another bond selloff could quickly change the tone in technology and other duration-sensitive groups.

Energy

Natural gas and heating oil are entering one of their more important seasonal windows. We’re watching whether those markets begin strengthening together into October. If they do, we’ll read that as a broader energy signal rather than an isolated commodity move.

What We’re Thinking

The technical picture is not cleanly bullish or bearish. Price is strong, participation is weak, sentiment is defensive, volatility is calm and rates remain a potential problem. We’re more interested in seeing which of those relationships resolves first than in forcing a directional opinion from one index.

06 / This Week’s Tactical Focus

Our plan this week starts with the bigger market relationships, then we’ll use ES as the vehicle when those relationships line up. We’re watching breadth, NQ leadership, Treasury yields, volatility and energy alongside the index levels.

Monday: We’re looking to see whether Friday’s rebound has real follow-through. If ES is firm but breadth and small-cap participation fade, we’ll be cautious about chasing the index. If the broader tape improves with it, we’ll give the move more respect.

Tuesday: JOLTS and consumer confidence give us an early read on labor demand and growth expectations. We’ll be watching the reaction in yields first, then NQ and ES. If yields ease and technology responds well, we’ll view that as constructive. If yields rise and NQ starts underperforming, we’ll lean more defensive.

Wednesday: PCE, GDP and quarter-end flows create the first major cross-market test. We expect the initial move to be noisy. We’ll be more interested in where bonds, the dollar, NQ and breadth settle after the first reaction than in the first ES spike.

Thursday: ISM gives us another chance to judge the growth-versus-inflation mix. We’ll be watching the employment and price components, but the market reaction matters more to us than the number itself. If yields and equities move in opposite directions, that divergence will have our attention.

Friday: Payrolls are the biggest scheduled event of the week. We plan to let the first reaction happen, then reassess after the cash open. The setup we care about most is whether stocks, bonds and volatility begin telling the same story.

The week’s tell: We’re watching for confirmation across markets. If ES, NQ, breadth, bonds and volatility begin lining up, we’ll be more aggressive with that direction. If they continue sending conflicting signals, we’ll treat the tape as rotational and keep our expectations smaller.

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