🔥 Election Chaos + Credit Cracks + Hyperscaler Earnings = Our Play
Chess, Trading, and Back to High School
Chess tournaments are back. David and I go every month again, but not in a church basement anymore. We go in my old high school gym. Same bleachers where I used to play basketball, same squeaky floors, same smell of varnish and chalk. Walking in with him brings back a flood of memories — my first tournaments there, staying up late to study openings with a book, not chess.com, and thinking a win in the school championship was the most important thing in the world.
David is 11 now and he is a bit rusty. Summer was Camp Kawaga, Aruba, Eagle River, and our driveway hoop where I’m still not allowed to raise my hands. We haven’t studied in months. So we are back on chess.com at night, one dog asleep at our feet, rebuilding. We review the Italian, the London, how to punish that Scandinavian that always annoyed him. He wants to attack fast. I keep telling him chess is not pickleball. You have to stay focused for a long time.
That focus is the hardest part. In today’s social media world, sitting for three hours with one board is a superpower. We practice not touching the clock until we have checked every check and capture. It’s meditation with consequences.
Last Sunday we were in that high school gym from 9 to 4. Five rounds. David lost round two to a kid who plays the Caro-Kann like a pro, won round three with a back-rank mate he saw three moves deep, and drew the last one in a rook endgame. Between rounds he was on the floor with his friends from school eating pretzels and analyzing with little plastic boards. I sat in the same hallway where I used to wait for my own pairings 35 years ago. Full circle.
He is pushing back more now. “Do we have to go every month? Can we just play online?” At 11, independence matters more than trophies. My answer is we go as long as it’s fun. For now the car rides home are still full of “Dad, did you see when I...” and that’s enough.
Watching him in my old gym, I realized chess and trading are the same psychological game. And for a financial newsletter, this is where it matters.
- Openings are setups. If you don’t know your opening, you are lost by move 10. In trading, if you don’t have a setup before the bell, you chase. At Yellowtunnel we have a rule: have a plan or the market gives you one you won’t like. David is learning you have to earn the right to improvise.
- Middle game is position management. David sees a tactic and wants to play it now, even if his pieces aren’t ready. Traders do the same — we see a move and force it. The best players improve their pieces slowly, control the center, and wait for the mistake. Not doing something stupid is often better than doing something brilliant.
- Endgame is exits, and tilt is the killer. David hates endgames. “It’s boring, just rooks.” But endgames are where games are won or lost. Same in trading. Everyone loves finding the right entry, but exits are what determine how much of that win you actually keep. And after a blunder, whether on the board or in the market, it's easy to tilt. You slam the clock, force the next move, or double your position trying to win it all back. I tell David what I remind myself: after a blunder, sit on your hands for two minutes. The board didn't change. Your emotions did.
This Sunday we'll be back in that high school gym. Water bottles, chess.com prep, same argument about e4 vs. d4. And I'll be taking notes, because watching an 11-year-old learn to stay patient and recover from a loss might be the best trading psychology refresher I've had all year.
Of course, unlike a chessboard, market conditions can change quickly. This week provided a perfect example. Investors entered the week excited about another potential rebound in artificial intelligence stocks. By Friday, many of those same companies were leading a sharp technology selloff as Wall Street questioned whether their enormous spending plans would translate into sufficient profits.
That's why successful trading isn't about predicting every market move. It's about understanding the position you're in, recognizing when conditions change, and knowing when to adjust before a manageable setback becomes a serious problem. With the Federal Reserve, corporate earnings, the midterm elections, and geopolitical tensions all competing for investors' attention as we head into November, that discipline matters more than ever.
Recent Trade Review
In a recent Live Trading Room session, I reviewed a market-neutral trading opportunity in Palo Alto Networks (PANW), a leading cybersecurity company. Our Dynamic Power Trader model identified the setup as an opportunity to evaluate a structured position without relying entirely on the broader market moving higher.
This is an important distinction between our free educational resources and paid trading services. While everyone can follow our market analysis and research, paid subscribers receive timely SMS notifications identifying potential entries, position adjustments, and exits. When volatility increases, having a defined process for managing an opportunity can be just as important as selecting the underlying stock.
You can review our recent market discussions and trading examples through the YellowTunnel Live Trading Room recordings.
Current Trading Landscape
The S&P 500 enters the final trading session of October under renewed selling pressure, with technology stocks leading the decline and investors reassessing the outlook for earnings, inflation, and interest rates. I continue to believe the longer-term bullish trend remains intact, with SPY potentially reaching the 780-810 range over the coming months, although the 740-750 area represents important support that bulls will need to defend. The immediate challenge is whether buyers can stabilize the market around its recent trading range and key moving averages before another round of selling puts those support levels to the test.
The week began on a much more encouraging note. On Monday, October 26, stocks rebounded following two consecutive weekly declines, helped by renewed optimism surrounding artificial intelligence. Anthropic's IPO filing energized the AI trade, while semiconductor and infrastructure companies attracted fresh buying interest. The S&P 500 gained approximately 0.7%, and the Nasdaq rose 0.8%, giving investors hope that the recent pullback had created another opportunity to enter the market.
That positive momentum carried into Tuesday. Technology shares continued recovering as investors positioned themselves ahead of major corporate earnings and the Federal Reserve's interest-rate decision. The Nasdaq advanced another 1.18%, with enthusiasm surrounding AI-related capital expenditures helping offset concerns about elevated borrowing costs.
Wednesday brought the week's first major policy decision. The Federal Reserve held its benchmark interest rate unchanged at 3.75%–4.00%, with two policymakers dissenting in favor of a quarter-point increase. Fed Chair Kevin Warsh acknowledged persistent inflation pressures while maintaining that the economy could continue expanding without requiring unnecessarily aggressive monetary tightening.
Markets initially reacted positively to the expected decision, and major indexes finished modestly higher. Nevertheless, the announcement reinforced that the Federal Reserve is not yet prepared to declare victory over inflation, leaving additional rate increases on the table.
Corporate earnings subsequently became the dominant story.
Microsoft demonstrated continued strength in its cloud business, offering reassurance that demand for AI infrastructure remains meaningful. However, Alphabet's results prompted a dramatically different reaction as investors focused on disappointing financial performance, rising capital expenditures, and pressure on free cash flow.
That disappointment spilled into Thursday's session. Alphabet suffered a historic one-day decline, dragging technology and communication-services stocks lower even as portions of the broader market demonstrated greater resilience.
Economic reports added another layer of complexity. Third-quarter U.S. GDP expanded at a 3.4% annualized rate, suggesting that economic activity remains relatively strong despite elevated borrowing costs.
At the same time, September's Personal Consumption Expenditures report showed headline inflation accelerating to 3.6% annually, while core PCE increased to 3.1%. Those numbers remain uncomfortably above the Federal Reserve's 2% objective and reinforce the possibility that interest rates will remain elevated for longer than investors previously hoped.
Friday's selling intensified following earnings from Amazon and Intel.
Amazon's substantial artificial intelligence investments and associated cash-flow pressures raised additional questions about when the company's growing spending commitments will produce sufficient returns. Intel, meanwhile, warned about cash consumption and operational challenges, triggering a severe decline in its stock and renewed weakness across the semiconductor industry.
By late Friday morning, the Nasdaq was down roughly 2.5%, while the S&P 500 had declined approximately 1.6%. This was a significant reversal from the optimism that supported technology stocks earlier in the week.
The underlying problem is not necessarily that artificial intelligence demand is disappearing. It is that investors are becoming much more demanding about the financial returns generated by that spending.
Companies that demonstrate improving margins, sustainable cash flow, and attractive earnings growth may continue attracting investment. Those relying on increasingly expensive expansion plans without sufficiently clear returns could face greater valuation pressure.
Outside technology, energy markets and geopolitical developments remain significant influences on investor sentiment.
The ongoing conflict involving Iran and disruptions around the Strait of Hormuz have kept oil prices elevated, increasing transportation and production costs while complicating the inflation outlook. Higher energy prices may benefit certain producers and refiners, but they also squeeze consumers and create additional challenges for the Federal Reserve.
ExxonMobil and Chevron reported stronger-than-expected quarterly profits on Friday, supported by exceptionally strong refining margins. Their relative resilience illustrates how market leadership is becoming increasingly selective.
Bond markets also deserve attention. The 10-year Treasury yield has continued fluctuating around the 5% threshold, within the broader 4.5%–5.5% range we've been monitoring. Higher yields increase financing costs, create additional competition for equities, and place pressure on companies whose valuations depend heavily on earnings far into the future.
Credit conditions reinforce the need for caution. While higher-quality corporate borrowers continue benefiting from relatively stable demand, financial stress is becoming more visible among the weakest issuers. This divergence is worth monitoring because deterioration in lower-quality credit can eventually influence lending conditions and broader risk appetite.
However, it is important not to confuse increased volatility with the end of the bull market.
The economy continues expanding, corporate profitability remains meaningful, and opportunities are emerging outside the narrow group of companies that dominated earlier portions of the rally.
I remain in the MARKET BULLISH camp, but I believe this environment increasingly rewards patience, selectivity, and disciplined position management rather than indiscriminate buying.
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Sector Spotlight
One of the most interesting developments in the current market is the growing divide between companies that depend on expectations of future growth and businesses that can demonstrate demand from customers today.
As Wall Street becomes increasingly sensitive to financing costs and profitability, I am paying particular attention to an area of the economy that can provide valuable insight into household confidence, pricing power, and the sustainability of economic growth.
This week's Sector Spotlight is Consumer Discretionary, represented by the Consumer Discretionary Select Sector SPDR Fund (XLY).
The sector includes companies involved in retail, automobiles, restaurants, travel, leisure, and other purchases that consumers can delay or reduce when financial conditions become more difficult.
That makes consumer discretionary particularly interesting at this stage of the economic cycle.
On one hand, elevated interest rates, persistent inflation, expensive gasoline, and uncertainty surrounding employment could pressure household budgets. Consumers may become more selective about discretionary purchases, particularly as spending on necessities absorbs a greater portion of their income.
On the other hand, stronger-than-expected economic growth, relatively resilient employment, and continued demand for travel, services, and certain retail categories suggest the American consumer has not completely exhausted their spending capacity.
The key distinction is that spending is becoming more selective.
Companies offering compelling value, differentiated products, effective inventory management, and strong customer experiences may continue performing well even as competitors face greater pressure.
XLY offers exposure to this broader economic theme, although its significant weightings in Amazon and Tesla mean the fund is also particularly sensitive to the performance of a small number of major companies. Amazon's recent earnings-driven weakness highlights that risk.
For that reason, I am approaching the sector selectively rather than assuming that all discretionary stocks will move together.
The approaching holiday shopping season will provide an important test of consumer confidence. Retail sales, company guidance, promotional activity, margins, and management commentary on purchasing behavior will help determine whether consumer spending remains resilient enough to support further earnings growth.
I believe the sector could offer attractive opportunities as investors look beyond the most crowded technology trades. However, the strongest setups are likely to come from individual businesses demonstrating improving execution and favorable relative performance.
Trade of the Week: Macy's (M)
This week's Trade of the Week is Macy's (M), one of America's best-known department-store operators and the parent company of Bloomingdale's and Bluemercury.
At first glance, a traditional retailer may seem like an unusual choice when investors are focused on artificial intelligence, high interest rates, and uncertainty surrounding consumer spending.
That is precisely what makes the opportunity worth examining.
While many technology companies are being asked to justify extraordinary future capital expenditures, Macy's is pursuing a more straightforward operational turnaround centered on improving store performance, strengthening its merchandise assortment, and focusing investment on locations with the greatest potential.
The company's latest quarterly results provided tangible signs of progress.
In September, Macy's reported second-quarter net sales of approximately $4.9 billion, representing a 1.1% increase from the prior year. Companywide comparable sales advanced 2.7%, marking continued improvement across its retail operations.
Bloomingdale's delivered especially strong performance, with comparable sales increasing 11.3%, while Bluemercury reported growth of 6.2%.
Management also raised its full-year earnings and revenue outlook, with adjusted earnings per share projected between $2.15 and $2.35.
These results suggest that the company's restructuring efforts are producing measurable improvements, particularly within its higher-end retail businesses.
Importantly, the company's turnaround is not simply dependent on attracting more shoppers. Better merchandise selection, inventory discipline, store optimization, and margin management can contribute to profitability even when overall consumer spending grows more slowly.
That creates a potential opportunity for investors looking for businesses with improving fundamentals at a time when the market is reassessing growth expectations.
There are meaningful risks. Macy's remains exposed to changes in consumer confidence, tariffs, labor costs, competitive pricing, and the possibility that elevated energy prices reduce discretionary spending. The recent rebound in its share price also means entry timing matters, especially during a volatile market.
Nevertheless, I believe its improving operating performance, raised earnings guidance, and focus on profitable growth make Macy's an interesting candidate as we approach the holiday shopping season.
The stock fits our broader Consumer Discretionary theme while offering a more company-specific turnaround thesis than a simple investment in the sector ETF.
As always, I want to evaluate the opportunity using YellowTunnel's AI-driven forecasting and technical tools, with particular attention to trend confirmation, risk-reward, and position sizing before committing additional capital.
This week, I am adding Macy's (M) to my portfolio.
Looking Ahead
Next week promises another challenging environment for investors.
The November 3 midterm elections could reshape expectations for fiscal policy, regulation, tariffs, and government spending. Meanwhile, additional corporate earnings from Apple, AMD, Qualcomm, and other major companies will test whether the recent technology selloff reflects temporary disappointment or a more significant change in investor expectations.
The economic calendar will culminate with the October employment report on Friday, November 6. After September payroll growth of just 29,000 jobs, investors will be watching closely for evidence that employment remains sufficiently healthy to sustain consumer spending without reigniting inflation.
I continue to believe the market's longer-term trend remains constructive, but higher-for-longer interest rates, geopolitical uncertainty, and earnings-related volatility represent meaningful risks.
This is definitely a stock picker's market, and risk management should remain at the forefront of every investor's strategy.
The goal isn't to predict every market move. It's to maintain a disciplined process, recognize when circumstances change, and remain prepared to take advantage of opportunities when the odds become more favorable.
As I've been reminding David at the chessboard, sometimes the strongest move is knowing when to wait.
The consistent performance of our services is just incredible. My historical stellar performance is made possible by being right on 82.16% of all trades that I made, with an average profit of 39.60% per trade on our collective trade recommendations. To my knowledge, this trading performance is one-of-a-kind and stands alone in the marketplace for superior trading advice, where our numbers and results speak for themselves.
For the rest of 2026, the market is entering a more selective and demanding phase. On the surface, major indexes remain resilient, but underneath, investors are navigating a more complicated environment shaped by geopolitical tensions, tariff uncertainty, uneven megacap earnings, sticky inflation expectations, and renewed pressure from interest rates. At the same time, labor market data is beginning to soften at the edges, creating a setup where discipline, timing, and data-driven decision-making are becoming more important than broad market optimism.
This is exactly where YellowTunnel becomes essential.
In a market where leadership is narrowing and volatility can return quickly, investors need more than headlines and guesswork. YellowTunnel’s AI-powered tools are designed to help you cut through the noise, identify high-probability setups, track changing market conditions, and stay aligned with the strongest pockets of opportunity. Whether you are looking for real-time trade ideas, advanced stock and options analysis, predictive market data, or a more disciplined trading process, YellowTunnel gives you the structure and clarity needed to act with confidence.
As conditions tighten heading into Q4, the difference between reacting emotionally and following a proven, data-backed approach can be significant. Our goal is to help you stay prepared, stay selective, and stay focused on the opportunities with the strongest risk-reward potential.
Whether you are focused on short-term trades, portfolio positioning, options strategies, or improving your overall trading mindset, YellowTunnel provides the tools, insights, and guidance to help you navigate this market with greater precision.
Let’s work together to make the rest of 2026 a stronger, smarter, and more disciplined period for your portfolio. As always, successful investing begins with informed decisions, proper risk management, and a clear understanding of your personal goals and risk tolerance before entering any trade.
Wishing you a productive and profitable trading week!
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