•  S&P 500 gains 0.71% to close at 6,840 as earnings season shows strong results with 84% of companies exceeding EPS expectations

•  Federal Reserve cuts interest rates by 25 basis points but signals December rate cut is not guaranteed

•  President Trump and China's President Xi reach trade agreement, reducing tariffs by 10% and delaying rare earth export controls

•  Major technology companies announce massive AI infrastructure spending with combined CapEx exceeding $250 billion for 2025

•  Market sentiment remains positive with technical indicators supporting continued upside toward 7,000 on S&P 500

•  AI and autonomy sectors demonstrate strength while consumer-facing sectors show significant weakness

The S&P 500 posted a modest gain of 0.71% last week, closing at 6,840, representing a continuation of the rally from the October 10th low of 6,550. Markets demonstrated resilience in the face of mixed signals from the Federal Reserve and ongoing earnings reports. The technical picture improved significantly as the index bounced off 6,800 support following the Fed decision, with the daily RSI finding support at the critical 60 level and the daily top Bollinger Band shifting higher to 6,915.

Market breadth showed some concerning signals with multiple Hindenburg Omens triggered during the week. These technical indicators occur when new highs and new lows on the NYSE both exceed the sum of advances and declines while the index remains above its 50-day moving average. While these signals have historically preceded market corrections, they often take time to materialize and can occur during sustained uptrends, as witnessed in 2013 and 2017.

Despite the equity market moving higher last week with 67% of companies beating expectations, only 35% of stocks that reported earnings traded higher on the week. This disconnect highlights an interesting dynamic where earnings beats are not necessarily translating to positive price action. The market appears to be rewarding select companies while punishing others, regardless of fundamental results.

Third quarter 2025 earnings season continued to exceed expectations, with 64% of S&P 500 companies having now reported. The results have been impressive across multiple metrics. Specifically, 84% of reporting companies beat EPS expectations while 79% exceeded revenue forecasts. The blended earnings growth rate for Q3 2025 currently stands at 10.7%, meaningfully above the initial expectation of 7.9%.

However, despite strong fundamental results, market reactions to earnings beats have been mixed, particularly among large-cap technology stocks. This appears to be a natural consolidation after the strong rally from April lows rather than a concerning divergence. Looking ahead to Q4 2025, 28 S&P 500 companies have issued negative EPS guidance compared to 21 companies issuing positive guidance, suggesting a more cautious outlook.

Sector performance showed notable divergence. AI and autonomy-related stocks demonstrated exceptional strength. The Digital Transformation ETF reported 93% of holdings up since reporting, while multiple AI-focused portfolios showed 76-83% of holdings higher since their last earnings releases. In stark contrast, consumer-facing sectors struggled significantly, with only 34% of retail holdings up since earnings and restaurant stocks performing even worse at just 14%.

The Federal Reserve cut interest rates by another 25 basis points in a 10-to-2 vote, marking the second rate cut of 2025. The statement reiterated concerns that policymakers have over the labor market, saying that downside risks to employment rose in recent months. Additionally, the Fed announced an end to quantitative tightening beginning December 1st, signaling a broader commitment to maintaining accommodative financial conditions.

Fed Chair Powell cautioned against assuming that a rate cut is guaranteed at the next meeting. Powell stated that a further reduction in the policy rate at the December meeting is not a foregone conclusion, noting strongly differing views about how to proceed. Markets have adjusted accordingly, now pricing in just a 65% probability of a December rate cut, down from over 90% earlier in the week.

The ongoing government shutdown, now exceeding 30 days and ranking as the second-longest in US history, has created a data blackout for key economic indicators. While the September jobs report remains unavailable, proprietary employment data suggests a sharp decline in September followed by a meaningful recovery in October. Market expectations call for an increase of 25,000 new jobs in October after a loss of 32,000 in September.

President Trump's meeting with China's President Xi resulted in an agreement to reduce tariffs by 10% on China, from 57% to 47%, and rare earth export controls were pushed back by one year. This development reinforces the view that tariff threats are buying opportunities and the posts made by President Trump are meant to be utilized as bargaining chips during trade discussions.

The technical setup for the S&P 500 appears constructive following last week's healthy pullback. The index reached a fresh all-time high at 6,920 on October 29th before the Fed decision, accompanied by a cross above the daily top Bollinger Band and a daily RSI exceeding 70. The subsequent decline to 6,800 on October 30-31 allowed technical indicators to reset, with the daily top Bollinger Band shifting up to 6,915 and the RSI falling back to approximately 60.

This represents a textbook technical correction that has created a favorable entry point for further upside. The rapid decline in overbought indicators, combined with the maintenance of uptrend support levels, suggests the dip will be bought by market participants. With technology CapEx remaining robust and the Fed maintaining its easing bias despite recent hawkish rhetoric, we expect new record highs ahead with an initial target of 7,000.

For the S&P 500, we are maintaining a bullish stance with a target of 7,000 and a stop-loss at 6,750. The current strategy remains trading long ahead of earnings while the S&P 500 is above 6,735. A move below this level would force a reassessment of market conditions. The recent pullback created a favorable entry point, with key technical support levels holding and momentum indicators resetting to healthier levels.

Fed Chair Powell's comments following the November rate cut introduced notable uncertainty regarding the December meeting. His statement that a further rate reduction in December is far from a foregone conclusion represented a significant shift in tone from prior guidance. Markets have adjusted accordingly, now pricing in just a 65% probability of a December rate cut.

However, we believe the Fed will ultimately deliver another 25 basis point cut in December. The ongoing government shutdown and resulting data blackout will force the Fed to rely on its stated priority of supporting the labor market. Furthermore, the Fed's decision to end quantitative tightening beginning December 1st signals a broader commitment to maintaining accommodative financial conditions. The dissent at the November meeting, with one member advocating for a 50 basis point cut, reinforces the dovish tilt within the committee.

While AI and related sectors continue to demonstrate strength, consumer-facing companies are experiencing notable pressure. Earlier this year, as consumer sentiment declined sharply, market participants saw a broad-based pullback in frequency across all income cohorts. Since then, the gap has widened, with low to middle-income consumers further reducing frequency.

Industry data suggests that consumers with household income below $100,000 represent approximately 40% of total sales for many retailers and restaurants, and this group is dining out less often due to concerns about the economy and inflation. A particularly challenged cohort is the 25- to 35-year-old age group, which is facing several headwinds including unemployment, increased student loan repayment, and slower real wage growth.

Despite these challenges, we continue to hear words like "resilient" and "healthy" when it comes to consumer spending during conference calls. The disconnect between consumer discretionary earnings estimates (which continue to rise) and actual stock performance suggests the market may be anticipating further deterioration that hasn't yet materialized in reported results.

WTI crude closed the week 0.85% lower at $60.85 per barrel, marking the third consecutive monthly decline. Despite a brief recovery following the US-China trade agreement, oil prices remain under significant pressure from multiple fundamental headwinds. The recent weakness comes despite the Federal Reserve's rate cut, typically a supportive factor for commodities, highlighting the strength of the bearish forces currently impacting crude markets.

The market attempted to rally back above $60.00 late in the week after briefly dipping below this psychologically important level. However, the bounce encountered resistance at $61.50 during intraday trade on October 31st, coinciding with rejection of approximately 55 resistance in the daily RSI. This technical setup suggests the recent relief rally may be setting up a lower high pattern before renewed weakness.

Supply-side dynamics continue to weigh heavily on crude prices despite OPEC+ production management efforts. Reports indicate that Saudi Arabia may reduce its December crude price for Asian buyers to multi-month lows due to ample supplies. This pricing action signals weakening demand from key Asian markets and intensifying competition among producers.

Additionally, Russian oil exports to top buyers China and India continue despite US sanctions, with new information suggesting OPEC+ is leaning toward a modest output boost in December. The eight OPEC+ members implementing production increases have already added more than 2.7 million barrels per day, approximately 2.5% of global supply. This incremental supply is entering a market already dealing with demand concerns.

Most significantly for the medium-term outlook, President Trump continues to advocate for lower energy prices and $2.00 per gallon gasoline. This political priority creates an implicit ceiling on crude oil prices, as the administration appears willing to encourage production increases and may resist any meaningful rally in energy markets. This represents a structural headwind that could cap upside attempts for an extended period.

From a technical perspective, WTI crude shows a bearish configuration. The daily Bollinger Bands have converged significantly, with the top band at $63.35 and the bottom band at $56.40, indicating a period of consolidation that typically precedes a directional move. Given the fundamental backdrop and the rejection of resistance levels, we expect this consolidation to resolve to the downside.

The path appears clear for a sustained break below $60.00 this week, potentially opening the door to a move toward $58.00. We watch $60.00 as the near-term pivot point to the downside. Therefore, we maintain a bearish stance on crude with a $58.00 target and $66.00 stop-loss. Fundamentally speaking, we believe the path is clear for sustained downside in oil prices with a drop below $60.00 coming as soon as this week.

Gold prices for December delivery closed the week 2.50% lower at $4,011 per ounce, retreating from recent record highs as investors reassessed the probability of continued Federal Reserve rate cuts. Despite the pullback, gold remains firmly above the critical $4,000 psychological level and continues to benefit from an exceptionally strong fundamental backdrop.

The decline came as Fed Chair Powell pushed back against market expectations for a guaranteed December rate cut, reducing the perceived probability from over 90% to approximately 65%. This shift in sentiment, combined with a rebound in the US Dollar Index to fresh three-month highs near 100.00, created near-term headwinds for gold. However, we view these moves as primarily technical adjustments rather than fundamental changes to the bullish thesis for precious metals.

The fundamental case for gold ownership remains robust across multiple dimensions. Central bank demand continues at historically elevated levels, geopolitical tensions persist globally, and real interest rates remain in negative territory despite recent nominal rate increases. Additionally, the ongoing government shutdown creates uncertainty about economic data and fiscal policy, traditionally supportive factors for gold as a safe-haven asset.

The recent strength in the US Dollar, while creating near-term pressure on gold prices, appears unsustainable from a technical perspective. The Dollar Index has reached a daily RSI of approximately 67 and crossed above its daily top Bollinger Band at 99.67, indicating overbought conditions. Without sufficient fundamental support for a sustained Dollar rally, we expect this strength to prove temporary, removing a key headwind for gold.

Gold's technical correction has actually improved the sustainability of the uptrend. Prices extended their decline to test the bottom end of the upward trending channel at $4,040 on October 27th, ultimately finding support at $3,901 on October 28th. This represented a direct bounce off approximately 45 support in the daily RSI, a level that has historically provided strong buying interest.

The pullback has allowed crucial technical indicators to reset to healthier levels. The daily RSI has declined nearly 40 points from overbought territory to approximately 51, creating substantial room for renewed upside. Meanwhile, the daily bottom Bollinger Band has shifted to $3,877, its highest level on record, suggesting that long-term support levels continue to rise. The daily top Bollinger Band remains elevated at $4,312, indicating significant upside potential from current levels.

We expect a sustained move above the $4,000 pivot point this week to open the path toward $4,100 and ultimately new record highs. The combination of improved technical positioning, strong fundamental support, and the likely temporary nature of Dollar strength creates a compelling setup for renewed gains in precious metals. Therefore, we remain bullish on gold with a $4,400 target and $3,950 stop-loss.

AppLovin represents a compelling opportunity in the AI-powered advertising technology space. The company reports third quarter 2025 earnings on Wednesday, November 5th after market close. Consensus expectations call for EPS of $2.37 on revenue of $1.34 billion, representing the high end of management's previously provided guidance range of $1.32 billion to $1.34 billion.

The fundamental story for AppLovin centers on the company's successful launch of self-serve capabilities for non-gaming advertisers on October 1st, combined with an ahead-of-schedule international expansion that began quietly in September. These strategic initiatives significantly expand AppLovin's addressable market beyond its core gaming vertical, opening access to billions of dollars in incremental advertising spending.

Industry checks indicate that AppLovin's AXON advertising platform pixel count has doubled since October 1st. This rapid adoption rate suggests strong early traction with non-gaming advertisers and international merchants. The company's proprietary AI technology for ad targeting and optimization appears to be resonating with a broader advertiser base than initially anticipated.

International audiences are attracting more merchants who ship globally, creating a network effect that should drive continued user and revenue growth. The combination of geographic expansion and vertical diversification positions AppLovin to capture share in the massive and growing digital advertising market, particularly as AI-powered ad targeting becomes increasingly important for ROI optimization.

Market expectations suggest revenue could exceed the high end of guidance based on the doubling of Axon pixels and international merchant growth. Analysis indicates that the probability of stronger-than-expected customer growth far exceeds the downside risk, emphasizing a compelling bull case with meaningful upside potential to consensus estimates.

AppLovin has demonstrated consistent positive reactions to earnings beats. When the company has exceeded consensus EPS estimates, the stock has gapped higher 79% of the time with an average move of 12.4% on the day of the report. More impressively, the stock has typically added an additional 4.5% by the end of the week following positive earnings surprises.

When AppLovin has both beaten estimates and provided positive forward guidance, the results have been even more dramatic. Under this scenario, the stock has gapped higher 100% of the time with an average immediate move of 18.2%, still maintaining an additional 4.5% gain by week's end. This pattern suggests significant upside potential if management delivers a beat-and-raise quarter, which appears increasingly likely based on recent data.

From a technical perspective, AppLovin stock currently trades with favorable setup characteristics. The daily technical indicators show room for upside momentum, with the recent pullback allowing the daily top Bollinger Band to shift up to $275.13 and the daily RSI to decline below 69. The overall trend continues to point toward $290.00 in our assessment.

Given the combination of strong fundamental momentum, positive market sentiment, favorable earnings patterns, and constructive technical setup, we believe AppLovin represents an attractive trading opportunity ahead of Wednesday's earnings release. The setup reflects an asymmetric risk-reward profile for those seeking exposure to potential upside.

Our current portfolio maintains a net long position in the overall stock market, reflecting our constructive outlook for equities in the current environment. We believe the combination of strong corporate earnings, accommodative Federal Reserve policy despite recent hawkish rhetoric, and robust technology sector capital expenditure plans supports further upside in major indices.

Within the equity portfolio, we hold long positions in three names that represent core themes we expect to drive market performance in the coming months. Specifically, we maintain positions in Nvidia, Arista Networks, and Astera Labs. These holdings reflect our conviction in the sustainability of AI infrastructure spending and the companies best positioned to benefit from this multi-year capital expenditure cycle.

The thesis for our AI infrastructure holdings has been significantly reinforced by recent earnings commentary from major cloud providers. Amazon's announcement of $34.2 billion in third quarter CapEx with plans to increase to $35.1 billion in Q4, Microsoft's similar spending of $34.9 billion, Meta's raised guidance to $70-72 billion for 2025, and Alphabet's increased estimate to $91-93 billion all point to sustained demand for AI servers, networking equipment, and specialized chips.

This massive and growing capital deployment creates a favorable backdrop for our holdings. Nvidia continues to dominate GPU supply for AI training and inference workloads. Arista Networks provides critical networking infrastructure for AI data centers. Astera Labs supplies essential connectivity components, particularly PCIe Gen 6 retimers, that pair with the latest generation of accelerators. The combination of these three positions provides diversified exposure to the AI infrastructure buildout across chips, networking, and connectivity.

We have not made any changes to these positions during the past week. The recent technical consolidation in large-cap technology stocks, including some volatility in our AI infrastructure holdings, appears healthy after the strong run from April lows. We view any near-term weakness as an opportunity to add to positions rather than a signal to reduce exposure, provided that the fundamental thesis remains intact based on continued CapEx commitments from hyperscale cloud providers.

For the S&P 500, we are maintaining our bullish stance with a target of 7,000 and a stop-loss at 6,750. The recent pullback to 6,800 following the Fed decision created a favorable entry point, with key technical support levels holding and momentum indicators resetting to healthier levels. We continue to view tariff-related headlines as noise and temporary buying opportunities rather than fundamental threats to the equity bull market.

In commodities, we remain bearish on WTI crude oil with a $58.00 target and $66.00 stop-loss. The fundamental backdrop for energy remains challenged by rising supply, political pressure for lower prices, and mixed demand signals. Conversely, we maintain our bullish stance on gold with a $4,400 target and $3,950 stop-loss, viewing the recent technical correction as a healthy reset that improves the sustainability of the precious metals uptrend.

For fixed income, we are bullish on the iShares 20+ Year Treasury Bond ETF with a $93.00 target and $85.00 stop-loss. Despite the recent backup in yields following the Fed decision, we expect the ten-year Treasury yield to fall back below 4.00% as markets price in continued rate cuts and the ongoing government shutdown forces the Fed to maintain its accommodative bias.

Overall, our positioning reflects confidence in the continuation of the equity bull market, supported by strong corporate fundamentals, accommodative monetary policy, and a constructive technical setup following recent consolidation. We remain focused on the AI infrastructure theme within equities while maintaining tactical positions in other asset classes to capture what we view as favorable risk-reward opportunities.

The divergence between AI-related sectors and consumer-facing companies represents a structural shift that extends beyond typical cyclical patterns. AI is fundamentally changing the economy, and it's not just making workers more productive—it's reshaping how consumers shop and how businesses operate. This transformation will likely accelerate in the coming quarters.

Department store retail sales have been in steady decline since 2000, reflecting the shift to online sales at companies like Amazon. Despite the 25-year decline, market commentary suggests that 80% to 85% of retail still lives in physical stores, but that equation is going to flip over time, and AI is going to only accelerate that transformation.

AI-powered shopping assistants are already delivering significant incremental sales. Companies have reported hundreds of millions of active customers using AI-powered features, with usage metrics showing dramatic year-over-year growth. These tools are making customers more likely to complete purchases and are fundamentally changing how commerce operates online.

Beyond changing the online shopping experience, AI is also transforming how retailers drive sales. Since the pandemic, retailers have leaned heavily into influencers and social media to drive traffic. However, this too is at risk of changing as AI becomes another massive information consumption platform shift, fundamentally altering the business model of the Internet.

Here's to your financial success,

Sincerely,

7AM Team

^{IMPORTANT DISCLAIMER}

^{This report represents analysis and opinion rather than investment advice or recommendations. All views expressed reflect our current thinking and may change as new information becomes available. Past performance does not guarantee future results.}

^{Readers should conduct their own research and consult with qualified financial advisors before making investment decisions. Market conditions can change rapidly, and positions discussed may not be suitable for all investors depending on individual circumstances, risk tolerance, and investment objectives.}

^{The information provided is believed to be accurate but is not guaranteed. We do not warrant the completeness or timeliness of information presented. Investing involves risk including possible loss of principal. There is no assurance that any investment strategy will achieve its objectives.}