Small investors appear to like what they see and have demonstrated this by leaning heavily on call options versus put options. The five-day CBOE equity-only put/call (P/C) ratio fell to 0.51 at the end of September, the lowest reading since July 2023 when it fell to 0.48. That was just when the stock market was peaking and ended up falling until the end of October. Since the low on September 26, the five-day P/C has climbed back to 0.57, which is still a fairly low level. However, the 21-day equity-only P/C ratio is still falling, which is bullish for stocks. Why? Heavy call buying versus put buying places a bid under prices. These P/Cs are low and warning that investors are leaning very hard on the bullish side of the market, are not worried about the downside, and are doing some hedging. But generally there is a turn in this action toward more put buying before the market falls back. So if the 21-day turns higher, that would be the signal that stocks might well experience some pain. We are watching this combination of P/C ratios very closely. While we think the bull market has room to run, the headlines stink and October can be a volatile month, especially during the election cycle. The market has survived wars, shipping issues, elections, and just about everything else over the decades -- and prices still trend higher over the long term. Near term, we think it's a good idea to consider some hedging just in case things turn ugly. We will act when the data and price action tell us to act. (Mark Arbeter, CMT)

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

For the first time since late 2023/early 2024, WTI (at around $71.30/barrel) is starting to look interesting for a number of reasons. Crude fell to $68 in December 2023, drifted sideways-to-higher until February, and then rallied to almost $88 by April. Since then, oil has been in what looks like an ABC or three-wave decline, dropping to a recent low of $65 on September 10. That was the lowest price since May 2023. After peaking in March 2022 just above $130, crude has been range trading between $64 and $95 for the past two years. Back in late 2023/early 2024, the Commitment of Traders (COT) data on oil became very bullish for the first time since the summer of 2023, with commercial hedgers having a relatively high net futures position and large speculators having a low net futures position. That same positioning has occurred over the past couple of weeks. In the very near term, $72 is important resistance as a jump above that price would represent a false breakdown, would break the bearish trendline off the peak since August 12, and would represent a 38.2% retracement of the decline since early July. There are many pieces of potential chart, moving-average, and retracement resistance from $72 to $80. The recent low of $65 is key chart support. Sentiment toward WTI is close to pessimistic, another potential contrarian positive. One of the few negatives is that October and November are the worst two months for oil when looking back over 30 years. Still, seasonality historically is supposed to be bullish from March to September -- and it certainly wasn't in 2024. (Mark Arbeter, CMT)

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.