Good evening friends and welcome to another recap of today’s markets.

For those who are new to The Smart Canvass Journal, I publish these reports to share my observations of the financial markets, the technical conditions influencing my trading decisions and the strategies I use to manage capital within my Strategic Capital Systems (SCS) framework. My goal is to offer a practical perspective on investing and trading, drawn from my own experiences, successes and occasional setbacks.

I also want to encourage those who enjoy these reports but haven’t yet subscribed to join me. My articles will always be free to subscribers. I have no intention of charging for access to my market commentary or introducing paid subscription tiers. I believe sharing knowledge and experience encourages better discussions and helps us become more informed investors.

Whether you’re an experienced trader, a long-term investor or someone simply interested in understanding how markets work, I appreciate you spending a few minutes of your evening with me. Your questions, observations and different perspectives are always welcome.

Finally, to those of you who have already subscribed, please accept my sincere appreciation. Your interest, encouragement and willingness to spend a few minutes reading my work mean a great deal to me. You are the sole reason I continue to write and share these experiences. - Dave Eberhart

Now, let’s take a look at what happened on Wall Street today.

Market Overview | Tuesday November 3, 2026

Monday belonged to value and today belonged to growth. In the span of two trading sessions investors reversed their preferences, returning to semiconductors, memory and selected technology companies while many of yesterday’s stronger sectors retreated. The whip-saw activity is deeply entrenched making it very choppy to navigate.

The Nasdaq 100 advanced approximately 0.7%, the S&P 500 gained 0.4% and the Russell 2000 finished modestly higher. The Dow Jones Industrial Average declined approximately 0.4%, while the VIX eased 1.9% to 20.74.

Source: Koyfin | 11/03/2026

Technology led the eleven S&P sectors with a gain of 1.3%, followed by communications at 1.2% and industrials at 1.0%. Real estate managed a fractional gain, while the remaining seven sectors declined. Consumer staples and materials were the weakest performers, each losing approximately 2.1%.

Source: Koyfin | 11/03/2026

The difference between Monday and Tuesday becomes even more interesting when we examine growth versus value.

Today mid-cap growth outperformed the S&P 500 by 0.93% followed by large-cap growth at 0.81% and small-cap growth at 0.62%. Conversely, large-cap value underperformed by 0.88%, mid-cap value by 0.69% and small-cap value by 0.56%.

Source: Koyfin | 11/03/2026

This reversal suggests investors are continuing to reposition capital rather than committing broadly across the equity market.

Election day adds more complexity and consideration as investors were evaluating the midterm elections alongside economic data and corporate earnings. JOLTS job openings reportedly reached a four-month high contributing to higher Treasury yields while factory orders exceeded expectations. Those developments are important to follow because interest rates, inflation expectations and corporate earnings remain important influences on equity valuations.

However, what interests me most isn’t simply that technology may have recovered in the near term. It’s where investors chose to commit capital and whether that buying interest can develop into something more sustainable. So far, it hasn’t…yet.

Market Breadth

Today’s market breadth provided a considerably less encouraging picture than the major growth indexes. This is beginning to sound more like a broken record, with the needle stuck on a skip. But, regardless, I always take a look at what chapter in the book the market story has opened up for me to read.

Advancing stocks represented 45.0% of the market, or 2,525 securities, while declining stocks accounted for 51.3%, representing 2,877 securities. That’s a meaningful reversal from Monday, when advancing stocks outnumbered declining stocks by 51.9% to 44.8%. The new-high/new-low figures also remained unfavorable. Only 110 stocks recorded new highs, compared with 320 registering new lows. New lows represented 74.4% of the combined total.

Participation relative to the major moving averages deteriorated slightly as well. Just 38.9% of stocks finished above their 50-day moving averages, while 39.9% remained above their 200-day moving averages. On Monday, those readings were 39.6% and 40.3%, respectively.

Finally, the short-term bull/bear gauge improved to 63% bullish and 37% bearish, an encouraging change in sentiment. However, that improvement has not yet translated into stronger participation across the broader market.

I continue to look for improvement in the percentage of stocks trading above their intermediate- and longer-term moving averages, fewer new lows and more consistent participation across sectors. Until those conditions improve, I remain reluctant to interpret a positive session in the major indexes as confirmation of a healthier overall market.

RMII Composite Index

The RMII Composite Index remains the heavy lifter in my assessment of broader market participation.

For readers unfamiliar with the indicator, the RMII combines RSP+MDY+IWM+IWC, representing equal-weight large-cap, mid-cap, small-cap and micro-cap stocks. Its purpose is to provide a broader perspective than capitalization-weighted indexes alone. Tuesday’s RMII advanced 0.22%, finishing at 1,352.51.

Source: Trading View | 11/03/2026

The composite reached an intraday high of 1,364.37 once again moving above the 50D resistance area before retreating. This marks the second consecutive session in which the RMII has tested this area without sustaining a breakout.

There are encouraging developments in the shorter-term technical structure. The composite remains above its 8-day EMA at 1,347.06, its 13-day EMA at 1,344.43 and its 21-day EMA at 1,344.17. The alignment of these moving averages has improved, suggesting buyers are beginning to regain some control over the shorter-term trend.

RSI finished near 53, while the momentum histogram remained positive at approximately 4.24. However, the RMII remains below its 50-day moving average at 1,356.54 and its 150-day moving average at 1,361.21. Those averages reinforce the resistance area that has repeatedly challenged the recovery.

My interpretation remains unchanged over the last several weeks. The RMII is undergoing constructive short-term technical repair, but the intermediate-term recovery has not yet been confirmed. I would like to see the composite reclaim and hold the 1,358–1,360 area, preferably accompanied by improving breadth before becoming more constructive about expanding into intermediate-term trading opportunities. For now, the market has made progress, but it hasn’t completed the work I need to see.

Sector and Industry Leadership

Semiconductors and memory-related companies attracted renewed buying interest Tuesday following Monday’s substantial declines. DRAM advanced approximately 2.85%, while the VanEck Semiconductor ETF, SMH, gained 2.01% after losing the 200D SMA. The ETF is also substantially below its 8-day EMA at $534.57, its 13-day EMA at $543.40 and its 21-day EMA at $553.52. The RSI finished near 37.9 reflecting a market that remains technically weak despite today’s recovery.

The nearby $520–$525 area deserves attention as an initial recovery objective. Beyond that the short-term moving averages present additional resistance. On the downside, the recent $503–$506 area remains an important reference.

Source: Trading View | 11/03/2026

Software and cybersecurity also participated, although their gains were more modest. HACK advanced 0.99%, SKYY gained 0.93%, IGV increased 0.77% and CIBR added 0.48%. The AIQ artificial intelligence ETF finished approximately 0.65% higher, while QQQ gained 0.62%.

Source: Trading View | 11/03/2026

These results demonstrate that buyers returned to several industries that had experienced considerable selling pressure however, I’m not convinced we see the follow through until the evidence tells me otherwise. The QQQ is still locked between two keys areas of support, the 200D SMA and resistance under the $700 zone.

These charts suggest the technology recovery is developing from technically oversold conditions rather than from an established uptrend thus, I want you to view this as important when considering new entries. Be careful if you want to take a bite at the apple. Yes, the return of buyers is encouraging, but sustained progress through resistance and improving momentum will be necessary before I become more confident in the durability of the recovery.

Earnings Spotlight

Corporate earnings continue to demonstrate that investors are becoming increasingly selective about the companies they’re willing to reward. Palantir declined approximately 1.7% despite reporting substantial revenue growth and raising its outlook. Its third-quarter revenue reportedly increased 96%, while management projected fourth-quarter revenue near $2.65 billion.

Apple also experienced selling pressure, declining nearly 2% amid concerns about its margin outlook.

Shopify retreated approximately 9% despite reporting revenue growth of 32% and exceeding revenue expectations, as investors evaluated other aspects of the company’s operating performance.

Suffice to say, investors are no longer responding uniformly to strong headline revenue growth. Forward guidance, margins, capital requirements and valuation expectations are becoming increasingly influential.

Yet, there were positive reactions elsewhere. Fabrinet advanced approximately 15% following better-than-expected earnings and the authorization of a $103 million share repurchase program while Grab Holdings gained approximately 9% after exceeding quarterly revenue expectations and increasing its full-year revenue and adjusted EBITDA forecasts.

These examples demonstrate that investors remain willing to reward companies delivering results that exceed expectations. However, the standards appear to be increasingly company-specific.

For us, the response to earnings matters at least as much as the reported numbers. A company can deliver impressive growth and still experience selling pressure when expectations have moved ahead of the business. The price action ultimately determines whether an opportunity meets our trading requirements.

SCSC Portfolio Actions

The broader market environment continues to justify a selective approach to capital deployment as I remain conservative while maintaining a reduced 0.25% fractional Kelly risk allocation for new positions. The ongoing uncertainty in market breadth and the incomplete technical recovery across several important indexes warrants such bias towards risk-off. Only trades with momentum, backed by sector strength, such as the recent one month performance in the XLV, XLY, XLE and XLP have been getting my attention.

Source: Trading View | 11/03/2026

Monday’s completed INO trade provides a recent example of how I approach realized gains and changing risk considerations. The position was closed in two transactions, with the first half realizing a 107.14% gain and the remaining half realizing 152.38%. The combined realized return was approximately 129.76%, representing 9.09R across the two exits during a holding period of just 12 calendar days. INO remains on the watchlist for potential future opportunities.

The broader principle remains unchanged. I want to harvest capital when circumstances justify doing so, protect existing gains where appropriate and avoid allowing short-term market enthusiasm to override the system’s risk-management requirements and Tuesday’s market recovery does not independently justify increasing my risk allocation. That decision will depend on improving market conditions and the quality of the opportunities presented.

SCS Open Positions

Existing SCS positions continue to be evaluated individually rather than through a blanket assumption that a positive or negative index session determines their prospects. The recent additions of GH and CRWD remain part of the active portfolio review, alongside other positions requiring continued technical evaluation.

I continue to distinguish between positions intended for shorter-term trading and those that have earned consideration for longer holding periods.

Reaching an initial 1R objective always provides an opportunity to harvest a portion of the position and protect the remainder at breakeven plus 1%, where appropriate under the trade-management process. However, extending a holding period requires more than a profitable entry. I want to see improving relative strength, constructive moving-average alignment and evidence that buyers are supporting the stock through normal periods of consolidation.

The RMII remains an important part of that evaluation because a healthier broader market can improve the environment for holding positions beyond the initial trading objective. Until the technical evidence becomes more convincing, preserving my capital deployment and flexibility remains a priority.

SCS Watchlist

Technology will remain an important focus as the market digests this week’s earnings and reassesses the AI infrastructure investment cycle. AMD, ANET, NVDA and PLTR remain names of interest for me, particularly as we evaluate earnings, forward guidance and the sustainability of AI-related demand.

Cybersecurity also deserves continued attention. CRWD, PANW, OKTA and ZS remain on my radar for evidence of improving relative strength and renewed buying interest.

Healthcare and biotechnology remain relevant despite Tuesday’s sector weakness. I’ll continue monitoring LLY, MRNA, NTRA, CRL and TMO for constructive technical developments and opportunities that may emerge independently of the major technology indexes.

Within consumer-oriented industries, ANF, SN, TJX, ROST and WMT remain candidates for continued observation.

The objective isn’t to chase whichever industry led the previous session. It’s to identify where relative strength is developing, whether buyers are defending meaningful support and whether the broader market environment supports the risk associated with a new position.

Closing Perspective

Monday’s market favored value while technology struggled. Tuesday reversed that relationship with growth and semiconductors recovering while several value-oriented and defensive sectors declined. Both sessions offered opportunities to observe how quickly investor preferences can change.

What hasn’t changed is the need for broader technical confirmation. The RMII remains below an important resistance area despite two consecutive intraday attempts to move higher. Market breadth continues to show more declining stocks than advancing stocks, and fewer than 40% of securities are trading above their 50-day and 200-day moving averages. Meanwhile, QQQ and SMH are attempting to recover from technically weakened conditions but, more intensive work is required.

I don’t view these developments as reasons to abandon the market or assume the recovery will fail. I view them as reasons to remain disciplined while the evidence develops. For SCS, patience doesn’t mean inactivity. It means managing the positions already held, recognizing opportunities when they meet our requirements and avoiding unnecessary exposure when conditions remain uncertain.

The market will eventually provide clearer evidence of where leadership is developing. Until then, I’m comfortable allowing the charts, breadth statistics and individual trading setups to guide the decisions.

Finally, to those of you who have already subscribed, please accept my sincere appreciation. Your interest, encouragement and willingness to spend a few minutes reading my work mean a great deal to me. You are the reason I continue to write and share these experiences.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge.

Disclaimer | Educational and Informational Purposes Only

The Smart Canvass Journal and Strategic Capital Systems (SCS) are published solely for educational, informational and general discussion purposes.

I am not a licensed financial advisor, registered investment advisor, broker-dealer or investment professional. Nothing published in this journal, shared through the SCS Discord Community or discussed in related communications should be interpreted as personalized financial, investment, tax or legal advice, or as a recommendation to buy, sell or hold any security.

The investment strategies, trading methods, market observations and portfolio activities discussed reflect my personal experience, research, opinions and financial objectives. I may hold positions in securities mentioned in my publications, and those positions may change without notice. My investment decisions are made according to my own circumstances, risk tolerance and objectives, which may differ substantially from those of individual readers.

Investing and trading involve substantial risk, including the possible loss of some or all invested capital. Certain investments, particularly speculative securities, small-cap biotechnology companies and other highly volatile assets, may involve additional risks such as limited liquidity, significant price fluctuations, regulatory uncertainty and capital dilution. Stop-loss orders and other risk-management techniques do not guarantee protection against losses, particularly during overnight trading, market gaps or periods of extreme volatility.

Any performance results, historical returns, trade examples or portfolio discussions are provided for illustration and education. Past performance does not guarantee future results, and no trading strategy can eliminate investment risk or ensure profitability.

Readers are solely responsible for their own investment decisions and should conduct independent research and consult qualified financial, tax or legal professionals when appropriate before committing capital.

The purpose of The Smart Canvass Journal is to share experience, encourage informed discussion and promote thoughtful risk management—not to provide investment recommendations or manage anyone else’s money.

Good evening, friends and welcome to another recap of today’s markets.

For those who are new to The Smart Canvass Journal, I publish these reports to share my observations of the financial markets, the technical conditions influencing my trading decisions and the strategies I use to manage capital within my Strategic Capital Systems (SCS) framework. My goal is to offer a practical perspective on investing and trading, drawn from my own experiences, successes and occasional setbacks.

I also want to encourage those who enjoy these reports but haven’t yet subscribed to join me. My articles will always be free to subscribers. I have no intention of charging for access to my market commentary or introducing paid subscription tiers. I believe sharing knowledge and experience encourages better discussions and helps us become more informed investors.

Whether you’re an experienced trader, a long-term investor or someone simply interested in understanding how markets work, I appreciate you spending a few minutes of your evening with me. Your questions, observations and different perspectives are always welcome.

Now, let’s take a look at what happened on Wall Street today.

Market Overview | Monday November 2, 2026

We began the month this morning with an encouraging futures market but the optimism surrounding a potential technology rebound didn’t survive the regular trading session. The Nasdaq 100 declined approximately 1.4%, the S&P 500 lost 0.5% and the Russell 2000 finished nearly unchanged, while the Dow Jones Industrial Average managed to eek out a 0.4% gain. The VIX increased 10.9% to 21.54 reflecting growing uncertainty ahead of Tuesday’s midterm elections.

Source: Koyfin | 11/02/2026

In this morning’s note to subscribers I expressed concern that the opening strength might prove to be a dead-cat bounce. Today’s price action did little to change that assessment particularly across technology and semiconductor stocks. The Nasdaq 100, QQQ and SMH remain under considerable technical pressure with important moving averages overhead and selling continuing into the close.

The energy sector also faced substantial pressure as crude oil declined sharply amid reports of possible diplomatic progress between the United States and Iran. WTI crude fell approximately 8.0%, Brent declined 8.3% and the Energy sector finished down 3.9%. Healthcare, another area I’ve been monitoring for continued leadership, finished nearly unchanged at −0.1%.

What makes today’s session interesting is that the weakness was far from universal.

Market Breadth

Seven of the eleven S&P 500 sectors advanced despite the decline in the headline S&P 500 index. Consumer Discretionary led with a 2.4% gain, followed by Financials at 1.8%, Materials at 1.7%, Consumer Staples at 1.6% and Industrials at 1.4%. Technology declined 3.0% and Energy lost 3.9%, accounting for the most significant sector weakness.

Source: Koyfin | 11/02/2026

Advancing stocks represented 51.9% of the market compared with 44.8% declining. That’s an improvement from Friday’s selling pressure, although the underlying technical picture remains less encouraging. Only 39.6% of stocks are trading above their 50-day moving averages, while 40.3% remain above their 200-day averages. New 52-week lows also outnumbered new highs by 372 to 187.

Source: Koyfin | 11/02/2026

The relative-strength comparison adds another important observation. Mid-cap value outperformed the S&P 500 by approximately 1.66% while mid-cap core, small-cap value and large-cap value also demonstrated relative strength. Large-cap growth and small-cap growth lagged.

Altogether, there was meaningful rotation taking place beneath the major indexes but I wouldn’t characterize today action as a healthy, “broad-based” recovery. The market is continuing to work through considerable technical damage, especially among growth-oriented equities.

RMII Composite Index

The RMII, my equal-weight composite of RSP, MDY, IWM and IWC finished at 1,349.93, advancing 0.39% on the session.

Source: Trading View | 11/02/2026

I consider the RMII my heavy lifter inside of SCS when evaluating broader market participation. Today’s positive performance, while the Nasdaq declined sharply, is precisely why I rely on this composite rather than allowing the capitalization-weighted indexes to determine my entire assessment of market conditions.

The RMII closed above all of it’s short term trend EMAs, 8D, 13D, and 21D as well as it’s 200-day moving average at 1,334.71. However, the 50-day moving average at 1,357.72 and the 150-day moving average at 1,360.31 continue to present overhead resistance. This is significant to how we trade inside the SCS framework. Until we can trade above the 50D and hold, I expect to selectively swing trade short term opportunities. Today’s intraday high of 1,364.70 briefly cleared that resistance area, but the composite was unable to hold those gains. The RSI finished at 51.96, while the momentum histogram remained positive at 4.37.

I see the RMII is showing better underlying participation than the Nasdaq, but today’s rejection near resistance tells me we haven’t yet established a convincing breakout. I’d like to see the composite reclaim and hold the 1,358–1,360 area before becoming more constructive and expanding into intermediate-term trading opportunities, where improving market conditions would give us greater confidence to hold positions beyond 30 days rather than concentrating primarily on shorter-term selective swing trades.

Technology and Sector Leadership

Technology remains the most concerning part of the market. QQQ declined 1.36% and closed at 681.13, only slightly above its 200-day moving average near 679.82. Break the 200D and we could see another -3% decline before we retest the 660 area, last tested July 29 of this year. The RSI stands at approximately 32 reflecting significant weakness. Equally troubling, the Nasdaq 100 also finished near its 200-day moving average with its RSI around 33.

Source: Trading View | 11/02/2026

Semiconductors remain under similar pressure. SMH declined 2.76% to 508.07 dangerously below its 200-day moving average near 520.06. Its RSI is approximately 34, and the sector has yet to demonstrate a convincing reversal. $503 is not much room before the bottom can fall in the semi space. The 250D SMA is ~$488, another -4% decline.

Source: Trading View | 11/02/2026

Cybersecurity didn’t catch the bid I was hoping to see this morning. HACK declined 4.61% and CIBR lost 4.27%, considerably worse than the broader market. Software, represented by IGV, also declined 2.24%.

These are not encouraging developments for the technology complex. Although oversold conditions may eventually produce a rebound, I don’t consider an oversold reading sufficient justification to initiate new positions without confirmation from price action and market participation.

Portfolio Actions | Inovio Pharmaceuticals (INO)

I completed the sale of my INO position today, closing the first half at a 107.14% gain and the remaining half at 152.38%. The combined realized return was 129.76%, representing approximately 9.09R across the two exits. The entire investment lasted just 12 calendar days.

My decision to exit was influenced by concerns about INOVIO’s future capital requirements as the company prepares for the potential manufacturing, commercialization and distribution of its RRP treatment. Unless management can secure alternative financing, a secondary stock offering remains a possibility, potentially diluting existing shareholders and putting pressure on the share price.

I have no confirmation that an offering is forthcoming, but after more than doubling my investment in less than two weeks, I was comfortable taking the profits rather than accepting additional financing risk. For now, INO remains on my watchlist, and I’ll continue monitoring its share price and financing developments for another opportunity.

SCS | Open Positions and Risk Management

With the midterm elections tomorrow, elevated volatility and continued weakness across technology, I’m maintaining a cautious approach toward new commitments. The SCS risk budget for new trades remains at 0.25% and I see little reason to increase exposure simply because individual stocks have experienced significant declines.

Existing positions continue to be evaluated individually according to their respective trade plans, technical conditions and risk profiles. A weak market environment doesn’t automatically require every position to be liquidated, but it does require greater attention to the risk already being carried.

Earnings Spotlight | AI & Technology Face Their Next Test

Apple and Palantir delivered earnings beats tonight but their initial after-hours reactions reinforced an important distinction between strong corporate performance and investor willingness to buy technology stocks.

Apple reported quarterly revenue of approximately $114.5 billion, slightly ahead of expectations while Palantir delivered a much more substantial growth story with revenue increasing approximately 96% year over year to $2.31 billion. Palantir also raised its full-year outlook supported by accelerating demand for its enterprise AI platforms. Yet, neither report immediately resolved the selling pressure I’ve been seeing across the technology sector.

Apple’s initial after-hours muted increase eventually turned down and Palantir’s relatively modest early advance, also turned down suggesting investors remain selective even when companies deliver favorable results.

Tuesday brings another important round of earnings with AMD, Arista Networks (ANET) and Astera Labs (ALAB) expected to report. Together, these companies provide a useful examination of the AI investment cycle. AMD will offer insight into demand for AI accelerators and the competitive semiconductor landscape. Arista will provide another perspective on cloud networking and data-center infrastructure, while Astera Labs will help assess demand for the connectivity technologies supporting increasingly complex AI systems.

All of these remain key pieces to the demand for AI related names. Strong results and constructive guidance from these companies could help restore confidence in the AI infrastructure trade, particularly if semiconductor and networking stocks respond positively. Conversely, disappointing guidance, margin pressure or signs of slowing customer investment could extend the technology correction and place additional pressure on the Nasdaq.

What matters most to SCS is not simply whether these companies beat earnings estimates, but whether investors respond by committing capital. With the RMII showing better underlying participation than the Nasdaq but still encountering resistance around 1,358–1,360 a sustainable technology recovery would be far more convincing if supported by improving breadth and renewed leadership across semiconductors, software and AI infrastructure.

For now, the long-term AI investment thesis remains compelling, but the market has yet to provide sufficient technical confirmation that the current correction has run its course.

Closing Thoughts | Looking Ahead

Heading into Tuesday my attention remains on Healthcare, Energy and Cybersecurity, although today’s performance reinforced the importance of separating sectors showing actual relative strength from those I simply expect or hope will recover.

I’ll be watching whether Healthcare can maintain its relative resilience, whether Energy stabilizes following today’s sharp decline in crude oil and whether Cybersecurity can attract buyers after another difficult session.

The RMII will remain central to that assessment. A sustained move above the 1,358–1,360 resistance area would be encouraging, while a failure to maintain the short-term moving averages around 1,343–1,346 would warrant additional caution. The 200-day moving average near 1,335 remains an important longer-term reference.

For now, the market continues to reward select areas outside large-cap growth while punishing technology. Until the indexes and underlying participation begin moving in the same direction, I intend to remain selective, manage existing positions and let the market provide the evidence before committing additional capital.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge - Dave

Disclaimer | Educational and Informational Purposes Only

The Smart Canvass Journal and Strategic Capital Systems (SCS) are published solely for educational, informational and general discussion purposes.

I am not a licensed financial advisor, registered investment advisor, broker-dealer or investment professional. Nothing published in this journal, shared through the SCS Discord Community or discussed in related communications should be interpreted as personalized financial, investment, tax or legal advice, or as a recommendation to buy, sell or hold any security.

The investment strategies, trading methods, market observations and portfolio activities discussed reflect my personal experience, research, opinions and financial objectives. I may hold positions in securities mentioned in my publications, and those positions may change without notice. My investment decisions are made according to my own circumstances, risk tolerance and objectives, which may differ substantially from those of individual readers.

Investing and trading involve substantial risk, including the possible loss of some or all invested capital. Certain investments, particularly speculative securities, small-cap biotechnology companies and other highly volatile assets, may involve additional risks such as limited liquidity, significant price fluctuations, regulatory uncertainty and capital dilution. Stop-loss orders and other risk-management techniques do not guarantee protection against losses, particularly during overnight trading, market gaps or periods of extreme volatility.

Any performance results, historical returns, trade examples or portfolio discussions are provided for illustration and education. Past performance does not guarantee future results, and no trading strategy can eliminate investment risk or ensure profitability.

Readers are solely responsible for their own investment decisions and should conduct independent research and consult qualified financial, tax or legal professionals when appropriate before committing capital.

The purpose of The Smart Canvass Journal is to share experience, encourage informed discussion and promote thoughtful risk management—not to provide investment recommendations or manage anyone else’s money.

Wall Street entered the final week of October showing encouraging signs of improvement. Monday through Wednesday produced three consecutive positive sessions across the major indexes, accompanied by improving market breadth and a gradual recovery in technical conditions. By Thursday, the rotation into smaller companies and value stocks was becoming increasingly apparent while large-cap technology was losing momentum, other areas of the market were attracting capital.

Friday changed the tone considerably. The Nasdaq 100 declined 3.5%, followed by the S&P 500 at 1.8%, the Russell 2000 at 1.7% and the Dow Jones Industrial Average at 1.1%. Semiconductor, software and AI-related companies experienced particularly aggressive selling. Despite that difficult final session, the weekly results tell a more complicated story.

Source: (Koyfin 11/01/2026)

The Russell 2000 was the only major index to finish the week higher. Its relative strength suggests that investors were willing to allocate capital beyond the largest technology companies, even as concerns surrounding earnings, valuations and AI infrastructure spending increased and the sector results support that conclusion.

Nine of the eleven S&P sectors finished the week positive. Healthcare led with a gain of 3.12%, followed by Materials at 2.79%, Utilities at 2.04% and Consumer Discretionary at 2.02%. Industrials, Real Estate, Consumer Staples, Financials and Energy also advanced.

Source: (Koyfin 11/01/2026)

Only Technology, declining 2.03% and Communication Services, falling 5.32%, finished the week in negative territory. The weakness in the major capitalization-weighted indexes was heavily influenced by a relatively concentrated group of large companies rather than uniform selling across every sector.

Source: (Koyfin 11/01/2026)

Factor Performance

Factor performance told a similar story. Small-cap stocks outperformed the S&P 500 by approximately 2.1 percentage points, high-dividend-yield stocks by 2.0 points and value stocks by 1.0 point. Growth and momentum underperformed by approximately 1.1 and 1.3 points respectively. My point to all this is regardless of Friday’s selling, this has demonstrated that the rotation we’ve been monitoring for a few weeks still remains vulnerable.

As November begins, I’ll be watching whether the rotation into smaller companies, value and defensive sectors continues or whether Friday’s weakness develops into a broader deterioration in market participation. The difference will influence how aggressively I deploy new capital.

The RMII | Recovery Meets Resistance

The RMII Composite Index remains one of my primary tools for evaluating the condition of the broader market. Constructed from equal-weight exposure to the S&P 500, S&P MidCap 400, Russell 2000 and Russell Microcap indexes, the RMII provides a broader perspective on market participation than the major capitalization-weighted benchmarks alone.

Following a difficult September and early October, the RMII established a low near 1,311.54 and began developing a recovery structure. The index reclaimed its short-term exponential moving averages and subsequently moved above its 200-day simple moving average. Thursday’s session was particularly encouraging with the RMII advancing 1.06% to 1,363.33 and reclaiming both its 50-day and 150-day moving averages.

Yet, Friday interrupted that progress with no fanfare. The RMII declined 1.37% to close at 1,344.70, surrendering Thursday’s breakout and falling back below the intermediate-term moving averages. Interestingly, the story on the index includes a week closing up approximately 1.2% above its previous Friday close. The recovery attempt has weakened, but it has not yet been completely invalidated.

Friday’s close was almost identical to the 8-day EMA. The 13-day and 21-day EMAs remain immediately below, creating a narrow area of potential support between approximately 1,342 and 1,344. The 200-day SMA near 1,334 represents the next important reference if short-term support fails.

Above the market, the 50-day and 150-day moving averages are closely aligned near 1,359–1,360. Reclaiming that area would provide renewed evidence that the recovery is gaining strength.

Momentum also deserves attention. RSI declined from 58.23 Thursday to 49.88 Friday. The MACD histogram remains positive at 4.33, although its improvement slowed during the final session.

Adding some positivity to the analysis, the developing series of higher lows since mid-October remains worth monitoring particularly as the closing price remains inside the rising trend channel visible on the RMII daily chart. I see two reasonable possibilities heading into November, so let’s call it a binary outcome.

The first is that Friday represented a sharp retest of short-term support within an emerging recovery. Holding the 1,342–1,344 area and eventually reclaiming 1,360 would strengthen that interpretation.

The second is that Thursday’s failed breakout marks the beginning of another deterioration. A sustained break below 1,334 would weaken the recovery structure and raise the possibility of revisiting October’s lows. But, for now the evidence remains mixed. I see no reason to anticipate either outcome before the market provides confirmation heading into the first week of the month.

Market Sentiment | Fear Remaining

The CNN Fear/Greed Index finished October 30 at 26, placing investor sentiment in the Fear category. That represents a meaningful improvement from the Extreme Fear reading of 16 one week earlier, although Friday’s selling pulled the index down from Thursday’s reading of 34.

Source: (CNN - 11/01/2026)

The ten-point weekly improvement suggests that investor confidence had been recovering before the final session disrupted that progress. I consider the sentiment a secondary indicator rather than an independent reason to initiate positions. Extreme Fear can accompany attractive opportunities, but it can also persist while market conditions continue deteriorating. Similarly, improving sentiment means considerably more when supported by strengthening market breadth and constructive price action.

The CNN Fear/Greed Index measures considerably more than investor sentiment at face value. Its underlying components, including market momentum, stock price strength, market breadth, volatility, put/call options activity, safe-haven demand and junk bond demand, provide insight into how investors are positioning themselves across equity, options and credit markets.

The RMII and Fear & Greed Index can exhibit meaningful positive correlation during broad risk-on and risk-off periods, but their differences are equally important. For November, I want to see improving investor confidence supported by strengthening market breadth, healthier risk appetite and constructive price action across the RMII. A rising sentiment reading alone isn’t sufficient. I want evidence that meaningful progress is taking place beneath the major indexes, rather than another recovery driven primarily by a handful of large-cap companies.

SCS Portfolio | October’s Decisions and Results

I share these results, both the successes and the disappointments because I believe transparency is important, particularly when discussing a strategy I’ve developed and continue to refine. I don’t pretend to have all the answers and I’m certainly not immune to making mistakes. I’ve had my share of both and I believe there’s just as much to learn from what doesn’t work as there is from what does. Those who have been with me for any length of time, know my ‘uber-conservative approach’ to trade management. They also know how at times I can spend weeks or months in purgatory with trades that I allowed to beat me. But, I don’t hide them. Instead, I try to learn from them…when I don’t allow myself to think I’m better than Wall Street.

SCS | October Review
October was a challenging month for SCS with the portfolio recording a negative realized result, although most of that performance was the decisions I made to begin tax-loss harvesting and reduce exposure in positions that have been a persistent drag on the RWAR (Risk Weighted Average-R).

ASTS and LUNR are two of those positions, both having experienced substantial declines from their original entries while remaining in the portfolio well beyond their intended trading horizons. Rather than continue carrying the original exposure, I began trimming these holdings recognizing the losses for tax purposes while reducing their influence on the portfolio’s overall risk profile.

That doesn’t mean I’ve adopted a policy of automatically liquidating every position that reaches −1R or worse. In fact, we carried several positions from 2025 into 2026 without trimming them at all and some subsequently recovered and generated profits.

I’ve seen enough of these situations to appreciate that patience can sometimes produce a better outcome than selling into weakness, particularly when the underlying investment case remains intact. Of course, the opposite can also happen, and holding a declining position carries its own risks. That’s why I continue evaluating these names individually taking into consideration their technical condition, prospects for recovery, portfolio exposure and whether the capital might be better deployed elsewhere.

(October 2026 Closed Trades)

There were also some favorable outcomes during October. DDOG delivered a profitable exit approaching 2R while MRNA generated gains across multiple transactions. NOW was another example of the trade-management process working as intended. After reaching the initial 1R objective, I harvested 50% of the position and moved the remaining shares into the LTH sleeve with protection at BE+1%. The runner subsequently exited before the substantial earnings-related decline that followed. Not every trade will develop that favorably, but the ability to harvest profits while maintaining an opportunity for further appreciation remains an important part of the SCS process.

YTD | R-Distribution

Looking at the larger picture, the 2025-2026 R-distribution through October includes 140 closed transactions in 2025 with +60% closing above breakeven and 32% achieving 1R while 177 closed transactions in 2026 have an approximate +76% finishing above breakeven and more than 43% reaching at least 1R.

(May 2025-Current)

The largest concentration of profitable exits occurred between 1R and 2R which is consistent with the SCS harvesting process. However, these figures require some perspective because partial exits from the same trade can create multiple transactions and a high percentage of profitable exits doesn’t necessarily translate into an equally impressive campaign-level return. Position sizing, realized R and the occasional loss beyond initial risk all contribute to the final result.

(May 2025 - Current R- Distribution Bar Chart)

October serves as a reminder that the distribution of winners and losers matters just as much as the percentage of profitable transactions.

Strategic Ownership | One Mind: Two Missions

From the inception of Strategic Capital Systems in May 2025, I’ve maintained a philosophy that I call One Mind: Two Missions. The first mission is to generate and harvest capital through active trading, while the second is to use a portion of those profits to establish long-term ownership in businesses I believe have the potential to appreciate substantially over time. The two objectives are connected, but the way I evaluate and manage them is intentionally different.

The Strategic Ownership portfolio, put together this year (January 2026) after defining strategic AI names, now combines the original AI investments purchased with profits generated during the first SCS trading cycle in 2025 with the additional Strategic Ownership positions acquired through subsequent capital deployment in 2026.

(Note: As of Market Close October 30, 2026)

Unlike the active trading sleeves, these holdings aren’t managed according to short-term R-ladders or the same tactical stop requirements. They’re selected for their business prospects, competitive positioning and potential to participate in longer-term economic and technological developments.

At the end of October, the combined Strategic Ownership portfolio was showing an unrealized gain of approximately 4.57%, although performance varied considerably in this volatile October with my individual holdings. AMD, CRWD, PLTR and CRM are among the stronger performers while several other positions remained below their respective entry prices. That’s not particularly surprising given the different industries, stages of development and market conditions affecting these companies.

The distinction between the two missions becomes especially important during periods like October. The active sleeves are designed to harvest opportunities while managing risk through an established trading process, whereas my SCS Strategic Ownership sleeve is intended to participate in the longer-term appreciation of selected businesses.

I don’t expect the two to produce identical results over any particular month or quarter, nor should their performance be judged by the same standards. The objective remains to use the opportunities generated through active trading to build an ownership portfolio capable of compounding over the years ahead.

Economic and Earnings Calendar | November 2–6

The first trading week of November brings another full economic calendar, corporate earnings and the November 3 midterm elections all of which have the potential to influence investor sentiment. Manufacturing activity, employment conditions and the outlook for corporate earnings will be particularly important following the recent weakness across technology and AI-related companies.

Monday begins with ISM Manufacturing and construction spending, followed Tuesday by the midterm elections and scheduled reports on job openings and factory orders. Wednesday brings ADP employment and ISM Services, while Thursday includes weekly unemployment claims, productivity and labor costs. The week concludes Friday with the scheduled October employment report and preliminary consumer sentiment reading. As always, the release schedule should be confirmed before the trading session.

Corporate earnings will continue to influence the market’s assessment of artificial intelligence, particularly as investors become more selective about the relationship between capital expenditures, revenue growth and profitability. The question isn’t simply whether companies are investing in AI, but whether those investments are producing meaningful financial returns and supporting the valuations investors are being asked to pay.

As for the midterm elections, I’m not interested in predicting the outcome or positioning the portfolio around political speculation. What matters is how the market responds once the results become known, particularly whether uncertainty begins to diminish and investors return their attention to earnings, economic conditions and the broader technical picture.

Closing | What Matters Most

As November begins, I see a market that has made some progress beneath the major indexes, but not enough to convince me that the recovery is firmly established. The Russell 2000 finished last week higher, nine of eleven sectors advanced and value-oriented stocks showed encouraging relative strength. Those are constructive developments, particularly after the concentrated leadership we’ve experienced throughout much of the year. However, Friday’s deterioration in breadth, the sharp selling across technology and The RMII’s failure to sustain its move above the 50-day and 150-day moving averages leave some important questions unanswered.

For the RMII, the immediate area of interest remains the short-term moving averages near 1,342–1,344, followed by the 200-day moving average near 1,334. A successful defense of those levels followed by a reclaim of the 1,359–1,360 resistance area would provide evidence that the recovery is progressing. Conversely, a sustained break below the 200-day would suggest that the market needs additional time to repair the technical damage accumulated during October.

I’ll also be watching the CNN Fear/Greed Index, which finished Friday at 26. Its underlying components, including market momentum, stock price strength, market breadth, volatility, put/call options activity, safe-haven demand and junk bond demand, provide considerably more information than a simple reading of investor optimism or pessimism. The RMII and Fear/Greed Index can exhibit meaningful positive correlation during broad risk-on and risk-off periods, although they don’t always move together, particularly when capital is rotating between sectors and market capitalizations. For November, I want to see improving investor confidence supported by the actual behavior of the RMII and the broader market. That would give me greater confidence that progress is being made beneath the indexes rather than another recovery dependent upon a relatively small group of large-cap companies.

Within SCS, the priorities remain evaluating existing positions, managing the exposure carried forward from October and maintaining the reduced risk budget until the broader market provides a more favorable environment for new entries. I’m not looking to predict the next advance or force additional activity simply because a new month has begun. There will be opportunities, as there always are, but I want the technical evidence to support the decisions rather than rely on expectations of what the market ought to do.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge.

Important Disclosures & Disclaimer

Educational and Informational Purposes Only

The Smart Canvass Journal and Strategic Capital Systems (SCS) are published for educational, informational and personal commentary purposes only. I am not a licensed financial advisor, registered investment advisor, broker-dealer or investment professional. The information presented reflects my personal observations, research, opinions and experiences managing my own portfolio. Nothing published here should be interpreted as personalized investment advice, a recommendation to purchase or sell any security or a solicitation to participate in any particular investment strategy.

Investment Risk and Individual Responsibility

All investing and trading involve risk, including the potential loss of some or all invested capital. The strategies discussed in this publication, including swing trading, position trading, concentrated equity investments and long-term strategic ownership, may not be suitable for every investor. Individual financial circumstances, investment objectives, risk tolerance and experience vary considerably. Readers are responsible for conducting their own research, evaluating the risks involved and consulting qualified financial, legal or tax professionals before making investment decisions.

Performance Reporting and Methodology

Any performance statistics, win rates, R-multiples, Risk-Weighted Average R (RWAR), equity curves, portfolio returns or other measurements discussed in this publication are based on my personal trading records and the methodology used within SCS. These figures may include realized gains and losses, partial exits, multiple transactions associated with a single trade, open positions and unrealized performance. Transaction-level statistics should not be confused with campaign-level results or total portfolio returns.

Performance figures may also be affected by position sizing, capital contributions or withdrawals, transaction costs, taxes and differences in the time periods being measured. Unless specifically stated otherwise, the results presented should not be interpreted as independently audited, independently verified or representative of the performance another investor could achieve.

Historical Performance and Forward-Looking Statements

Past performance is not indicative of future results. Profitable trading periods, favorable win rates and successful investment decisions do not guarantee that similar outcomes will occur in the future. Market conditions change, strategies can experience extended periods of underperformance and positions held beyond their original risk thresholds may incur additional losses.

Any discussion of future market direction, economic developments, technical price levels, corporate earnings or potential investment opportunities represents my assessment at the time of publication. These observations are subject to change without notice and should not be regarded as forecasts or assurances of future outcomes.

Positions, Conflicts of Interest and Editorial Independence

I may own, purchase, sell, reduce or otherwise modify positions in securities discussed in The Smart Canvass Journal, including those appearing on SCS watchlists or within the Strategic Ownership portfolio. My holdings and opinions may change without prior notice, and publication of a security or investment thesis does not constitute a commitment to maintain that position.

Unless expressly disclosed otherwise, the commentary reflects my independent opinions and is not sponsored by, endorsed by or prepared on behalf of the companies or securities discussed.

No Guarantees or Reliance

Although I make reasonable efforts to present information accurately, market data, technical indicators, third-party research and personal trading records may contain errors, omissions or subsequent revisions. I make no representation or warranty regarding the completeness, accuracy or timeliness of the information provided.

Readers should not rely exclusively on this publication when making financial decisions. Responsibility for investment decisions and their consequences rests with each individual investor.

Final Thoughts

I share my research, decisions, successes and mistakes in the interest of transparency and continuing education. Strategic Capital Systems remains an evolving process, and I make no claim to possess a formula that eliminates uncertainty or guarantees investment success. My objective is to document the process as faithfully as possible, including the occasions when the results fall short of expectations.

© 2026 The Smart Canvass Journal. All rights reserved.

“Amen, I say to you, whatever you did for one of these least brothers of mine, you did for me.”
— Matthew, 25:40

As Thanksgiving approaches, I find myself searching for something more meaningful to reflect upon in this month’s edition of Lessons in Retirement than the usual discussions about retirement goals, finances, income or health. These are important subjects and there will be plenty of opportunities to explore them throughout the year. But with Thanksgiving approaching, I want to turn my attention toward something that deserves consideration well beyond the holiday season.

As a Christian, I’ve heard this passage from the Gospel of Matthew many times throughout my life. Yet, when I take the time to read the entire 25th chapter, I gain a deeper understanding of what Jesus was teaching. His message goes well beyond a single act of kindness or generosity. It challenges each of us to consider how we use the blessings we’ve received, how we treat those less fortunate and whether our faith is reflected in the way we live our everyday lives.

As I read the chapter, I’m always particularly drawn to the account of the final judgment, where Jesus describes all the nations gathered before Him. He separates the people as a shepherd separates the sheep from the goats, placing the sheep at His right and the goats at His left. What follows is a rather sobering account of how each group is judged.

Those welcomed into His kingdom are recognized for feeding the hungry, welcoming strangers, clothing those in need, caring for the sick and visiting prisoners. Those who failed to respond to those same needs face an entirely different outcome.

What always catches my attention is that neither group fully recognized that their actions, or their failure to act, were directed toward Jesus Himself. He identifies Himself with the poor, the hungry, the sick, the stranger, the unclothed and those imprisoned.

Reading this again as Thanksgiving approaches allows me to consider my own circumstances. I’ve been blessed with a loving family, good health, a comfortable retirement and opportunities that many others haven’t enjoyed. Yet, if I’m being fair with myself, I can’t say that I’ve always been as generous with my time, resources or attention as I could have been.

Being a career public servant to my community and helping others was my calling. It has never left me, nor has it ever disappointed me. But I also recognize that wearing a uniform and serving my community for more than forty years doesn’t necessarily mean I’ve fulfilled all the responsibilities that come with my faith. There have been plenty of opportunities to help others outside my profession and I’m certain I’ve missed more than a few.

Retirement may have brought my professional responsibilities to an end, but it certainly hasn’t relieved me of my personal responsibilities to others. As I reflect on Jesus’ words in Matthew 25, I can’t help but wonder how often I’ve encountered someone in need without recognizing the opportunity to serve Him.

That’s something I want to consider this Thanksgiving and I hope you’ll consider it with me.

Why I Write “Lessons in Retirement”

When I began writing Lessons in Retirement on Substack I had no intention of becoming a professional writer or building a publication that generated income. After more than forty years in public service, I simply wanted to share some of my experiences, observations and thoughts about a chapter of life that many of us spend decades preparing for but don’t always fully understand until we get there.

I also wanted to reach people who haven’t yet retired. There are lessons I’ve learned over the years, mistakes I’ve made and decisions I might approach differently today. If sharing some of those experiences helps someone think about their own circumstances, prepare for retirement or appreciate something in their life they may have overlooked, then I consider the time spent writing worthwhile.

I’ve enjoyed hearing from readers who’ve shared their own experiences, sometimes agreeing with my observations and other times offering a completely different perspective. Those conversations have become one of the more rewarding aspects of writing this series. I’m still learning and I hope that never changes.

That’s also why Lessons in Retirement will always be free to read. I don’t need or expect anyone to pay for my thoughts or experiences. I’ve been fortunate in life and sharing a little of what I’ve learned is something I’m happy to do without asking for anything in return.

Perhaps, in its own modest way, that’s another example of philanthropy. It doesn’t always require writing a check or making a financial contribution. Sometimes it simply means sharing something you have that might be useful to someone else. For me, writing Lessons in Retirement is one small way I can continue doing that.

The same applies to the experiences and knowledge I share through The Smart Canvass Journal and Strategic Capital Systems. If something I’ve learned can be useful to someone else, I’m happy to share it.

Philanthropy

When I began writing Lessons in Retirement, I identified four pillars that I believed were important to a fulfilling retirement: Perspective, Purpose, Prosperity and Philanthropy. Until now, philanthropy is the one I haven’t explored in much detail. With Thanksgiving approaching, I can’t think of a more appropriate time to introduce it.

When we hear the word philanthropy, we often associate it with wealthy individuals, charitable foundations and substantial financial contributions. But I’ve always believed that generosity isn’t measured exclusively in dollars. Giving of our time, sharing our experiences, helping a neighbor, supporting a worthy cause or simply being there for someone who needs us can be just as meaningful.

The words of Jesus in Matthew 25 weren’t directed exclusively toward those with financial means. We’re not all blessed with the same resources, physical abilities or opportunities, but most of us have something we can offer someone else. The challenge, at least for me, is recognizing those opportunities and making a conscious effort to act upon them.

Like everyone else, I have my share of flaws. I’ve had moments of selfishness and times when my own priorities took precedence over the needs of others. Regardless of what I’ve accomplished, accumulated or achieved, there’s always room to become a better person.

Giving Thanks

Now, I could easily convince myself that tithing each week or sharing my writing freely with subscribers fulfills the spirit of Jesus’ words in Matthew 25 and call it a day. But I’d simply be fooling myself.

I’ve been fortunate in so many ways throughout my life and as I grow older, I’m becoming more aware of just how much I have to be thankful for. My wife, our children and grandchildren, my parents, the friendships I’ve developed over the years and the opportunity to enjoy retirement after a long and rewarding career. I’m grateful for our health, a comfortable home, financial security and the freedom to spend our days doing many of the things we enjoy.

Yet, despite all those blessings I still find myself complaining about things that hardly deserve my attention. An unexpected expense, an inconvenience or something that simply doesn’t go the way I had planned. Looking back, I sometimes wonder why I allowed such insignificant matters to occupy so much of my time and attention.

I also recognize that not everyone will experience Thanksgiving the same way. Some families will gather with an empty chair where a loved one once sat last Thanksgiving or years past. Others are struggling to afford groceries, dealing with serious illnesses, caring for aging parents or simply trying to make ends meet. Some will spend the holiday alone.

I don’t mention these circumstances to diminish the blessings we’ve received or suggest that we should feel guilty about our good fortune. We’ve worked hard, made sacrifices and hopefully made some good decisions along the way. But hard work alone doesn’t determine everyone’s circumstances. Life can change unexpectedly, and many good, hardworking people face difficulties through no fault of their own.

Beyond Thanksgiving

As I gather with family and friends this Thanksgiving, I’ll offer my thanks to God for another year with the people I love, the opportunities I’ve enjoyed and the many blessings He’s provided, including those I’ve occasionally failed to appreciate.

I’ll also be thinking about those who won’t have the same Thanksgiving experience. Perhaps there’s a neighbor who could use some company, a family struggling to put food on the table or someone whose circumstances have changed through no fault of their own. We may never know the difficulties others are experiencing unless we take the time to ask.

I began this article with the words of Jesus from Matthew 25:40, and I want to return to them as I close. I’ve heard those words throughout my life, but I can’t claim that I’ve always practiced them as faithfully as I should have.

At this stage of my life, I’m thankful that I still have the opportunity to do more for others and continue working on becoming a better Christian, husband, father, grandfather, friend and neighbor and perhaps that’s a question we can all consider as we celebrate Thanksgiving this year.

I leave you with this final thought. Beyond giving thanks for the blessings you’ve received in your life, what else are you willing to do with them?

From my family to yours, may you have a Blessed and Happy Thanksgiving.

Dave

Good evening, friends. Welcome to another recap of today’s markets.

For those who are new to The Smart Canvass Journal, I publish these reports to share my observations of the financial markets, the technical conditions influencing my trading decisions and the strategies I use to manage capital within Strategic Capital Systems (SCS). My goal is to offer a practical perspective on investing and trading, drawn from my own experiences, successes and occasional setbacks.

I also want to encourage those who enjoy these reports but haven’t yet subscribed to join me. My articles will always be free to subscribers. I have no intention of charging for access to my market commentary or introducing paid subscription tiers. I believe sharing knowledge and experience encourages better discussions and helps us become more informed investors.

Whether you’re an experienced trader, a long-term investor or someone simply interested in understanding how markets work, I appreciate you spending a few minutes of your evening with me. Your questions, observations and different perspectives are always welcome.

Now, let’s take a look at what happened on Wall Street today.

Market Recap | Friday October 30, 2026

Today brought a sharp increase in selling pressure across Wall Street, led by technology and semiconductor stocks. All four major indexes finished lower with the Nasdaq 100 declining 3.5% after falling more then 4% intra-day, the S&P 500 lost 1.8% , followed by the Russell 2000 down 1.7%. The Dow Jones held up somewhat better, declining 1.1% .

Source: (Koyfin - 10/30/2026)

Technology Takes the Brunt

Technology was the weakest of the eleven S&P sectors, declining 4.9%. Industrials fell 1.6% and Communications lost 1.3%, while Financials declined 0.8%. Energy led the market with a gain of 1.9%, followed by Consumer Staples at 1.4%. Utilities, Healthcare, Materials and Real Estate also finished positive.

The difference between the strongest and weakest sectors was substantial. Six sectors managed gains, but the selling in technology overwhelmed those advances and pulled the major indexes lower.

The pressure was especially pronounced across AI-related investments. DRAM declined 7.23%, SMH lost 6.98% and AIQ fell 4.45%. Cybersecurity also suffered, with HACK declining 3.94% and CIBR losing 3.78%. Software ETF IGV finished down 3.41%.

These are significant declines across several groups that have attracted considerable investment capital during the AI expansion. The market is reassessing earnings expectations, capital spending and the timing of returns on AI infrastructure investments.

Source: (Koyfin - 10/30/2026)

VIX

Volatility returned as the VIX advanced 13.8% to 19.58. The selling intensified during the afternoon before the major indexes recovered modestly from their session lows. Nevertheless, the closing results left little doubt about the pressure facing equities as October comes to a dramatic end.

Market Breadth | Significant Deterioration Again

Friday’s market internals were considerably weaker than Thursday’s. Only 25.9% of stocks advanced while 70.2% declined. New 52-week lows increased sharply to 448, compared with 230 Thursday. New highs remained at 162 leaving nearly three new lows for every new high.

The percentage of stocks trading above their 50-day moving average fell to 36.5%, down from 40.5% Thursday. Those above their 200-day moving average declined to 39.1% from 41.5%.

Growth stocks suffered across all market capitalizations with large-cap growth declining 2.6%, mid-cap growth losing 1.9% and small-cap growth falling 2.2%. Value stocks held up relatively better, although all nine factor categories finished negative.

Yesterday, I discussed the encouraging improvement in participation despite weakness in large-cap technology. Today’s results reversed some of that progress. Selling spread across market capitalizations and the decline in market breadth confirms that Friday’s weakness extended beyond a handful of technology companies.

The SCS RMII Composite Index

The RMII, for readers unfamiliar is the RMY+MDY+IWM+IWC, declined 1.37% Friday to close at 1,344.70 surrendering Thursday’s advance and falling back below its 50-day and 150-day moving averages, but closing above it’s lower support channel.

This is an important development because those were the same two moving averages reclaimed during Thursday’s session. The RMII finished below the 50-day moving average at 1,359.11 and the 150-day moving average at 1,359.17.

The index remains marginally above its short-term moving averages, with the 8-day EMA at 1,344.35, 13-day EMA at 1,342.01 and 21-day EMA at 1,342.71. It also remains above the 200-day moving average at 1,334.35.

Momentum weakened with RSI declining to 49.88 from Thursday’s 58.23. The MACD histogram remains positive at approximately 4.33, although the loss of momentum deserves attention.

The developing recovery has not been completely invalidated, but Friday’s reversal changes the near-term technical picture. The RMII is now testing the short-term moving averages that supported the recent advance. A sustained move below those levels would increase the likelihood of another test of the 200-day moving average near 1,334. Conversely, reclaiming the 1,359–1,360 area would be necessary before I could consider Thursday’s breakout attempt restored.

For now, the broader market remains technically mixed with Friday’s selling reinforcing the importance of maintaining a selective approach to capital deployment.

Market News | Winners and Losers

Corporate earnings continued to drive substantial price movements Friday, with disappointing guidance and concerns about future profitability weighing heavily on technology stocks.

Intel (INTC) plunged approximately 29% following weak fourth-quarter guidance, continued softness in the PC market and a reported production accident at its Israeli facility. The company indicated that the disruption could reduce revenue by approximately $300 million in each of the next two quarters. The reaction added to selling pressure across semiconductors where the SMH declined nearly 7%.

Source: (Trading View - 10/30/2026)

Reddit (RDDT) also fell approximately 29% following analyst downgrades and concerns about slowing user growth, search-related traffic and weaker-than-expected fourth-quarter guidance.

Amazon (AMZN), which remains part of the Strategic Ownership sleeve declined approximately 1.4%. Investors continue to evaluate the company’s accelerating AI infrastructure spending and its impact on free cash flow. Reports of a potential financing arrangement of up to $80 billion for additional AI hardware investment added to those concerns. I’ll be following these developments closely, particularly the relationship between AWS growth, capital expenditures and future profitability.

There were notable winners despite the broader decline. Regeneron (REGN) advanced approximately 13% after reporting strong quarterly results supported by Dupixent growth, with revenue increasing 36% and earnings per share rising 70%. Global Payments (GPN) also gained approximately 13% amid reports of a potential $40 billion acquisition, while FedEx Freight (FDXF) advanced roughly 15% following its announcement of a planned 6.9% general rate increase for 2027.

Energy provided another area of strength. ExxonMobil (XOM) and Chevron (CVX) reported favorable earnings supported by stronger refining margins, helping the Energy sector advance 1.9% and finish as Friday’s strongest S&P sector.

The contrast between these results illustrates the selectivity of the current market. Investors are responding favorably to earnings growth, improving profitability and credible business outlooks while showing considerably less patience for disappointing guidance and rising capital requirements. That distinction is particularly important as I continue evaluating the AI-related holdings in the Strategic Ownership sleeve.

Breaking After-Hours News | INO Receives FDA Approval

On a personal and long journey sort of news, some exciting news to close out Friday! Inovio Pharmaceuticals (INO) announced that the FDA has approved Voceryq (INO-3107) for the treatment of recurrent respiratory papillomatosis (RRP), a rare disease that causes recurring growths in the respiratory tract and often requires repeated surgical procedures. Inovio is a name I covered over at Seeking Alpha for years and years. I have a very long history of following and investing in this company, through the ups and downs, especially through COVID.

This represents a major milestone for Inovio, marking the company’s first FDA-approved product and an important validation of its DNA medicine platform.

The market’s initial reaction has been extraordinary, with INO shares reportedly surging approximately 283% in after-hours trading following the announcement.

I personally own shares of INO, with a cost basis of 0.84 cents that were purchased days ago, on the back of news pending approval for INO-3107 by the FDA. So, while I have been in and out of this stock for over a decade, this is certainly welcome news for the portfolio and for all of the INO shareholders who have hung on.

However, FDA approval is only the beginning of the next chapter. Commercial execution, physician adoption, insurance reimbursement and the company’s financial position will determine how successfully Inovio can translate this regulatory achievement into a sustainable business. I’ll be watching how shares trade next week following tonight’s announcement, particularly after such a substantial initial price reaction.

Congratulations to the Inovio team, shareholders and to the patients who will benefit from this new treatment. After years of development, this is a significant accomplishment and much welcomed news for this tiny biotech.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge.

SCS Portfolio Activity

Earlier this week, I initiated a quarter-position in CrowdStrike (CRWD) at $256.32, with an initial protective stop just below last Friday’s low near $234. The planned second addition remains conditional on renewed strength across the cybersecurity industry. With CIBR declining 3.78% Friday, that confirmation has not materialized.

Guardant Health (GH), entered Wednesday at $184.42, also remains part of the portfolio’s recent activity. The original trade plan established the 50-day moving average as the initial protective stop, approximately 8.3% below entry. Healthcare showed relative strength Friday, gaining 0.5%, although that sector performance alone does not establish the status of the individual position.

Both GH and CRWD remain above their stops.

Within the Strategic Ownership sleeve the recent selling across AI-related companies warrants continued attention. Amazon, in particular, remains under review as investors evaluate the relationship between accelerating infrastructure investment, cloud revenue growth and free cash flow.

For now, the SCS risk FK remains at 0.25%. Any additional capital deployment will depend on improving market conditions, individual technical confirmation and the broader participation measured by The RMII.

Capital preservation remains the priority until the market provides stronger evidence of a sustainable recovery.

Closing Thoughts | Looking Ahead

Friday’s selloff was a disappointing conclusion to a week that had shown some encouraging improvement in market participation. Technology bore the brunt of the selling, but the deterioration in market breadth and the RMII’s retreat below its 50-day and 150-day moving averages tell us that the broader recovery remains uncertain.

As we head into November, I’ll be watching whether the market can stabilize, whether institutional capital continues rotating away from technology and whether the broader indexes can regain their technical footing. The earnings season has also demonstrated that investors are becoming increasingly selective about corporate guidance, profitability and the enormous capital commitments associated with AI development.

For SCS, the approach remains unchanged. I’ll continue managing existing positions according to their established trade plans, maintaining the reduced 0.25% risk budget and waiting for better technical conditions before committing additional capital.

This Sunday, look for my weekly edition of SCS | The Week Ahead. I’ll review the week’s market performance, review the technical developments across the major indexes and the RMII, revisit the portfolio’s positioning and identify the opportunities and risks worth monitoring as November begins.

I also want to thank everyone who continues reading and supporting The Smart Canvass Journal. All of my articles remain free to subscribers, and I welcome your questions, observations and participation in our discussions. You can also visit smartcanvas.com to learn more about the SCS Discord Community.

Enjoy your weekend, friends. I’ll see you Sunday.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge.

Disclaimer — Educational and Informational Purposes Only

The Smart Canvass Journal and Strategic Capital Systems (SCS) are published solely for educational, informational and general discussion purposes.

I am not a licensed financial advisor, registered investment advisor, broker-dealer or investment professional. Nothing published in this journal, shared through the SCS Discord Community or discussed in related communications should be interpreted as personalized financial, investment, tax or legal advice, or as a recommendation to buy, sell or hold any security.

The investment strategies, trading methods, market observations and portfolio activities discussed reflect my personal experience, research, opinions and financial objectives. I may hold positions in securities mentioned in my publications, and those positions may change without notice. My investment decisions are made according to my own circumstances, risk tolerance and objectives, which may differ substantially from those of individual readers.

Investing and trading involve substantial risk, including the possible loss of some or all invested capital. Certain investments, particularly speculative securities, small-cap biotechnology companies and other highly volatile assets, may involve additional risks such as limited liquidity, significant price fluctuations, regulatory uncertainty and capital dilution. Stop-loss orders and other risk-management techniques do not guarantee protection against losses, particularly during overnight trading, market gaps or periods of extreme volatility.

Any performance results, historical returns, trade examples or portfolio discussions are provided for illustration and education. Past performance does not guarantee future results, and no trading strategy can eliminate investment risk or ensure profitability.

Readers are solely responsible for their own investment decisions and should conduct independent research and consult qualified financial, tax or legal professionals when appropriate before committing capital.

The purpose of The Smart Canvass Journal is to share experience, encourage informed discussion and promote thoughtful risk management—not to provide investment recommendations or manage anyone else’s money.

Good evening, friends and welcome to another recap of today’s markets.

For those who are new to The Smart Canvass Journal, I publish these reports to share my observations of the financial markets, the technical conditions influencing my trading decisions and the strategies I use to manage capital within Strategic Capital Systems (SCS). My goal is to offer a practical perspective on investing and trading, drawn from my own experiences, successes and occasional setbacks.

I also want to encourage those who enjoy these reports but haven’t yet subscribed to join me. My articles will always be free to subscribers. I have no intention of charging for access to my market commentary or introducing paid subscription tiers. I believe sharing knowledge and experience encourages better discussions and helps us become more informed investors.

Whether you’re an experienced trader, a long-term investor or someone simply interested in understanding how markets work, I appreciate you spending a few minutes of your evening with me. Your questions, observations and different perspectives are always welcome.

Now, let’s take a look at what happened on Wall Street today.

Market Recap | Thursday October 29, 2026

Wall Street finished Thursday with a noticeable change in market leadership. The Nasdaq 100 declined 1.4% as investors reacted to disappointing earnings from Alphabet and ServiceNow, while the S&P 500 and Dow Jones each lost 0.3%. The Russell 2000 moved in the opposite direction, advancing 1.0% to 2,859.22. The VIX increased 1.8% to 17.21.

Source: Koyfin | 10/29/2026

The difference between large-cap growth and the rest of the market was particularly striking. Large-cap growth declined 1.5% while large-cap value gained 0.9%. Mid-cap value advanced 1.5% and small-cap stocks gained approximately 1% across value, core and growth classifications. Investors were not abandoning equities altogether. They were reallocating capital away from some of the market’s largest technology companies.

Healthcare led the eleven S&P sectors with a gain of 2.4%, followed by Real Estate at 2.2%. Consumer Staples and Utilities each advanced 1.5%, while Financials gained 1.4%. Nine of the eleven sectors finished higher, with Technology declining 1.2% and Communications falling 1.9%.

Source: Koyfin | 10/29/2026

The selling was concentrated in several technology groups. DRAM declined 4.38%, software ETF IGV lost 3.52% and cybersecurity ETF CIBR fell 2.71%. AIQ declined 2.27%, QQQ lost 1.42% and SMH finished down 1.06%. Healthcare ETF XLV gained 2.40%, providing a considerably different picture of the day’s sector performance.

Market Breadth

Despite the losses in the major large-cap indexes, market breadth improved. Advancing stocks represented 56.2% of the market compared with 39.8% declining. New 52-week highs increased to 161 while new lows declined to 230 narrowing a gap that has been a persistent concern throughout the recent correction.

The percentage of stocks trading above their 50-day moving average improved to 40.5%, up from Wednesday’s 36.9%. Stocks above their 200-day moving average increased to 41.5% from 39.8%.

These improvements deserve attention. The Nasdaq’s decline dominated the headlines, but the underlying market was considerably healthier than the index performance suggested. Participation broadened across sectors and market capitalizations although a majority of stocks still remain below their intermediate and longer-term moving averages.

RMII Composite Index

The RMII advanced to 1,363.33 Thursday, gaining approximately 1.06% and moving above two important technical levels that have served as resistance throughout the recovery. The index reclaimed its 150-day moving average at 1,358.16 and finally, its 50-day moving average at 1,360.42. It also remains above the 8-day, 13-day and 21-day exponential moving averages along with the 200-day moving average.

Source: Trading View | 10/29/2026

Momentum strengthened further, with RSI advancing to 58.23 and the MACD histogram increasing to approximately 5.57. The developing pattern of higher lows remains intact and Thursday’s advance provides additional evidence that the broader market is recovering despite continued weakness in some large-cap technology stocks.

I’ll now be watching whether The RMII can hold above the 1,358–1,360 area. A successful retest would be encouraging, particularly if market breadth continues improving.

The technical picture has improved considerably since last Friday and this is the direction we like to see, but the recovery still needs to establish staying power. I’ll continue to evaluate the evidence before making any changes to the portfolio’s current risk allocation.

Market News | Winners and Losers

Corporate earnings continued to influence Thursday’s trading, with investors rewarding companies delivering strong results while punishing those falling short of expectations.

Alphabet (GOOGL) declined more than 12% after quarterly revenue of $127.58 billion missed expectations and accelerating AI infrastructure spending raised concerns about profitability and free cash flow.

ServiceNow (NOW) suffered an even steeper decline of approximately 27% following disappointing earnings and fourth-quarter guidance. It gapped down 18% at the open and fell all day to close near it’s low, round tripping back to July 2026, adding another -9% more pain on the day.

Fortinet (FTNT) fell roughly 20% after reducing its full-year service revenue outlook, contributing to broader weakness across software and cybersecurity stocks. But, it had a different story for the day. After gapping down at the open ~27%, it closed off adding to the day 8% from the lows, round tripping back to June 2026.

Two stocks, both gapped down, two different market reactions.

In healthcare, Eli Lilly (LLY) advanced approximately 7% after exceeding revenue and earnings expectations and raising its full-year outlook for the third time. Glaukos (GKOS) surged approximately 33% following record quarterly sales that substantially exceeded estimates. Both contributed to Healthcare’s 2.4% advance, making it Thursday’s strongest S&P sector.

Elsewhere, Crocs (CROX) jumped 25.5% after raising its annual sales and profit outlook, while Caterpillar (CAT) declined approximately 9% despite an earnings beat as investors questioned the sustainability of demand and future growth.

The difference in these reactions reinforces a theme I’ve been following throughout earnings season. Investors are becoming more selective about profitability, forward guidance and the returns companies are generating from their capital investments. Strong revenue growth alone is no longer enough to guarantee a favorable market reaction as we head into the last few months of 2026.

SCS Portfolio Activity | CrowdStrike (CRWD)

I initiated a quarter-position in CrowdStrike (CRWD) today at $256.32 following weakness across the cybersecurity sector triggered by Fortinet’s (FTNT) disappointing earnings report. The entry followed an encouraging development in the First Trust Nasdaq Cybersecurity ETF (CIBR).

After opening near $102 CIBR tested its 50-day moving average, bounced off it and recovered from its session lows. By the close the ETF was trading approximately 3.81% above its 50-day moving average.

For CRWD, I’ve positioned the initial protective stop just below last Friday’s low near $234, which marked the stock’s previous retest of its 50-day moving average before today’s session. That establishes approximately 8.4% of initial downside risk from my $256.32 entry.

Source: Trading View | 10/29/2026

I’m beginning CRWD with just one-quarter of the intended position because I want additional confirmation that the cybersecurity group is recovering from today’s selling. A second addition will be considered once the sector demonstrates renewed strength and CRWD’s own technical conditions support increasing exposure. For now, my position is established and the initial risk is defined while additional capital remains available if the recovery develops as anticipated.

Closing | Looking Ahead

Today’s session provided me with further evidence that the broader market is improving even as some of the largest technology companies face renewed selling pressure. Nine of the eleven S&P sectors finished higher, market breadth strengthened and the RMII reclaimed both its 50-day and 150-day moving averages. These are all encouraging developments although I still want to see these gains hold before increasing the portfolio’s risk exposure and change my FK back to 0.50% and enter the intermediate trading SCS strategy where I place less emphasis on momentum trades and instead, identify opportunities based on expectancy, asymmetry and historical performance.

Today’s initial CRWD entry reflects a measured approach, as we should while momentum trading. I’ve committed one-quarter of the intended position while waiting for additional confirmation from the cybersecurity group. With GH added yesterday and MRNA still under consideration, there are opportunities developing, but each must meet the established technical and risk-management requirements.

I’ll also be watching whether the RMII can hold its newly reclaimed moving averages and whether technology can stabilize following this week’s earnings disappointments. The improvement in broader participation is encouraging, but there’s still work to be done.

As I said at the open, for those who haven’t subscribed, I hope you’ll consider joining The Smart Canvass Journal. My articles will always remain free. You can also visit smartcanvas.com to join the SCS Discord Community where we continue these discussions and share market observations, scanners and trading resources.

Thank you for reading and for being part of the conversation. I appreciate your continued interest, questions and contributions.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge - Dave

Good evening, friends. Welcome to another recap of the markets.

For those who are new to The Smart Canvass Journal, I publish these reports to share my observations of the financial markets, the technical conditions influencing my trading decisions and the strategies I use to manage capital within Strategic Capital Systems (SCS). My goal is to offer a practical perspective on investing and trading, drawn from my own experiences, successes and occasional setbacks.

I also want to encourage those who enjoy these reports but haven’t yet subscribed to join me. My articles will always be free to subscribers. I have no intention of charging for access to my market commentary or introducing paid subscription tiers. I believe sharing knowledge and experience encourages better discussions and helps us become more informed investors.

Whether you’re an experienced trader, a long-term investor or someone simply interested in understanding how markets work, I appreciate you spending a few minutes of your evening with me. Your questions, observations and different perspectives are always welcome.

Now, let’s take a look at what happened on Wall Street today.

Market Recap | Wednesday October 28, 2026

Wall Street extended its recovery for a third consecutive session Wednesday with all four major indexes finishing higher. The Nasdaq 100 led the advance gaining 0.5%, followed by the Russell 2000 up 0.4%. The S&P 500 advanced 0.4% while the Dow Jones gained 0.3%. The VIX declined another 3.9% to 16.83 reflecting a continued reduction in market volatility.

Source: Koyfin 10/28/2026

Technology led sector performance with a gain of 0.8% followed by Financials and Energy at 0.4%. Industrials and Healthcare each advanced 0.3%. Six of the eleven S&P sectors finished positive while Real Estate and Utilities were the weakest, each declining 0.8%. Growth stocks continued to outperform across all market capitalizations, particularly small-cap growth which advanced 0.7%.

Source: Koyfin 10/28/2026

Semiconductors remained among the strongest areas of the market. DRAM gained 6.97% and SMH advanced 1.81%, supported by continued enthusiasm surrounding AI infrastructure and memory demand. AIQ gained 1.19% while QQQ advanced 0.60%. Software participation was considerably more subdued, with IGV gaining just 0.11%. That distinction remains important as investors continue to favor certain segments of technology over others.

Market Breadth

Market breadth was positive, with 55.3% of stocks advancing against 41.5% declining. New 52-week lows fell to 251 from Tuesday’s 284, although they continued to outnumber new highs by nearly two to one. The percentage of stocks trading above their 50-day moving average improved to 36.9% while 39.8% remained above their 200-day moving average.

These are incremental improvements, but the broader market still has work to do. More than 60% of stocks remain below their 50-day and 200-day moving averages. The indexes are recovering faster than the underlying market so I’m maintaining a selective approach rather than treating three positive sessions as confirmation of a new sustained advance.

The RMII Composite Index

The RMII advanced another 0.30% Wednesday to close at 1,349.06, extending its recovery from the October lows. The index is now trading above its 8-day EMA at 1,338.80, 13-day EMA at 1,337.93 and 21-day EMA at 1,340.43. It also remains above its 200-day moving average at 1,333.44.

Source: Trading View 10/28/2026

Momentum continues to improve as the RSI advanced to 52.58 and the MACD histogram remains positive. The recovery is becoming more constructive, particularly with the index holding its short-term moving averages.

The next technical challenge remains the 150-day moving average at 1,357.15 and the 50-day moving average at 1,361.66. Both remain overhead resistance therefore, a sustained recovery through that area, accompanied by stronger market breadth would provide additional evidence that participation is expanding beyond the market’s strongest individual names.

I've also added a tentative trend channel to the chart. Trend lines are subjective, but this gives me a reference for evaluating whether the recovery can establish a sequence of higher highs and higher lows. It's still early and the developing trend will need further confirmation.

For now, the RMII is improving but the broader technical picture remains mixed.

SCS | Today’s Portfolio Activity

ServiceNow (NOW) triggered its protective stop at breakeven plus 1% during Wednesday’s session, closing the remaining 50% of the position ahead of tonight’s earnings announcement. The first half of the position had already been harvested at 1R last week, completing the campaign with a realized gain.

ServiceNow has released its quarterly earnings and the company reported revenue of $4.11 billion, slightly ahead of the $4.09 billion estimate, while earnings of $1.00 per share missed expectations by 2.22%. The initial reaction has been severe, with shares declining approximately 17% with an initial after hours reaction. Note: These are figures displayed by my earnings data provider rather than imply they necessarily represent the company's preferred adjusted earnings measure.

I made the decision to activate the protective stop before knowing the earnings results. Holding through the announcement would have exposed the remaining position to considerable overnight risk, something I wasn’t willing to accept after already securing a profitable trade.

The earnings call and management’s forward guidance still deserve attention, particularly given the magnitude of the market’s reaction. I’ll review those developments and reassess the technical picture before considering another entry.

For SCS, today’s exit wasn’t about anticipating an earnings disappointment. It was about following the established trade-management process, protecting the capital already earned and accepting the outcome. The market made the decision to close the position during regular trading hours. Tonight’s results simply reinforce the value of having that process in place.

Source: Trading View 10/28/2026

I also initiated a new position in Guardant Health (GH) at $184.42. Monday’s successful test of the 50-day moving average was followed by Tuesday’s confirmation, providing the technical conditions I wanted to see before committing capital. The initial protective stop is positioned at the 50-day moving average, approximately 8.3% below entry. Healthcare sector participation provided additional support today, with XLV advancing 0.3%.

Source: Trading View 10/28/2026

Moderna (MRNA) remains on my watchlist for a potential reentry. I want to see the stock recover toward my original purchase area near $227.10, then demonstrate that it can hold that level and rebuild its prior trend structure. Reclaiming the price alone would be encouraging, but sustained strength would provide better confirmation that the original uptrend remains intact.

The portfolio continues to operate under the reduced 0.25% Fractional Kelly risk allocation while I evaluate the durability of the broader market recovery.

Warsh Holds Rates Steady

The Federal Reserve held its benchmark interest rate unchanged at 3.75%–4.00% Wednesday, following September’s quarter-point increase. The decision passed by a 10–2 vote, with Governor Lisa Cook and Cleveland Fed President Beth Hammack favoring another quarter-point increase.

Chairman Kevin Warsh and the FOMC acknowledged continued strength in the U.S. economy, including resilient consumer spending, robust capital investment and stable employment conditions. However, inflation remains elevated and the Fed wants additional economic data before determining its next move. Sounding like a broken record, “the decision leaves open the possibility of further tightening if inflation fails to improve.”

For equity investors, that means interest rates remain an important consideration, particularly for growth companies whose valuations depend heavily on expectations of future earnings.

Wall Street finished higher, extending its recovery for a third consecutive session. For the portfolio, I view today’s decision as a continuation of the Fed’s current policy rather than a change in direction. The market is improving, but persistent inflation and the possibility of additional tightening remain considerations in my capital allocation decisions.

Closing | Looking Ahead

Three consecutive positive sessions have improved the market’s technical condition, but I’m not ready to conclude that the broader correction has ended. The RMII has reclaimed its short-term moving averages, volatility continues to decline and market breadth is showing modest improvement. Those are encouraging developments although the number of stocks trading below their longer-term moving averages remains a concern.

Today’s portfolio activity also reflects the two sides of managing capital. NOW completed a profitable campaign after its protective stop was triggered ahead of earnings, while GH provided a new opportunity supported by a developing technical setup. MRNA remains on the watchlist until price action provides the confirmation I’m looking for. CRWD is still in the bullpen.

Tomorrow brings another opportunity to evaluate the market’s response to corporate earnings on MSFT’s beat and GOOG’s miss (saved for tomorrow’s morning note), the Fed’s decision and the strength of this week’s recovery. I’ll continue to follow the technical evidence, manage the positions already in the portfolio and remain selective with new capital commitments.

As I stated in the open I hope you’ll consider joining me. These reports will always remain free. You’re also welcome to visit smartcanvas.com and join the SCS Discord Community, where we continue the discussion and share market observations, trading resources and ideas with other like-minded investors.

Thank you for reading and for being part of the conversation. I’ll see you tomorrow.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge. - Dave

Disclaimer:

The Smart Canvass Journal and Strategic Capital Systems (SCS) provide educational and informational content only, not financial, investment, tax or legal advice. I am not a financial advisor and nothing published constitutes a recommendation to buy, sell or hold any security.

All strategies, trades, portfolio decisions and opinions reflect my personal experience and objectives. Investing involves risk, including the potential loss of principal.

Past performance does not guarantee future results. Readers should conduct their own research and consult qualified professionals before making investment decisions.

Good evening, friends. Welcome to another recap of today’s session close.

For those who are new to The Smart Canvass Journal, I publish these reports to share my observations of the financial markets, the technical conditions influencing my trading decisions and the strategies I use to manage capital within Strategic Capital Systems (SCS). My goal is to provide readers with a practical perspective on investing and trading, drawn from my own experiences, successes and occasional setbacks.

I also want to make something clear to both new and longtime readers. These reports will always be free to my subscribers! There are no paid subscription tiers or premium articles required to follow my market commentary. I believe sharing knowledge and experience encourages better discussions and helps all of us become more informed investors.

Whether you’re an experienced trader, a long-term investor or someone simply interested in understanding how markets work, I appreciate you spending a few minutes of your evening with me. I welcome your questions, observations and different perspectives because the conversation is often just as valuable as the article itself.

Now, let’s take a look at what happened on Wall Street today.

Market Recap | October 27, 2026

Wall Street extended Monday’s recovery with another strong session for technology and growth stocks. The Nasdaq 100 advanced 1.3% while the S&P 500 gained 0.6%. The Russell 2000 added 1.2% and the Dow finished modestly higher at 52,391.29. The VIX declined another 4.2% to 17.62, reflecting a reduction in near-term market volatility ahead of Wednesday’s Federal Reserve decision and several major technology earnings announcements.

Source: Koyfin October 27, 2026

Technology led the S&P sectors for the second consecutive session, gaining 1.7%, followed by Consumer Discretionary at 1.0% and Materials at 0.8%. Industrials and Utilities also advanced while Energy declined 2.0%, reflecting the continued retreat in crude oil prices. Communication Services and Financials each lost 0.3% with Consumer Staples declining 0.9%. The sector results suggest investors are showing renewed interest in growth-oriented industries while remaining selective elsewhere.

Source: Koyfin October 27, 2026

Participation Begins to Improve

Tuesday’s breadth provided a more encouraging picture than Monday’s session. Advancing stocks represented 58.8% of issues compared with 38.0% declining, a meaningful improvement from Monday when declining stocks slightly outnumbered advancers. The percentage of stocks above their 50-day moving averages increased to 35.7% while those above their 200-day averages improved to 39.3%. Although both readings remain relatively weak, the direction of change is encouraging.

New 52-week lows declined from 444 Monday to 284 Tuesday while new highs fell from 139 to 102. The reduction in new lows suggests that selling pressure is moderating, although the continued imbalance between new highs and lows indicates that the broader market has not fully recovered. Growth stocks led across large-cap, mid-cap and small-cap categories, with small-cap growth advancing 1.7%.

The RMII Composite Index

The RMII Composite Index advanced another 0.71% Tuesday to close at 1,345.28, extending Monday’s recovery and moving above its 8, 13 and 21-day exponential moving averages. More importantly, the RMII finished above its 200-day moving average for the second consecutive session.

This represents a meaningful technical improvement following several weeks of declining prices and repeated failures to sustain recovery attempts. It is ~1.3% below the 50D, lost over two months ago. A move above and a retest of the 50D and hold becomes a green light to move back to our regular 0.50% FK and more intermediate SCS trading.

Source: Trading View October 26, 2026

Momentum is also improving. The index RSI climbed to 50.87 while the MACD histogram strengthened to a positive 3.08. The RMII has now advanced approximately 2.5% from its recent support area near 1,312.

Participation Begins to Improve

Tuesday’s improvement in market breadth adds credibility to the move. Advancing stocks increased to 58.8% while new 52-week lows contracted from 444 Monday to 284 Tuesday. I’ll be watching whether the RMII can extend its advance toward the 1,356–1,363 resistance area while maintaining support above its short-term moving averages. As mentioned, a sustained recovery through those levels accompanied by continued improvement in market participation would strengthen the case for gradually increasing capital deployment within the portfolio and changing up our trading framework.

Semiconductors Continue Recovering

Semiconductors extended Monday’s rebound with the SMH advancing 3.0% and DRAM gaining 4.41%. The SMH remains ~2% below the 50D as it continues it’s advance. Cybersecurity also remained strong as HACK gained 1.51% and CIBR advanced 1.10%. QQQ finished 1.26% higher while IGV gained a more modest 0.32%. The continued improvement in semiconductors is encouraging following last week’s sharp selling, although SMH remains approximately 2.5% below its 50-day moving average.

Source: Trading View October 27, 2026

QQQ is approaching its own 50-day moving average, which could become an important technical development during Wednesday’s session. A sustained recovery above that level would strengthen the Nasdaq’s intermediate-term technical condition, particularly if semiconductor participation continues improving.

Technical Setups Continue Developing

I’m seeing constructive developments among several names on the SCS watchlist. SNOW and CSCO both reclaimed their 50-day moving averages Monday and successfully retested those levels Tuesday attracting buyers and finishing above them again. PENG also moved above its 50-day moving average while DELL continues recovering and remains approximately 1% below that level.

Source: Trading View October 27, 2026

GH, SNOW, PENG, CSCO and MRNA remain on my active watchlist. CRWD is also under consideration following the recent strength in cybersecurity. I placed a buy-limit order this morning at Monday’s low because I expected to be away from the market. The order wasn’t filled, so no position was established. I’ll reassess the setup Wednesday rather than chase the stock above my intended entry.

Capital Deployment

The SCS Fractional Kelly risk allocation remains at 0.25%. Although the improvement in market breadth and technology leadership is encouraging, I want additional confirmation before increasing exposure across the portfolio. I’ll continue monitoring The RMII, the recovery in semiconductors and the developing technical setups on the watchlist.

Wednesday brings the Federal Reserve’s interest-rate decision and earnings from Microsoft, Alphabet and ServiceNow. Those announcements could influence both short-term trading opportunities and the long-term outlook for several holdings within the Strategic Ownership sleeve.

For now, I’m encouraged by the improvement in market participation but remain focused on managing risk and allowing the technical evidence to guide capital deployment.

Join the Smart Canvass Community

That concludes today’s market close. The improvement in market breadth and the RMII is encouraging and I’ll continue following these developments as the market approaches another important session of earnings announcements and the Federal Reserve’s interest-rate decision this week.

If you enjoy these daily reports, I invite you to visit smartcanvas.com and join the SCS Discord Community. You’ll find like-minded traders discussing market conditions, technical setups, individual stocks and risk management strategies. It’s an opportunity to exchange ideas, ask questions and participate in discussions that extend beyond what I publish in The Smart Canvass Journal.

As always, my articles are free to read and share. I appreciate your continued readership and welcome your participation in the community.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge. - Dave

Disclaimer

The information presented in The Smart Canvass Journal and Strategic Capital Systems (SCS) is intended solely for educational and informational purposes and should not be considered financial, investment, tax or legal advice.

I am not a financial advisor and nothing discussed constitutes a recommendation to buy, sell or hold any security. All investments, portfolio holdings, trading strategies, performance results and capital allocation decisions discussed reflect my personal investment experience and objectives.

References to Artificial Intelligence, the AI supercycle and potential long-term wealth creation represent my personal outlook, not predictions or guarantees of future performance.

Past performance does not guarantee future results. All investing and trading involve risk, including the potential loss of principal. Readers should conduct their own research, evaluate their financial circumstances and risk tolerance and consult qualified professionals before making investment decisions.

Technology Leads the Recovery. Market Breadth Still Remains My Concern

Good evening friends. We open the week with a broad advance across the major indexes, led by the Nasdaq 100 which gained 1.1% to finish at 29,281.26. The S&P 500 advanced 0.7% while the Russell 2000 gained 0.4% and the Dow added 130 points.

Honestly, I’m not surprised by it after last weeks “less than stellar” performance. Tomorrow let’s me know if this was a dead cat bounce or the start of something else.

The VIX declined 4.8% to 18.51 reflecting some improvement in investor sentiment ahead of this week’s Federal Reserve decision and major technology earnings.

Source: Koyfin October 26, 2026

Technology led the S&P sectors with a 1.69% advance followed by Industrials at 1.43% and Consumer Discretionary at 1.05%. Communication Services remained the notable exception, declining 1.6%, while Consumer Staples slipped 0.3%, adding to the 4% slip last week in the XLC. YTD, the XLC is down +10% and today just added insult to injury.

Source: Koyfin October 26, 2026

The return of buying interest in Technology was encouraging, particularly after last week’s semiconductor weakness, but the performance beneath the major indexes is where I do more digging.

Source: KoyFin October 26, 2026

The RMII Composite Index — Reclaiming the 200-Day Moving Average

The RMII Composite Index advanced 0.52% Monday to close at 1,335.76, reclaiming its 200-day moving average at 1,332.54. The index also finished above its 8-day EMA at 1,333.23 and its 13-day EMA at 1,334.57. This is a constructive improvement following several unsuccessful attempts to sustain a recovery above these levels in October, yet the technical picture remains mixed.

The RMII is still below its 21-day EMA at 1,339.02 and its 150-day and 50-day moving averages at 1,355.52 and 1,365.02 respectively. The RSI improved to 46.65 while the MACD histogram turned positive at 2.02 suggesting that downward momentum is beginning to moderate.

Monday’s intraday high of 1,342.99 also demonstrated that buyers were willing to test resistance above the 21-day EMA although the index couldn’t maintain those gains into the close.

Source: Trading View October 26, 2026

Monday’s improvement was encouraging, but market breadth continues to lag. With only 34% of stocks above their 50-day moving averages and 38.1% above their 200-day moving averages, I still want to see broader participation before increasing the portfolio’s risk allocation. Reclaiming the 200-day moving average is a positive development. Holding it and attracting additional buying participation will be the more important test and before we go back to selecting trades based on their expectancy, asymmetry and historical performance the RMII needs to be back over the 50D EMA.

Market Breadth | No Broader Participation

Despite the gains across the major indexes, advancing stocks represented just 47.7% of issues compared with 48.7% declining. Only 34% of stocks finished above their 50-day moving averages and 38.1% remained above their 200-day moving averages. New 52-week lows continued to dominate new highs by 444 to 139. Those readings are difficult to reconcile with the strength displayed by the Nasdaq and S&P 500.

The improvement in the major indexes is welcome, but I want to see more companies participating before concluding that market conditions have materially changed. Large-cap growth stocks outperformed value stocks while mid-cap and small-cap growth also led their respective categories. Thus, today’s gains were concentrated in growth-oriented companies rather than representing a meaningful expansion in overall market participation.

QQQ and Semiconductors | A Constructive Recovery

QQQ advanced 1.11% to close at $712.20 after trading as high as $715.25. The ETF successfully defended the $700 support area late last week and has now recovered approximately $12 from that level. However, QQQ remains below its 8-day EMA near $716.69 and its 50-day moving average around $725.43. I’ll be watching whether buyers can reclaim those levels as earnings announcements begin arriving later this week.

Source: Trading View October 26, 2026

Semiconductors delivered a stronger performance with the SMH advancing 2.74% to $541.62 and DRAM gaining 2.70%. SMH recovered from last week’s decline toward $520.53 but remains below its 8, 13 and 21-day EMAs. The ETF’s RSI near 40 reflects improving momentum from oversold conditions without yet establishing a sustained recovery. A move above the 8-day EMA near $546.86 would be encouraging followed by additional resistance around $557–$567.

Source: Trading View October 26, 2026

Cybersecurity continued demonstrating relative strength, with HACK advancing 2.80% and CIBR gaining 2.18%. Software also participated, although IGV’s 0.72% advance was more modest. The combination of improving semiconductor performance and continued cybersecurity leadership was among the more constructive developments in today’s session.

Capital Deployment | No SCS Trading Activity

There were no new SCS entries, additions or exits today. I’m maintaining the reduced 0.25% Fractional Kelly risk allocation while continuing to monitor market breadth, sector participation and the technical condition of existing positions. Although today’s advance was encouraging the underlying participation numbers haven’t improved enough to justify a broader increase in exposure.

I’ll also continue evaluating underperforming positions that weigh on the portfolio’s Risk Weighted Average-R (RWAR). As suitable opportunities develop during the remainder of the fourth quarter, tax-loss harvesting remains part of the capital management plan.

The Takeaway Today

Monday’s recovery was encouraging, particularly the improvement in semiconductors and continued leadership in cybersecurity. However, fewer than half of stocks advanced and more than 60% remain below their 200-day moving averages. That tells me the market still has considerable work ahead before I can describe the recovery as broadly supported.

With the Federal Reserve and several major technology companies reporting this week, I’ll remain focused on how prices respond and whether buying interest expands beyond the largest growth companies. For now, the SCS capital deployment strategy remains unchanged.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge. - Dave

Join the Smart Canvass Community

As always, The Smart Canvass Journal is free to read. I share my market observations, trading decisions and portfolio management strategies to encourage informed discussions about investing and trading.

If you’d like to participate beyond these daily reports, visit smartcanvas.com to access the SCS Discord Community. You’ll find a group of like-minded traders sharing market observations, technical analysis, trading opportunities and ideas about risk management. The community also provides access to trading discussions, scanners and additional resources that complement what I publish in the Journal.

I appreciate everyone who reads, comments and contributes to the conversation. Whether you’re an experienced trader or still developing your approach, you’re welcome to join us.

Disclaimer

The information presented in The Smart Canvass Journal and Strategic Capital Systems (SCS) is intended solely for educational and informational purposes and should not be considered financial, investment, tax or legal advice.

I am not a financial advisor and nothing discussed constitutes a recommendation to buy, sell or hold any security. All investments, portfolio holdings, trading strategies, performance results and capital allocation decisions discussed reflect my personal investment experience and objectives.

References to Artificial Intelligence, the AI supercycle and potential long-term wealth creation represent my personal outlook, not predictions or guarantees of future performance.

Past performance does not guarantee future results. All investing and trading involve risk, including the potential loss of principal. Readers should conduct their own research, evaluate their financial circumstances and risk tolerance and consult qualified professionals before making investment decisions.

The RMII Composite Index remains one of the most important indicators I’m monitoring as we enter the final trading week of October. Friday’s close at 1,328.36 placed the RMII Composite Index back below its 200-day moving average of 1,332.09, continuing a pattern of unsuccessful attempts to establish support above that level. The index also remains below its 8, 13 and 21-day exponential moving averages and firmly below the 50D moving averages (white). With the RSI at 43.35, I see little technical evidence that the broader market has established a sustainable recovery.

Daily Chart - RSP+MDY+IWM+IWC (RMII) Source: Trading View 10/25/2026

I’ve been paying particular attention to the relationship between the RMII and its 200-day moving average because I consider that an important reference for the broader market’s intermediate-term condition. The composite index has repeatedly approached or briefly reclaimed this level without sustaining an advance.

Heading into Monday, I’ll be watching whether buyers can push the RMII back above 1,332 and begin establishing support. Beyond that, the 21-day EMA near 1,339 and the 150-day moving average around 1,355 represent additional levels that would need to be reclaimed before I become more confident in the recovery.

On the downside, I’m watching the 1,311 support area. A move to that zone is a ~1.3% pullback and a possible double bottom, dating back to October 14 and a sustained break below that zone would suggest that selling pressure is continuing to expand and could place additional pressure on stocks already struggling beneath their longer-term moving averages.

Market Breadth

Also concerning me is the inability of buying interest to extend beyond a relatively small group of companies and industries. Friday’s market breadth showed only 37.6% of stocks advancing against 58.7% declining. Just 33.8% of stocks remain above their 50-day moving averages while 38.3% are trading above their 200-day moving averages. New 52-week lows outnumbered new highs by 432 to 144. These readings suggest that the weakness is widespread rather than concentrated exclusively in the technology sector.

I don’t view any single technical level as a guarantee of support or resistance, but these reference points help me evaluate whether market conditions are improving or deteriorating.

Performance and Leadership | A Look at Last Week

Reviewing the SPDR sector performance for October 19–23 provides a different perspective from Friday’s market close. Eight of the eleven sectors finished the week higher, led by Energy at 1.60%, Healthcare at 1.45% and Real Estate at 0.97%. Utilities, Materials, Consumer Staples, Financials and Consumer Discretionary also recorded modest advances. Technology finished nearly unchanged at −0.13%, while Industrials declined 1.87% and Communication Services experienced the week’s largest loss at 4.36%.

What interests me is the contrast between the weekly results and Friday’s selling. Although eight sectors managed to finish the week with gains, only three advanced during Friday’s session. That suggests the market experienced a meaningful deterioration in participation toward the end of the week.

I also find the relative strength in Healthcare, Utilities and Consumer Staples noteworthy because those industries are often associated with more defensive positioning. Their performance doesn’t necessarily establish a sustained rotation away from growth, but it does suggest that investors were finding opportunities outside the technology sector.

Sector Performance-Weekly (October 19-October 23, 2026) Source: Koyfin 10/25/2026

Communication Services deserves particular attention. Its 4.36% weekly decline was substantially worse than any other SPDR sector, reflecting weakness in an industry that includes several influential companies within the major indexes. Industrials also struggled, while Technology’s nearly flat weekly performance concealed considerable differences among its underlying industries. Software and cybersecurity demonstrated improving relative strength late in the week while semiconductors remained under pressure. Those differences are becoming increasingly important to how I’ll evaluate opportunities this week.

Daily Chart SMH - Source: Trading View 10/25/2026

I’ve also been following the semiconductor industry’s performance in the context of its substantial gains throughout 2026. Although SMH and SOXX have experienced considerable selling recently, their longer-term performance remains impressive. I don’t view the recent weakness as evidence that the industry’s long-term prospects have fundamentally changed. However, I do recognize that strong historical returns don’t necessarily translate into favorable conditions for new entries. For SCS, I continue separating long-term strategic ownership from shorter-term trading opportunities particularly when the technical evidence suggests that an industry is undergoing a correction.

Heading into the new week, I’ll also be watching whether Energy and Healthcare can maintain their leadership and whether the late-week selling in other sectors continues. I’d like another stab at MRNA.

I’m particularly interested in whether Technology can stabilize and whether buying interest in software and cybersecurity begins extending into semiconductors. The weekly SPDR results demonstrate that opportunities remain available across several industries, but Friday’s performance reminds me that those gains can become vulnerable when broader market conditions deteriorate.

Where I Might Exploit Opportunities This Week

Technology remains particularly interesting to me because the sector’s modest gain concealed substantial differences among its underlying industries. For instance, Software and Cybersecurity attracted meaningful buying interest Friday with IGV advancing 1.72%, HACK gaining 4.09% and CIBR rising 3.28%. I’ve been following these industries closely because their technical structures remain considerably healthier than those of many semiconductor companies.

If you want the definition of trading opportunities in theme stocks, opposed to meme stocks, look no further than PANW, ZS, CRWD and FTNT. I’ve traded CRWD since moving into the breakout strategy, after the RMII lost the 50D in late August, multiple times and have a cumulative +39% return (avg. 5.6% per trade).

Daily Chart - CRWD, Source: Trading View 10/25/2026

These conditions make both industries worth monitoring for additional opportunities therefore, heading into Monday, I’ll be watching whether the relative strength in software and cybersecurity continues and whether semiconductor selling pressure begins to moderate. I’m also interested in whether Energy can sustain its recent improvement and whether buying interest begins expanding into additional SPDR sectors.

I don’t expect every industry to advance simultaneously, but broader participation would provide more convincing evidence that market conditions are improving. Until then, I’ll continue focusing on individual opportunities supported by relative strength rather than assuming that a recovery in one industry signals a recovery across the entire market.

Technology Has Some Work To Do

The Nasdaq 100 enters the final trading week of October facing several important technical challenges. QQQ finished Friday at $704.44 virtually unchanged for the session but still below its 8, 13 and 21-day exponential moving averages and its 50-day simple moving average. The ETF’s RSI has declined to approximately 36.5 reflecting the selling pressure that has developed throughout October. Although Friday’s session offered some stability, I don’t believe the technical evidence is sufficient to conclude that the recent correction has ended and I’m paying close attention.

Daily Chart QQQ - Source: Trading View 10/25/2026

My immediate attention remains on the $700 area which closely aligns with QQQ’s 150-day moving average at $699.41. Friday’s intraday low of $701.16 brought the ETF within striking distance of that level before buyers managed to support prices. I’ve been watching this area because a sustained break below it would represent another deterioration in the Nasdaq’s intermediate-term technical condition. The 200-day moving average near $677.30 remains an additional longer-term reference should selling pressure continue.

I also want to consider the composition of QQQ when evaluating its recent performance. NVIDIA and Apple each account for approximately 8% of the ETF while Microsoft represents another 6.17%. Five semiconductor companies, NVIDIA, Micron, AMD, Broadcom and Intel, collectively account for approximately 20.5% of its holdings. That concentration helps explain why weakness in semiconductors can exert considerable pressure on the Nasdaq even when other technology industries are performing well. That concentration becomes particularly relevant during the coming earnings week.

For me, the market’s reaction to earnings will be just as important as the numbers themselves. Strong results don’t always produce higher stock prices, particularly when expectations are already elevated. Likewise, a disappointing report doesn’t necessarily lead to sustained selling if investors believe the underlying outlook remains favorable. I’ll be watching whether the largest Nasdaq components can attract buyers and whether that buying interest extends beyond a handful of companies.

As the week begins, I see QQQ approaching an important technical decision area. A successful defense of $700 accompanied by improving market breadth and renewed semiconductor participation would be encouraging. A sustained break below that level would reinforce my cautious outlook and raise the possibility of additional weakness toward the 200-day moving average.

Investor Sentiment

Beginning this week, I’m adding the CNN Fear & Greed Index to my weekly market assessment to provide another measure of investor confidence. Friday’s reading of 21 places the market in Extreme Fear territory compared with 19 on Thursday, 22 a week ago and 32 one month ago. Investor sentiment has deteriorated throughout October despite occasional recovery attempts in the major indexes.

Source: CNN 10/25/2026

The current reading is consistent with weakening market breadth, an expanding number of stocks reaching 52-week lows and the RMII trading below its 200-day moving average. Although extreme pessimism can eventually create attractive buying opportunities, it doesn’t establish that a market bottom is in place. I’ll be looking for improving sentiment supported by stronger market participation and sustained price recovery before considering a more aggressive capital deployment strategy.

I’ll track the index weekly to evaluate whether investor confidence is improving or deteriorating alongside the broader technical evidence.

Economic & Earnings Calendar | October 26–30

The Federal Reserve meets October 27–28 with its interest-rate decision scheduled for Wednesday at 2:00 PM ET. I’ll be paying particular attention to the Fed’s assessment of inflation, economic growth and the outlook for additional rate changes. Thursday brings the advance estimate of third-quarter GDP and September’s Personal Consumption Expenditures (PCE) inflation report. Both are scheduled for 8:30 AM ET and could influence expectations for monetary policy heading into November.

Several of the companies reporting this week, including Microsoft, Alphabet and Amazon, are holdings in the SCS Strategic Ownership sleeve. Their earnings are particularly relevant to my long-term investment outlook, where I'm focused on revenue growth, AI monetization, capital expenditures and the ability to convert those investments into sustainable earnings and free cash flow. Unlike shorter-term SCS trades, these positions are intended for long-term ownership, so I'll be evaluating the results against the underlying investment thesis rather than the immediate market reaction.

The calendar also includes Boeing, UPS, Visa and RobinHood on Tuesday with Eli Lilly and Mastercard reporting Thursday and major energy companies including ExxonMobil and Chevron scheduled for Friday. These results should provide additional information about consumer demand, industrial activity, financial services and the Energy sector’s recent leadership.

SCS Capital Deployment and Risk Management

I’m maintaining the SCS Fractional Kelly risk allocation at 0.25% heading into the final trading week of October. These conditions don’t justify increasing risk across the portfolio, particularly with several major earnings announcements and the Federal Reserve’s interest-rate decision approaching.

Any capital deployment will remain selective with an emphasis on companies demonstrating relative strength, improving technical structures and clearly defined entry opportunities with supporting sector strength and volume. Software and cybersecurity remain areas of interest while semiconductors require additional evidence of stabilization. I’ll continue managing existing positions through the established 1R framework and maintaining cash reserves until broader market conditions improve.

A few underperforming positions in the broader SCS trading portfolio continue to weigh on the Risk Weighted Average-R (RWAR), an important measure of portfolio health. I’m continuing to evaluate those holdings against their remaining opportunities and the capital they occupy. As suitable opportunities present themselves during the remainder of the fourth quarter, I intend to continue tax-loss harvesting to reduce exposure to weaker positions, improve capital efficiency and offset realized gains where applicable.

My priorities remain straightforward: protect capital, manage existing exposure and maintain the flexibility to act when opportunities meet SCS criteria. An improvement in the RMII, stronger market breadth and expanding sector participation would support reconsidering the current risk allocation. Until then, the portfolio will remain positioned conservatively.

Closing Thoughts

That concludes this week’s edition of SCS The Week Ahead. I’ll continue sharing my market observations, trading decisions and portfolio management strategies as the coming week unfolds. As always, The Smart Canvass Journal is free to read. My objective is to share practical experience and provide readers with information they can use to develop and refine their own investment and trading decisions.

For those interested in taking the conversation further, I invite you to visit smartcanvas.com, where you can access the SCS Discord community. It’s a growing group of like-minded traders who share market observations, discuss opportunities and exchange ideas about trading strategies, technical analysis and risk management. You’ll also find additional trading resources and discussions that extend beyond what I publish here.

I appreciate everyone who takes the time to read, comment and contribute to the conversation. I look forward to another week of trading and sharing what develops along the way.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge. - Dave

Software and Cybersecurity Found Today’s Buyers While the Broader Market Struggled

Friday brought another difficult session for the broader market. The Dow Jones declined 656 points or 1.2%, while the S&P lost 0.5% and the Russell 2000 slipped 0.3%. The Nasdaq 100 managed to finish essentially unchanged, which caught my attention considering the substantial selling I witnessed in technology just one day earlier. The VIX climbed another 4% to 19.79 reminding me that investors remain uncomfortable with the market’s current direction. I suspect things stay volatile through the midterms before any chance at stabilizing.

Major Indices - October 23, 2026

What interested me most was the difference in performance within technology itself. Software and cybersecurity attracted buyers, while semiconductor stocks continued struggling to recover from Thursday’s losses. I’ve been emphasizing the importance of looking beyond the major indexes because they don’t always tell us where institutional capital is moving. Friday was another example.

Technology finished modestly higher, but that doesn’t mean the entire sector is recovering. There is a considerable difference between the technical condition of software and cybersecurity and what we’re seeing in semiconductors. That distinction matters when deciding where, or whether, to commit additional capital.

For SCS, Friday wasn’t a day for expanding exposure. We had no new trading activity, and I’m comfortable with that decision. Our reduced Fractional Kelly risk budget remains at 0.25%, and I’m continuing to favor patience and selective opportunities over increasing portfolio exposure simply because a few stocks are moving higher. The market is still providing opportunities, but it is also giving me plenty of reasons to remain cautious.

Market Breadth and the RMII Composite Index

Friday’s market breadth continued to reinforce my concerns about the health of this market. Declining stocks outnumbered advancing stocks by 3,297 to 2,109 with just 37.6% of issues finishing higher. More importantly, only 33.8% of stocks are trading above their 50-day moving averages while just 38.3% remain above their 200-day moving averages. The market also recorded 432 new 52-week lows against only 144 new highs. Those aren’t the participation numbers I want to see when considering whether the market is ready for another sustained advance or the deployment of more capital.

RMII Composite - October 23, 2026

The RMII Composite Index finished at 1,328.98, declining 0.56% and slipping back below its 200-day (red line) moving average of 1,332.09. Thursday’s recovery attempt didn’t carry into Friday, and the RMII remains below its 8, 13 and 21-day exponential moving averages, as well as its 50- and 150-day simple moving averages. The RSI stands at 43.35 still below the neutral 50 level. Although momentum has shown some improvement from recent lows, I don’t see sufficient technical evidence to conclude that the broader market has regained its footing. What concerns me is the repeated failure to sustain a recovery above the RMII’s 200-day moving average.

I’m encouraged by the relative strength developing in selected software and cybersecurity names, but I don’t want to confuse strength in a handful of industries with improving market conditions.

Until the RMII can reclaim its 200-day moving average and breadth begins to expand, I intend to maintain a defensive posture. The opportunities are there, but the broader evidence still argues for selectivity rather than aggressive capital deployment.

S&P Sector Performance

Friday’s SPDR sector performance provided another example of just how selective this market has become. Only three of the eleven S&P sectors finished higher, with Energy leading the way at +2.6%, followed by Technology at +0.5% and Real Estate at +0.1%. Energy’s strength stood out against the broader selling, while Technology’s modest gain concealed considerable differences between its underlying industries. The remaining eight sectors finished lower, suggesting that buyers were concentrating their capital rather than participating in a broad market recovery.

Sector ETFs - October 23, 2026

What caught my attention was the weakness in several sectors that had previously attracted defensive buying. Consumer Staples declined 1.9%, Healthcare lost 1.1% and Utilities fell 0.7%. Consumer Discretionary and Communications also struggled, declining 1.7% and 1.8% respectively, while Industrials and Financials each surrendered 1.3%. When both economically sensitive sectors and traditional defensive sectors are selling together I have to question whether investors are simply rotating capital or reducing their overall equity exposure. Is this a move by funds to lighten their positions in AI? Or, a move to secure their returns in 2026 ahead of the 2027 Fund Prospectus prints going into the end of the year? Keeping customer accounts and adding accounts is their game. Whatever the reason, I’m paying attention.

I’m particularly interested in whether Energy can sustain its recent leadership and whether Technology’s improvement can extend beyond software and cybersecurity going into the end of the year. One positive session isn’t enough to establish a durable change in leadership, especially when eight sectors are moving in the opposite direction. For now, the SPDR sector results reinforce my decision to remain selective, maintain a larger cash position and wait for stronger evidence that buying interest is spreading across the market.

Software and Cybersecurity Versus Semiconductors

One of the more interesting developments Friday was the return of buying interest in software and cybersecurity while the semiconductor industry continued to struggle. HACK gained 4.09%, CIBR advanced 3.28%, and IGV finished 1.72% higher. These weren’t insignificant moves, particularly on a day when the Dow lost more than 650 points and most sectors finished in negative territory. I’ve been watching software closely, and Friday’s action gave me another reason to keep that industry near the top of my watchlist.

HACK - October 23, 2026

IGV closed at $110.59, comfortably above its 50-day moving average of $106.30. Its 8, 13 and 21-day EMAs are stacked in bullish alignment and the ETF has recovered nicely from its recent pullback. Cybersecurity looks equally interesting. HACK closed at $127.74, with its major moving averages aligned and rising. Its RSI has moved above 60, reflecting improving relative strength. Both charts suggest that buyers are willing to commit capital to ected areas of technology despite the weakness elsewhere.

IGV- October 23, 2026

Semiconductors tell a very different story. SMH recovered just 0.74% Friday after Thursday’s 5.99% decline, closing at $527.24. The ETF remains below its short and intermediate term moving averages and sits only 2.29% above its 200-day moving average at $515.44. That’s an important technical level I’m watching closely. Losing the 200-day would represent another deterioration in an industry that has been central to the AI investment narrative.

SMH - October 23, 2026

Memory names also rose today. DRAM also managed a 3.04% rebound finishing at $47.07, but I’m not convinced the selling is over. The ETF remains below its declining short-term moving averages, with an RSI near 35. More importantly, the $44.50–$45.20 area represents a critical support zone, having attracted buyers during previous declines in May and July. Friday’s rebound was encouraging, but one positive session doesn’t repair the technical damage we’ve witnessed over the past several weeks.

DRAM - October 23, 2026

This is where the Wall Street Soup D’Jour becomes particularly relevant. The AI narrative has shifted (AGAIN) toward concerns about spending, valuations and the ability of companies to deliver returns on enormous capital investments. That doesn’t mean the long-term AI opportunity has disappeared. It means Wall Street is reassessing expectations (AGAIN) and the selling pressure is falling disproportionately on some of the companies that benefited most from the earlier enthusiasm. The narrative can turn bullish again, just as it has turned bearish but I prefer to let price action tell me when that change is taking hold.

For now, I’m seeing a market that is becoming increasingly selective about where capital goes and so am I. Software and cybersecurity are showing signs of renewed institutional interest, while semiconductors and memory remain under pressure.

QQQ — $700 Support Area Coming Into Focus

I’ve been watching QQQ closely as the Nasdaq continues struggling to regain its footing following the recent selling in technology. Friday, QQQ finished virtually unchanged at $704.44, but the closing price doesn’t tell the entire story. The ETF traded as low as $701.16 during the session, bringing it within striking distance of the $700 support area and its 150-day simple moving average at $699.41. Buyers managed to defend that area Friday, but I wouldn’t interpret the modest recovery as evidence that the selling pressure has ended.

QQQ - October 23, 2026

What concerns me is the deterioration in QQQ’s technical structure. The ETF continues below its 8, 13 and 21-day EMAs, the EMA stack is inverted and its 50-day moving average near $725.81. Its RSI has fallen to approximately 36 while the MACD remains negative. Those readings suggest that sellers continue to have the advantage despite occasional attempts to rally. The $700 area is particularly important because it represents both a psychological price level and a longer-term technical reference that institutional investors may be watching.

I also find it interesting that the QQQ has been unable to sustain a meaningful recovery even as software and cybersecurity demonstrate improving relative strength. Over 20% of the QQQ top 20 holdings are weighted towards semis and the weakness in semiconductors and other large-cap technology names continues to weigh on the index which reinforces my concern about relying too heavily on the performance of a handful of companies to assess the broader market.

QQQ Top 20 Holdings by weighting, as of October 23, 2026

I’ve been emphasizing that the Nasdaq’s performance doesn’t necessarily reflect the condition of every technology industry and the Top 20 holdings graph illustrates the concentration risk and helps explain why. When semiconductors struggle, their influence on QQQ can overwhelm improvements elsewhere. Until that selling pressure begins to ease, I believe the Nasdaq will have difficulty establishing a sustainable recovery, regardless of the opportunities emerging in selected software and cybersecurity names.

Heading into Monday, I’ll be watching how QQQ behaves around $700 rather than attempting to predict whether that level will hold. A successful defense, accompanied by improving volume and broader participation, would be encouraging. A decisive break below the 150-day moving average would raise additional concerns about the intermediate-term trend. For now, I’m comfortable maintaining a cautious approach and allowing the technical evidence to guide my next capital deployment decisions.

NOW Still in the Winners Circle

Friday was a quiet day for SCS with no new entries, additions or exits. Given the continued deterioration in market breadth and the uncertainty surrounding the major indexes I was comfortable allowing existing positions to develop without committing additional capital.

ServiceNow (NOW) provides readers with a good example of how I approach trade management once a position reaches its first profit objective. I entered NOW on Tuesday at $148.42 with an initial stop at $140.15, just below the 21-day EMA. That established approximately $8.27 of initial risk per share. On Thursday, NOW reached my 1R objective at $156.76 allowing me to harvest 50% of the position and advance the stop on the remaining shares to breakeven plus 1%, approximately $149.90. With the initial profit secured and the remaining position protected by a higher stop, NOW officially entered my SCS Winners Circle. That means it moves out of one sleeve of names that have yet to prove themselves and into the WC of harvested trades.

NOW - October 23, 2026

Moderna (MRNA) is another example of why the 1R decision matters. I entered MRNA on October 15 at $227.10 and harvested half the position Wednesday at $245.72 after reaching my initial profit objective. The remaining shares were subsequently stopped out Thursday at approximately breakeven plus 1%, following reports suggesting less favorable results from the melanoma vaccine research expected to be discussed Saturday. Those reports remain unconfirmed and I have no interest in treating market speculation as established fact. What matters from a trading standpoint is that the position was managed according to plan, allowing me to retain the realized gain from the first half while limiting the risk on the remainder.

MRNA is now back on my watchlist.

These two trades illustrate an important distinction in the SCS process. Reaching 1R doesn’t mean the trade is finished; it means I’ve arrived at the first major management decision. NOW has continued advancing after its initial harvest, while MRNA returned the remaining shares through its adjusted stop. Both outcomes are acceptable because the decisions were made within the same risk-management framework. The mechanical process speaks. for itself.

My Takeaway — Friday’s Close

Friday’s session reinforced something I’ve been discussing throughout the week and that there is a considerable difference between finding individual opportunities and having a healthy market that supports broad capital deployment. Software and cybersecurity are attracting buyers, Energy is showing renewed strength and several individual stocks continue to demonstrate constructive technical patterns. Yet beneath those pockets of strength, market breadth remains weak, the RMII is still struggling below its 50-day moving average for nearly two months and most sectors continue to experience selling pressure. I can’t ignore those conditions simply because a few areas of the market are performing well.

I’m not bearish on the long-term opportunities ahead, particularly in technology and artificial intelligence, but I am cautious about the environment we’re trading in today. The Wall Street market noise can change quickly and the same institutions that enthusiastically supported the AI investment narrative can become equally aggressive sellers when expectations shift. I have no intention of allowing those changing narratives to dictate my decisions. I would rather concentrate on price, participation, relative strength and the quality of the opportunities in front of me.

As we head into the weekend, I’m satisfied with the decisions made this week, including those occasions when I chose not to trade. I’ll use the weekend to review the technical evidence, update my watchlist and prepare for whatever opportunities next week may present. For now, I see no reason to abandon a cautious approach simply because selected industries are beginning to recover.

I’ve spent enough years in the market to appreciate that preserving capital and maintaining the ability to participate tomorrow are every bit as important as the opportunities available today. That remains the foundation of Strategic Capital Systems.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge. - Dave

Join the Smart Canvass Community

If you’ve been following The Smart Canvass Journal and would like to take the discussion further, I invite you to join the Strategic Capital Systems community at smartcanvas.com.

The Discord community is where I share trading activity, developing opportunities, watchlists and the technical observations that influence my decisions. It’s also a place to exchange ideas, ask questions and learn from other traders who understand the importance of managing risk. Members can explore scanners, technical tools and the MARS indicators developed by Mars Cyrillo, along with discussions about the practical application of the SCS trading process.

My objective has always been to share the experience I’ve accumulated through years of trading, including the successes, mistakes and lessons that continue shaping my approach. Whether you’re an experienced trader or just beginning to develop your own process, I believe there’s value in learning alongside others who take their decisions seriously.

Disclaimer

The information presented in The Smart Canvass Journal and Strategic Capital Systems (SCS) is intended solely for educational and informational purposes and should not be considered financial, investment, tax, or legal advice.

I am not a financial advisor, and nothing discussed constitutes a recommendation to buy, sell, or hold any security. All investments, portfolio holdings, trading strategies, performance results, and capital allocation decisions discussed reflect my personal investment experience and objectives.

References to Artificial Intelligence, the AI supercycle, and potential long-term wealth creation represent my personal outlook, not predictions or guarantees of future performance.

Past performance does not guarantee future results. All investing and trading involve risk, including the potential loss of principal. Readers should conduct their own research, evaluate their financial circumstances and risk tolerance, and consult qualified professionals before making investment decisions.

Good evening, traders! The delay this evening was a 38 year dinner date in the making. IFYKYK.

Well, Wall Street’s Soup D’Jour changed its flavor again and today the selling in AI and semiconductor stocks was anything but subtle. After two consecutive sessions of improving market conditions, technology came under heavy selling pressure, dragging the Nasdaq 100 down 2.8% and the S&P 500 lower by 1.2%. The Dow Jones and Russell 2000 managed to finish essentially unchanged, while the VIX jumped 14.6% to 19.12.

The divergence between the major indexes tells an important story. This wasn’t indiscriminate selling across the entire market. It was a particularly aggressive retreat from technology, semiconductors and AI-related investments. Technology was the weakest S&P sector, declining 3.3%, followed by communications at −1.4%.

Meanwhile, consumer staples advanced 3.3%, utilities gained 2.1%, healthcare rose 1.3% and real estate and financials each advanced 1.1%. Once again, investors rotated toward more defensive areas of the market while reducing exposure to the technology names that have dominated much of the market’s performance.

The Indexes Don’t Tell the Whole Story

Despite the sharp decline in the Nasdaq, market breadth was nearly evenly divided, with advancing issues representing 47.7% of the market compared with 48.2% declining. The percentage of stocks trading above their 50-day moving averages actually improved from yesterday’s 31.6% to 34.6%, while those above their 200-day averages remained relatively stable at 38.8%.

However, new 52-week lows increased substantially, rising from 285 yesterday to 430 today. New highs also increased to 177 suggesting that while certain sectors continue attracting capital, selling pressure is intensifying elsewhere.

This is an important distinction. We’re not necessarily witnessing a broad market collapse, but we are seeing significant deterioration in some of the market’s former leadership groups and nowhere was that more evident today than in semiconductors.

Semiconductors: Approaching Critical Technical Levels

The semiconductor ETF SMH declined 5.99% today, closing at $523.35. That leaves it just 1.68% above its 200-day simple moving average, currently near $514.73. That’s an important technical development.

SMH

The SMH is now trading below its 8-day, 13-day and 21-day EMAs, as well as its 50-day and 150-day moving averages. Its RSI has deteriorated to approximately 31.6 reflecting considerable downside momentum. The former support area near $537 has become overhead resistance and today’s decline brought the SMH dangerously close to testing its longer-term 200-day moving average.

A decisive break below that level would represent another deterioration in the semiconductor group’s technical structure. Conversely, a successful defense could provide an opportunity for stabilization, although I would want to see improving volume, momentum and relative strength before interpreting any rebound as a meaningful recovery.

Memory Stocks

DRAM declined 7.08% to close at $45.68, leaving it less than 1% above a critical support area near $45.21. That’s a level the ETF tested twice earlier this year in May and July.

A third test of that support zone deserves close attention. Whether buyers defend it or sellers force a breakdown could help determine the next direction for the memory group.

For now, both SMH and DRAM remain under considerable technical pressure.

QQQ: Another Important Support Test Approaching

The Nasdaq 100’s sharp decline also brought QQQ closer to another important technical area. The QQQ finished near $704.47, less than 1% above its 150-day moving average and the psychological support area around $700. That level becomes particularly important following the Nasdaq’s inability to sustain its recent recovery.

We’ve seen several attempts to reclaim shorter-term moving averages, but the selling pressure in technology continues to overwhelm those efforts. If QQQ loses the $700 area and its 150-day moving average, the technical damage could deepen. On the other hand, a successful defense accompanied by improving participation would provide some evidence that buyers remain willing to support the broader technology sector. I’m not interested in predicting which outcome occurs. I’ll let the price action tell us.

Wall Street Soup D’Jour: AI Spending Under Scrutiny

Today’s bearish narrative centered on renewed questions surrounding AI infrastructure spending, corporate outlooks and the sustainability of growth expectations.

Semiconductor weakness was particularly pronounced with pressure across Nvidia, Lam Research and Micron Technology. Concerns about funding, supply-chain constraints and capital spending contributed to the selling. The Philadelphia Semiconductor Index reportedly declined more than 6%, reinforcing the weakness evident in SMH and DRAM.

Meanwhile, geopolitical tensions in the Middle East continued supporting elevated oil prices, with Brent crude holding above $110 per barrel. The 10-year Treasury yield eased toward 5.01%, reflecting some demand for Treasuries as investors reassessed risk.

What interests me most is how quickly the AI narrative continues shifting. On Wednesday, improving corporate outlooks and renewed enthusiasm supported a technology rally. Today, concerns about the very same investment theme brought sellers back aggressively.

The long-term opportunity presented by AI hasn’t necessarily changed overnight. But Wall Street’s willingness to pay for that opportunity clearly has. That’s why I continue separating the long-term investment thesis from the short-term trading environment.

Two Harvests, Two Winners Circle Positions

Despite today’s difficult market, our SCS trade management framework continued doing exactly what it was designed to do. Yesterday, MRNA reached our first 1R target, allowing us to harvest 50% of the position at $245.72 for approximately an 8% gain. We subsequently advanced the stop on the remaining shares to breakeven plus 1%. Today, MRNA triggered that adjusted stop, closing the remaining position with a modest gain.

The result was a completed trade with two profitable exits, achieved without needing to predict the next development in Moderna’s clinical research or the market’s reaction.

Reports concerning potentially disappointing clinical trial results circulated ahead of a planned October 24 announcement. Those reports remain unverified, but the uncertainty reinforces the importance of protecting gains rather than assuming a strong stock will continue advancing indefinitely.

We also had another successful harvest this morning in NOW. My ServiceNow position, entered at $148.42 caught a bid this morning and reached the designated 1R target of $156.76. I harvested 50% of the position, securing approximately a 5.6% gain on those shares and advanced the stop on the remaining position to breakeven plus 1%. That moves NOW into our Winners Circle, with a planned exit above the original entry price on the remaining shares, subject to execution risk.

Two consecutive mornings, two successful 1R harvests and another example of why the management rules matter.

Protecting the Progress

Today’s selling reinforces why I’ve maintained a cautious approach to new positions. Fractional Kelly remains reduced to 0.25% and I’m continuing to prioritize selective entries, harvesting gains, reducing exposure and preserving cash.

The RMII Composite Index slipped approximately 0.3% today reflecting some deterioration following its recent recovery. I’ll be watching whether it can maintain its position above the 200-day moving average, which remains an important reference for broader market health.

At the same time, the sharp deterioration in semiconductors raises additional concerns about the sustainability of the recent technology rebound. I don’t need to be fully invested to participate in opportunities and I certainly don’t need to increase exposure simply because a sector appears oversold.

There will be opportunities when the technical evidence improves. My current cash position stands at thirty-seven percent (37%). I’m still invested for a number of reasons and the main deciding factor is to have some exposure.

My Takeaway

Today’s market delivered another reminder that improving conditions can reverse quickly, particularly when the market’s former leadership groups remain technically vulnerable.

SMH is approaching its 200-day moving average. DRAM is nearing a support zone that has held twice this year. QQQ is approaching its 150-day moving average and the $700 area. These are important technical references that I’ll be watching closely heading into Friday. If buyers defend those levels, we may begin seeing evidence of stabilization. If they fail, the market could face another round of selling pressure, particularly in technology and AI-related names.

For SCS, the priority remains unchanged: preserve capital, manage our existing positions, harvest gains when our rules call for it and remain selective about new opportunities.

I’ve now demonstrated twice this week that opportunities can still be found in a difficult market. But those opportunities only become meaningful when they are manage properly.

I don’t control Wall Street’s Soup D’Jour. I control how much capital I expose to it and how I manage that capital once it’s committed.

I share my SCS real time entries, exits and trade management decisions in the Smart Canvass Discord Community. Join us free at smartcanvas.com.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge.

Disclaimer: The information presented in The Smart Canvass Journal and Strategic Capital Systems (SCS) is intended solely for educational and informational purposes and should not be considered financial, investment, tax or legal advice.

I am not a financial advisor, and nothing discussed constitutes a recommendation to buy, sell, or hold any security. All investments, portfolio holdings, trading strategies, performance results, and capital allocation decisions discussed reflect my personal investment experience and objectives.

References to Artificial Intelligence, the AI supercycle and potential long-term wealth creation represent my personal outlook, not predictions or guarantees of future performance.

Past performance does not guarantee future results. All investing and trading involve risk, including the potential loss of principal. Readers should conduct their own research, evaluate their financial circumstances and risk tolerance, and consult qualified professionals before making investment decisions.

Good evening, traders!

Today’s market provided something we haven’t seen enough of lately: improving participation beyond the largest technology stocks. After several sessions of deteriorating breadth and a market increasingly dependent on a handful of large-cap names, Tuesday offered some encouraging evidence that buyers are beginning to return to other areas of the market.

The Russell 2000 led the major indexes, advancing 1.67%, followed by the Dow Jones with a 1.0% gain. The S&P 500 added 0.27%, while the Nasdaq 100 slipped 0.1%. The VIX declined 4.8% to 17.55, reflecting some easing in market volatility.

What caught my attention wasn’t necessarily the performance of the major indexes, but what was happening underneath them. Ten of the eleven S&P sectors finished positive, led by healthcare (+2.3%), real estate (+1.7%), utilities (+1.2%) and financials (+1.2%). Technology was the only sector to finish negative, declining 0.32%.

The rotation was equally evident across market capitalization and investment styles. Small-cap growth advanced 1.8%, small-cap value gained 1.5%, and mid-cap value rose 1.3%. Meanwhile, large-cap growth declined 0.2%.

That’s quite a contrast from Monday when technology led the market higher while much of the broader market continued struggling.

Market Breadth: Finally, Some Improvement

One of the more encouraging developments today was the improvement in market breadth. Advancing issues accounted for 66% of the market, compared with just 39.7% yesterday. Decliners represented approximately 30% giving advancing stocks better than a 2-1 advantage.

The percentage of stocks trading above their 50-day moving averages improved from 26.2% to 30.3%, while those above their 200-day averages increased from 36.3% to 38.2%. New 52-week lows declined from 483 yesterday to 339 today. These are encouraging developments, particularly after the deterioration we’ve witnessed over the past several sessions.

However, perspective remains important because despite today’s improvement, fewer than one-third of stocks are trading above their 50-day moving averages and new 52-week lows continue to substantially outnumber new highs.

In other words, the market is showing improvement, but the damage hasn’t been repaired.

RMII Composite Index: Reclaiming the 200-Day

Perhaps the most important development today came from our RMII Composite Index, which advanced 1.27% to close at 1,335.97, gaining 16.77 points.

For those following our daily notes, the RMII is our equal-weight composite of RSP, MDY, IWM and IWC, providing a broader perspective on market participation than the capitalization-weighted major indexes.

Yesterday, the RMII closed at 1,319.19, below its 200-day moving average. Today, it reclaimed that important technical reference, currently near 1,330.62.

It also closed above its 8-day EMA at 1,330.54 and 13-day EMA at 1,334.22. The next immediate challenge is the 21-day EMA near 1,340.83, followed by the 150-day moving average near 1,352 and the 50-day moving average near 1,373. The MACD histogram is also showing improvement suggesting that downside momentum may be weakening.

This is an encouraging technical development, particularly following the recent test of support near 1,311–1,314. However, one session above the 200-day doesn’t establish a new uptrend. I’ll be looking for follow-through, improving momentum and continued participation before considering a meaningful increase in capital deployment.

SCS Trade Management: MRNA and NOW

Our MRNA position continues to demonstrate strength, advancing 6.72% today to $242.14. The stock nearly reached our first 1R harvest target, and I’ll be looking to place 50% of the position on the block tomorrow at $245.72, representing approximately an +8% gain from our original entry if we can catch a bid.

I’ve also raised the technical stop to $216.06 using the 13-day EMA as our reference. That level sits just below today’s intraday low and provides approximately a 12% buffer from today’s closing price. If our harvest executes, we’ll reassess the remaining shares under our Winners Circle management rules.

I also added NOW (ServiceNow) today at $148.42. The stock finished at $149.55, advancing 2.88% on the session. Our initial stop is $140.15, established at the 21-day EMA (5.5%) with a designated first 1R management target of $156.76.

The technical setup remains constructive, with RSI above 62, MACD positive and above the zero line, a green histogram and bullishly aligned EMAs.

I’m also encouraged by the recent action in IGV, the software ETF, which has been positive for two consecutive sessions and closed above its 50-day moving average. That’s an important technical reference for me, and sustained strength in IGV would provide additional support for software names such as NOW. Volume, admittedly for the IGV, was light and momentum indicators have not yet flashed green, thus a tight stop at the 21D for NOW is set.

One consideration is NOW’s upcoming earnings announcement on October 28, with expectations of $1.02 per share on revenue of $4.09 billion. We’ll factor that event into our trade management as the date approaches.

Capital Deployment: Encouraged, But Still Selective

Today’s market action was certainly more constructive than what we’ve seen recently. Improving breadth, stronger small and mid-cap participation, declining volatility and the RMII reclaiming its 200-day moving average are developments worth recognizing.

But I haven’t changed our overall risk posture based on one session. Within SCS, Fractional Kelly remains reduced to 0.25%, how I bought NOW and I’m continuing to prioritize selective opportunities, portfolio repair and maintaining sufficient cash to respond when conditions improve.

The Wall Street Soup D’Jour continues to influence market behavior, particularly around AI and technology. Today, however, the broader market demonstrated that leadership doesn’t have to come exclusively from those areas. Whether this rotation develops into something more sustainable will depend on continued buying, improving breadth and the ability of key technical levels to hold.

My Takeaway

Tuesday was a better day for the broader market and the RMII reclaiming its 200-day moving average was particularly encouraging. Still, there’s a difference between a market showing improvement and a market that has completed its repair.

Tomorrow, I’ll be watching whether the RMII can hold above 1,330 and challenge its 21-day EMA near 1,341. I’ll also be looking for continued breadth improvement, strength in software and confirmation that today’s rotation has staying power.

For now, I’ll remain selective, manage the existing positions and allow the evidence to determine when it’s appropriate to increase exposure and FK as one strong session improves the evidence but, sustained participation is what changes my capital deployment decisions.

I share my SCS entries, exits and trade management decisions in the Smart Canvass Discord Community and do the morning and afternoon recaps here.

Join us free at smartcanvas.com.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge.

Disclaimer: For educational and informational purposes only. Not investment advice. Trading involves risk.

Last Sunday, I asked a fairly straightforward question: The market is rotating, but is it getting healthier? At the time, there were some encouraging developments worth discussing. Software and cybersecurity were demonstrating relative strength, semiconductors were surrendering leadership and our RMII Composite Index had successfully defended an important technical area near its 200-day moving average. There were reasons to believe the market might be working through a constructive rotation, even though broader participation remained disappointing.

Well, here we are one week later and I think I have a little more clarity. The rotation is real and unfortunately, the improvement in market health hasn’t followed.

Friday’s selling pushed all four major U.S. indexes below their respective 50-day moving averages. The RMII Composite Index, which I look to because it reveals the underlying health and breadth of the market beyond the headline indexes, helps me determine whether conditions favor deploying capital, managing existing positions, or stepping aside to preserve it. It also surrendered its 200-day moving average while market breadth deteriorated further and volatility expanded considerably. The VIX, which finished the previous Friday at 14.79, ended this week at 19.98, an increase of more than 35%.

Yet the S&P 500 remains approximately 2% below its all-time high. That’s an interesting contradiction, isn’t it? An investor looking exclusively at the headline index might conclude that the market is experiencing little more than a routine pullback. But when I look beneath the surface, particularly at participation across large, mid, small and micro-cap stocks, I’m looking at a market that has become considerably less healthy than its proximity to record territory would suggest.

This is precisely why I continue to emphasize the difference between what the major indexes are reporting and what is actually happening to the individual stocks I trade. In this environment, I’ve become more selective, placing greater emphasis on daily breakouts, confirming volume, relative strength and leadership within the strongest sectors. The core SCS framework, built around historical expectancy, asymmetry, average losses and disciplined risk management, hasn’t changed, but those statistical advantages are taking a temporary backseat to shorter-term swing trading opportunities supported by current price action.

While reducing Fractional Kelly to 0.25%, becoming more patient with entries, managing stops with greater flexibility and limiting participation to setups where technical confirmation and sector strength justify the risk isn’t abandoning the SCS edge; it’s adapting how and when I deploy it until broader market conditions become more favorable and the Wall Street Soup’D’Jour is served up with more bullish ingredients.

RMII Composite Index - What Changed in Seven Days

Last Sunday, I discussed how the RMII Composite Index had broken above the declining channel that developed during September. The composite had pulled back toward the former channel boundary, which coincided with its rising 200-day moving average and buyers appeared willing to defend that area. At approximately 1,345, the RMII was showing some encouraging signs of stabilization.

At the time of the articles publication, I wasn’t ready to declare a new advancing trend, but I was encouraged by the possibility that former resistance was beginning to function as support. I wanted to watch the index this week reclaim its shorter-term moving averages, establish a higher high and eventually work toward the 1,363 area and unfortunately, that isn’t what happened.

Instead, the RMII finished Friday at 1,317.90, down 1.20% for the session and approximately 2% below where we finished the previous week. Thursday’s brief recovery above the 200-day moving average proved unsuccessful and Friday’s selling pushed the composite back below that important reference, now near 1,329. It’s intermediate-term structure has also deteriorated. The 50-day moving average has crossed below the 100-day moving average, while the MACD crossed beneath its signal line, with both lines remaining below zero. The RSI has declined to approximately 37, well below the 60 level I generally prefer to see associated with stronger momentum on any chart.

Taken together, these developments suggest that the market’s underlying weakness is more than a temporary interruption in an otherwise healthy advancing trend. The RMII is now trading beneath its major moving averages and the shorter-term averages remain negatively aligned. Friday’s low near 1,314 brings the 1,311–1,314 support area into focus. I’ll be watching whether buyers can defend that area during the coming week. A recovery above the 200-day moving average would be an encouraging first step, but I would still want to see improving participation and a more constructive moving-average structure before becoming comfortable with increasing exposure.

Last Sunday, my question was whether the RMII could build on its breakout. Today, the question is whether it can defend support after surrendering that progress. That’s a meaningful change in the technical environment and something that get’s my full attention.

Market Breadth

One of the more revealing comparisons between last Sunday’s report and this week’s results is market breadth. Last week, only 28.6% of stocks were trading above their 50-day moving averages, while 39.3% remained above their 200-day averages. Those weren’t particularly encouraging readings.

This Friday, those figures deteriorated to 26.5% and 36.9%, respectively. Declining stocks accounted for 66.2% of the market, compared with just 30.5% advancing. In other words, approximately three out of every four stocks are now trading below their 50-day moving averages, even as the S&P 500 remains relatively close to its all-time high.

There is one development that caught my attention. New 52-week lows declined from 705 on Wednesday to 476 on Thursday and 408 on Friday. That contraction suggests some moderation in the number of stocks making fresh lows, despite the selling pressure affecting the broader indexes. I consider this worth monitoring, although I’m certainly not prepared to interpret it as confirmation that the market has established a bottom.

What I want to see is a sustained improvement in participation, not just simply fewer stocks making new lows. A healthy market advance should eventually include expanding numbers of stocks reclaiming their intermediate moving averages and participating alongside the headline indexes and why the 50D is a key player in my analysis.

When all four major indexes are trading below their respective 50-day moving averages, I believe that's a warning worth respecting. It doesn't guarantee further declines, but it certainly argues against complacency, particularly when fewer than 27% of individual stocks remain above their own 50-day averages.

Until that happens, I remain cautious about treating any single positive trading session as evidence that the broader market has recovered.

Sector Rotation

Last week’s report focused heavily on the divergence developing within technology. Software applications had advanced 4.78% for the week, software infrastructure gained 3.57% and cybersecurity was demonstrating impressive relative strength. Meanwhile, semiconductors declined approximately 4%, and semiconductor equipment and materials lost more than 6%.

Last week I questioned whether this represented a healthy broadening of the leadership puzzle or simply a redistribution of capital within a weakening market and Friday gave me another piece to that puzzle.

Friday, technology declined approximately 3% with semiconductors, software, cloud computing and cybersecurity all experiencing substantial selling pressure. IGV lost 4.68%, CIBR declined 4.65%, HACK fell 4.24%, and SMH surrendered another 3.44%. The software and cybersecurity groups that appeared capable of assuming leadership just a week earlier were unable to escape the renewed selling. Collectively, that raises a few eyebrows. But, here’s where the rotation becomes particularly interesting.

Six of the eleven major U.S. equity sectors finished Friday in positive territory. Energy led with a 2.5% gain, followed by Utilities at 1.3%, Consumer Staples at 1.1%, Materials at 0.7%, Financials at 0.5% and Real Estate at 0.4%. This tells me capital hasn’t simply abandoned the equity market.

This week's sector performance (above) illustrates a significant rotation in capital, with Consumer Staples (+5.02%), Energy (+4.86%) and Healthcare (+3.45%) demonstrating strength while Technology plunged 7.70%. To me, this reinforces the defensive shift underway as investors move away from growth-oriented leadership, further supporting our decision to reduce risk and become more selective with capital deployment.

Investors appear to be reassessing where they’re willing to assume risk, with greater interest in energy, defensive businesses and other areas less dependent on the growth expectations that have supported technology valuations.

Equity Factors

We saw a similar distinction in equity-factor performance. Large-cap value finished essentially unchanged Friday, while large-cap growth declined 1.9%. Small-cap growth suffered an even larger decline of 2.5%.

Last Sunday, I was interested in whether software and cybersecurity could assume leadership as semiconductors consolidated. This Sunday, the rotation has moved further toward defensive and value-oriented areas, while technology leadership continues to struggle.

Is this a healthy rotation? Perhaps, eventually but I would be more encouraged if these sector gains were accompanied by improving market breadth rather than continued deterioration across the majority of individual stocks.

In conclusion, for now, I see a market becoming increasingly selective, not one demonstrating the characteristics of a broad, sustainable advance.

Wall Street Soup D’Jour: AI Isn’t the Only Ingredient

I’ve often referred to Wall Street’s prevailing investment narratives as the Wall Street Soup D’Jour. There’s always a favorite story being served to investors in the mainstream media and when that story gains traction, institutional buying and selling can amplify the resulting price movements well beyond what the underlying fundamentals might otherwise justify.

Take just this last week. On CNBC, the talking heads couldn’t shake themselves free from pounding the AI infrastructure spending and the CRWV debt obligations theme into every segment of the networks available time. Artificial Intelligence is genuinely today’s featured Soup D’Jour ingredient.

I continue to believe AI represents a potentially generational technological development and I’ve committed long-term capital to that opportunity through my Strategic Ownership portfolio. But believing in the long-term economic significance of AI doesn’t require me to believe every company associated with the theme deserves its current valuation or that every decline in semiconductor stocks represents a buying opportunity. Those are two very different considerations.

Here is what I believe is more concerning and moving the markets besides the manufactured uncertainty surrounding semiconductor demand and AI infrastructure spending.

We’re approaching the midterm elections with the possibility of changes in congressional control and the policy uncertainty that can accompany them. At the same time, continuing tensions in the Middle East introduce additional concerns surrounding energy markets, geopolitical stability and global economic conditions. In my view, these broader uncertainties deserve at least as much attention as the debate surrounding AI spending and semiconductor demand. Their potential influence extends across the market, affecting investor sentiment, sector allocation and the willingness of institutions to assume additional risk.

And this is where Wall Street Soup D’Jour becomes particularly relevant to our trading. When institutional money begins moving aggressively in response to the prevailing narrative, otherwise sound trades can become temporarily overwhelmed by the noise. A stock may experience an opening selloff, violate a technical reference and subsequently recover as the market begins sorting through the day’s uncertainty.

That’s why the SCS stop management requires patience, flexibility and constant attention. My initial stops are provisional and I remove resting stop orders at the opening bell so we can evaluate the developing session rather than automatically surrendering positions to every opening disruption. Sometimes the evidence supports adjusting a stop as the day’s price action unfolds. Just as I’ve been patient with buying, in particular when a pattern reveals Fair Value Gaps, it pays to wait and be rewarded with a better ROI. If a name escapes me, I don’t chase momentum escape names when too many trades can still be executed the same day or next.

Of course, that flexibility comes with responsibility. Delaying an exit or moving a stop can increase losses when the selling represents genuine technical deterioration rather than temporary noise, like yesterday…like this entire past week. We must remain hyper-vigilant about that distinction.

The objective isn’t to ignore risk. It’s to manage it with a plan, good, bad or indifferent, adjust and remain flexible without allowing Wall Street’s latest narrative to dictate your every decision.

Credit Markets - Still Waiting for Confirmation

Last Sunday, I discussed the importance of high-yield credit as another measure of investors’ willingness to assume risk. At the time, the weakness in semiconductor stocks hadn’t been accompanied by an equivalent deterioration in high-yield credit, which I considered encouraging.

However, I also pointed out that JNK remained technically weak and that credit conditions weren’t providing convincing confirmation of improving risk appetite. Friday, JNK declined 0.39%, HYG lost 0.34% and BKLN finished 0.20% lower. These aren’t particularly dramatic moves compared with the losses experienced across technology, but neither do they suggest that investors are becoming increasingly comfortable assuming risk.

With the VIX now approaching 20, I’ll continue monitoring whether credit markets stabilize or begin reflecting a broader deterioration in financial conditions.

I’m not suggesting that we’re facing an imminent credit problem. Rather, credit remains another piece of evidence that argues against becoming overly aggressive with new capital commitments.

SCS Portfolio - The Repair Process Continues

Last Sunday, I wrote about beginning the difficult work of repairing portfolio health, including reductions in ASTS and LUNR. Those decisions weren’t particularly enjoyable, but they were necessary steps toward improving capital efficiency and reducing exposure to positions that were consuming too much portfolio capacity. That process has continued.

During the past week, we harvested gains in selected positions, exited others that no longer justified their capital commitment and continued evaluating the relationship between portfolio risk and opportunity.

We also initiated a new position in DOCU near Friday’s session lows. The position finished approximately 1.5% below our entry price, with our initial stop referenced to the 21-day EMA. I’m still interested in the technical potential of DOCU, particularly given the relative strength software demonstrated earlier in the week, but Friday’s sharp reversal in IGV means Monday’s price action will deserve close attention.

I don’t want to force a bullish interpretation onto a deteriorating market simply because I own a position. If the evidence supports the trade, I’ll manage it accordingly. If that evidence changes the decisions must change with it.

One of the more important lessons I’ve learned is that portfolio repair isn’t simply about selling losing positions. It’s about improving the overall quality of the capital I have deployed, reducing unnecessary correlation and making sure I’m preserving sufficient capacity to participate when better opportunities emerge.

Our Capital Decision Index, portfolio RWAR, and available capacity remain central to that process.

Fractional Kelly - Another Reduction in Risk

Last Sunday, I explained why SCS remained at a reduced 0.33% Fractional Kelly allocation rather than our normal 0.50%. Market breadth was weak, the RMII hadn’t established a convincing advancing trend and our portfolio was still working through its own repair process. After reviewing Friday’s deterioration, I’ve reduced that allocation further to 0.25%, one-quarter our normal risk allocation.

I don’t consider that a prediction that the market is about to experience a major correction. It’s simply an acknowledgment that the environment has become less favorable for deploying additional capital.

All four major indexes are now below their 50-day moving averages. The RMII is below its 200-day moving average, technology leadership has deteriorated and volatility has expanded. At the same time, our own portfolio still has work to do. Those conditions don’t justify operating at our normal risk allocation.

I can always increase my exposure when market conditions and portfolio health improve. But recovering capital lost through unnecessary risk-taking is considerably more difficult than preserving it in the first place. The objective remains the same: stay in the game, protect my capital and remain prepared for the opportunities that eventually emerge.

The Week Ahead - What Would Change My Mind

As we enter the week of October 19–23, I’ll be watching whether the major indexes can begin reclaiming their respective 50-day moving averages. Those averages may now become areas of overhead resistance and I want to see whether buyers can demonstrate enough conviction to reverse the recent deterioration.

Our RMII Composite Index remains at the top of my list. My immediate concern is whether the 1,311–1,314 support area can hold but now, the 50D has fallen below the 100D. That is a technical breakdown requiring the potential of weeks to repair.

Beyond that, reclaiming the 200-day moving average near 1,329 would be an encouraging first step, although the declining shorter-term averages would still need to be addressed.

I’ll also be watching whether the contraction in new 52-week lows continues and more importantly, whether the percentage of stocks above their 50-day averages begins improving. I’d like to see software and semiconductors stabilize, but I don’t want to mistake an isolated rebound in a few technology names for a meaningful improvement in broader participation.

Credit markets and volatility will remain important, particularly as investors continue evaluating earnings, the economic outlook, geopolitical developments, and the approaching elections.

Within SCS, portfolio repair and capital preservation remain the priorities. We’ll continue managing our existing positions, evaluating selective opportunities, and operating at the reduced 0.25% Fractional Kelly allocation until the evidence supports something more aggressive. I don’t need to predict what Monday will bring. I need to be prepared to respond to what the market actually delivers.

Closing Perspective - Two Percent From the High

Here’s what I find most interesting about the current environment. The S&P 500 is approximately 2% below its all-time high, yet nearly three-quarters of individual stocks are trading beneath their 50-day moving averages.

All four major indexes have lost their intermediate-term trend references, our RMII Composite Index has fallen below its 200-day moving average and technology leadership continues to weaken and those aren’t the characteristics of a market I want to approach with complacency.

Last Sunday, I asked whether the rotation we’re witnessing was making the market healthier. Seven days later, the evidence suggests the rotation is continuing, but broader market health has deteriorated. That doesn’t mean the bull market is over, nor does it mean a significant correction is inevitable. Markets can repair themselves, leadership can change and opportunities can develop even when the broader environment remains challenging.

But I’ve spent too many years watching markets to confuse proximity to an all-time high with protection from risk. Sometimes the most productive thing we can do is reduce exposure, remain patient and allow the market to demonstrate that conditions are improving before committing additional capital.

There will always be another opportunity. The challenge is making sure we’re still in a position to take advantage of it.

Staying in the Game Long Enough for Your Edge to Matter, is Your Edge. - Dave

Disclaimer: The Smart Canvass Journal and Strategic Capital Systems (SCS) are provided for educational and informational purposes only and do not constitute financial, investment, tax or legal advice. The securities, strategies, technical levels and portfolio observations discussed reflect my personal analysis and investment experience, not recommendations to buy, sell or hold any security. Trading and investing involve substantial risk, including the potential loss of principal. Stop-loss levels do not guarantee execution at a specified price, particularly during market gaps. Past performance does not guarantee future results. Readers should conduct their own research and consult qualified professionals before making investment decisions.

Semiconductors surrender leadership, software and cybersecurity demonstrate relative strength and the RMII Composite holds a critical technical level. Meanwhile, SCS begins the work of repairing portfolio health and preparing capital for the next opportunity.

We finished another volatile trading week with the major indexes recovering on Friday, but I continue to see a significant difference between what the headline indexes are reporting and what is actually happening beneath the surface.

Friday’s session saw the Dow advance approximately 0.83%, the S&P 500 gain 0.59% and both the Nasdaq 100 and Russell 2000 finish approximately 0.5% higher. The VIX declined 4% to 14.79 providing some relief following Thursday’s selling pressure across semiconductor and AI-related stocks.

It was an encouraging finish, particularly after a week in which some of the market’s strongest industries experienced considerable weakness. However, like I’ve said many times before, one positive session doesn’t repair the deterioration we’ve been witnessing the in broader market participation for the last few weeks in the micro-small-, medium-, cap names.

Friday’s breadth figures illustrate the problem. Only 28.6% of stocks were trading above their 50-day moving averages, while just 39.3% remained above their 200-day moving averages. New lows outnumbered new highs 264 to 83, and advancing stocks barely exceeded declining stocks despite the major indexes finishing higher. These are not the internal characteristics I would ordinarily associate with a broadly supported market advance.

For several weeks, I’ve questioned whether we’re witnessing a normal rotation within an intact bull market or the early stages of a more meaningful deterioration in market structure. I still don’t believe the evidence supports a “definitive” conclusion. What I do see is a market becoming increasingly selective about where capital is being deployed. Some industries are demonstrating impressive strength while others that previously led the advance are experiencing substantial corrections. Is this a rotation?

As traders our job isn’t simply to determine whether the market is going up or down. We want to identify where leadership is developing, whether that leadership is sustainable and how much capital we’re willing to risk while the broader environment remains uncertain.

Is This a Rotation?

One of the most revealing developments last week was the performance divergence across industries, particularly within technology. Software applications advanced 4.78% for the week, while software infrastructure gained 3.57%. Meanwhile, semiconductors declined 4.03% and semiconductor equipment and materials fell 6.22%. That’s an 8.81-percentage-point difference between software applications and semiconductors in just five trading sessions.

Computer hardware declined 2.05%, electronic components fell 2.11% and telecom services lost 6.20%. Several industries associated with AI infrastructure and the broader technology supply chain clearly came under pressure. Yet capital wasn’t abandoning every area of the market.

Independent power producers led the industry rankings while regulated water utilities advanced 6.42%. Consulting services gained 6.13%, electronic gaming and multimedia rose 6.35% and oil and gas refining and marketing advanced 6.08%. Credit services, specialty retail, healthcare information services and several consumer-oriented industries also demonstrated strength.

That distribution is important. The market isn’t simply experiencing a uniform withdrawal of capital from equities. Investors appear to be reassessing which industries deserve their attention with software and selected defensive or economically sensitive businesses outperforming areas that previously attracted considerable investment.

The question is whether this becomes a healthy broadening of leadership or merely a temporary redistribution of capital still remains to be seen. I would be more encouraged if these industry gains were accompanied by sustained improvement in the percentage of stocks trading above their intermediate and long-term moving averages and so far, that confirmation remains elusive.

RMII — Holding the Breakout

Our RMII Composite Index remains central to my assessment of the broader market. For readers unfamiliar with the RMII, it is a composite that combines the RSP, MDY, IWM and IWC ETFs representing equal-weight large-cap stocks, mid-cap stocks, small-cap stocks and micro-cap stocks. I use it to evaluate participation beyond the familiar capitalization-weighted indexes for a complete picture.

Following the decline that began in August, the SCS RMII spent much of September moving within a downward-sloping channel. The recent breakout above that channel was encouraging, but what happened afterward was equally important. The index pulled back toward the former channel boundary which also coincided with its rising 200-day moving average. Buyers defended that area and Friday’s recovery left RMII near 1,345, above the 200-day average at approximately 1,327.

That is a constructive technical development. Former resistance may be beginning to function as support and the index has not surrendered its recent breakout. However, I am not ready to declare that the broader market has established a new advancing trend. The RMII has yet to produce a convincing higher high, and the shorter-term moving averages remain inverted.

The 8-day EMA is approximately 1,344, the 13-day EMA is near 1,346, and the 21-day EMA sits around 1,353. In a healthier trend, I want to see these averages return to a positive top-down stack with the 8-day above the 13-day and the 13-day above the 21-day. We aren’t there yet.

The area near 1,363 is my next important reference point. A sustained recovery through that level, particularly if accompanied by improving EMA alignment, would strengthen the case that buyers are regaining control. The 50-day moving average remains considerably higher, near 1,385, reminding us that the intermediate-term structure still requires repair.

Momentum is improving, but it also remains a work in progress. RSI has recovered to approximately 43.7, while the lower momentum indicator has turned upward and its histogram has moved into positive territory. Those are encouraging developments, although RSI remains below the 60 level I prefer to see associated with stronger momentum.

For the coming week, I’ll be watching whether RMII can defend the former channel boundary, reclaim its shorter-term averages and establish the higher-high, higher-low structure that has been missing.

Leadership Under Pressure

The semiconductor complex experienced one of its more difficult weeks with the industry declining approximately 4% and semiconductor equipment and materials losing more than 6%. The SMH also suffered significant selling pressure Thursday, falling below its 13-day EMA before attracting buyers near the 21-day EMA.

Semiconductors have played a central role in the market’s advance, particularly as investors continue allocating capital toward AI computing, networking, memory and infrastructure. When a leading industry experiences this degree of selling pressure, I want to understand whether we’re witnessing ordinary profit-taking, a temporary valuation adjustment or a more meaningful change in institutional demand.

The answer matters because semiconductor leadership has been an important contributor to the performance of the major technology indexes. A recovery in SMH would be encouraging, particularly if the ETF can reclaim its short-term moving averages and begin rebuilding momentum.

However, I would prefer that recovery occur alongside improving participation in other industries rather than another advance concentrated in a relatively small number of companies. If software, cybersecurity, financials and other industries can establish sustainable leadership while semiconductors consolidate the broader market may be undergoing a constructive rotation.

Cybersecurity — An Opportunity for New Leadership

One area that has captured my attention is cybersecurity. Both HACK and CIBR established new all-time highs Friday, a particularly interesting development considering the weakness across other portions of the technology complex.

The contrast between software’s strength and semiconductor weakness suggests investors may be shifting their attention toward businesses with different earnings characteristics, demand drivers and valuation profiles.

Cybersecurity is particularly interesting because demand for network protection, cloud security, identity management and enterprise security continues to evolve alongside the expansion of digital infrastructure and Artificial Intelligence. That doesn’t make every cybersecurity company an attractive investment, but it does make the industry worth examining when its technical performance begins distinguishing itself from the broader market.

We already own CSCO, which reached its initial 1R objective Friday and advanced into our Winners Circle. We also added to the position, doubling our exposure as the trade demonstrated strength. Looking ahead, I intend to evaluate opportunities to increase our exposure to cybersecurity.

ZS, FTNT and CRWD have been on my watchlist, and I’m adding PANW to the group.

I’ll be comparing these names through the SCS decision framework, including relative strength, trend structure, entry quality, stop placement, expected reward relative to initial risk and correlation with our existing technology holdings. One consideration is particularly important: I don’t want to chase extended stocks simply because their industry is making new highs. An attractive business and an attractive trade aren’t necessarily the same thing.

If cybersecurity continues demonstrating leadership, which so far to date it has, I’ll be looking for qualified entries this week that provide sufficient room between the purchase price, initial stop and reasonable upside objective. The industry has earned my attention.

Credit Markets — Still Waiting for Confirmation

Credit remains another important component of my broader market assessment. I’ve been watching HYG and JNK for evidence that investors are becoming more comfortable assuming risk, particularly as the equity market attempts to stabilize. Thursday’s semiconductor selloff wasn’t accompanied by an equivalent deterioration in high-yield credit. That was encouraging because it suggested the weakness in equities hadn’t immediately developed into a broader rush away from financial risk.

However, JNK has continued struggling beneath its moving averages, and I don’t yet consider credit conditions a convincing confirmation of renewed risk appetite. I’m not interpreting that weakness as evidence of an imminent credit crisis. Rather, I see it as another reason to remain measured in our capital deployment.

If RMII begins improving, semiconductor leadership stabilizes and high-yield credit starts confirming the recovery, we’ll have a much stronger combination of evidence. Until then, I prefer to treat the market’s recent improvement as tentative.

SCS Portfolio — The Repair Process Has Begun

Turning to our own trading book, October remains relatively flat following a week in which we began addressing some of the portfolio’s largest underperforming positions.

Friday, I trimmed ASTS and LUNR, two positions that had become an unnecessary drag on overall portfolio health. These were not particularly enjoyable decisions. Realizing accumulated losses inevitably reduces the gains we’ve worked to generate elsewhere, and those adjustments contributed to our relatively flat performance for the month.

However, I believe the more important consideration is what those positions were doing to our capital efficiency and portfolio risk. At some point, continuing to hold an underperforming investment becomes less about the opportunity ahead and more about hoping to recover what has already been lost. That isn’t the discipline I want governing SCS.

I’ve spent considerable time developing a trading framework built around expectancy, asymmetry, defined risk and the ability to remain in the game long enough for our edge to matter. Allowing a handful of positions to consume capital and portfolio capacity indefinitely works against that objective and I own it.

The reductions in ASTS and LUNR represent the beginning of a deliberate effort to improve portfolio health, reduce unnecessary exposure and rebuild my ability to allocate capital toward more productive opportunities.

I’m optimistic that I’ll recover those losses through disciplined execution over time. That confidence doesn’t depend on any one stock producing an extraordinary return. It depends on consistently applying a process that has demonstrated an edge across many trades. The work ahead involves more than simply improving my monthly P&L.

I’ll continue monitoring my Capital Decision Index, portfolio RWAR, capital deployment capacity and the relationship between the strongest and weakest positions. I want to see the portfolio become healthier internally with fewer positions consuming disproportionate risk and more capital available for opportunities that meet the established criteria.

Strength Rewards My Patience

While I was reducing exposure to weaker positions, several of my active trades continued making meaningful progress. MRNA reached its initial 1R profit objective Friday on 1.5X 10D avg. volume and officially advanced into the Winners Circle. In accordance with the management framework its stop loss was moved to breakeven plus 1% allowing the position to continue developing while protecting against a reversal into a meaningful loss, subject to execution and gap risk.

CSCO also reached 1R and entered the Winners Circle. I added to the position, doubling my exposure as the trade demonstrated strength. That expansion reflects my willingness to allocate capital toward positions that are working, although the additional exposure also requires careful attention to the combined position’s risk. This was on the back of the Cybersecurity move Friday.

DDOG continues performing well, trading near 2.5R and approaching the next milestone at 3R. If the trade reaches that objective, I’ll advance its stop loss to 2R and continue managing the position according to the established R-Ladder rules outlined in my framework and available to the Smartcanvas.com Discord Community.

CDNS also remains under active management. Its stop loss has advanced to $331.03, following the rising 21-day EMA while maintaining approximately a 6% buffer.

These developments illustrate why I don’t view portfolio repair as a retreat from trading. I’m reducing exposure where the evidence no longer supports continued commitment while allowing stronger positions to progress through the system. The objective is not to eliminate risk. It’s to ensure the risk I assume is justified by the opportunity in front of me. Traders can only trade the charts in front of us.

Maintaining the Reduced Risk Allocation

My normal SCS Fractional Kelly allocation is 0.50%, but I’ve been operating at a reduced 0.33% as market breadth and portfolio health have worked through a period of deterioration.

I don’t see sufficient evidence to restore the higher allocation heading into Monday. The major indexes remain resilient, but fewer than 30% of stocks are above their 50-day moving averages. RMII has defended an important technical area but hasn’t established a new higher high. Semiconductor leadership is under pressure and credit markets have not provided convincing confirmation of improving risk appetite. At the same time, our own portfolio remains in a repair phase.

Therefore, these conditions argue for preserving capital and being very selective at the same time. Open season has not started.

Strategic Ownership Takes Another Step

Another important development this past week was the consolidation of my AI Legacy and Strategic Ownership portfolios. Both were established to pursue the same long-term investment objective and maintaining separate portfolios with overlapping positions had become unnecessarily redundant.

The AI Legacy investments were initially funded with realized SCS trading profits from 2025 and additional profits harvested during 2026 have contributed to the long-term ownership effort alongside my personal capital. The consolidation brings these holdings under one Strategic Ownership framework providing a clearer view of my total exposure, blended cost basis, position weighting and concentration risk.

As part of that process, I’ll continue reviewing overlapping holdings, trimming selected positions and raising cash where appropriate. That doesn’t reflect a change in my long-term conviction regarding the AI supercycle. I continue to believe this period of technological development could represent a generational opportunity, perhaps comparable in its economic significance to the expansion of oil, energy and industrial infrastructure during the Rockefeller era.

Active trading seeks to generate and harvest capital through disciplined execution. Strategic Ownership puts a portion of that capital to work over a longer investment horizon.

That philosophy has been part of SCS since its inception, and the portfolio consolidation represents another practical step in carrying it forward.

The Week Ahead

As we enter the week of October 12–16, several developments will influence my decisions. RMII remains at the top of the list. I want to see the composite defend its recent breakout, reclaim the 8-, 13- and 21-day EMAs and make progress toward the 1,363 area. A positive top-down EMA stack and the establishment of a higher high would strengthen the argument that broader market participation is improving.

Semiconductors are next. I’ll be watching SMH for evidence that buyers can stabilize the industry following last week’s decline. A recovery of its short-term trend would be encouraging, but I want to see that improvement accompanied by participation beyond the largest technology leaders.

Cybersecurity will receive additional attention. With HACK and CIBR reaching new highs, I’ll be examining ZS, FTNT, CRWD and PANW for potential opportunities while continuing to manage our existing CSCO exposure.

Credit remains important. HYG and JNK need to demonstrate more convincing strength before I become comfortable with a broader increase in risk.

Bank earnings will also begin providing new information about lending conditions, credit quality and the economic outlook. I’ll be watching whether the financial sector can build on Friday’s improvement and whether the reports influence market breadth.

Within SCS, portfolio repair continues. The reductions in ASTS and LUNR were a beginning, and I’ll continue evaluating positions that may be consuming more capital or risk than their current opportunities justify.

Finally, our developing winners require attention. MRNA and CSCO have entered the Winners Circle, DDOG is approaching another R-Ladder milestone, and CDNS continues advancing its stop alongside the 21-day EMA.

Those are the kinds of decisions I want to spend my time making: identifying opportunity, controlling risk and allowing positions that demonstrate strength to continue working.

Closing Perspective

I’ve learned that one of the more difficult aspects of managing a portfolio isn’t identifying a good investment. It’s recognizing when an investment is no longer doing the job we expected it to do. The temptation to wait for a losing position to recover can become particularly strong when other positions are performing well enough to offset some of the damage and when a dog bites you, you’ll know it.

But the market doesn’t know my purchase price and it certainly doesn’t owe me a recovery. What matters is whether the capital committed today has a reasonable opportunity to produce an attractive return relative to the risk I’m assuming. That principle applies equally to the active trading portfolio and my long-term Strategic Ownership investments even though the management frameworks are different.

As I move into the new week, I see reasons for cautious optimism. RMII has defended an important technical level, software and cybersecurity are demonstrating relative strength and several SCS positions are progressing through the trade management system.

I also see reasons to remain patient. Market breadth is still weak, semiconductor leadership requires repair and credit conditions haven’t confirmed a healthier risk environment. For now, I’ll continue managing the portfolio in front of me rather than trying to predict the market I hope to see. If participation improves and the evidence becomes more convincing, I’ll have the capital and the framework to respond. If conditions deteriorate, my reduced risk allocation of 0.33% FK and continued portfolio repair should help preserve my ability to participate when better opportunities emerge.

The goal has never been to win every trade or avoid every difficult period. It’s to manage risk, preserve capital and remain positioned to benefit when the edge presents itself.

“Staying in the Game Long Enough for Your Edge to Matter, is Your Edge.” - Dave

Disclaimer: The Smart Canvass Journal and Strategic Capital Systems (SCS) are provided for educational and informational purposes only and do not constitute financial, investment, tax or legal advice. The securities, strategies, technical levels and portfolio observations discussed reflect my personal analysis and investment experience, not recommendations to buy, sell or hold any security. Trading and investing involve substantial risk, including the potential loss of principal. Stop-loss levels do not guarantee execution at a specified price, particularly during market gaps. Past performance does not guarantee future results. Readers should conduct their own research and consult qualified professionals before making investment decisions.

Back in May, I published An Active Purpose. A Strategic Legacy., detailing how I began reinvesting profits generated by the 2025 Strategic Capital Systems trading portfolio into a dedicated portfolio of long-term AI-related investments. That article introduced readers to the practical application of a philosophy that has been part of the SCS philosophy since its inception, “One Mind: Two Missions.”

Today, I’ve completed another step in that process by consolidating the AI Legacy investments into my existing Strategic Ownership (SO) sleeve. The combined portfolio now contains 35 individual ticker positions with overlapping holdings blended into single positions to provide a clearer picture of overall performance, portfolio weighting, valuation and concentration risk.

The consolidation brings together two previously separate long-term investment sleeves: the AI Legacy portfolio, established in June 2026 using realized SCS trading profits, and my existing Strategic Ownership portfolio, which also includes investments funded with personal capital. Both portfolios shared the same long-term investment philosophy, making their combination a natural progression of One Mind: Two Missions.

Rather than representing new purchases or a change in strategy the consolidation combines overlapping positions, preserves their original cost basis and places all 35 ticker positions under one management framework. As of October 8, 2026, the combined portfolio reflects a cumulative unrealized return of 17.90% on invested capital.

What makes this particularly meaningful to me is how the portfolio has been funded. The initial AI investments were purchased using profits harvested from my SCS 2025 trading portfolio and I’ve continued directing a portion of my realized trading gains from 2026 into long-term ownership. I also committed additional personal capital at the initial investment stage alongside those profits, reflecting my own conviction in the investment opportunity I believe is developing. Call it my own “skin in the game” and not just ‘house money’ from the SCS portfolio’s profits.

An AI Supercycle

I’ve written previously about what I consider the potential for an AI supercycle to become the next Rockefeller moment in wealth creation. Much as the development of oil, energy and industrial infrastructure helped create enormous fortunes during an earlier period of economic transformation, I believe the expansion of Artificial Intelligence could reshape entire industries, productivity, infrastructure and capital investment for decades. This is an interest that extends far beyond the obvious technology leaders and towards the companies providing power, connectivity, automation, real estate, semiconductors, software and the supporting infrastructure necessary to sustain the AI expansion.

That conviction doesn’t mean every company associated with AI will succeed or that I can ignore valuations, competitive risks and the possibility of substantial market corrections. The Strategic Ownership positions operates under a fundamentally different management framework from my active trading strategies, emphasizing business fundamentals, free cash flow, valuation, portfolio construction and a much longer investment horizon.

The consolidation itself doesn’t represent a change in strategy or require selling and repurchasing investments. It brings the AI Legacy holdings and existing Strategic Ownership positions together under one long-term management framework, preserving their original cost bases while making it easier to evaluate overlapping exposures and future capital allocation decisions.

For me, the significance goes beyond organizing another spreadsheet. I can now follow the progression of capital from profits generated through active trading into investments intended to participate in long-term economic growth under the same umbrella. As future SCS profits are realized, I’ll continue evaluating opportunities to reinvest a portion of those gains into Strategic Ownership, consistent with market conditions, valuation and portfolio concentration.

This is precisely what I envisioned when I began developing SCS. The first mission seeks to generate and harvest capital through disciplined trading, defined risk and positive expectancy. The second seeks to compound a portion of that capital through long-term ownership of businesses I believe can benefit from structural economic change.

I wrote about this ambition in May. Today, with profits from both 2025 and so far in 2026 I’m contributing to the Strategic Ownership Portfolio alongside my own capital, to put the One Mind:two Missions philosophy into practice.

Disclaimer: The information presented in The Smart Canvass Journal and Strategic Capital Systems (SCS) is intended solely for educational and informational purposes and should not be considered financial, investment, tax, or legal advice. I am not a financial advisor, and nothing discussed constitutes a recommendation to buy, sell, or hold any security.

All investments, portfolio holdings, trading strategies, performance results and capital allocation decisions discussed reflect my personal investment experience and objectives. References to Artificial Intelligence, the AI supercycle, and potential long-term wealth creation represent my personal outlook, not predictions or guarantees of future performance.

Past performance does not guarantee future results. All investing and trading involve risk, including the potential loss of principal. Readers should conduct their own research, evaluate their financial circumstances and risk tolerance, and consult qualified professionals before making investment decisions.

When I started building Strategic Capital Systems in May 2025, I certainly didn’t envision where all of this would eventually lead. What began as an effort to bring more discipline and structure to my own trading has continued to evolve and somewhere along the way the journal I was keeping became a ledger, the ledger became a database and that database is now large enough to begin testing some of the assumptions I’ve made while developing the Strategic Capital System’s framework.

About 12 months ago, I started sharing a relatively simple Google Sheets database to track my own trades and the early development of the Strategic Capital System framework with fellow Smart Canvas Discord Community members. As the project grew, I eventually opened more portions of that work to members of the SmartCanvas.com Discord Community where they could follow the trades, the data and frankly, some of the trial and errors that comes with building something like this in real time.

I originally built the first database because as the number of trades and positions increased, I needed something better than looking at individual charts and asking myself whether my system was beating the SPX. However, in later iterations I wanted to know how much risk was deployed, whether the positions I already owned were collectively working, what was my concentration risk, what sectors and trades dragged on my portfolio, whether I was carrying too many positions, how much risk remained in those positions and whether the current market environment supported putting additional capital at risk. The more information I collected, the more I realized the individual trade was only part of the story. I needed a way to evaluate what was happening across the portfolio as a whole.

Then a valuable and highly skilled member of the SmartCanvas.com Discord Community came to me with some ideas for turning that growing database into something much larger and more robust. The subsequent six month long collaboration became an important next step in the evolution of what is now the Capital Decision Index, or CDI. Instead of simply recording what happened to a trade, we began developing ways to connect the trade history, portfolio risk, market regime and actual outcomes so I could start asking better questions of my own data. The member has requested anonymity so, I will respect that request.

Subsequently, over the last eighteen months my original Google Sheets has continued to evolve into a platform. What started primarily as a trading ledger has become a growing research database containing more than 300 completed trades. Every one of those trades adds another observation, entry and exit information, risk, R performance, holding period, market regime and other characteristics that can now be studied together rather than one trade at a time.

That’s where this gets interesting to me. With more than 300 trades behind me, my CDI is reaching the point where I can stop asking only, “What do I think should work?” and begin asking, “What does my own trading history say has actually worked?” Today, I asked it one of those questions and the answer wasn’t quite what I expected.

What Happens When I Trade During RISK-OFF

Market regime has been an important part of SCS from the beginning. I classify the broader environment as RISK-ON or RISK-OFF using objective market conditions, and I’ve generally operated under the assumption that healthier markets should produce better trading conditions. That doesn’t seem particularly controversial. If more stocks are participating, trends are healthy and the broader market is supportive, it makes sense that our individual trades should benefit.

The question was whether my actual trading history supported that assumption.

Rather than simply looking at whether a trade was entered RISK-ON or RISK-OFF, we separated the trades into four groups based upon the regime when the trade was opened and the regime when it was eventually closed.

The first result that caught my attention was the 71 trades entered during RISK-OFF that eventually experienced a transition to RISK-ON. Those trades produced a 74.6% win rate and averaged 0.93R, the best average return of any of the four groups. There is a fairly logical explanation for at least some of that.

We were entering positions while broader conditions were weaker and then benefiting when the market improved during the life of the trade. What surprised me more were the 59 trades where conditions never improved. They were entered RISK-OFF and exited RISK-OFF, yet they still produced a 64.4% win rate and averaged 0.82R.

Compare that with the largest sample in the database, the 129 trades that were entered RISK-ON and exited while the market remained RISK-ON. Those trades had a better 72.1% win rate, as I would have expected, but they averaged 0.79R. The difference isn’t enormous, but the fact that our RISK-OFF → RISK-OFF trades produced a slightly higher average R than trades that spent their entire lives in a RISK-ON environment certainly wasn’t what I expected to find and this is where the CDI data begins to earn its keep.

The Strategy Matters, Too

There is another variable I don’t want to overlook when interpreting the RISK-ON/RISK-OFF results. The variable I want to best understand is which one of the SCS strategies actually generated the best outcomes? The CDI regime study combines trades taken for different reasons and our latest sleeve (strategy) analysis shows why separating them may eventually become important.

The original SCS sleeve represents the largest part of the database with 232 completed trades, a 65.5% win rate and an average realized result of 0.77R. Under healthier market conditions, when the indices have reclaimed their 50-day moving averages, breadth has improved, portfolio health supports additional exposure and Fractional Kelly has returned to 0.50%, this is where the SmartTrend Super (SCS) Indicator data becomes an important part of the selection process. I’m evaluating a stock’s historical expectancy, asymmetry and loss characteristics to help determine whether the probabilities are favorable enough to initiate a position with the potential for a longer hold.

BO/MO is different and I don’t want readers confusing the two. Break Out Momentum trades do not use SST expectancy, asymmetry or historical-loss data as qualification criteria. BO/MO is focused on what the stock is doing right now: breakouts, momentum, relative strength and leadership. That’s particularly relevant during the type of market we’ve been experiencing because a stock that can demonstrate genuine strength while broader conditions remain less favorable may already be separating itself from much of the market.

The early BO/MO results are certainly interesting, 13 completed trades, an 84.6% win rate and 0.76R average return, with an average holding period of only 8.3 days. But 13 trades in the last 45 days, since the RMII composite Index has deteriorated below the 50D, are nowhere near enough for me to draw any conclusions. It’s something I want to continue watching as the sample grows.

LTH gives me another useful comparison. Across 53 completed trades, it has produced an 88.7% win rate and an average realized return of 1.28R, with positions held an average of 34.2 days. That is currently the strongest combination of win rate and average R among the sleeves with a meaningful number of completed trades, but there is an important distinction: LTH, or Long Term Hold, is not where these trades begin. They earn their way into what I call the Winner’s Circle by first reaching 1R at which point the stop loss is moved out of the original risk zone to breakeven +1%. From there, the objective changes from protecting the initial trade to giving a proven winner additional time and room to develop into a longer-term holding. A trade can start based on any SCS strategy, but at 1R they all move to the Winners Circle at 1R and the stop loss is adjusted.

This is why I’m hesitant to look at the regime study and decisively conclude that RISK-OFF itself somehow creates better trades. What I may actually be seeing is the interaction between market regime, trade selection and the type of setup I’m willing to take under those conditions. During weaker markets, I’m demanding visible breakout strength, momentum and leadership from BO/MO candidates. Under healthier conditions, the original SCS sleeve allows the stock’s historical expectancy, asymmetry and loss characteristics to become part of the selection process.

That’s another question CDI can now help me answer. The next step isn’t simply asking whether RISK-OFF or RISK-ON performs better. I want to break those trades down by both regime and sleeve and see whether the apparent RISK-OFF advantage remains once we’re comparing like trades with like trades. That should help me determine whether the result I’m seeing is primarily associated with the market regime itself, or with the kinds of trades I’ve been selecting within those different environments.

RISK-OFF Means I Control Risk, Not Eliminate Opportunity

This ties directly into something readers have seen me doing recently with Fractional Kelly. Under healthier market conditions and when the portfolio itself is healthy, my normal initial risk allocation is 0.50% of portfolio equity. Right now I’m using 0.33%, not because I think the market is about to collapse, but because the combination of market breadth, RMII (RSP+MDY+IWM+IWC) composite index, credit conditions and my own portfolio’s RWAR (Risk Weighted Average-R) hasn’t justified moving back to full risk.

The CDI results suggest that this may be exactly where market regime provides its greatest value. Instead of viewing RISK-OFF as a reason to automatically reject an otherwise qualified trade, it tells me to become more selective and reduce the amount I’m initially willing to risk.

That also fits with how I actually trade and the systems architecture from day 1. The FK allocation determines my initial risk, it doesn’t necessarily determine how large the position can ultimately become. If the trade begins working, price confirms the setup and the position earns the right to become larger, I can add to it. I would rather begin with 0.33% risk and add to a position that proves itself than start every trade at 0.50% because the broader market happens to be classified RISK-OFF.

It also helps explain why I’ve recently been more interested in breakout and momentum setups while the broader market internals remain mixed. If a stock is separating itself from the market through price, momentum and relative strength, I don’t necessarily want the RISK-OFF label to prevent me from participating. I want it to influence how much I’m willing to risk if I’m wrong.

The Strategic Capital System’s own data is beginning to support that strategy.

What CDI Is Becoming

This is probably the part of the project I find most interesting. I didn’t set out to build a trading research database. I was trying to become more disciplined about documenting what I was doing and holding myself accountable to the rules I was creating. After more than 300 trades, however, the accumulated history is beginning to allow me to study my own trading in ways that weren’t on my list of goals when SCS was new.

Now, I can start asking questions that are specific to how I actually trade. Do tighter stops improve expectancy or simply increase the number of premature exits? Which setups produce the best asymmetry? How do breakout and momentum trades compare with trades identified through SmartTrend Super (SST) Indicator data? How long do the best trades typically take to reach 1R? Which sectors have produced the strongest results? What happens after a market regime changes while I’m already holding a position? And where is my own discretion helping the system versus interfering with it? Those questions are far more useful to me than trying to find somebody else’s backtest and assuming their results apply to the way I trade.

There is another benefit to having this history that may be even more important, the data doesn’t care what I expected to find. I went into this particular analysis believing that trades initiated during RISK-OFF conditions would probably be one of the weaker parts of the system. So far, they aren’t. If anything, the group that deserves more attention is the one where conditions were favorable when I entered and then deteriorated while I was holding the position.

That doesn’t mean I’m rewriting the rules tomorrow morning. It means I now know what I want to study next. As the CDI grows from 300 trades to 500 and eventually 1,000, I’ll be able to separate these results further and determine whether what I’m seeing is persistent or simply a characteristic of this particular sample. I’m especially interested in breaking the results down by setup, sector, stop size and market regime because I suspect there is considerably more information underneath these averages than the first table can show me.

One of the newer additions to my Capital Decision Index may become particularly important in answering those questions. I now track the VIX at both entry and exit for every trade, which gives me another objective way to measure the market environment each position experienced rather than relying solely on a RISK-ON or RISK-OFF classification. As the database grows, I’ll be able to study how each sleeve and strategy performs across different volatility environments, what happens when volatility expands or contracts while I’m in a position, and whether certain strategies have historically performed better when the VIX was rising, falling or already elevated when I entered the trade.

That additional data is important to what I’m trying to accomplish with the CDI. I don’t simply want to know which trades worked. I want to understand why they worked, which strategies produced the results, the market conditions that existed when I entered them, how those conditions changed while I owned them, and ultimately whether those relationships repeat often enough to influence how I allocate risk in the future.

Closing

When I started SCS, most of my attention was naturally focused on finding better trades. As the system has matured, I’ve become just as interested in understanding the decisions surrounding those trades: how much to risk, when to add, when to harvest, when to tighten a stop and when the broader market should cause me to change my behavior.

That’s really what CDI has become for me. It isn’t another indicator telling me whether to buy or sell tomorrow. It’s a way to use my own trading history to determine whether the rules and assumptions I’ve built into SCS are actually doing what I intended them to do.

After 300 trades, one of the first assumptions we’ve tested has already given me an answer I wasn’t expecting. RISK-OFF entries haven’t been the problem I thought they might be. The more interesting issue may be what happens to a trade when the market deteriorates after we’re already in it. Now we have enough data to start figuring out why.

Disclaimer

The information presented in The Smart Canvass Journal and Strategic Capital Systems is for educational and informational purposes only and should not be considered financial, investment, tax, or legal advice. I am not a financial advisor, and nothing presented here constitutes a recommendation to buy, sell, or hold any security. Any trades, positions, strategies, portfolio decisions, or performance results discussed are my own and are shared to document my personal investment and trading process. Past performance does not guarantee future results. Investing and trading involve risk, including the possible loss of principal. Always conduct your own research, consider your individual financial circumstances and risk tolerance, and consult a qualified professional when appropriate.

Friday was a good day for the market. The Nasdaq 100 gained 1.0%, the Russell 2000 0.9%, the S&P 500 0.7% and the Dow 0.5%. The VIX fell 6%, Technology and Consumer Discretionary were among the leaders and we finally saw better participation from small and mid-cap stocks.

As traders, however, we need to look beyond the major indices before deciding that conditions have materially changed. That’s especially important right now because the strength we’re seeing in QQQ and several leading technology groups isn’t representative of what is happening across the entire market.

The breadth data we looked at this weekend makes that very clear. Only 29.2% of stocks are currently above their 50-day moving average, while 70.8% are below it. Only 39.8% are above their 200-day moving average and we also have 306 stocks making new lows compared with 94 making new highs.

Friday did show some improvement. Advancing stocks outnumbered declining stocks 3,082 to 2,277 which is something I want to see continue this week. One session, however, isn’t enough for me to increase risk apetite.

RMII Is Improving, But It Still Needs Work

The SCS RMII composite is also beginning to improve. For newer readers, RMII combines RSP+MDY+IWM+IWC, giving me a view of equal-weight large caps, mid caps, small caps and microcaps. I use it because I want to know what is happening beyond the capitalization-weighted indices.

Last week the RMII composite index bounced from its recent low and moved back above its 150-day moving average. That’s encouraging. It still remains below its declining 50-day and below the short-term 8, 13 and 21-day averages, so I don’t consider the broader market “healthy” as of yet. Why this matters to me is because I’m not looking for a reason to avoid trades. In the SCS architecture, I’m always mindful when trying to determine how aggressively I should size the trades I take and there is a significant difference between these decisions.

Credit Still Has My Attention

I’m also continuing to watch the HYG and JNK. Both continue last week to remain below their major moving averages, including the 8, 13, 21, 50, 150 and 200-day averages. They did bounce Friday, but neither has done enough for me to consider high-yield credit “healthy” enough to change my risk.

BKLN has held up somewhat better, although its trend has also weakened. BKLN is an ETF that tracks senior secured floating-rate bank loans made primarily to below-investment-grade companies giving me another way to monitor conditions and my risk appetite in and around the credit markets.

When equities are moving higher while high-yield credit is deteriorating, I can’t simply ignore that disagreement and neither should you. While I don’t specifically need HYG and JNK to lead the stock market, I would like to see them stabilize and begin reclaiming ore of their short-term averages. This would give me another piece of confirmation that I’d become more comfortable with before adding risk.

The Aggregate: Why I’m Staying at 0.33% FK

This is where all of these observations become actionable for me. If you don’t know what or how Fractional Kelly (FK) works, it is a mathematical formula that determines how much portfolio equity I’m willing to risk on an individual trade. In healthier market conditions, with a healthy portfolio my normal allocation is 0.50%. Right now I’m using 0.33%. I’m not at 0.33% because I think the market is about to fall. I’m there because the evidence doesn’t justify 0.50% yet.

QQQ and several technology groups are performing well. Semiconductor leadership has improved. Software has held up. Friday’s participation from small and mid caps was encouraging. At the same time, fewer than 30% of stocks are above their 50D, RMII remains below its 50D and high-yield credit remains technically weak.

That’s not a market where I want to stop trading, in fact I’ve simply switched gears and have become more selective on the strategy. It’s a market where I want to be more selective about the trades I take and reduce the amount I’m willing to lose when I’m wrong.

It’s also why, during this period, I’ve been more focused on breakout and momentum opportunities rather than trades evaluated primarily through the SmartTrend SuperIndicator (SST) data developed by Mars Cyrillo. I want price and momentum providing additional confirmation when overall breadth and portfolio RWAR remain weak. If you’re not familiar with the work behind these indicators, I encourage you to visit SmartCanvas.com and make your way to the Smart Canvas Discord group to learn more about the framework and the data Mars has developed.

As I noted, my portfolio’s RWAR is the other consideration. My overall Risk Weighted Average-R (RWAR) remains in “Preservation mode”, with ASTS, LUNR and KGS currently the three positions having the largest negative draw on the scoring inside the RWAR. As I’ve discussed previously, I’ll be evaluating those positions during the final three months of the year and may harvest some or all of those losses depending on market conditions.

Market health and portfolio health therefore arrive at the same conclusion for now: 0.33% FK remains appropriate.

The R-Ladder Did Its Job Last Week

“We had several good examples this week of why I don’t need to make discretionary decisions every time a position moves against us.”

BMNR had previously reached 2R before pulling back to our protected 1R stop. The exit produced approximately a 12% gain on that trade. CRWV also reached 2R before eventually retracing to its protected 1R level, producing approximately a 6.4% gain.

NBIS was handled slightly differently. Because it was a smaller position, I classified it Neutral when it reached 1R rather than taking the normal 50% Harvest. The full position remained intact with 1R protected. After repeatedly challenging the $247 area without getting through it, NBIS eventually pulled back and our remaining position was closed at $231.32.

These are three different trades, but the management principle was consistent. Once a position earns 1R, I want to reduce the possibility that a successful trade becomes a meaningful loss while still giving it enough room to continue higher.

DDOG remains in the Winner’s Circle and pushed close to 2R Friday without getting through it. Its stop has now moved to $259.57 at the 13-day EMA. CDNS also remains in the Winner’s Circle with its stop unchanged at $329.59.

There Are Plenty of Names to Watch

The watchlist isn’t short of opportunities heading into the new week. CRDO is particularly interesting after finally reclaiming its 50D. We watched it make several attempts before Friday’s 4% gain pushed it more decisively above that area. I didn’t need to anticipate the reclaim. Now I can watch whether it holds.

OUST gained 8.5% Friday and AEHR gained 5.4%. Both have been on our list recently, although AEHR has earnings coming up, which changes the risk around any potential entry. GH also remains interesting after its breakout and subsequent consolidation. The price structure has tightened, and I’ll continue watching how that resolves before considering an entry. There are other names we’ll review as the week develops, but the same rule applies to all of them.

Being on the watchlist doesn’t mean a stock has earned my capital. I want to see how the name trades relative to its important levels, what the broader group is doing, what happens after the opening volatility, and whether the available stop gives us acceptable risk.

One Mind; Two Missions

I also reinvested some of September’s realized SCS gains Friday, adding to NFLX and V in the Strategic Ownership portfolio. This is an important part of how I’ve structured SCS. I don’t want every dollar generated through active trading automatically committed to another trade. Harvesting gains gives me the opportunity to periodically move some of that capital into companies we’ve evaluated through our fundamental and DCF work.

That’s the connection behind One Mind; Two Missions. The active trading sleeves are intended to generate and protect gains. Strategic Ownership gives us the ability to reinvest a portion of those gains into longer-term holdings.

The two sleeves have different objectives and different management rules, but they’re part of the same portfolio-management process.

What Would Change My Risk This Week?

I’m entering the week at 0.33% FK, but that isn’t a permanent decision. I’ll change it when the data changes and the first to know are my followers in the Smart Canvas Discord Community. Once there, the community has access to my book, the trades, the data behind the scenes that drives my decisions and more.

I want to see the percentage of stocks above their 50D improve from the current 29.2% and I want the RMII to continue recovering and eventually reclaim its 50D. I also want the improvement in small and mid-cap participation that we saw Friday to continue and I want HYG and JNK to begin confirming the improvement we’re seeing in equities. Furthermore, I want the overall portfolio RWAR to improve.

If those conditions begin lining up, I’ll have no problem increasing my FK sizing. If they deteriorate, I can reduce risk further. That’s the purpose of my framework. I don’t have to decide on Sunday where the market will be Friday. I need to know what conditions I’m willing to trade, how much I’m willing to risk under those conditions and what evidence would cause me to change that risk.

For Monday morning, that number remains 0.33%. There are plenty of stocks I want to watch this week. I’m simply requiring the market and each individual setup to justify the risk before I put more capital behind them.

Disclaimer: This publication is for educational and informational purposes only and reflects my personal market observations, trading process, and portfolio-management framework. Nothing presented here constitutes investment, financial, tax, or legal advice, or a recommendation to buy or sell any security. Any trades, positions, stop levels, targets, or portfolio allocations discussed are specific to my own circumstances and risk tolerance and may change without notice. Investing and trading involve risk, including the possible loss of principal. Always conduct your own research and consult a qualified financial professional regarding your individual circumstances.

The third quarter of 2026 was another important period with the progression of my Strategic Capital Systems development. The realized gains continued to move higher, the equity curve reached another high-water mark and my system continued to evolve beyond individual trade selection and towards a broader framework for managing capital.

It was also another quarter that reinforced one of the central lessons behind the SCS framework: a rising equity curve does not mean everything underneath the surface is working perfectly.

There were mistakes, losses, periods of volatility and deterioration within the active trading portfolio. That contrast between realized results and current portfolio health is precisely why I continue to develop measures such as the Capital Deployment Index (CDI) and Risk Weighted Average-R (RWAR). SCS is becoming less about asking whether the last trade worked and more about understanding whether the entire process is working underneath the system.

When I started this endeavor some 18 months ago, I was planning for retirement. The idea was pretty simple: trade as a hobby, take some profits along the way, invest a portion of those gains into long-term positions and give myself something challenging and enjoyable to do between worrying about safe withdrawal rates, sequence-of-returns risk and booking the next cruise.

Somewhere along the way, that simple idea took on a life of its own. Now I find myself deep in RWAR, Capital Deployment Index (CDI), Realized Edge Index (REI), Fractional Kelly, expectancy, asymmetry, portfolio construction, Strategic Ownership, writing retirement lessons along side my trading hobby on Substack and sharing what I’m learning with a growing community.

I certainly didn’t envision all of this when I started, but it has become one of the more unexpected lessons of my own retirement. Yet, the best part is, I’ll never charge you a dime in Substack for any of it. I simply want to pay forward some of what I’ve learned to those who share an interest in the markets, investing, risk management or simply becoming better stewards of their own capital.

If sharing the successes, the mistakes, the research and the evolution of SCS helps someone else along their own journey, then this endeavor has become worth far more than whatever appears on the equity curve. Please, if you would, take just a moment and share this and spread the word.

Third Quarter Performance

SCS recorded positive realized gains during each month of the third quarter. During the third quarter of 2026, SCS recorded positive realized gains in each month. In total, Q3 generated $4,783.31 in realized gains, continuing the steady upward progression of the SCS equity curve.

• July produced $1,380.68, bringing cumulative realized gains to $27,963.16.

• August was the strongest month of the quarter, adding $2,316.18 and increasing cumulative gains to $30,279.34. I added more AMZN with a portion of those gains for the Strategic Ownership sleeve.

• September added another $1,086.45, allowing the equity curve to finish the quarter at a new high of $31,365.79.

Perhaps more important than the total itself is how it was produced. July, August and September were all profitable months. August provided the largest contribution, but the quarter was not dependent upon one isolated trade or one unusually strong month. More importantly, the quarter demonstrated that disciplined execution continued to generate realized gains even as market conditions and portfolio health fluctuated.

The Equity Curve

The longer-term equity curve continues to provide the clearest visual representation of the SCS development. The first gains were recorded in May 2025 at $2,428.67. By the end of September 2026, cumulative realized gains had reached $31,365.79.

The path between those two numbers has certainly not been a straight line. There was a strong initial advance, followed by a period of consolidation and modest drawdown from late 2025 into early 2026. The curve subsequently resumed its advance and established new highs during the second and third quarters of 2026.

That shape matters. A trading system should not be judged by whether every month, trade or market environment produces a positive result. What matters is whether the combination of expectancy, risk management and asymmetric outcomes allows the equity curve to advance over a sufficiently large sample of trades.

That remains the objective of SCS.

Understanding the R-Distribution

My “All-Years R-Distribution Table” provides another way to look beneath the dollar results. The largest concentration of outcomes currently resides between 1R and 2R, with 75 observations. Another 34 outcomes fall between 0.5R and 1R. This is the area where names have triggered my R-Ladder rule the most.

At 1R, we can harvest gains, add or remain neutral with the position; not taking any action on the position I have in the book. Another key SCS feature is moving the stop loss to break even +1% to take what the market is giving and keeping the name from falling into a loss, once it hits 1R. Beyond that point, the number of trades naturally declines as the R-multiple increases, but the distribution continues into the 2R, 3R, 4R, 6R and even greater-than-10R ranges.

The losing side of the distribution is equally important. Losses are not evidence that the system has failed. They are the cost of discovering which positions are capable of becoming larger winners. The objective is to contain those losses while preserving the right side of the distribution.

The image above illustrates the asymmetry my SCS is attempting to capture. A relatively small number of larger winners can contribute disproportionately to overall expectancy when losses remain controlled. This is also why prematurely selling every profitable trade can be just as damaging to a system as allowing losses to grow unchecked.

The table tells me that the left side is what has to be carefully managed with tight stops, strict adherence and discipline. I sometimes get this wrong, for sure as I have a few trades I’d like to forget. Call it self improvement goals for 2027. The right side of the table is allowed to exist in order to allow your winning trades the freedom to run.

Q3 Trade Management

The individual trades from July, August and September show that process in practice. The quarter included small losses, approximately 1R stop-outs, partial gains, 1R transitions and several substantially larger outcomes. HOOD generated outcomes approaching 5R, while positions including NOW, SNOW and HPE produced gains extending beyond 2R at various points.

Not everything worked. IREN produced a -3.22R outcome, while several other positions reached approximately -1R. Those trades deserve as much attention as the winners because they provide information about execution, stop discipline, position management and whether the portfolio is allowing individual losses to extend beyond their intended risk.

One of the purposes of maintaining the historical database is to make those mistakes visible rather than explain them away.

One Mind: Two Missions

The “One Mind, Two Missions” philosophy captures the purpose of a Strategic Ownership sleeve within SCS. The same disciplined process that identifies, manages, and harvests opportunities in the active trading portfolio serves a second mission: converting a portion of those realized profits into long-term ownership of exceptional businesses.

Trading is designed to create capital through disciplined execution and asymmetric trade management; Strategic Ownership is designed to compound a portion of that capital over considerably longer periods. Rather than allowing successful trades to simply become cash, approximately 25% to 50% of monthly realized gains can be systematically redeployed into companies evaluated through a discounted cash flow (DCF) framework, with an emphasis on intrinsic value, margin of safety, free cash flow, durable growth, strong margins, and returns on invested capital.

Those valuations are periodically reviewed as business fundamentals, cash-flow expectations and market prices change. One system harvests the gains while the other puts those gains back to work for the future.

That PnL distinction becomes especially important when compared with the active trading portfolio.

Two Portfolios, One Capital Picture

As of September 30, the active trading portfolio contains 14 positions with unrealized P&L of -$4,607. The Strategic Ownership sleeve, meanwhile, currently carries unrealized P&L of +$3,454.07. This changes on a daily, weekly and monthly basis.

This is an important distinction in evaluating the SCS. The active trading book is currently underwater by -$4,607, but the long-term Strategic Ownership positions offset approximately $3,454 of that unrealized decline. Across the two portfolios, current combined unrealized P&L is approximately -$1,153.

However, I don’t combine the two portfolios for purposes of calculating my portfolios RWAR (Risk Weighted Average-R). Strategic Ownership operates under a different mandate. These companies are selected for long-term ownership and evaluated through business quality, cash-flow generation, growth, returns on invested capital and valuation. The sleeve is not managed according to the same stop structure or R-ladder governing the trading portfolio.

Combining the two into RWAR would therefore dilute the usefulness of RWAR as a measure of trading-portfolio health.

Strategic Ownership Is Not Buy and Forget

Long-term ownership does not mean permanent ownership. Each company in the Strategic Ownership sleeve remains subject to ongoing evaluation as fundamentals, valuation, competitive positioning, capital allocation and the underlying investment thesis change.

The valuation process incorporates discounted cash flow analysis influenced by the principles presented by Phil Town in his book Rule #1. The objective is to estimate the economic value of a business and when possible, purchase that business with a meaningful margin of safety.

A negative margin of safety does not automatically mean a company should be removed. DCF models are estimates built upon assumptions about future growth, margins, free cash flow and discount rates. Companies experiencing unusually heavy investment cycles can temporarily produce cash-flow characteristics that make a traditional DCF model less reliable. That is particularly relevant to companies investing aggressively in artificial intelligence, data centers, semiconductors and related infrastructure.

When valuation reliability is identified as low because of uncertain cash flows, the appropriate response is additional research rather than an automatic exclusion from the portfolio. Price matters, but so does understanding what the business may look like several years from now.

Trading Portfolio Health Entering Q4

The active trading portfolio tells a more cautious story as Q4 begins.

As of September 30, the RWAR remains negative at -0.11R. Eleven of fourteen active trade positions are underwater at the end of the month, only three are positive and five have moved beyond the -1R stop threshold. These trades are candidates for tax loss harvesting going into the last quarter.

The Capital Deployment Index (CDI) is currently flashing a PRESERVATION signal. That signal should not be dismissed simply because Q3 was profitable. In fact, that distinction is one of the primary reasons the CDI was developed. The equity curve tells me what the system has accomplished; my RWAR tells me about the condition of the risk I own at the end of each day. It is in a constant state of flux.

With the current portfolio health calling for greater caution, trading activity has been tightened and concentrated primarily on breakout and momentum opportunities, which are classified within the portfolio’s BOMO sleeve.

Our selective use of Fractional Kelly position sizing is also helping guide those decisions, allowing position size and capital deployment to respond to the strength of the opportunity while remaining aligned with the portfolio’s current risk condition.

Looking Ahead to Q4 - Stay the Course

SCS enters the fourth quarter from an interesting position. The realized equity curve finished Q3 at a new high. Every month of the quarter was profitable. The historical R-distribution continues to demonstrate the importance of allowing larger winners to develop. Strategic Ownership is currently contributing $3,454.07 of positive unrealized P&L, substantially offsetting weakness in the active trading book.

Yet the active portfolio is clearly telling me to remain cautious. Volatility and portfolio deterioration have slowed capital deployment. RWAR remains negative. The majority of active positions are underwater. The CDI remains in PRESERVATION mode.

That isn’t a contradiction. It is the system doing what it was designed to do. Trading conditions will eventually improve. RWAR will either recover or tell me that additional risk needs to be removed. Existing positions will either regain strength or fail to justify continued capital exposure. There is no need to predict which comes first.

The SCS objectives have never been to predict markets. It’s to build a repeatable process that allows disciplined decisions to compound over time, learn from mistakes, continue growing, share what I’ve learned with others, give back some of the experience accumulated over the last several decades and celebrate both the small wins and the much larger victories.

Q3 added another chapter to that process.

Continue the Journey

For readers who want to follow the work beyond these quarterly reviews, you’re invited to join us as the SCS framework continues to evolve. Visit SmartCanvas.com for market tools, SST indicators, technical analysis, educational resources, and the growing SmartCanvas community.

You can also subscribe free to The Smart Canvass Journal on Substack, where I share SCS framework updates, capital-management lessons, and my Lessons in Retirement series. This remains a collaborative journey built around education, process, and continuous improvement. The market decides. We respond while the math compounds and does the work for me.

Disclaimer

Strategic Capital Systems (SCS), The Smart Canvass Journal and SmartCanvas.com are provided for educational and informational purposes only. Nothing presented should be considered investment, financial, tax or legal advice, or a recommendation to buy, sell or hold any security.

Any positions, trades, performance results, valuation models or strategies discussed and illustrate my personal research and experience and may not be appropriate for every investor.

Past performance does not guarantee future results and all investing involves risk, including the potential loss of principal. Readers should conduct their own research and consult a qualified financial professional when appropriate before making investment decisions.

“Why were Fridays always the goal? We spent most of our lives looking forward to Fridays, then one day we realized Fridays don’t matter anymore.”

Weekly Dividends

For most of my working life Friday always meant something. It was the end of another workweek, a chance to sleep a little later, spend time with my family, catch my breath or simply enjoy a couple of days when my time felt a little more like my own. Monday through Thursday were the price I had to pay to get to Friday and I don’t think Kelly and I were much different from other working couples who spent most of their adult lives looking forward to the weekend.

I can still remember the 5 p.m. train whistle on FM radio, followed by the song Working for the Weekend by Loverboy or Earth, Wind & Fire’s Let’s Groove. I’ve lived in South Florida since the 1960s and grew up listening to stations like Y-100, Power 96 and WSHE, “She” radio. The Friday afternoon drive always sounded different than the rest of the week and by five o’clock, the DJs were celebrating the start of the weekend, people were getting off work, traffic was building and you could feel the South Florida pulse shifting into weekend mode.

To get to Friday, Kelly and I had our own weekly countdown. Monday was “Bloody Monday.” Tuesday was just Tuesday, probably because there wasn’t much worth celebrating about it. Wednesday was…well, “Hump Day,” when we could finally see the downhill side of the week and Thursday became our “Friday Eve” because we were knocking on the door to another Friday. Then came Friday, which by itself needs no explanation.

Looking back on that countdown ritual now makes me smile because we were working, raising our family, paying off debt, going to our boys’ baseball tournaments and doing all the things families do. We simply looked forward to those couple of days when more of our time belonged to us. Those days were rare when we were fully preoccupied with raising children, but it’s a life we were happy to choose and the one we signed up for.

Kelly and I retired and somewhere along the way we both realized that Friday wasn’t the prize anymore. The work week dividends we had spent much of our lives working for came to an abrupt end. Instead we found something much more valuable: the rest of the week.

After Checkmate

Last month, in Checkmate, I wrote about the idea that as long as we’re still here, the game isn’t over and regardless of our age, there may still be another move left on the board.

I’ve thought about that quite a bit since writing it and I’ve realized that I may’ve been putting too much emphasis on what that next move needs to look like. I tend to think it has to be something significant, either another adventure, another accomplishment, another purpose or something that proves I’m still moving forward. To my point, Kelly and I managed to squeeze a five-day RCL cruise between these last two publications and a trip to Anna Maria Island, FL to celebrate Kelly’s Birthday in September.

There’s also an economic term that seems to fit here: opportunity cost. Simply put, whenever we choose to spend our time doing one thing, we give up the opportunity to use that same time for something else, like a cruise. During my working years, I thought about opportunity cost mostly in financial terms. In retirement, I’m beginning to think about it more in terms of time.

For those of us who are retired, that doesn’t mean every available hour needs to be filled with something productive. It’s literally quite the opposite. Spending an afternoon reading, sitting by the pool, visiting with friends or doing absolutely nothing may be exactly how we want to use it. The point is that our time now involves choices we didn’t always have while we were working. Saying yes to one thing often means saying no to something else, and as we get older, I think we become more aware of the value of that choice.

The bottom line is, most of retirement isn’t a cruise every week and each day still shows up right on schedule. There may be nothing special happening, no vacation planned, no birthday or anniversary to celebrate, no cruise ship waiting at the pier and nothing on the calendar worth taking a picture of and posting on social media. But, for most of my working life, I wouldn’t have given a day like that much thought because everyday was simply another workday that had to pass before I got a little closer to Friday.

Personal Archive Note
Ft. Lauderdale, FL (Spring Break) Summers on the Beach (shown), The Candy Store, Penrod’s, The Elbo Room
SR A1A facing north from Las Olas Blvd.

What Fridays Look Like Now

One of the things I seem to appreciate most about in my retirement is having more control over my own time. I’ve written in many other articles how most of my adult life, somebody or something else controlled a significant portion of it. Work schedules, supervisors, meetings, deadlines and commutes all took their share, while raising a family took another very large piece. Even weekends weren’t exactly free because there were lawns to mow, errands to run, bills to pay, kids’ activities and plenty of baseball practices, travel, lessons and tournaments. Sunday afternoon would arrive and somewhere in the back of my mind, I knew Monday morning wasn’t very far away. The constant and lingering dark cloud that hung over every weekend wasn’t what preoccupied my mind, but I knew it was always there.

These days, I can wake up on a Tuesday morning with nowhere I absolutely have to be, allowing me time to have another cup of coffee, take a walk, have breakfast with Kelly, meet some friends for lunch or spend a few hours working on something simply because it interests me. Appropriately enough, I now bowl on Tuesdays which would have been impossible during most of my working life unless I happened to be on vacation.

While putting this article together, I became curious about the research on aging and retirement and whether other retirees experienced the same change in their daily lives. Researchers Jeff Steiner and Teresa Amabile studied American professionals as they transitioned into retirement and found that leaving work involved more than questions about identity, purpose or what someone planned to do with the rest of his or her life. People also had to figure out what everyday life would look like when work no longer organized so much of their time.¹ It seems aging and retirement has been researched to death and there’s no lack of information.

Steiner and Amabile use the word “quotidian” to describe the routines and ordinary activities that make up everyday life. I probably won’t be using quotidian over coffee with my neighbors, but I understand exactly what they’re talking about. My retirement now may include more cruises, family celebrations and the occasional bucket-list experience, but most of it is lived during regular mornings and afternoons when nothing particularly exciting is happening.

Then My Medicare Card Arrived

Another reminder that retirement is very much about ordinary life arrived in the mail this month: my Medicare card. I’ll be 65 soon so I knew it was coming, but actually reading the instructions on the card was different from researching Medicare or talking about what I would eventually do. Now I have to make some of the same decisions that millions of Americans face as they approach 65.

One of those decisions is whether to remain with Original Medicare, including Part B, or choose a Medicare Advantage plan. I’ve spent a good amount of time looking at the choices and I’ve decided to stay with Original Medicare and Part B. Under Original Medicare, after the Part B deductible, I’m generally responsible for 20 percent of the Medicare-approved amount for covered Part B services.³ Because I also have retiree health coverage available through my former employer, my intention is to use that coverage to help pay expenses that Original Medicare doesn’t cover, according to the coordination rules of my retiree plan.⁴

Someone else approaching 65 may reach a completely different conclusion. Medicare Advantage plans can offer additional benefits and premiums, networks and out-of-pocket costs vary among plans. In my situation, I like the flexibility of Original Medicare, including generally being able to see any doctor or hospital in the United States that accepts Medicare, rather than selecting a Medicare Advantage plan that may use a provider network or require prior authorization for certain services.³ Yet, because I’m staying with my former employer’s plan, I still need to account for the 20% of uncovered expenses and stay inside their provider network.

I will say that receiving that card made aging feel a little different to me. I’ve spent years planning around aging, finances, pensions, Social Security, savings, investments, taxes and health care. Yet, all that planning becomes everyday life saved on a hard drive. Medicare arrives in the USPS mail and you sit down and read through the Medicare information, compare your choices and make a decision that could affect your health care for years. It’s certainly not the picture of retirement we usually see in television commercials, but it’s every bit as much a part of retirement and in many ways, a much bigger decision compared to where we’d like to take our next vacation.

Research on Aging

There are still things to do around the house, appointments to keep and errands to run. I exercise, swim, bowl, golf, go to the gym, bike ride and keep busy following the markets, working on my trading projects and spend a fair amount of time writing Lessons in Retirement. Kelly and I travel, spend time with family and friends and, occasionally, I’ll spend part of a day doing absolutely nothing productive. Most days I don’t even wear a watch.

Retrospectively speaking, the old Monday-through-Friday countdown is almost the opposite of how I think about time in retirement today. A longitudinal study published in 2017 followed 124 people before retirement and then again three, six and twelve months afterward.

During my working years, I couldn’t wait to get through Monday, Tuesday, Wednesday and Thursday so I could finally reach the weekend. Retirement has changed that for me and now that I have more control over my days, I’m also much more aware that the number of them ahead of me is smaller than the number behind me. That makes me reluctant to simply let any single day just slip away without purpose or meaning as doing so can result in health challenges, both mental and physical.

I’m not alone in that perception as there is certainly more to it based on research in the field.

A U.S. Health and Retirement Study has found that adults over 50 with a stronger sense of purpose tend to have better outcomes in several areas of physical and mental health. One study of nearly 13,000 Americans found that a stronger sense of purpose was associated with a lower risk of depression, fewer sleep problems, greater optimism and lower mortality.³ Another study of almost 7,000 Americans over 50 also found an association between a greater sense of purpose and lower all-cause mortality.⁴

Researchers aren’t saying that we need to make every day productive or that an afternoon doing nothing is somehow unhealthy. The research is looking at something much broader…having a sense that our lives still have direction and meaning.

I find that distinction important because I don’t want to spend retirement trying to fill every hour just for the sake of being busy. After forty years of working, that would seem to defeat part of the reason I retired in the first place.

For all of us, purpose can be something as simple as exercising, writing, working on a project, spending time with family, socializing with neighbors, joining a community organization or even enjoying an afternoon when we deliberately decide not to accomplish much of anything. Purpose doesn’t have to be measured by how much we get done, sometimes it’s simply choosing how we want to spend the day without allowing it to pass us by without losing that sense of purpose.

Personally, what I’m trying not to do is lose my appreciation for each day simply because I once took for granted that there will always be another day tomorrow and that’s not always as easy as it sounds.

Most Days in Retirement Aren’t Vacations

If you look at enough retirement advertising you could easily get the impression that all retirees are supposed to spend our days on beaches, golf courses and cruise ships or having dinner somewhere overlooking the Mediterranean. Don’t get me wrong, of course Kelly and I enjoy traveling and we intend to continue doing it as long as we’re healthy enough to do so while in our go-go years and beyond, God willing.

But, to be clear, most retirement days aren’t even remotely like vacations and most retiree’s can attest to it. Most days still include all of the activities like grocery shopping, cooking dinner, doctor’s appointments, things that need fixing around the house, bills that still need paying, investments that don’t always cooperate and in my case, an occasional bowling score I’d prefer nobody ask me about. Now I can add reading Medicare paperwork to the list.

I don’t find any of that disappointing because the difference isn’t necessarily what I’m doing. Instead, it’s how much control I have over when I decide to do it. I can go to Costco early on a Tuesday morning instead of fighting a Saturday crowd. Kelly and I can go out for breakfast and take our time or I can spend a couple of hours reading, trading and writing without having to rush somewhere afterward, and if we decide we’d like to take a trip, neither of us has to ask a supervisor for vacation time or count how many hours we have left in our vacation banks.

Having an empty space on the calendar doesn’t bother me nearly as much as it once might have but, as I noted above, the time left shouldn’t be taken for granted. But, after spending so many years with much of my week already spoken for, there’s something very, very satisfying about looking at a day and realizing that Kelly and I can decide what to do with it.

Ordinary Things Matter More

Getting older has also changed what I consider important. A phone call from one of my children, dates with Kelly, sitting around a table with friends, talking with neighbors, cooking dinner or taking a walk on a nice morning aren’t the kinds of things I thought very much about when I was younger. I didn’t give them much thought and today I know why. These were ‘in the moment’ and the value was lost in the effort to keep the parts of life synchronized and moving. Yes, it seems silly enough now, but the value of these small pieces of everyday life that were once taken for granted are definitively nuggets of pure gold today.

Don’t get me wrong here, I still want the bigger experiences too. I want Kelly and me to travel while we’re able and see places we haven’t seen, keep spending time with our children and grandchildren, keep learning, remain active and occasionally do something we’ve never done before. It goes without saying retirement should have some adventures in it and I hope we have plenty of them ahead of us.

That may be one of the biggest changes retirement has made in me. I just don’t want to believe anymore that something special has to happen for me to consider the day worthwhile. I spent much of my adult life looking forward to what was coming next. Friday, the weekend, the next vacation and eventually, retirement itself. Now that I’m here, I don’t want to make the same mistake and spend retirement constantly waiting for the next trip, the next event or the next thing on the calendar.

Closing Thoughts

If you’re already retired, maybe the lesson worth taking from this months article is to enjoy the ordinary days just as much as the ones you put on the calendar.

For most of our working lives, we couldn’t wait for Friday because Friday represented a little more freedom and a little more control over our time. Now you may have that freedom on a Monday, Tuesday or Wednesday too, and it can become so ordinary that you hardly notice it. Enjoy the trips, make plans, stay active and keep something on the calendar to look forward to, but don’t let the ordinary days become something you simply pass through while waiting for the next big event. Pay attention to the breakfast with your spouse, the phone call from your children, the conversation with a neighbor or an afternoon when there’s nowhere you have to be.

You spent a good part of your working life waiting to have more time for those things. Now that you have some of that time, the lesson may be as simple as recognizing what you already have and making sure you don’t spend retirement waiting for another Friday.

Sources & Further Reading

1. Steiner, J., & Amabile, T. M. (2022). What do I make of the rest of my life? Global and quotidian life construal across the retirement transition. Organizational Behavior and Human Decision Processes, 171, 104137. https://doi.org/10.1016/j.obhdp.2022.104137

2. Sprod, J., Olds, T., Brown, W., Burton, N., van Uffelen, J., Ferrar, K., & Maher, C. (2017). Changes in use of time across retirement: A longitudinal study. Maturitas, 100, 70–76. https://doi.org/10.1016/j.maturitas.2017.02.018

3. Kim, E. S., Chen, Y., Nakamura, J. S., Ryff, C. D., & VanderWeele, T. J. (2022). Sense of purpose in life and subsequent physical, behavioral, and psychosocial health: An outcome-wide approach. American Journal of Health Promotion, 36(1), 137–147. https://doi.org/10.1177/08901171211038545

4. Alimujiang, A., Wiensch, A., Boss, J., Fleischer, N. L., Mondul, A. M., McLean, K., Mukherjee, B., & Pearce, C. L. (2019). Association between life purpose and mortality among US adults older than 50 years. JAMA Network Open, 2(5), e194270. https://doi.org/10.1001/jamanetworkopen.2019.4270

5. Centers for Medicare & Medicaid Services. Compare Original Medicare & Medicare Advantage. Medicare.gov.

6. Centers for Medicare & Medicaid Services. Retiree insurance & Medicare. Medicare.gov.