The Weekly Watchlist: oil fund up 36% in three months, chip fund 21% off its peak, Fed meets Oct. 28

Oil is the one clear trend on the board. The USO crude fund closed Friday, October 23 at 169.53, up 35.9% in three months and exactly at its peak. Health care is also trending up. Small caps, industrials, regional banks, gold and silver are trending down, and the chip fund SMH sits 21.2% below its high. The Federal Reserve meets on October 28, and the calendar on our markets board shows a forecast of no change in the policy rate, which stands at 3.88%. This is the second edition of the Weekly Watchlist, so it opens with a grade on the first, and with a correction.

Last week's scorecard

A correction first. Last week's edition said inflation was "cooling on the year." That was wrong for September. Headline CPI rose 3.72% from a year earlier in September, up from 3.35% in August and 3.30% in July (FRED, recomputed by us). Core CPI rose 2.57%, up from 2.45%. What did decline is the three-month average of the yearly rate, which is how our method defines "decelerating": 3.46% for July to September against 3.80% for April to June, a fall of 0.35 points for headline, and 2.50% against 2.71% for core. Both statements are about different clocks, and we should have said so. Note also that our automated dashboard shows 4.02% for headline CPI, because the FRED series has no October 2025 observation, which makes the dashboard compare September with August of last year. We use the recomputed 3.72%.

The five ideas from the October 19 edition, with the reading we logged then (an intraday level) against Friday's close. None of the invalidation conditions was hit. Two moves went against the direction of the idea.

Idea (Oct. 19)	Then	Fri. Oct. 23 close	Change	Invalidation hit?
Energy and crude (USO)	161.17	169.53	+5.2%	No: needed a close under 139.97
Small caps (IWM)	271.67	275.75	+1.5%	No: needed a close above 289.66
Homebuilders (XHB)	94.45	98.38	+4.2%	No: needed a close above 101.59
Semiconductors (SMH)	554.31	527.20	-4.9%	No: needed a close above 598.95
Gold (GLD)	379.56	366.61	-3.4%	No: needed a close above 393.80

What held: energy, semiconductors and gold moved the way the notes described. What did not: homebuilders rose 4.2% and small caps edged up 1.5% while the 10-year yield fell from 5.13% to 4.96% on October 22, which is the relief our countercase for both had flagged. We called the homebuilder idea a pressure thesis, and the pressure eased. The reference prices were intraday readings, the grades use closes, and the formal review date for all five is October 26, so treat this as an interim score. The results are logged.

The backdrop

Inflation: higher in September, lower on a three-month view. Headline CPI for September was up 0.65% on the month and 3.72% on the year; core was up 0.33% and 2.57%. PCE prices for August, the latest, are up 3.42% on the year. A slower three-month trend does not mean prices fell, and September's yearly rate went the other way.

Growth: mixed. Payrolls rose 29,000 in September after a gain of 133,000 in August, a fall of 10,000 in July and a gain of 31,000 in June, so the three-month average is 50,700. Unemployment is 4.2%, up from 4.1% in August and down from 4.4% a year earlier (September 2025). Initial jobless claims were 194,000 for the week ended October 17, with a four-week average of 197,750. Against that, nominal retail sales rose 0.77% in September and are up 6.29% on the year, and industrial production rose 0.66% on the month and 2.25% on the year. Retail sales are not adjusted for prices. Housing permits were 1.400 million in September, down 0.21% on the month and down 3.05% on the year. Last week's edition showed permits up 4.16% on the year for August; the swing is mostly the base, since permits were 1.444 million in September 2025 against 1.347 million in August 2025.

Rates (Treasury yields through October 22). The 10-year yield was 4.96% and the 2-year 4.65%, down 0.17 and 0.16 points from October 21, after readings of 5.12% and 4.79% on October 20. The 10-year is up 0.25 points over three months and the 2-year up 0.28. The 10-year minus 2-year spread was 0.31 points on October 23. The 2-year sits 0.77 points above the 3.88% policy rate, so the bond market is pricing a higher path than where the Fed is today. The 30-year mortgage rate reads 7.32% on our board, down 0.08.

Trends (closes through October 23). Up: energy (XLE), health care (XLV), crude (USO) and the dollar (UUP). Down: Russell 2000 (IWM), financials, regional banks (KRE), industrials (XLI), consumer discretionary, real estate, homebuilders (XHB), gold (GLD) and silver (SLV), plus Ether. Mixed: S&P 500 (SPY), Nasdaq 100 (QQQ), technology, semiconductors (SMH), staples, utilities, long Treasuries (TLT) and Bitcoin. "Up" requires the close above its 60-day average and the 20-day above the 60-day; "down" is the reverse. SPY is 2.45% below its peak, QQQ 7.27% below.

Five ideas to watch

These are research notes on what is changing, not recommendations. The reference levels are 20- and 60-day averages and a one-day volatility band from the dashboard, not forecasts. We name funds here, not single companies, because the filings work for company ideas has not been done this week.

1. Crude oil and energy: thesis, the trend is extended and still rising

What changed: USO closed at 169.53 on October 23, up 4.8% on the week, 10.7% on the month and 35.9% on three months, at its peak with trading volume 1.25 times normal. XLE is up 18.8% over three months and 10.8% over one. Comparison: SPY is up 2.8% over the same three months. Mechanism: higher crude lifts producer revenue and raises fuel bills for trucking, airlines and farms, and it feeds headline inflation, which is the number the Fed is weighing. Countercase: a fund at its high, 9.9% above its 20-day average, has little cushion, and we have not independently verified what is driving crude. Headlines on our scoop board from single outlets point to Iran tensions, and we have not confirmed that link. Horizon: weeks. Invalidation: USO closing under its 60-day average (142.47, 16.0% below the close) or the 20-day average falling under the 60-day. Bull/base/bear: bull, new highs above 169.53; base, a range between the 20-day average (152.75, 9.9% lower) and the high; bear, a close under 142.47. Next catalysts: the Fed on Oct. 28 and jobless claims on Oct. 29.

2. Health care: thesis, defensives are rising while technology slips

What changed: XLV closed at 179.28, up 9.7% in three months and 5.5% in one, 1.1% below its peak. In the same month QQQ fell 4.95% and XLK 5.9%, while staples (XLP) rose 8.0% and utilities (XLU) 8.1%. Comparison: a move into the slower-growing sectors while the growth leaders fall is a rotation pattern, not a broad rally: SPY is down 0.9% over the month. Mechanism: with the 10-year near 5% and payrolls averaging 50,700, investors can favour steadier earnings, and health care is less tied to the business cycle. We have not tested that against company earnings. Countercase: the staples jump came on 1.48 times normal volume and a rotation can reverse in days. Horizon: weeks to a quarter. Invalidation: XLV closing under its 60-day average (170.17, 5.1% below). Bull/base/bear: bull, a new high above the October 23 close plus a rising 20-day average (172.48); base, a range between the two averages; bear, a close under 170.17. Next catalyst: the Fed on Oct. 28. We have not verified company earnings dates for the fund's holdings.

3. Industrials: thesis, the sector fund and the output data disagree

What changed: XLI closed at 164.62, down 10.1% in three months and 11.7% below its peak, in a "down" trend. Yet industrial production rose 0.66% in September and 2.25% on the year, up from 1.62% in August. Comparison: output is accelerating while the sector fund falls, and the ISM manufacturing index was 54.5 last time (a reading above 50 means expansion). Mechanism: a fund prices the future and production data looks back. Crude is up 35.9% in three months, which raises costs for freight-heavy and fuel-heavy industrial firms, and the 10-year is up 0.25 points over the same period. We have not tested either link against company results. Countercase: September production can be a one-month burst, and the gap may simply be the sector catching up to slower orders. Horizon: one to two months. Invalidation: XLI closing above its 60-day average (174.32, 5.9% higher). Bull/base/bear: bull, a reclaim of the 20-day average (168.21, 2.2% higher); base, a range between the 163.18 band floor and 168.21; bear, a close under 163.18 and an ISM reading well below 54.5. Next catalyst: ISM manufacturing on Nov. 2.

4. Semiconductors: thesis, the leadership drop is concentrated, not broad

What changed: SMH closed at 527.20, down 12.2% in a month and 21.2% below its peak. Over that month QQQ fell 4.95%, XLK fell 5.9% and SPY fell 0.9%. Last week the same fund read 554.31 and we called leadership wobbling; it has since lost another 4.9%. Comparison: chips fell about twice as much as the technology sector as a whole. Mechanism: when a handful of large holdings dominate a fund, one group of stocks drives the fund and the index tied to it. Countercase: volume was only 0.91 times normal, which is not heavy selling, and the three-month return is minus 3.9%, not a collapse. We have not verified a company-level cause, so this note describes the move and does not explain it. Horizon: weeks. Invalidation: SMH closing above its 20-day average (585.55, 11.1% higher). Bull/base/bear: bull, a reclaim of the 60-day average (574.27, 8.9% higher); base, a range between the 515.94 band floor and 574.27; bear, a close under 515.94. Next catalyst: the Fed on Oct. 28. We have not verified earnings dates for the fund's holdings, so none is listed.

5. Gold and silver: thesis, last week's explanation no longer fits the move

What changed: GLD closed at 366.61, down 4.0% on the week, 6.4% on the month and 26.1% below its peak. SLV closed at 48.72, down 5.4% on the week, 15.5% on the month and 53.9% below its peak. Comparison: last week we tied gold's slide to a stronger dollar and higher yields. This week the 10-year yield fell, the dollar fund UUP rose only 0.14% on the week, and gold still fell 4.0%. That mechanism explains the month less well than we said. Mechanism: still open. Headlines on our scoop board link the drop to oil-driven fears of a Fed rate hike (a single desk's explanation, which we have not confirmed). If so, the Fed on Oct. 28 matters more than the dollar. Countercase: three-month returns are only minus 2.1% for GLD and minus 8.0% for SLV, and GLD volume was 1.23 times normal, so some of the move is positioning rather than a new trend. Horizon: weeks. Invalidation: GLD closing above its 20-day average (379.09, 3.4% higher). Bull/base/bear: bull, a reclaim of 379.09; base, a range between the 361.54 band floor and 379.09; bear, a close under 361.54. Next catalysts: the Fed on Oct. 28 and CPI on Nov. 10, when the board shows the prior monthly reading at 0.6% and the yearly rate at 3.7%.

What would change our mind this week

• A Fed decision or tone that differs from the no-change forecast on Oct. 28 would test ideas 1 and 5 together, since both depend on how the market reads oil-driven inflation.
• USO closing under its 20-day average (152.75) would end the extension in idea 1 and ease the inflation argument behind idea 5.
• A 10-year yield back above its October 21 level of 5.13% would undercut the relief that lifted small caps and homebuilders last week.
• Jobless claims on Oct. 29 well above the 200,000 forecast, or payrolls on Nov. 6 far from the 50,700 three-month average, would move the growth label away from "mixed."
• ISM manufacturing on Nov. 2 coming in strong while XLI keeps falling would weaken the cost explanation in idea 3.

Sources: Federal Reserve Bank of St. Louis FRED series CPIAUCSL, CPILFESL, PCEPI, PAYEMS, RSAFS, INDPRO, UNRATE, PERMIT, ICSA, DGS2, DGS10, T10Y2Y. Latest data dates: CPI, payrolls, unemployment, retail sales, industrial production and permits are September 2026; PCE is August 2026; claims are the week ended Oct. 17; Treasury yields are Oct. 22 and the spread Oct. 23. ETF prices, averages and returns come from the Chronicle research dashboard (built Oct. 25, 2026, 3:00 PM ET; closes through Oct. 23). Year-over-year figures for CPI, core CPI and the unemployment comparison were recomputed by us from the FRED series because the dashboard skips the missing October 2025 observation. The policy rate, mortgage rate and the calendar forecasts and prior readings are from the Chronicle markets board, captured Oct. 25 at 3:01 PM ET. Different series are dated differently; the date is shown beside each value.

The Weekly Watchlist is research and commentary for a general audience, not personalised investment advice. Do your own research. The Chronicle discloses any position its writers hold in a company named here; none were disclosed for this edition.