Back to Top

The S&P MidCap 400 broke out of a broadening triangle consolidation, hitting new yearly highs and confirming a bullish continuation pattern.

Silver has completed a multi-decade cup-and-handle breakout, with the current parabolic advance showing no clear signs of exhaustion.

After breaking out of an ascending triangle, soybean prices have pulled back to retest former resistance as support; a decisive rebound here would confirm the reversion and signal scope for a renewed leg higher.

U.S. Treasury bond prices have recently broken down from a head-and-shoulders top and are now retesting the neckline from below; a failure at this level would validate the pattern and point to further downside risk (higher long-end yields).

  Back to Top

At its final policy meeting of 2025, the Federal Reserve delivered a widely expected 25 basis point (bps) cut, bringing the target Federal funds rate to 3.50%–3.75%. This marks the third consecutive reduction since September, lowering the benchmark by a total of 75 bps.

The broader market has labelled this a "hawkish cut," noting that the median dot plot now implies just one cut in 2026 and another in 2027. We disagree. After listening to Chairman Powell's press conference, we see this as distinctly dovish. Policy is clearly shifting to less restrictive; the Fed cut despite sticky inflation because they are confident in growth, as underscored by their GDP forecast upgrade to 2.3% for 2026. Crucially, the central bank also announced a resumption of Treasury purchases of $40 billion per month in T-bills, injecting further liquidity into the system.

The macro backdrop is a textbook Goldilocks environment, featuring moderating rates that ease debt pressures and robust growth that drives earnings. This soft-landing-turned-mid-cycle-recovery has drawn our attention to a sweet spot we have rarely explored: U.S. mid-caps (S&P MidCap 400).

In past commentaries, we focused on large caps (S&P 500 and Nasdaq-100) and small caps (Russell 2000). Today, mid-caps present the most compelling case. From a valuation standpoint, the S&P 500 remains stretched at over 22x forward P/E, a multiple inflated by the AI boom and carrying considerable narrative risk. Mid-caps, by contrast, trade at a much more reasonable 17x. Furthermore, unlike the Russell 2000, which is often burdened by unprofitable “zombie companies,” the S&P MidCap 400 enforces strict profitability screens, requiring constituents to show a positive sum of earnings over the trailing four quarters.

Most importantly, the combination of low real rates (nominal rates minus inflation) and positive growth tends to favor domestically oriented companies with sound balance sheets - particularly cyclicals in industrials, financials and consumer discretionary. The S&P MidCap 400 fits this profile precisely, as these three sectors collectively account for over 50% of the index. This structural tilt anchors the asset class to the anticipated real economy recovery, offering a potent mix of valuation margin of safety and business quality that neither large caps nor small caps can match.

Finally, 2026 is a midterm election year, meaning economic momentum will be high on the incumbent's agenda. It also marks the end of Chairman Powell's second term and the arrival of President Trump's appointee. The political winds favor a sustained Goldilocks environment, placing mid-caps squarely in the sweet spot.

  Back to Top

We conclude with the following hypothetical trades:¹

Case study 1: Long E-mini S&P MidCap 400 futures

If we hold a bullish view towards the mid-caps, we would consider taking a long position in E-mini S&P MidCap 400 (EMD) futures at the current price of 3,380, with a stop-loss below 3,180, a hypothetical maximum loss of 3,380 – 3,180 = 200 points. Looking at Figure 1, if the breakout from the broadening triangle is confirmed, S&P MidCap 400 futures price has the potential to climb to 3,680, resulting in 3,680 – 3,380 = 300 points. Each point move in the E-mini S&P MidCap 400 futures contract is 100 USD.

Case study 2: Long Soybean futures

If we hold a bullish view towards soybean prices, we would consider taking a long position in Soybean (ZS) futures at the current price of 1,090, with a stop-loss below 1,050, a hypothetical maximum loss of 1,090 – 1,050 = 40 points. Looking at Figure 3, if the rebound at support is confirmed, soybean prices have the potential to reach 1,190, resulting in 1,190 – 1,090 = 100 points. Each Soybean futures contract represents 5,000 bushels, and each point move is 50 USD. The Mini Soybean (XK) and Micro Soybean (MZS) futures contracts are also available 1/5 and 1/10 of the standard size, respectively.

  Back to Top

¹ Examples cited above are for illustration only and shall not be construed as investment recommendations or advice. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. Please refer to full disclaimers at the end of the commentary.

This publication is provided by Inspirante Trading Solutions Pte Ltd (“ITS”) for general information and educational purposes only. ITS is NOT licensed or regulated for the provision of investment or financial advice, and we do not seek to do so.

Any past performance, projection, forecast, or simulation of results is not necessarily indicative of the future or likely performance of any investment.

Any expression of opinion, which may be subject to change without notice, is personal to the author, and ITS makes no guarantee of any sort regarding the accuracy or completeness of any information or analysis supplied.

None of the information contained here constitutes an offer or solicitation of an offer to buy, sell or hold any currency, product, or financial instrument, to make or hold any investment, or to participate in any particular trading strategy.

ITS does not take into account your personal investment objectives, specific investment goals, specific needs, or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. Suitable advice should be obtained from a licensed financial advisor for this purpose. The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice, or any other advice or recommendation of any sort. 

ITS shall not be liable for any loss arising from any investment based on any perceived recommendation, forecast, or any other information contained here. The contents of these publications should not be construed as an express or implied promise, guarantee, or implication by ITS that the reader will profit or that losses in connection therewith can or will be limited from reliance on any information set out here.

This content has been produced by ITS. CME Group has not had any input into the content, and neither CME Group nor its affiliates shall be responsible or liable for the same. 

CME Group does not represent that any material or information contained herein is appropriate for use or permitted in any jurisdiction or country where such use or distribution would be contrary to any applicable law or regulation.

  Back to Top

  Back to Top