Computing power lifts technology valuations; oil prices face rising Middle East risk

On Monday, 2026-08-31, the US stock market showed some divergence. SPY fell 0.30%, meaning the large-cap S&P 500 ETF pulled back slightly; QQQ instead rose 0.05%, meaning the tech-heavy Nasdaq-100 was essentially flat. ETF Radar's main themes today are China's relatively strong financial report and the continuing spillover from the Middle East conflict into oil prices and gold.

First look at the China thread. In the latest disclosed half-year reports, the six major state-owned banks' combined revenue for the first half exceeded 2 trillion yuan for the first time, reaching 20049.87 hundred-million yuan, up 9.38% year-on-year; combined net profit attributable to the parent was 7125.98 hundred-million yuan, up 4.41% year-on-year. In plain terms, this shows the banking 'financial engine' has not stalled and is actually more stable than in prior years.

This matters; look at two details first. First, the six big banks are the core layer of China's financial system. Their stable profitability indicates deposits and loans, net interest margin, and asset quality have generally held up. Net interest margin stabilizing, in plain language, means the margin banks earn from 'borrowing short and lending long' is no longer being continually squeezed. Second, multiple banks also plan dividends totaling over 2200 hundred-million yuan. High dividends, in plain terms, mean real cash is returned to shareholders, which can boost market confidence in the financial sector's cash flows.

At the same time, the five listed insurance companies reported a combined net profit attributable to the parent of 3173.84 hundred-million yuan for the first half, up 78.11% year-on-year. China Life's net profit was 1344.89 hundred-million yuan, a year-on-year increase of 228.6%. With insurance and banking both strengthening, the transmission becomes more complete. Banks are like the pipes and insurers like reservoirs. If the pipes are clear and the reservoirs are filling, the market will see the financial system's repair as more real, not just a few companies looking good.

Where will this transmission go? First to valuations. Valuation, in plain language, is how much the market is willing to attach as a "price tag" to these companies. When earnings improve and dividends increase, investors will re-run the numbers: if fundamentals are not as bad as feared, prices can be repriced upward. Further on, this will transmit to capital flows. Because banks, insurers, and brokerages have significant weights in China large-cap indices, if the financial sector steadies, the broader China equity market is more likely to attract passive and active capital. Passive capital, in plain terms, is money allocated mechanically according to an index; active capital is money where fund managers pick and choose.

There is an ancillary piece of news that also supports this thread. The pilot for comprehensive brokerage account management will be made routine, and the Financial Regulatory Administration emphasized firmly advancing strict and strong regulation. Strict regulation sounds like a negative, but for the plain investor it can be thought of as 'making the rules clearer.' Clearer rules stabilize the infrastructure for wealth management business and make it easier for large institutions to do long-term allocations. It may not produce an immediate sharp rally in the short term, but in the medium term it will make the market more willing to put money into this system.

However, there is a countercurrent today. China’s stronger financial data did not cause all China-related assets to take off immediately, because the external thread is still interfering — namely the global risk sentiment from the Middle East and sanctions.

The second main thread is the Middle East. Among major themes, the US-Iran conflict remains a high-profile event. The inputs mentioned that the chain effects of US military action and economic sanctions on Iran are still brewing, even sparking discussions like 'who would be willing to lend more to Saudi Arabia.' In plain terms, the market is worried not about one- or two-day headlines but whether a protracted conflict will together affect oil, financing, shipping, and regional security.

This transmission chain is easy to understand. Tighter Middle East tensions first hit oil supply expectations. Supply expectations, in plain language, mean whether people worry about future shortages or transport disruptions. If oil tightens, energy prices tend to react first. When oil prices rise, inflationary pressure can be reignited. Inflation, in plain language, means average costs for living and production rise. If inflation cannot be contained, the Fed will be less willing to cut rates. Slower rate cuts, in plain language, mean borrowing costs remain higher for longer. As a result, safe-haven assets like gold are more likely to be re-focused on, and energy stocks can get support from improved upstream profitability.

This is also why, on Monday’s market, energy-related ETFs clearly performed stronger. BNO rose 2.64% on Monday, VDE rose 2.04%, and USO rose 3.08%. This did not come out of nowhere; behind it, geopolitical tensions first push up oil and then transmit to the energy sector's profit expectations.

There is also a piece of US macro noise to mention. The debate about whether the US economy is K-shaped, C-shaped, or E-shaped continues, and former Fed official Wash is also discussing US potential growth. Potential growth, in plain terms, is how fast the economy can run in a not-too-stimulated, not-too-overheated state. On top of that, the Bank of England governor warned that AI could exert downward pressure on the global economy. This warning will not directly change today’s market in the short term, but it reminds the market of one thing: on one hand there are geopolitical and inflation risks, and on the other hand there is uncertainty about the quality of growth. In other words, the market's surface may not be crashing, but underlying conditions are not comfortable.

Next look at ETFs. First MCHI. MCHI actually fell 0.38% over the past 5 trading days, i.e., the past week. ETF Radar's model is biased positive for MCHI over the next 1 to 3 months, with consistent signals. There are three quantitative readings supporting it. First, since 2026-08-19, MCHI's net creations were +110M USD, representing +1.74% of AUM; 30-day cumulative net flow +2.08% AUM. Net creations, in plain language, mean there were real cash purchases of this ETF, not just paper optimism. Second, MCHI's excess return versus EEM is +9.82%. Excess return, in plain language, means it has outperformed the comparable emerging markets large-cap ETF by 9.82%. Third, on the options side call IV is 27.08%, put IV is 22.9%, put-call skew -4.17pt. Option implied volatility, in plain language, is how much the market is willing to pay for future volatility; calls being more expensive than puts indicates stronger momentum to chase upside. To be honest, it has still been down over the past week, which diverges from the model's positive bias and indicates the model is looking at the next 1 to 3 months while short-term sentiment has not yet fully caught up.

Second, GLD. GLD actually fell 4.28% over the past 5 trading days. Looking forward, ETF Radar is biased positive on GLD, with multiple pieces of evidence aligned. First, CFTC gold net longs are +144,747 contracts, at the 100th percentile of its own range. CFTC net longs, in plain language, mean large traders' net long positions in futures are very high. Second, since 2026-08-17, GLD net creations/redemptions were +4,677M USD, representing +3.12% of AUM; 30-day cumulative inflow +3.63% AUM. Creation/redemption inflows, in plain language, mean real money is continuously flowing into the gold ETF. Third, 20-year real rates fell by 7 basis points to 10Y real rate 2.34%. Real rates, in plain language, are yields after subtracting inflation; since gold does not generate interest, lower real rates ease some pressure on gold. There is also divergence here: GLD has fallen over the past 5 trading days, but the model is still biased positive because the system focuses on safe-haven demand and capital flows, not short-term price pullbacks.

Third, BNO. BNO actually fell 1.78% over the past 5 trading days. For the next 1 to 3 months, the model readings point to a positive bias for BNO with consistent signals. This ETF has a real transmission relationship to today's main theme because the Middle East conflict hits oil first. Quantitatively, first, CFTC crude net longs are +84,020 contracts. In plain language, large traders are overall still positioned for higher oil. Second, the WTI near-month versus 12-month curve slope is annualized 15.817%. The futures curve slope, in plain language, means near-term oil is pricier than oil 12 months out, signaling tighter supply near term. Third, BNO has gained 19.39% over this thematic window, with a maximum drawdown of -15.21%. Maximum drawdown, in plain language, is how deep the biggest interim decline was. Note the divergence: it was down over the past week, but it already rose 2.64% on Monday, indicating short-term price is beginning to move back toward the main theme.

Fourth, VDE. VDE actually rose 1.29% over the past 5 trading days. ETF Radar's model is biased positive on VDE for the future, but the signal is moderate. It is considered moderate because this logic has already been partly reflected in the price. Quantitative evidence: first, VDE's excess return versus SPY is +11.48%. In plain language, it has outperformed the US large-cap market by 11.48% over this period. Second, the WTI near-month/12-month annualized slope expanded to +18.125%, again indicating near-month oil is tighter. Third, real creations/redemptions over the past 1 day were net inflows of +0.96% AUM, showing money chasing into energy. A reminder: this theme ties to today’s oil-price story, but the system’s signal strength for it is not as concentrated as for MCHI or GLD, because it has already run some and part of the move is "early."

One final note on divergence. Today’s news that China's financial sector is warming should theoretically help China equities; however the system remains negative on KWEB with consistent signals. KWEB actually fell 0.51% over the past 5 trading days. This is not a contradiction but reflects different sectors. Financial strength and the pressure on China internet platforms from US-China tech decoupling are different issues. Decoupling, in plain language, means supply chains, regulation, and capital flows become separated. In the system readings, FINRA short shares are 44,063,314 with days-to-cover 2.09, indicating shorts are still positioned. Days-to-cover, in plain language, is how many days of volume it would take to cover those short positions. So today’s main theme being warm does not mean all China assets will benefit together.

Putting it together today, the stronger financial results provide a floor for the China market; the Middle East risk fallout has pushed oil and gold back into focus. One is fundamental repair, the other is a resurgence of safe-haven and inflation concerns — both moving together explains why the overall market did not crash on Monday but sector performance diverged sharply. A reminder again: the above are ETF Radar system quantitative model directional forecasts for general market conditions and do not constitute personal investment advice; please consult a licensed investment advisor before investing.