Hey trader,
Nearly five weeks of losses were erased in just eight trading sessions.
Stocks exploded higher last week after a ceasefire announcement with Iran.
If you’ve been reading these letters, you saw this coming. I spent the last month laying out exactly what needed to happen for stocks to bottom.
Growth had to lead. Energy had to roll over.
That is now playing out in real time.
A week ago, my Trinity Terminal highlighted AMD for a potential opportunity.
The turn started when most traders weren’t watching.
The ceasefire news lit the fuse, but the powder keg was already packed. Short interest was elevated across the board.
Positioning was overwhelmingly defensive. Cash levels were high.
That combination creates the exact conditions for a violent snap-back rally. Traders betting on more downside were forced to buy back shares at higher and higher prices.
That kind of mechanical buying feeds on itself.
But here is what matters more than the short squeeze. The market’s internal signals were flashing bullish before the headline even dropped.
Tech began showing relative strength days before the ceasefire was announced. That leadership shift is the single most important development in this market right now.
I’ve been pounding the table for weeks about the need for growth sectors to step up. That finally happened.
It happened during a holiday trading week when most traders had mentally checked out. The market has a habit of making its biggest moves when the fewest people are paying attention.
A New Cycle is Underway
Back on March 30, I hosted the quarterly forecast session for Trinity Trade subscribers. We identified major turning points for numerous markets heading into Q2.
Stocks were due for a low. Oil was due for a top.
A couple of weeks later, both calls are playing out. Stocks have completed an important bottom with the right kind of internal leadership.
Semiconductors already hit a new all-time high. That is not the behavior of a market rolling over into a bear phase.
For this rally to hold, I need to keep seeing leadership from the sectors that drive economic expansion:
- Semiconductors and tech continuing to make new highs
- Industrials and consumer discretionary participating in the move higher
- Communications and financials showing relative strength against the broader market
A return to defensive leadership would be the warning sign. If energy, consumer staples, healthcare, or utilities start outperforming again, the rotation back into growth has failed.
Tread Carefully, But Stay Positioned
The market’s condition is improving, but headline risk remains elevated. I am not suggesting anyone go all-in here.
The VIX is back below 20. That is a meaningful shift in the volatility regime and suggests the worst of the panic selling is behind us.
The perma-bears are going to tell you this rally is a dead cat bounce. They said the same thing at every major low I can remember.
These are the same voices that called for a crash for months and have nothing to show for it. They will be wrong at the worst possible time.
The best buying opportunity of the year looks to have formed right in alignment with Trinity’s expectations. I will be keeping you posted as this new cycle develops.
Gianni Di Poce
