Hey trader,
Stocks just ripped to fresh all-time highs. The bears are livid.
Every perma-bear who called for a crash is now scrambling to explain themselves. But the signs of this rally were flashing for weeks before the headlines caught up.
Now we are seeing stories about ceasefires, de-escalations, and oil flowing freely through the Strait of Hormuz again. The narrative has finally aligned with what the tape has been saying all along.
I have watched this script play out hundreds of times in my career. The plot never changes.
The ultimate truth in trading is simple. Sentiment follows price, not the other way around.
Here is how I saw this coming, what the internals are screaming now, and why the bears are about to get run over again.
The Signs Were There All Along
Oil topped out over a month ago. That was the first major tell.
Crude rolled over quietly while fear levels in the broader market stayed stubbornly elevated. This is exactly how major tops in commodities work. They sneak out the back door while everyone is still panicking about the last headline.
The VIX dropped back below 20 about a week ago. That is a key level I always watch to confirm a shift into a lower volatility regime.
Once volatility breaks lower like that, the path of least resistance shifts decisively in favor of the bulls.
Here in the Sector Leader Bullseye newsletter, I have been pounding the table on tech leadership for weeks. Tech has been leading, and the timing of that leadership has been the real signal.
Tech is notorious for emerging first out of market bottoms. What we just experienced over the past several months was a textbook correction.
Growth got punished. Commodities ran while fear dominated the tape.
Then tech started ripping. That shift happened exactly when it was supposed to, right on schedule with every other major bottom I have traded through.
Growth Comes Back to Life
The setup gets better when you look beneath the surface. Growth is staging a full comeback while defensive sectors are getting sold hard right now.
That divergence is the real tell. Investors feel safe enough to rotate out of utilities and staples to chase semiconductors and software again. This is what a healthy bull market looks like from the inside.
We are still early in this move. Plenty of traders got caught flat-footed on the way up and are now waiting for a pullback to get long.
The market rarely accommodates that kind of wishful thinking.
When capital is sidelined and forced to chase, you get squeezes. You get gap-ups. You get frustration from people who were waiting for a better entry.
That is exactly what is happening right now.
Short interest is still elevated across major growth names. Hedge fund exposure remains light by historical standards. The fuel for this rally has barely been touched.
When It Will Be Time to Get Cautious
Here is what actually worries me at this moment. Nothing is flashing red yet, and that is the whole point.
For a meaningful decline to set up, the bears finally need to throw in the towel. They need to admit that stocks are in a healthy bull market and start chasing.
Until that happens, the path of least resistance remains higher.
Positions matter more than opinions. My positioning reflects an aggressive long stance across growth sectors, with a close eye on the sentiment data for any signs of exhaustion.
When the majority turns overwhelmingly bullish, that is when we shift gears. The warning signs will show up in breadth first, then in defensive sector strength, and finally in the VIX rising from complacent levels.
None of that is flashing yet.
The perma-bears will keep calling tops. They always do.
These are the same voices that told you to sell during the correction, missed the bottom, and are now scrambling to explain why their models failed.
Ignore them. Read the tape instead of the headlines.
Sentiment follows price. It has been true for every cycle I have traded through, and this cycle will be no different.
Talk soon,
Gianni Di Poce
