Surprise, Surprise – It Happened Again

Hey trader,

Stocks ripped higher last week, with both the S&P and Dow soaring to new all-time highs.

This came just days after another of typical media antics at the market bottom.

We live in the Age of Information. There’s hardly an issue with the quantity, only the quality.

I’m pleased to say that the market’s internal price action over the past two weeks was straight out of a textbook, but only for those that knew what to look for.

Don’t worry.

I’m going to lay out the roadmap for the next five days in this week’s Tale of the Tape.

Tech Domination Returns

The strongest performing sector in the market last week was technology. Frequent readers of the Sector Leader Bullseye newsletter saw that one coming.

I can’t tell you how many times in my career I’ve watched tech, or some other growth sector, lead the way out of a market bottom.

Two weeks ago, at the low, consumer discretionary took that role. That was a strong signal the market had bottomed.

Tech’s rally was powerful enough to catapult it back into the leader position on both a year-to-date and one-year basis. Basic materials sitting at the top of the one-month rankings is hardly bearish either.

The market is starting to price in growth again.

The most exciting part of tech’s outperformance has to do with its subsectors. Semiconductors closed higher and outperformed the major indices, which I always like to see.

Software rallied even more.

That matters because the group has been beaten down for months. I was specifically looking for a rotation back into that space in recent weeks.

Now we find out whether software can carry the momentum and lift tech to new highs. The moves in Palantir and Microsoft over the past couple of weeks suggest this is only getting started.

The Roadmap for the Next Five Days

Leadership tells you where the money is going. Rotation tells you how much conviction sits behind it.

Both point the same direction right now.

Here’s what I’m tracking over the next five sessions to confirm this move has legs:

• Software versus semiconductors. A clean handoff between the two keeps the tech rally alive far longer than one group carrying the load alone.
• Basic materials holding rank. Cyclical strength sitting alongside growth strength points to a broadening market, not a narrow one.
• Consumer discretionary participation. That group led off the low two weeks ago. Leaders off a bottom rarely fade quietly.
• Defensives staying buried. Money crowding back into staples and utilities would be the first crack in this thesis.

Those four checkpoints matter more to me than any headline that crosses the tape this week.

Notice that none of them require a prediction. Each one is an observation I can make in real time and act on.

Positions Matter More Than Opinions

The same voices calling for a crash two weeks ago have gone quiet again. They’ll resurface on the next red day. They always do.

Growing up in Michigan taught me something useful about markets. The coldest stretch of winter always shows up right before the thaw.

Perma-bears have been calling tops for years now. Anyone who listened missed one of the strongest runs in modern market history.

I’m not going to pretend the path higher is a straight line. Drawdowns are normal. Corrections are the admission price for the returns that follow them.

Historically, the average year delivers a double-digit peak-to-trough drawdown at some point. Investors still finish the year green far more often than not.

So if we get a pullback this week, I’m treating it the same way I treated the low two weeks ago. That’s a chance to add exposure, not a reason to run.

My positioning reflects that. I’ve been long since the bounce, and I’m staying long until the internals tell me otherwise.

The Trinity Terminal has been picking up setups in the exact corners of the market that led this move off the lows. I’ll be sharing those as they trigger.

Buckle up, and enjoy the ride.

Gianni Di Poce