Sector Rotation: Why All-Time Highs Are Decoupling from Reality Through the first six weeks of 2026, a stark divergence has emerged in market leadership. While the $S&P 500(.SPX)$ remains near elevated levels, traditional growth engines like Technology and Consumer Discretionary have significantly lagged the broader index. Instead, the heavy lifting is being done by defensive and cyclical sectors, with Consumer Staples, Energy, Industrials, and Materials all outperforming. This rotation suggests a defensive posture among institutional participants and warrants extreme caution. Historically, when the “Real Economy” sectors lead while Tech falters, it signals a lack of risk appetite for the high-beta names that typically sustain a healthy bull m

Despite the relief rally on Friday that saw the $Dow Jones(.DJI)$ achieve a historic close above 50,000, the technology sector remains under intense scrutiny as it faces an uphill battle to reverse its recent underperformance. This divergence serves as a significant warning for the broader market, particularly as the “AI trade” shifts from euphoria to an era of massive capital expenditures. $Amazon.com(AMZN)$ ’s staggering forecast of at least $200 billion in infrastructure spending for 2026, a $50 billion overshoot of analyst expectations, has intensified concerns that aggressive investments by hyperscalers like $Alphabet(GOOG)$

See the daily chart for $S&P 500(.SPX)$ and the CML posted during the last two years for every week, this monthly line is a great tool to assess bullish or bearish conditions, our role as traders is to make decisions studying price action, and the chart highlights how significant has been to lose the CML using the red areas: Of course, there are choppy months like December 2024 when the CML was breached several times, that price action is something to consider as a condition as we use the VIX, divergences, or Bitcoin (you don’t need to trade it, just use it as a risk-on/off thermometer). The selloff in March and April had a condition: The Price was below the CML. We use the CWL to time momentum, the CML works better for medium or long term pos

Friday’s session featured dramatic volatility in commodities and divergent reactions to corporate earnings. Precious metals suffered a sharp correction following their record run, with $SPDR Gold ETF(GLD)$ plunging -10% and $iShares Silver Trust(SLV)$ collapsing -29%. This historic selloff hammered the materials sector ( $Materials Select Sector SPDR Fund(XLB)$ ), which fell -1.5% to finish as the day’s worst performer sector following the -2.04% selloff in technology ( $Technology Select Sector SPDR Fund(XLK)$ ). Corporate earnings delivered mixed results. $Verizon(VZ)$ surged nearly

U.S. equities finished the midweek session essentially flat, marked by a historic intraday move in which the S&P 500 $S&P 500(.SPX)$ briefly crossed the 7,000 level for the first time. The benchmark index ultimately faded to settle unchanged like the $Dow Jones(.DJI)$ , and the $NASDAQ 100(NDX)$ gained 0.32%. Market participants digested the Federal Reserve’s widely expected decision to hold interest rates steady. The S&P 500 remained muted not only today but also throughout November and December, showing net moves of just 0.13% and 0.05% respectively. As mentioned weeks ago, the real opportunities right now are found in individual names rather than th