Seven out of ten are semis or semi equipment. Due to the high correlation between these stocks, I will not be entering them all in full size positions - even if they all offered “perfect entries”. What I’ll do instead is reduce position size and use a scatter-gun approach (buy them all but in smaller size) if good entries are on offer early in the week. One benefit is that you’ll get stopped out of the positions that don’t work and can look to add to the ones that do - or if you’re lucky, they may all work. However, it’s possible they all fail, so I would not risk more than about 3 or 4% of my entire portfolio when entering this many new positions in a short period. For example, if taking 8 new positions I would risk 0.5% per trade. Another option is to enter two or three names and only add new positions if you get traction on the original ones. Both methods have their own pros and cons - and I do both at different times.

I am writing this at 7pm Melbourne time on Tuesday May 26 - depending on the price action during the week, I may and likely will change at least some of the entry prices and methods (pullback buy or breakout/strength), tighten stop losses, or outright cancel resting orders if the market starts acting badly. If they explode higher without me, I’ll let them go, I do not chase. Flexibility, adaptability and discipline are key to my trading style.

Subscribe now

Semi Equipment

Applied Materials ($AMAT) - Semiconductor equipment. Up 3.6% last week. 3.8% above the 20-day SMA, 4.1% ATR, extension 0.9x ATR from 20-SMA. 3.6% from the all-time high. RSI 62.

AMAT Chart

Note: All daily charts - the black line is the 20-day SMA, the green is the 50-day SMA, and the red is the 200-day SMA.

My strategy for AMAT is to leave a resting limit order at $418 with a stop loss at $392. Those of you in the US or at least in a similar time zone can be more tactical and work your entries better. As with most things in life there are positives and negatives. I usually can’t get the best, most precise entries. However, one benefit of being in the opposite time zone is you can’t panic out of your positions based on daily price action, which makes riding your winners easier.

KLA Corporation ($KLAC) - Semiconductor equipment. Up 4.7% last week. 4.5% above the 20-day SMA, 4.1% ATR, extension 1.1x ATR from 20-SMA. 2.6% from the all-time high. RSI 63.

KLAC Chart

I will enter a buy stop order on KLAC, so I only enter on strength. This also helps reduce risk - if markets pull back and you only have limit orders, they would all trigger and get stopped out if prices continue lower.

I use pretty tight stops most of the time. I usually set a stop between 1-3 ATR for each stock trade - not randomly, but always using a price point on the chart that would invalidate my thesis. For KLAC I will enter a buy stop at $1960 and place my stop at $1780. Could use a tighter stop under Friday’s low around $1861 - because if it breaks out you want it to keep running. If it falls back below Friday’s low, that’s a logical spot to get out, but I’m going to give it a little more room.

One thing to be aware of with buy stop orders: if the market gaps up above your order price, you get filled at the market price on the open, which may be well above the level you set. To manage that risk, I check pre-market prices before going to bed and decide whether to leave the order active or cancel it.

Lam Research ($LRCX) - Semiconductor equipment. Up 4.9% last week. 9.0% above the 20-day SMA, 4.5% ATR, extension 2.0x ATR from 20-SMA. 1.5% from the all-time high. RSI 66.

LRCX Chart

The pre-market is currently showing LRCX (and most of these stocks) will gap up on the open. So I don’t want to be entering too many positions using buy stop orders - if we gap and run that means I’ll miss out, but I’m cool with that. I can’t make tactical entries with tight low-of-day or AVWAP stops unless I stay up until midnight, so it’s a trade-off I need to accept.

Two options I’d consider: a limit order on a slight pullback to about $300, which was resistance during the recent short consolidation, or a lower limit order around $282 which lines up approximately with the 20-day SMA. The first feels a bit aggressive, so I’m going with $282. Stop loss goes under the May 19 low with a little extra breathing room at $252, which would also be under the 50-day SMA. In my opinion there’s no reason to hold a swing trade if the stock is breaking its 50-day SMA - I’m looking for the strongest stocks continuing their uptrend.

MKS Instruments ($MKSI) - Semiconductor equipment. Up 3.4% last week. 7.5% above the 20-day SMA, 4.7% ATR, extension 1.6x ATR from 20-SMA. 1.9% from the all-time high. RSI 66.

MKSI Chart

I’m looking at buying a breakout on MKSI - will place a buy stop order at $325. This has been a very strong stock, so if it goes it could go quickly. I would prefer if it just went sideways for a week or so between the 20-day SMA and the $320 level that’s been holding it back. But you don’t always get what you want. It is currently trading at $334 in the premarket.

The May 19 low is too far away for a stop loss on a breakout setup. An aggressive stop would be Friday’s lows around $311. I’m going to give it more room and put the stop under Wednesday’s (May 20) low, which also sits under the 20-day SMA. Stop loss at $289.

Semiconductors

Monolithic Power Systems ($MPWR) - Power management semiconductors. Up 2.6% last week. 0.8% above the 20-day SMA, 4.4% ATR, extension 0.2x ATR from 20-SMA. 5.1% from the all-time high. RSI 56.

MPWR Chart

I’m just gonna watch this one for now. I may end up missing it - after the shakeout and strong recovery last week, it could get going again here. Pre-market it’s currently trading at $1,625. I considered placing a buy stop order for this as well, with a tight stop loss around $1,550. If I entered this, I’d want it to run quickly. I wouldn’t want to give it too much room as it’s not the cleanest, tight setup. It already pulled back to around $1400 and recovered last week - so if it breaks higher and fails, I wouldn’t want to hold it. Also, I don’t want to enter too many positions on a gap up today, in case they gap and reverse. I’ll just watch this for now and see how it develops during the week. However, if you can take a tactical entry during the live trading session, with a stop under the low of the day, I’d consider that if I was able to do so.

ON Semiconductor ($ON) - Power and sensing semis. Up 2.7% last week. 9.7% above the 20-day SMA, 4.9% ATR, extension 2.0x ATR from 20-SMA. 2.4% from the all-time high. RSI 67.

ON Chart (Daily)

ON Chart (Weekly)

Above are both the daily and weekly charts for ON Semiconductor, so you can see the longer-term base breakout. It peaked in July 2023 on earnings, entered a massive decline of about 70% bottoming in April 2025, and has since staged an impressive recovery. These longer-term base breakouts can often be a little messy. Obviously not always - it might just rip from here. It already retested the breakout zone and bounced strongly last week. I might end up missing it, but that’s okay with me.

Buy limit order at $108.50 with a stop at $101.50.

Credo Technology ($CRDO) - High-speed connectivity for data centres. Up 26.9% last week. 17.9% above the 20-day SMA, 7.5% ATR, extension 2.4x ATR from 20-SMA. 0.2% from the all-time high. RSI 65. Beta of 3.8 - size accordingly.

CRDO Chart

Credo is too wide and loose to enter here, but the strength is undeniable. It closed at all-time highs last Friday but needs to settle down and tighten up to offer a lower risk entry. Definitely on the watch list.

Networking & Infrastructure

Ciena Corporation ($CIEN) - Optical networking equipment. Up 5.3% last week. 6.7% above the 20-day SMA, 5.9% ATR, extension 1.1x ATR from 20-SMA. 2.6% from the 52-week high - but still 44.8% below its all-time high, which dates back to the dot-com era in 2000. RSI 61.

CIEN Chart

This is probably one of my favorite charts. The trend has been so clean, and it has respected the 50-day SMA on pullbacks going back around a year. I’m going to use a limit order here, looking for a bit of a pullback. Limit at $560, stop at $480 - which is below both the May 19 low and the 50-day moving average (currently at $484 but rising quickly). I will also risk 1% of my portfolio on this trade rather than the 0.5% on the others.

Applied Digital ($APLD) - AI/HPC data centre infrastructure. Up 7.8% last week. 14.5% above the 20-day SMA, 8.5% ATR, extension 1.7x ATR from 20-SMA. 5.6% from the 52-week high - but still 59.1% below its all-time high from 2003. RSI 61. Beta of 2.7 - so size accordingly.

APLD Chart

Applied Digital is pretty wild - 8.5% ATR. Limit order at $40.50, which is the convergence of the 20-day SMA and some previous resistance and support. Stop loss under the May 19 low at $34.50, just to give it a little breathing room.

Crypto / Digital Assets

Hut 8 Corp ($HUT) - Bitcoin mining and data centre operations. Up 3.4% last week. 13.5% above the 20-day SMA, 7.7% ATR, extension 1.8x ATR from 20-SMA. 5.7% from the all-time high. RSI 65. Beta of 3.8 - size accordingly.

HUT Chart

I’m taking the opposite strategy with HUT and buying strength. Buy stop order at $113.50 with a tight stop - it should either work or not, and quickly. Friday’s low was $101, so my stop goes at $98.50.

I find writing out a full public plan forces you to think very deeply about each trade - this is as much for me as it is for anyone reading. But I hope you gain some knowledge and insights along the way. I'll try to share updates and make this a regular Sunday night or Monday morning (US time) post.

Wishing everyone a great week ahead!

Cheers,

Marcus Grant, CFTe

Share

Subscribe now

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

Two weeks ago (May 15), only 21 of 121 ETFs were positive. Last week, 98 were positive.

Subscribe now

SPY Chart

QQQ Chart

Market Temperature

The Market Temperature ticked up to 5.9 from 5.7, remaining in the Goldilocks Zone.

Breadth recovered - MMFI (% of US stocks above their 50-day moving average) climbed from 49.74 to 57.18, and MMTH (% above 200-day) improved from 50.44 to 53.60.

The VIX dropped from 18.43 to 16.70.

Why only +0.2 despite a broad rally? Three of four pillars improved, but Sentiment was a drag - the VIX dropped to 16.70, which the model scores as a contrarian signal. The Monetary pillar improved marginally but still has the most room to run if bond volatility compresses and the dollar eases. The MOVE Index barely budged (79.87 to 78.43), the US dollar (UUP) stayed flat at 27.77, and credit spreads improved marginally, but remain at low levels and are not indicating any signs of stress currently. TLT bounced 1.22% last week after falling 2.81% the prior week, closing strongly after probing new lows during the week - I will be watching last week’s low of 82.77. A break below that would be a potential warning sign.

SPDR Sector Relative Strength

XLK (Technology) is the only GICS sector in Leading. Interestingly, the three best-performing GICS sectors on the week were all more defensive - XLU (Utilities, +3.37%), XLV (Healthcare, +3.30%), and XLRE (Real Estate, +3.08%). XLV and XLRE both moved from Lagging to Improving, and XLU is right on the boundary.

Broadening Participation

Across our 121-ETF universe, eight names moved from Lagging to Improving - utilities (RSPU, UTES), real estate (RSPR, XLRE), healthcare (XLV), Germany (EWG), airlines (JETS), and software (XSW).

23 ETFs in our ETF universe are now within 1% of their all-time highs. And it’s not all tech - it includes RSP (S&P 500 Equal Weight), IWD (Russell 1000 Value), DIA (Dow 30), IWM (Russell 2000), and QQQJ (Nasdaq Next 100) alongside the usual AI and semiconductor names. QQQJ - which contains the next tier of non-financial NASDAQ names below QQQ - gained 4.37% vs QQQ’s 1.21%.

Semiconductors, Software, Cyber, and Speculative Tech

XSD (Equal-Weight Semiconductors) gained 9.89% last week finishing the week at a new all-time closing high. RS-Momentum hit 113.62 - the highest reading in our universe. The leadership is mid/small-cap semis: NVTS +37%, ALAB +32%, CRDO +27%, LSCC +19% on the week. SMH (Market Cap weighted Semiconductors) was up 3.59%.

XSD Chart

IGV (Software) is in the Improving quadrant, but a drill-down into its components tells a more nuanced story. Of the 21 Leading names in the software universe, seven are cybersecurity and three are crypto miners. The large enterprise software names - CRM, ADBE, NOW, WDAY, HUBS - are almost all Lagging with YTDs ranging from -30% to -49%. INTU lost 18.59% just last week. The “software rally” is really a cyber and AI infrastructure story wearing a software label.

CIBR (Cybersecurity) continued its run, gaining 6.62% and closing at a weekly all-time high. 17 names are Leading or Improving. The Improving quadrant has 10 names, almost all with double-digit weekly gains (TENB +18.43%, ZS +13.24%, QLYS +13.72%, OKTA +11.44%, S +10.97%).

WGMI (Crypto Miners) was up 8.25% with RS-Momentum accelerating to 108.46. This is increasingly an AI compute story as miners pivot infrastructure toward providing compute for AI - WGMI decoupled entirely from IBIT (Bitcoin, -4.15%) and ETHA (Ethereum, -7.10%) last week.

QTUM (Quantum & AI) rose 7.24%, entering the Leading quadrant. The quantum pure-plays had a massive week - RGTI +48%, QBTS +44%, IONQ +22% are all Leading, while ARQQ +31%, BTQ +29%, and QUBT +17% are all Improving. That said, QTUM is still heavily semiconductor-weighted, and the broader semi rally is doing a lot of the heavy lifting underneath.

Energy - Fossil Fuel Momentum Pauses, Clean Energy Holds

Six energy and oil names dropped from Leading to Weakening in a single week: USO (Crude Oil), XLE (Energy), RSPG (Energy EW), XOP (Oil & Gas E&P), OIH (Oil Services), and DBC (Broad Commodities) - reversing the move from the prior week.

Clean energy is telling a different story. TAN (Solar) and PBW (Clean Energy) both remain in Leading, and LIT (Lithium & Battery) which has an RS-Trend of 117.72 despite Weakening momentum, is bouncing after a roughly 12% pullback between May 12-19.

Tan Chart

PBW Chart

LIT Chart

Thoughts for the upcoming week

Two weeks ago, six energy ETFs were surging into the Leading quadrant while everything else sold off - only 21 of 121 names were positive and breadth deteriorated sharply. Last week that picture reversed completely. The bounce wasn’t just tech snapping back - RSP, IWM, and MDY all outperformed SPY, breadth recovered, and 23 ETF names are at or very near all-time highs, across tech, value, and small caps. That’s a much healthier looking tape in the space of one week. If oil stabilizes around current levels or continues lower, TLT can hold last week’s low, or even better continue higher (rates lower), and the US dollar weakens or goes sideways, the conditions are there for a resumption of the rally off the March 30^th low. Some of the fast movers are already up a lot since Tuesday’s (May 19) low, so I would avoid any new buys if too extended (I am looking for stocks and/or ETFs ideally within 2-3 x ATR% of May 19 low). I will be looking to add exposure this week, generally using the May 19 low as my stop loss.

Stay open-minded and manage risk carefully.

Cheers,

Marcus Grant, CFTe

Subscribe now

Share

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

The S&P 500 (SPY) gained just 0.21% last week. The Nasdaq 100 (QQQ) slipped 0.32%. FANG+ (FNGS) was down 0.32%. The equal-weight S&P 500 (RSP) lost 1.24%, the S&P MidCap 400 (MDY) dropped 2.36%, and the Russell 2000 (IWM) fell 2.31%.

Flat index returns, but that doesn’t tell the real story. Only 21 of 121 ETFs in our universe posted a positive return last week. The other 100 were down.

That divergence got worse on Friday. SPY was up around 1.4% through Thursday before falling 1.20% on Friday alone. QQQ dropped 1.51%, IWM lost 2.41%, and SMH (Semiconductors) gave back 3.80%. The only GICS sector positive on Friday was Energy.

Subscribe now

Market Temperature

The Market Temperature dropped a full point to 5.7, back into the Goldilocks Zone after sitting at 6.7 the prior week.

Breadth deteriorated quite sharply - MMFI (% of US stocks above their 50-day moving average) fell from 63.15 to 49.74. MMTH (% of US stocks above their 200-day moving average) declined from 56.34 to 50.44.

The Monetary pillar weakened as well. The MOVE Index (rate volatility) spiked from 67.25 to 79.87, and the dollar strengthened with UUP rising from 27.34 to 27.77.

The discretionary vs staples ratio (XLY/XLP) also deteriorated, dragging the Regime pillar lower.

What’s holding the reading up? SPY and QQQ both remain in Strong Uptrends and the weekly RSI is still healthy at 69.45. SPHB/SPLV is still signalling Risk-On. But other components in the model - breadth, rates vol, dollar, defensive leadership - all pulled the temperature score down last week.

Energy Sweeps Into Leading

The dominant theme of the week. Five energy and commodity ETFs flipped from Weakening to Leading in a single week: USO (Crude Oil) +10.96%, XLE (Energy) +6.71%, RSPG (Energy Equal-Weight) +5.95%, XOP (Oil & Gas E&P) +5.43%, and OIH (Oil Services) +4.68%. DBC (Broad Commodities) also moved to Leading. UNG (Natural Gas) jumped 7.19% and moved from Lagging to Improving.

SPDR Sector Relative Strength

XLK (Technology) and XLE (Energy) are the only two SPDR sectors in the Leading quadrant. The other nine are all Lagging. XLP (Consumer Staples) is worth watching - its trend state upgraded to Strong Uptrend despite sitting in the Lagging quadrant, and it was one of only four GICS sectors positive on the week alongside XLK, XLE and XLV.

The Other Side

Housing (ITB -7.04%, XHB -6.04%), retail (XRT -6.65%), airlines (JETS -6.99%), and utilities (UTES -4.62%) were among the worst performers. These are all rate-sensitive or inflation-sensitive sectors. Higher oil and rising rates hit them directly.

The mining and metals complex also pulled back hard. URA (Uranium) fell 9.51%, REMX (Rare Earth) dropped 9.22%, GDX (Gold Miners) lost 7.65%, and LIT (Lithium) was down 6.75%. Every mining-related ETF in our universe was negative on the week.

TLT (Long-Term Treasuries) fell 2.81%, and the MOVE Index spike from 67 to 80 signals ongoing rate volatility. In last week’s post I flagged the prior MOVE/VIX divergence resolving - it un-resolved. Rate vol is climbing again while equity vol remains relatively subdued.

What I’m Watching

The Leading quadrant contracted from 25 to 21 names despite SPY being flat. Lagging expanded from 62 to 66.

At 5.7, the temperature is still comfortably in the Goldilocks Zone. But breadth is weakening with large-cap indices holding near highs. It remains to be seen whether this is a short-term rotation and pullback or the early stages of longer consolidation or deeper pullback. We are still quite extended from the 50-day SMAs in SPY, QQQ, SMH and other tech/AI ETFs.

Stay open-minded and manage risk tightly.

Cheers,

Marcus Grant, CFTe

Subscribe now

Share

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

FANG+ (FNGS) gained 4.94% and moved back into the Leading quadrant after slipping to Improving the prior week. It finished the week at an all-time closing high for the first time since October 2025.

Subscribe now

SPY Chart

For all daily charts the black line is the 20-day SMA, the green is the 50-day SMA, and the red is the 200-day SMA.

QQQ Chart

FNGS Chart

Extensions

QQQ and SPY are getting to extreme levels of historical extension from their 50-day SMA. QQQ closed the week 14.55% above its 50-day (up from 10.04% last week). SPY was 7.80% above its 50-day (up from 5.94% last week). In our backtest from May 1999 to April 2026 (6,782 weekly observations for SPY and 6,774 for QQQ), QQQ is almost in the 99th percentile, with only just over 1.0% of observations (70 out of 6,774) at or above current levels. SPY is in the 99th percentile, with slightly less than 1.0% of all observations (67 out of 6,782) at or above this level.

The semiconductor ETFs are even more stretched in percentage terms. SMH (Semiconductors) is 30.37% above its 50-day. XSD (equal-weight semis) is 43.85% above its 50-day.

Market Temperature

The Market Temperature rose slightly to 6.7 last week, up from 6.4 the prior week.

The Tape pillar improved (3.03 → 3.24 out of 4) driven by SPY’s weekly RSI pushing to 69.13 from 65.47.

The Monetary/Macro pillar score dropped (1.48 → 1.26) but the underlying readings were largely unchanged. MOVE actually fell from 70.41 to 67.25, but the model’s direction component scored lower because the 4-week comparison base rolled forward from the April 3 stress peak (84.41) to the April 10 reading (72.15). The rate of improvement slowed, not the conditions themselves. UUP was essentially flat (27.41 → 27.34) but scored slightly lower for the same reason - the more favourable 4-week comparison is fading, as the April 3 stress peak rolled off.

The Sentiment pillar was basically unchanged, with a tiny tick up in the VIX week over week.

The Regime pillar score was up 0.33, due to the IWF/IWD ratio (growth vs value) component flipping from negative to neutral.

Fixed Income Update

In last weekend’s note I flagged equity vol falling while rate vol rising was a divergence worth watching. That resolved last week - MOVE dropped from 70.41 to 67.25 while VIX ticked higher (16.99 → 17.19). Fixed income ETFs bounced slightly - TLT +0.55%, LQD +0.55%, IEF +0.23% - but all remain Lagging with downtrend trend states. LQD was the only one to see its trend state improve (Strong Downtrend → Downtrend). TIP continues to be the outlier, holding a Recovering Uptrend and the only fixed income ETF positive YTD (+1.27%).

SPDR Sector Relative Strength

XLK (Technology) is the only SPDR sector in the Leading quadrant. Nine of the eleven SPDR sectors are now Lagging, up from six last week. XLI (Industrials), XLB (Materials), and XLRE (Real Estate) all dropped into Lagging last week. The only sector not Lagging besides XLK is XLE (Energy), which sits in Weakening after a tough week.

Semiconductors and AI

Semiconductors and AI continue to lead. SMH gained 11.13% for the week and is up 33.88% over the past month. XSD (equal-weight semis) gained 11.18% and is up 54.19% over the past month. Both closed at all-time highs. Thirteen ETFs in our universe currently have RS-Momentum above 105, and all thirteen are tech, semiconductor or AI related names, if you include WGMI (Crypto Miners), EWY (South Korea) and EWT (Taiwan) – which I believe you should given their components.

CIBR (Cybersecurity)

CIBR gained 9.54% last week and its RS-Trend jumped from 92.15 to 97.15. It remains in the Improving quadrant with RS-Momentum at 105.60. The trend state flipped from Recovering Downtrend to Recovering Uptrend and is now 3.85% off its all-time high.

ARKQ

ARKQ (Autonomous Tech) moved from Weakening to Leading last week, gaining 4.72%. RS-Trend at 109.09, RS-Momentum at 100.50. Strong Uptrend and up 15.73% YTD.

I’m considering a new position in ARKQ, with a stop under $127 (could use $129.50 for a tighter or multi-level stop).

Crypto

WGMI (Crypto Miners) gained 20.40% and jumped from Weakening to Leading. RS-Momentum surged to 116.85 - the highest in our entire ETF universe. RS-Trend at 134.31. Strong Uptrend and up 48.24% YTD.

IBIT (Bitcoin) was up 2.20% and remains in Improving. RS-Trend improving steadily (84.79 → 90.32) but still well below 100 and still in a Recovering Downtrend.

ETHA (Ethereum) moved from Lagging to Improving, but only gained 0.34% - underperforming Bitcoin.

IBIT Chart

I don’t usually trade laggards below their 200-day SMAs, but I’m willing to make an exception for Bitcoin. However, personally, I prefer the 24/7 liquidity of the underlying to avoid the gap risk associated with the ETF.

BTC Chart

If BTC continues higher and can consolidate for 2-4 weeks between about $83K-86K and then breakout, that would be an ideal entry. I’ll be watching closely but not planning on buying now with the 200-day SMA (red line) and AVWAP from the all-time high (black line) just overhead. It may just rip through all that potential resistance but that’s OK, and if it does it will offer another better lower risk entry in the future.

Energy

Energy pulled back hard across the board last week. XLE was down 5.35%, XOP -6.51%, OIH -5.37%, USO -6.45%, and RSPG -5.99%. XOP, USO, and RSPG all dropped from Leading to Weakening. RS-Momentum fell sharply across all five names.

OIH and USO charts look the best of the bunch and are sitting right around their 20-day SMAs (OIH -0.87% below, USO -0.01%). XLE, XOP, and RSPG have pulled back below their 50-day SMAs (XLE -3.84% below its 50-day, XOP -3.23%, RSPG -2.93%).

OIH Chart

I’m considering a new trade in OIH, but would enter on strength above Thursday’s (May 7) high, with a stop under the low from the same day.

TAN

TAN (Solar) gained 4.50% and is sitting just 0.27% off its 52-week high. RS-Momentum at 99.44, just below the 100 line. Strong Uptrend and up 23.02% YTD.

Watching TAN for an entry. Ideally would like a pullback toward $59.50 and see some support/signs of strength around the 20-day SMA which should keep rising towards that level over the next week or two.

COPX (Copper Miners)

COPX had a strong week, up 8.75%. The trend state flipped from Neutral to Strong Uptrend and RS-Momentum jumped from 88.17 to 97.46. Still in Weakening but accelerating. Still 14.02% from its 52-week high.

I am also considering taking a position in COPX. Would look to buy strength above Friday’s (May 8) high, with a stop under the low of the 6th, or maybe under $81 to give it a little more breathing room.

With the QQQ and SPY massively extended, driven by tech, semis and AI names, the question becomes how will this resolve itself in the near-term? Will we see a continuation of this explosive performance leading to a massive “blow-off” top, a sharp mean-reversion move in the leaders or just a mild pullback or consolidation while money rotates into some of the laggards. Unfortunately, I don’t have a crystal ball, but in my opinion, given the level of extension in the leaders, it’s prudent to take at least some partial profits on big winners and/or tighten your trailing stops. I won’t be deploying a lot of new capital here, but considering small positions in TAN on a pullback, COPX and OIH on strength, and ARKQ, which just rotated into the Leading quadrant.

Stay open-minded and manage risk tightly.

Cheers,

Marcus Grant, CFTe

Subscribe now

Share

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and/or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and/or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

Australia doesn’t have that luxury.

The ASX is a much smaller and concentrated market. Banks, resources, and a handful of healthcare and property names make up the bulk of the index. The thematic ETF ecosystem that makes the US framework possible simply doesn’t exist here. You can’t run a two-layer analysis when there’s no first layer to build on.

So, I had to think about it differently.

The ASX 300 Relative Strength Framework takes 301 stocks (VAS holds 304 stocks as at 31 March 2026, but three are suspended from trading) in the Vanguard Australian Shares ETF (VAS), which tracks the S&P/ASX 300 Index and benchmarks each one directly against VAS itself. Instead of ETF groups, I built 33 curated categories - Gold, Critical Minerals, Oil Gas & Coal, Banks, Software, and so on - that group the universe in a way that makes relative strength comparisons meaningful across the ASX 300. Each stock gets an RS-Trend score (how much is it outperforming or underperforming VAS over time?) and an RS-Momentum score (is that outperformance accelerating or decelerating?). Those two dimensions place every stock into one of four quadrants - Leading, Weakening, Lagging, or Improving - exactly like the US framework. Every stock also gets a Trend State rating depending on the current price relative to its Simple Moving Averages (SMAs).

The methodology underneath is the same. The structure around it is different because the market demanded it.

Subscribe now

How weak is the Australian market right now?

Across all 301 stocks in VAS, less than half (48.5%) are above their 20-day moving average. Only a third (33.7%) are above their 200-day. Just 19.7% sit in the Leading quadrant.

At the category level, the leadership is narrow. Only seven of the 33 categories have more than 40% of their stocks in the Leading quadrant - and most of them are resource or energy related. Utilities & Energy Infrastructure leads at 80%, followed by Oil Gas & Coal (67%), Critical Minerals (50%), and Mining & Industrial Services (50%). On the other side, 10 categories have zero stocks in Leading, including Software, Discretionary Retail, Property, and Medtech. The strength in this market is concentrated and thematic.

The first scan

After applying the RS framework, I then run a bottom-up scan for the strongest names.

For the first live run (week ending May 1, 2026), I ran a scan across all 301 stocks looking for names in either the Strong Uptrend or Uptrend state, not overly extended, and trading near their 52-week highs. The parameters are the same ones I use for US stocks - trend states, extension from the 20-day SMA within about three days of normal price movement (measured in ATRs, so it adjusts for each stock’s volatility), and within 10% of the 52-week high.

29 stocks passed the initial scan and there were 10 near misses on the criteria. I then went through all the charts and picked the 15 names that I believe have the cleanest, strongest trends and have the potential to offer low-risk entries over the coming week(s).

Critical Minerals

The standout category. Four of the 15 names come from here, and the broader category has 50% of its stocks in the Leading quadrant.

PLS Chart

(Note: In all daily charts the black line is the 20-day SMA, the green is the 50-day SMA, and the red is the 200-day SMA.)

PLS Group Ltd (PLS) - Lithium producer (spodumene concentrate). Critical Minerals, Leading, Strong Uptrend. Up 6.4% last week (week ending May 1). Currently 8.1% above the 20-day SMA with a daily ATR of 4.4%, giving an extension of 1.8 days of normal range. 0.5% from the 52-week high (-0.5% ATH). RSI 67.

Consolidating at all-time highs, with blue skies above.

SRL Chart

Sunrise Energy Metals Ltd (SRL) - Nickel, cobalt, scandium, and battery materials. Critical Minerals, Weakening, Strong Uptrend. Up 0.8% last week. 6.5% above the 20-day SMA, 7.6% ATR, extension 0.8x. 7.8% from the 52-week high (-32.6% ATH). RSI 60.

Consolidating nicely, first target could be around $16, just shy of the late 2017 all-time highs.

LTR Chart

Liontown Ltd (LTR) - Lithium miner (battery materials). Critical Minerals, Leading, Strong Uptrend. Up 17.9% last week. 24.3% above the 20-day SMA, 5.4% ATR, extension 4.5x - well outside the scan threshold. Right at the 52-week high (-17.4% ATH). RSI 75.

I like the chart, but too extended to buy here for me. Add to pullback watchlist.

MI6 Chart

Minerals 260 Ltd (MI6) - Niobium exploration and critical minerals. Critical Minerals, Weakening, Uptrend. Down 3.4% last week. 3.9% below the 20-day SMA, 6.6% ATR, extension -0.6x. 13.2% from the 52-week high (-14.8% ATH). RSI 50. Near miss on 52-week high gate.

Could wait to see if it breaks out to all-time highs, or if you’re looking for an early entry, could buy strength on a clear reclaim of the 20 SMA.

Diversified Resources

RIO Chart

Rio Tinto Ltd (RIO) - Iron ore, aluminium, copper. Diversified Resources, Weakening, Strong Uptrend. Up 0.2% last week. 0.3% above the 20-day SMA, 2.4% ATR, extension 0.1x. 2.2% from the 52-week high (-2.2% ATH). RSI 57. The Weakening quadrant means momentum is fading relative to VAS, but the trend state is still Strong Uptrend.

Consolidating near all-time highs. Had a shakeout on Thursday, the 30th of April. I’d probably be looking to buy strength above $176. Blue skies above.

MIN Chart

Mineral Resources Ltd (MIN) - Mining services, iron ore, lithium. Diversified Resources, Leading, Strong Uptrend. Up 12.4% last week. 11.2% above the 20-day SMA, 4.5% ATR, extension 2.5x. 1.6% from the 52-week high (-31.2% ATH). RSI 68.

Recent price action is a bit loose. Could wait for it to tighten up, or if you are more aggressive, buy strength above Thursday the 30th of April’s high of $67.80 - Potential targets $75 and $91.

Gold

Both of these names are in the Weakening quadrant with fading RS momentum, and both just miss the 52-week high threshold. However, I thought they were worth including given their outperformance relative to the broader gold category and the gold price.

GGP Chart

Greatland Resources Ltd (GGP) - Gold and copper. Gold, Weakening, Uptrend. Down 2.8% last week. 5.0% below the 20-day SMA, 5.1% ATR, extension -1.0x. 11.9% from the 52-week high (-11.9% ATH). RSI 50. Near miss on 52-week high gate.

I wouldn’t buy this one here, but possibly on strength if it can reclaim the 20-day SMA and prior resistance around $14.50 zone - but I’d be watching the gold price too. I would be hesitant to buy a breakout if the gold price isn’t improving.

PDI Chart

Predictive Discovery Ltd (PDI) - Gold explorer. Gold, Weakening, Uptrend. Down 4.7% last week. 2.9% below the 20-day SMA, 5.8% ATR, extension -0.5x. 11.7% from the 52-week high (-66.2% ATH). RSI 49. Near miss on 52-week high gate.

Another one for the watch list. A potential buy on strength over recent highs around $1.015 - Trading a bit loose at the moment though. Potential targets after a breakout would be $1.50 and $2.00.

Engineering & Contractors

Both of these are mining services plays.

SRG Chart

SRG Global Ltd (SRG) - Engineering, contracting, mining services. Engineering & Contractors, Leading, Strong Uptrend. Up 0.7% last week. 4.9% above the 20-day SMA, 3.5% ATR, extension 1.4x. 5.7% from the 52-week high (-5.7% ATH). RSI 64.

Not the cleanest base, but if it can tighten up a bit in its consolidation here and then break out to all-time highs, could provide a low-risk entry - Watchlist

NWH Chart

NRW Holdings Ltd (NWH) - Engineering, contracting, mining services. Engineering & Contractors, Leading, Strong Uptrend. Up 4.6% last week. 6.6% above the 20-day SMA, 3.3% ATR, extension 2.0x. 2.3% from the 52-week high (-2.3% ATH). RSI 65.

Also not a clean base. But if it tightens up a bit here and breaks out to all-time highs, could provide an entry - Watchlist

Transport & Infrastructure

DBI Chart

Dalrymple Bay Infrastructure Ltd (DBI) - Coal export port terminal. Transport & Infrastructure, Leading, Strong Uptrend. Up 2.2% last week. 5.5% above the 20-day SMA, 2.1% ATR, extension 2.6x. 0.5% from the 52-week high (-0.5% ATH). RSI 70.

I wouldn’t buy this here but on the watchlist for a lower risk entry.

Digital Infrastructure

CDA Chart

Codan Ltd (CDA) - Communications equipment and metal detection technology. Digital Infra & Hardware, Leading, Strong Uptrend. Up 21.6% last week. 21.0% above the 20-day SMA, 4.3% ATR, extension 4.9x. 0.7% from the 52-week high (-0.7% ATH). RSI 77. The RS acceleration is the strongest in the scan.

Extended - pullback watchlist.

ELS Chart

Elsight Ltd (ELS) - Connectivity solutions and drone communication technology. Digital Infra & Hardware, Weakening, Strong Uptrend. Flat last week. 0.3% above the 20-day SMA, 6.2% ATR, extension 0.0x. 7.0% from the 52-week high (-7.0% ATH). RSI 56.

Consolidating nicely - shakeout on Thursday the 30th of April. Could buy on strength on a clear 20-day SMA reclaim for the more aggressive or wait for all-time high breakout.

Food & Agriculture

CBO Chart

Cobram Estate Olives Ltd (CBO) - Olive oil producer. Food & Agriculture, Leading, Strong Uptrend. Up 8.6% last week. 8.5% above the 20-day SMA, 3.7% ATR, extension 2.3x. 4.6% from the 52-week high (-4.6% ATH). RSI 76.

If it forms a handle here under $4, could provide a low-risk entry.

Telco

SLC Chart

Superloop Ltd (SLC) - Fibre broadband and business connectivity. Telco, Leading, Strong Uptrend. Down 0.3% last week. 2.6% above the 20-day SMA, 2.9% ATR, extension 0.9x. 4.8% from the 52-week high (-4.8% ATH). RSI 61.

Consolidating nicely under all-time highs - on breakout watch.

What ties it together

Ten of the fifteen pass all scan criteria. Two (LTR and CDA) are extended after strong recent runs. Three (GGP, PDI, MI6) narrowly missed the proximity to 52-week highs threshold.

The resource and mining services theme dominates, which tells you something about where the ASX’s genuine relative strength lives right now. But the outliers - CBO, SLC, CDA, ELS - are arguably the more interesting stories precisely because their business models are independent of the commodity cycle that drives most of the other names on the list.

Stay open-minded and manage risk tightly.

Cheers,

Marcus Grant, CFTe

Subscribe now

Share

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

Both SPY and QQQ closed at new all-time highs for the week. Worth noting though - SPY gapped up on Friday and pushed higher but reversed to close on the lows, just under where it opened. QQQ held its gains and continues to be the leader.

Subscribe now

SPY Chart

For all daily charts the black line is the 20-day SMA, the green is the 50-day SMA, and the red is the 200-day SMA.

QQQ Chart

The Market Temperature dropped from 7.4 to 6.4 - back below the Surge zone (7.0+) after one week. The 6.4 reading is classified as Stable due to the 1 point drop.

If you read last week’s post, I went through the historical context for Surge readings. In the model’s backtest period from 2016, post-correction thrusts into Surge have typically lasted just one week. November 2023, December 2023, and July 2025 all dropped back below 7.0 the following week. So this is consistent with the pattern.

What is a bit different this time is the size of the drop. Those three prior falls from Surge fell by 0.37 to 0.48 points. This week’s drop of 1.0 is roughly double that, and the landing level of 6.4 is lower than any of those precedents. Still comfortably in the Stable zone - but worth being aware of.

Pillar Breakdown

Two pillars drove the drop in roughly equal measure.

Tape/Trend fell from 3.40 to 3.03 (out of 4). SPY and QQQ both held their Strong Uptrend trend states - the decline came entirely from breadth and RSI momentum scores. There’s a nuance here though. The model uses a two-week lookback for breadth scoring, so it sees MMFI (percentage of US stocks above their 50-day MA) declining from 69.2% to 63.7%. But week-over-week, MMFI actually ticked up from 62.4% to 63.7%. MMTH (200-day) was essentially flat at 55.9%.

Regime fell from 1.66 to 1.28 (out of 2). Driven mostly by the IWF/IWD (growth vs value) ratio turning down. Year-to-date, IWD (Value) is up 9.40% while IWF (Growth) is up just 0.75%. XLY/XLP (discretionary vs staples) also declined for a second consecutive week - XLY is down 1.21% year-to-date while XLP is up 8.31%. Both ratios are trading below their 200-day moving averages.

Monetary and Sentiment were barely changed. However, one divergence worth flagging - VIX dropped from 18.71 to 16.99 while MOVE (bond market volatility) rose from 66.97 to 70.41. Equity vol falling, rate vol rising. That sits alongside deterioration across fixed income ETFs - more on that later.

Extension from SMAs

The 20-day moving averages are catching up. SPY closed the week (May 1st) 3.17% above its 20-day SMA, down from 4.84% the prior week. QQQ was 5.63% above, compared to 7.90% the prior week. The 50-day extensions are barely changed (SPY 5.46% to 5.94%, QQQ 9.48% to 10.04%).

SPDR Sector Relative Strength

The SPDR sector picture is largely unchanged from last week. Technology (XLK) remains the only sector in the Leading quadrant. Real Estate (XLRE) is the one shift - it moved into Improving. Six of eleven sectors are Lagging, with Healthcare (XLV) and Financials (XLF) the weakest.

Semis and AI

The semiconductor and AI infrastructure complex continues to lead. Every AI-related ETF I track - SMH, XSD, IDGT, DTCR, GRID, BAI, CHAT, THNQ - is in the Leading quadrant with a Strong Uptrend trend state. XSD (equal-weight semis) is still the strongest with an RS-Momentum of 113.49, up another 4.06% last week.

In our AI Custom Universe (81 names benchmarked against SMH), the number of Leading names rose from 16 to 25 and Lagging dropped from 37 to 28. Worth noting that last week’s elevated Lagging count was due to the SMH itself being up around 9%. Big moves in Leading names include Intel (+20.7% on the week), Bloom Energy (+25.8%) and STX (+24.00%).

FNGS slipped back from Leading to Improving. Its RS-Trend dropped back below 100 after only crossing it by 0.04 points last week.

Critical & Precious Metals

LIT (Lithium) and REMX (Rare Earths) both moved back into the Leading quadrant after slipping to Weakening last week. LIT was up 5.88% and REMX up 8.08%. Both remain in Strong Uptrends. URA (Uranium) stayed in Weakening but still has a Strong Uptrend trend state.

LIT Chart

REMX Chart

COPX Chart

Copper Miners (COPX) have diverged from LIT and REMX. COPX was down 4.03% for the week and is now below its 20 and 50-day SMA.

SLV Chart

SLV (silver) looks weak, below its 20 and 50-day SMA, down 0.73% for the week, and SIL (silver miners) down 6.54%.

GLD Chart

GLD also looks weak, below its 20 and 50-day SMA, down 2.32% for the week and dropped into the Lagging quadrant. GDX (gold miners) fell 7.66%. If GLD continues to fall and closes below the 395-400 zone, where the late March lows and the 200-day SMA are converging, I wouldn’t want to own it, even in a longer term “investment” portfolio.

Oil and Clean Energy

USO (crude oil) remains the strongest name in the entire 121-ETF universe by RS-Trend (149.27), up another 7.85% last week. OIH (oil services) slipped from Leading to Weakening - still outperforming on trend but the momentum paused. XOP (oil & gas E&P) moved the other way, from Weakening back to Leading.

PBW Chart

PBW (Clean Energy) is in the Leading quadrant with a Strong Uptrend, up 4.23% on the week.

TAN Chart

TAN (Solar) is Weakening - still outperforming on trend but momentum fading.

Speculative Growth, Quantum and Robotics and Micro-Caps

QTUM (Quantum Computing & AI) and ROBO (Robotics & AI) are both in the Leading quadrant with Strong Uptrend trend states.

QTUM Chart

ROBO Chart

IWC Chart

IWC (micro-caps) moved from Weakening to Leading - up 1.27% on the week and 14.19% year-to-date.

Biotech

XBI (Biotech) pulled back last week but bounced off its 50-day moving average and the shelf of prior resistance (now potentially support) on Wednesday.

XBI Chart

Fixed Income

Nearly all fixed income ETFs are now in downtrends. TLT, IEF, and LQD are all Lagging with Strong Downtrend trend states, all down last week: TLT -1.27%, IEF -0.86%, LQD -0.91%. HYG (high yield) was down 0.52% and is Lagging with a Recovering Downtrend. TIP (U.S. Treasury Inflation-Protected Securities) is the only one holding a Recovering Uptrend.

SPY and QQQ are at all-time highs with VIX at 16.99 - but fixed income ETFs (excluding TIP) are broadly deteriorating, and the MOVE Index ticked up from 65.69 to 70.41 over the last 2 weeks. Equity vol falling while rate vol rises is a divergence worth watching. Continued consolidation or a mild pullback for the major indices around these levels would be constructive and potentially lead to new entries.

I’ll post another piece tomorrow with some potentially actionable names from my scans.

As always, I am open to all possibilities. Stay open minded and manage risk tightly.

Hope everyone has a great week!

Cheers,

Marcus Grant, CFTe

Subscribe now

Share

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

There’s a visual explainer here covering the relative strength quadrants and trend states so you can understand the terminology I use in this analysis.

I also screened across the drill-down data in this note for names in the top two trend states (Strong Uptrend or Uptrend), near their 52-week highs, and not too extended from their 20-day SMA relative to their own volatility (as of Friday April 24^th closing prices). I use each stock’s ATR to normalise. I then ran through all the charts to eyeball the better potential setups. You can grab the watchlist here if you want. Be mindful some names are still to report earnings. I highlight some potentially actionable names below.

The AI Stack - one week later

Last week’s AI Stack piece benchmarked 81 names against SMH and found interconnect, specialty foundries, the miner pivot, and systems integration leading. A week later, many of those names have dropped from Leading to Weakening.

However, context matters here. SMH gained over 9% last week (week ending April 24). When the benchmark moves that much, not all names keep pace. Ciena, Coherent, Fabrinet, Vertiv, Celestica, Jabil - all dropped to Weakening. But all of them still have RS trend readings well above 100 and Strong Uptrend trend states. They didn’t weaken. They just didn’t match a 9% benchmark week.

“Weakening” in this context means the outperformance stopped accelerating, not that something is wrong.

The names that outperformed through the 9% SMH week did so with extreme moves. ARM gained over 40% and now has the highest momentum reading in the entire universe. AMD up nearly 25%. Intel up over 20%. Texas Instruments crossed into Leading, as did Astera Labs (ALAB).

NVIDIA went the other way - moving from Improving to Lagging, despite gaining 3.27% on the week. Broadcom also slipped to Lagging, with its momentum reading at 99.99. Both had decent weeks in absolute terms but couldn’t keep pace with SMH’s move.

The miner-to-AI pivot names all lost ground. WULF, HUT, IREN, and APLD dropped from Leading to Weakening - same story as the interconnect names, still outperforming on trend but couldn’t match the benchmark move. CORZ was already the weakest of the group last week in the Improving quadrant and has now slipped to Lagging.

GE Vernova Inc. (GEV) Chart

Leading, Strong Uptrend, gapped up on earnings Wednesday then traded tight Thu/Fri. I am watching to see if it can hold Wednesday’s low. If it does, that’s a sign of real strength. Even if it fills part or all the gap, but holds the 20 SMA, it could provide a new entry opportunity.

Lam Research Corporation (LRCX) Chart

Weakening, Strong Uptrend, Gained 0.07% last week - basically flat while the rest of semis surged. Tight consolidation near all-time highs.

Software remains almost entirely absent. Every enterprise SaaS name is Lagging versus SMH. ServiceNow down 41% YTD. Workday down over 44%. HubSpot down 44%. Intuit down 40%. Salesforce down nearly 33%.

Software - the benchmark illusion

Staying with software for a moment - Microsoft is Leading within IGV. Sounds good until you check the other benchmarks - MSFT is Lagging versus XLK and SMH.

Even among the actual ‘software leaders’, Synopsys (SNPS) and Cadence (CDNS) are EDA companies - they sell the design tools chipmakers use. They’re classified as software in IGV, but their business is entirely tied to the semiconductor cycle.

Crypto miner names like CORZ are also showing up as Leading within IGV. Classified as software, behaving like something else entirely.

Two names from the IGV universe that came up in my screen were Clear Secure (YOU) and A10 Networks (ATEN) - both Leading within IGV with Strong Uptrend trend states. YOU runs the CLEAR biometric identity platform at US airports and has been expanding into B2B identity services. ATEN is a cybersecurity and application delivery company expanding into AI workload security. Both have earnings coming up though.

Clear Secure (YOU) Chart

A10 Networks (ATEN) Chart

XLF - the most misleading ETF

XLF is Lagging with a Recovering Downtrend trend state. Down almost 2% last week, down over 6% YTD. At the ETF level, financials look like an avoid.

But the drill-down reveals something interesting.

The banks are dominating. State Street (STT), Citi (C), BNY Mellon (BK), Northern Trust (NTRS), Morgan Stanley (MS), and Goldman Sachs (GS) - all Leading with Strong Uptrend trend states. JPMorgan is also Leading in a Recovering Uptrend.

Morgan Stanley (MS) Chart

Tight consolidation under all-time highs.

Dragging XLF down: insurance brokers AJG and BRO, Visa and Mastercard, Blackstone and Ares, Berkshire Hathaway, and Schwab - all Lagging, most in Downtrend or Strong Downtrend trend states.

Visa (V) Chart

OIH - the rebound has structure

OIH bounced over 9% last week. The drill-down shows it wasn’t uniform.

Land-focused names are Leading. Drillers ProPetro (PUMP) and Patterson-UTI (PTEN) are in Strong Uptrend. Tenaris (TS), a tubular goods manufacturer, is also Leading with a Strong Uptrend.

Tidewater (TDW) is Leading too - TDW is an offshore marine services company, so it’s bucking the broader offshore trend.

Offshore drillers - Transocean (RIG), Valaris (VAL), Noble (NE) - are Weakening.

The big integrated names SLB, HAL, and Baker Hughes (BKR) are Lagging or Improving but all have Strong Uptrend trend states.

Not a single name in the 25-stock OIH universe has a Downtrend trend state.

Weatherford (WFRD) Chart

Weatherford (WFRD), a diversified oilfield services company, is also Leading with a Strong Uptrend.

TechnipFMC (FTI)

TechnipFMC (FTI), a subsea systems and technology company, is Weakening with a Strong Uptrend. Earnings April 30th though.

The ETF-level data shows the broad direction but often masks what’s happening underneath. The AI stack’s large shift from Leading to Weakening is more about a 9% benchmark week than any real deterioration. Software ‘strength’ within IGV doesn’t translate to strength against stronger benchmarks. XLF Lagging hides strength in big banks. And OIH’s bounce has structure underneath.

As always, stay open minded to all possibilities and manage risk tightly.

Cheers,

Marcus Grant, CFTe

Share

Subscribe now

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

The Market Temperature - which I introduced in detail in this post - hit 7.4 out of 10, up from 6.9 the prior week. That puts us into the Surge zone (7.0+) for the first time since July 2025.

Surge is the highest zone in the model, and it’s very rare - in my 10-year backtest, the model only spent about 7% of weeks at 7.0 or above. It’s hard to reach because it needs almost everything firing at once: the tape and trend pillar - which captures moving average alignment, breadth, and momentum - accounts for 4 of the 10 points and needs to be near-maxed. On top of that, credit and monetary conditions need to be supportive, risk appetite and regime indicators need to be healthy, and for sustained readings in the Surge zone, VIX elevated enough to act as a contrarian signal. That last one is why the COVID Surge run (VIX 20-35, peaked at 7.98) lasted for months.

Outside of COVID, the model has only touched Surge five times in ten years (prior to this week’s reading) - and never for more than a week or two. Two of those were at tops: January 2018 (7.29, two weeks before a 10% correction) and November 2021 (7.19, eight weeks before the 2022 bear market). Both came at the end of extended rallies.

The other three were momentum surges after corrections. The model hit 7.04 in late November 2023 after the October bottom and touched 7.02 again in late December 2023. The last one hit 7.32 in early July 2025 - about three months after the tariff selloff bottom. All three were single-week spikes that dropped back below 7.0 the following week. The tariff recovery took three months to reach Surge because the correction was over 20% - deep enough to drag the moving averages far apart, requiring a long rally to get them realigned. The October 2023 correction was a similar depth to this March 2026 one (a little over 10%) but more drawn out - three waves down over three months - and the recovery, while strong, wasn’t as extreme as what we’ve just seen.

This week’s 7.4 is different from all of those, and it is unique in the model’s history. The correction was just under 10%, and yet the reading is higher than any previous post-correction Surge spike. What sets this one apart is the speed and intensity of the snap-back. Even though last week’s gain was modest in percentage terms, the four-week rally of around 12.7% off the low was enough to push the moving averages into full bullish alignment. Three of the model’s four pillars - tape, monetary, and regime - are all running at 77-85% of their maximum scores. The only pillar not fully contributing is sentiment, where VIX at 18.71 isn’t elevated enough to provide a contrarian boost.

I’m genuinely not sure what to make of this week’s reading. The rapid movement into the Surge zone could be setting us up for a sustained uptrend. Or it could mean the model reached Surge too easily because the correction was shallow, and the reading is less meaningful than it looks. SPY and QQQ are extended - SPY is 5.46% above its 50-day SMA, and QQQ is 9.48% above its 50-day. To put that in context, SPY’s extension sits between the 89th and 95th percentile of the last 26 years of daily data, depending on whether you adjust for the current volatility regime - meaningfully stretched but not extreme. QQQ’s is at the 95th-97th percentile on both measures - historically rare, and a level where forward returns have tended to compress. The next few weeks should tell us a lot. If we consolidate above the breakout zones or have an orderly pullback to the 20-day SMA or even the 50-day SMA - with the market temperature remaining above 5 - it would be positive and likely offer new lower-risk entries.

I track how each index ETF sits relative to its key moving averages - the 20-day, 50-day, and 200-day SMAs. When all three are stacked in bullish order (price above the 20, the 20 above the 50, the 50 above the 200), that’s a “Strong Uptrend”. When price is above at least the 20 and the 200, but the 20 and 50 haven’t sorted into bullish sequence yet - typically after a sharp correction drags them down - that’s a “Recovering Uptrend”.

Last week, both SPY and QQQ flipped from Recovering Uptrend to Strong Uptrend - their 20-day moving averages crossed above their 50-day. I flagged this potential in last week’s post. MDY and IWM are also in a Strong Uptrend. FNGS and DIA are still Recovering - DIA is about to cross into bullish alignment, but FNGS is messier. Price is above all of the moving averages, but they are not bullishly aligned - the 200 is above the 20, which is above the 50.

For all daily charts the black line is the 20-day SMA, the green is the 50-day SMA, and the red is the 200-day SMA.

Those trend state upgrades were the biggest driver of the temperature move from 6.9 to 7.4. Conversely, breadth narrowed slightly - the percentage of US stocks above their 50-day moving average dropped from around 69% to 62%, and those above their 200-day fell from around 59% to 56%.

VIX closed at 18.71, up slightly from 17.48 the prior week. Still comfortably below 20.

The sector-level data reinforces that picture. At the GICS level, Technology is the only sector in the Leading quadrant (outperforming SPY and accelerating). Only two sectors posted meaningful gains last week - Technology (+3.80%) and Energy (+3.36%). Consumer Staples was up just under 1%. Materials and Utilities were essentially flat. Everything else was down, including Comms Services (-2.99%), Healthcare (-3.10%), Financials (-1.93%), Consumer Discretionary (-1.43%), and Real Estate (-1.46%).

Last week I highlighted Real Estate and Consumer Discretionary as Improving sectors (still underperforming on trend, but showing short-term momentum). Both dropped back to Lagging (underperforming and decelerating) this week. No sectors remain in the Improving quadrant at the GICS level.

Only one sector Leading. Will the other sectors catch up, or will tech catch down?

The semiconductor and AI complex continues to be the dominant theme. XSD (the equal-weight semiconductor ETF) had the strongest short-term momentum reading in our entire 121-ETF universe last week, with a gain of 15.51%. SMH (the cap-weighted version) gained 9.11%. The equal-weight outperforming the cap-weighted tells you the strength is broad-based across the sector. Both are massively extended, with the XSD 34.08% above its 50-day SMA, and SMH is 22.58% above.

The AI hardware and infrastructure complex - generative AI, digital infrastructure, data centre infrastructure ETFs - all remain in the Leading quadrant with Strong Uptrend trend states. Most of these names are extended after the recent run. Software (IGV) remains the missing piece - it was roughly in line with SPY last week (+0.14%) and the gap between hardware and software widened meaningfully.

FNGS confirmed into the Leading quadrant last week - its relative strength trend reading crossed above 100, but barely. It’s sitting at 100.04 - four hundredths of a point above the boundary.

The more interesting story is what’s happening underneath. Within the FNGS components, it’s a split: four names are Leading - MU, AVGO, NVDA, and AMZN. Two are Weakening - GOOGL and AAPL (still outperforming on trend but losing momentum). And four names are Lagging with Downtrend trend states - META, MSFT, NFLX, and PLTR. It’s the semiconductor and cloud infrastructure names driving the ETF into Leading, not broad mega-cap strength.

The divergence between US tech and Chinese tech is extreme. XLK (Technology Sector SPDR ETF) is in a Strong Uptrend and is in the Leading quadrant. KWEB (China Internet) is in a Strong Downtrend and is one of the weakest ETFs in the entire universe. Last week XLK gained 3.8% while KWEB fell 5.32%. Below is a ratio chart showing XLK/KWEB. The outperformance since October 2025 is stark.

Even within KWEB, the names that are technically outperforming their peers - JD, Baidu, Alibaba, Trip.com - mostly have Downtrend or Weakening trend states. They look relatively good only because the rest of the universe is worse.

Financials are another divergence story worth mentioning. XLF (the Financials sector ETF) is Lagging with a Weakening trend state. Last week XLF dropped 1.93% and is now down 6.22% year-to-date. It got turned away right at its 200-day moving average.

The banks within XLF tell a different story. Goldman, Morgan Stanley, Citi, State Street, and BNY Mellon are all Leading with Strong Uptrend trend states. JPMorgan - the largest US bank - is also Leading but still in a Recovering Uptrend. Bank of America is right on the boundary - its momentum reading is 0.03 below Leading.

What’s dragging XLF down is the non-bank weight - insurance brokers (AJG, BRO - in Strong Downtrends), payment networks like Visa and Mastercard, alternative asset managers (ARES, BX), and brokerages like Schwab.

Energy was the reversal story of the week. In last week’s post I highlighted the energy complex as the area where rotation was clearly moving away from - USO (crude oil) fell over 7% while SPY gained over 4.5%.

However the bounce back was strong, USO gained 14.10%.

USO has the strongest longer-term relative performance reading in the entire 121-ETF universe. Meanwhile UNG (natural gas) continues to fall with a Strong Downtrend - two energy commodities, two completely different stories.

In the mining and metals space, the picture has shifted. Last week lithium (LIT), rare earths (REMX), and uranium (URA) were all Leading. This week all three lost that status as their momentum faded below 100, moving them into the Weakening quadrant (still outperforming on trend, but the acceleration has paused).

However, all three are still in Strong Uptrend trend states. The longer-term relative performance is intact; the acceleration has just paused. Worth keeping an eye on. That’s a different character from the precious metals complex. Gold (GLD) and gold miners (GDX) have dropped to Neutral trend states - the moving averages have lost their directional bullish alignment and price is below both the 20 and 50-day SMAs. Silver (SLV) and silver miners (SIL) are in slightly better shape at Recovering Uptrend, but the momentum declines were sharp across all four - GLD was down 2.84% last week, GDX down 5.98%, SLV down 6.57%, and SIL down 6.05%.

GLD’s relative strength reading on a trend basis is less than a point above the boundary between Weakening and Lagging. If it crosses below next week, it moves from “still outperforming but fading” to “underperforming.”

A few other notable moves. ARKK and ARKG, which I mentioned last week as approaching the Leading boundary after double-digit weekly gains, both dropped back to Lagging. ARKK fell 3.45% with a Weakening trend state, and ARKG fell 4.06% with a Recovering trend state. The deep-Lagging names to avoid remain the same as recent weeks: UNG, KWEB, and IHI (Medical Devices, down 15.12% YTD in a Strong Downtrend). Healthcare broadly remains the weakest GICS sector.

So we have the Market Temperature in Surge territory, with leadership concentrated in semiconductors and the AI hardware build-out, while breadth narrows and most major sectors lag. The leading groups are mostly all extended, as is QQQ and SPY. Some more consolidation or an orderly pullback in the coming week(s) would be optimal for any new entries. If we push higher from here without the SMAs catching up the risk of mean reversion increases.

I’ll be posting a drill-down piece later today or tomorrow looking at what the component-level data reveals underneath some of these ETFs.

As always, I am open to all possibilities. Stay open minded and manage risk tightly.

Hope everyone has a great week!

Cheers,

Marcus Grant, CFTe

Subscribe now

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

I measure two things for each stock - RS-Trend, which tells me whether it's outperforming or underperforming the benchmark on trend, and RS-Momentum, which tells me whether that relative performance is accelerating or decelerating. That gives four quadrants: Leading (outperforming and accelerating), Weakening (outperforming but losing steam), Lagging (underperforming and getting worse), and Improving (underperforming but turning around).

For this analysis, I benchmarked against SMH (the VanEck Semiconductor ETF), not against SPY. I’ll explain why that matters in a moment.

Two of the most discussed names in the AI trade - NVIDIA and Broadcom - aren’t leading. The real strength is in other parts of the stack.

Subscribe now

The AI trade is not one trade

Most people lump “AI stocks” into one bucket. But the AI build out has at least a dozen distinct layers, each at a different stage of the investment cycle.

I built a TradingView AI Stack Watchlist, grouped by layer. You can grab the watchlist yourself (here) if you want.

The bottom of the stack is the physical infrastructure - power, data-centre real estate, and networking. The middle is the semiconductor complex - compute silicon, foundries, equipment, memory, and analog chips. The top is cloud platforms, software, and applications. Alongside the main stack, a group of companies pivoting from crypto mining to AI compute. And at the edge, a handful of companies bringing AI inference to devices.

Why SMH and not SPY?

If I’d benchmarked this universe against SPY, nearly everything would show up as “Leading” because most AI names are outperforming the SPY. Benchmarking against SMH asks a much harder question: which AI names are outperforming the already-strong semiconductor complex?

So let’s dive into where the strength within AI is concentrated.

Interconnect - the leading layer

One sub-theme that stands out is networking and optical interconnect - the companies that connect GPUs inside data centres. Nearly every interconnect name in the watchlist is confirmed Leading versus SMH.

Credo Technology (CRDO) has the highest RS-Momentum of all 81 stocks currently. It had a nearly 60% drawdown between December 2025 and the end of March 2026, but has recovered extremely strongly since. It still sits below its all-time highs, but if it can form a handle or tighten up here under the ATHs, allowing the 20 and 50-day SMAs to catch up to price and cross above the 200-day SMA, it might allow a good entry in the future. One to watch.

Credo Technology (CRDO) Chart

On all the daily charts the black line is the 20-day SMA, the green is the 50-day SMA, and the red is the 200-day SMA.

Corning (GLW) held its 50-day SMA throughout the entire March pullback.

Corning (GLW) Chart

Fabrinet (FN), Coherent (COHR) and Ciena (CIEN) are all in the Leading quadrant, with clean uptrends (particularly CIEN, which has held its 50 SMA on all pullbacks for many months). Lumentum (LITE) has fallen from the Leading to Weakening quadrant, but has been trending nicely for 10 months, holding its 50 SMA on all pullbacks.

Fabrinet (FN) Chart

Coherent (COHR) Chart

Ciena (CIEN) Chart

Lumentum (LITE) Chart

NVIDIA and Broadcom - only keeping pace

NVIDIA (NVDA) and Broadcom (AVGO) barely scrape into the Improving quadrant. But are worth watching because if they tighten up here under their all-time highs, may provide a fresh entry on a breakout.

NVIDIA (NVDA) Chart

Broadcom (AVGO) Chart

Power and grid - sharply split

The market is clearly differentiating within this layer. Data-centre-specific power and cooling names are Leading versus SMH. Broader utilities and generators are Lagging.

Bloom Energy (BE) is Leading versus SMH, up 141% year-to-date. Fuel cells for data-centre power.

Bloom Energy (BE)

Vertiv (VRT) is Leading, up 85% year-to-date.

Vertiv (VRT) Chart

On the other side, Constellation Energy (CEG) is Lagging versus SMH - down nearly 20% year-to-date. The nuclear-for-data-centres narrative has stalled. Vistra (VST) and NRG are also Lagging.

Specialty foundries are outperforming TSMC

TSMC (TSM) is Lagging versus SMH.

Tower Semiconductor (TSEM) is Leading - up over 86% year-to-date. It’s a specialty foundry focused on analog, RF, power management, and silicon photonics. GlobalFoundries (GFS) is also Leading - up 65% year-to-date, after experiencing a large decline during 2024-25.

Tower Semiconductor (TSEM) Chart

AI doesn’t just need cutting-edge 3nm GPU dies. It also needs the analog, power, and photonic chips that make the whole system work, and those are manufactured on different process nodes by different foundries.

One thing worth noting - GlobalFoundries filed a patent lawsuit against Tower Semiconductor in late March 2026. Both stocks are performing well despite that, but it’s a headline risk worth being aware of.

The crypto-miner pivot is real

Several former Bitcoin miners are repurposing their data-centre infrastructure - power contracts, sites, cooling - to sell GPU compute to AI companies.

Hut 8 (HUT) has the highest RS-Momentum in the group and is up 65% year-to-date. It’s approaching its November 2021 all-time high. If it can consolidate here for a while, a breakout could provide a fresh entry.

Hut 8 (HUT) Chart

TeraWulf (WULF) is Leading with a 75% year-to-date gain and recently broke out of a 6-month or so consolidation.

TeraWulf (WULF) Chart

Systems integration - quietly leading

Celestica (CLS), Dell (DELL), and Jabil (JBL) - the companies that turn chips into deployable racks and clusters - are all Leading versus SMH. They’re outperforming the chipmakers themselves.

CLS is extended here but worth watching for a retest of the breakout zone or if it can start trending cleanly above its 20 and 50 day SMAs again.

Celestica (CLS) Chart

Semi equipment is decelerating

Lam Research (LRCX), Applied Materials (AMAT), KLA (KLAC), and Teradyne (TER) are all in the Weakening quadrant. High RS-Trend but fading momentum.

Software is absent

Almost every software and applications name in the watchlist is Lagging versus SMH. Palantir, Snowflake, Salesforce, ServiceNow, Adobe, IBM - all underperformers. The market is rewarding the infrastructure buildout, not the companies consuming it.

The takeaway

The strength is concentrated in interconnect, specialty foundries, data-centre-specific power and cooling, the miner-to-AI pivot, and systems integration. Nothing is really actionable now, as almost everything showing leadership is extended. This is a good shopping list though. Be mindful that most of these stocks have very high ATRs, so position size and set stops accordingly on any entries.

Stay open minded to all possibilities and manage risk tightly.

Cheers,

Marcus Grant, CFTe

Share

Subscribe now

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

Let’s get into it.

The Market Temperature, which I introduced in detail in this post (link here) hit 6.9 out of 10 - firmly in the Strong zone (measured on Friday April 17th close) . That’s up from 6.2 last week and the highest reading since early December, before the correction. Every pillar except Sentiment improved.

At 6.9, we’re knocking on the door of the Surge zone (7+). To put that in context - Surge is rare. In my 10-year backtest, the temperature only spent about 7% of weeks there, and it was almost entirely concentrated in the 2020 COVID recovery, when the market was bouncing hard off a 30%+ crash with VIX still elevated. What we’ve just come through was a much shallower pullback - about 8-9% peak to trough. Getting this close to Surge off a relatively shallow correction is interesting, but I’d want to see at least a week or two actually in Surge territory (and see the SMAs align bullishly with the 20 SMA>50 SMA) before reading it as the all-clear.

So what’s behind the 6.9?

The Tape pillar is the strongest contributor. Participation is confirming the price move, and that matters a lot. Around 69% of US stocks are now trading above their 50-day moving average, up sharply from recent lows, and the weekly RSI on SPY has swung from 45.9 to 63.0 in just two weeks.

On the Monetary side, financial conditions are supportive. Bond market volatility (the MOVE Index) is low. Credit stress is easing. The US dollar is flat to weak.

The Regime pillar had the biggest week-over-week jump. Consumer Discretionary is decisively outperforming Consumer Staples. High-beta stocks continue to lead low-volatility stocks. And the Growth vs Value ratio flipped from a strong Value signal to neutral - removing what had been a significant headwind. In the model it was the single largest indicator swing of the week.

The one area that didn’t improve was Sentiment. The VIX at 17.48 is now below the model’s neutral zone, which shifts the Sentiment score slightly negative. Nothing alarming, but worth noting as the only pillar that moved in the wrong direction last week.

The six US indices we track are all in what I’d call a Recovering Uptrend - price is above all key moving averages, but the moving averages themselves haven’t sorted into the proper bullish sequence yet. The 20-day was dragged down by the recent correction and needs a bit more time to cross above the 50-day. If price holds around these levels, we could see that happen within a week or two.

Here’s a chart of the SPY. The black line is the 20-day SMA, the green is the 50-day SMA, and the red is the 200-day SMA.

Now let’s talk about where the money is flowing.

I track 121 ETFs against the S&P 500, measuring their trend and momentum relative to SPY. Each ETF sits in one of four quadrants: Leading (outperforming and accelerating), Weakening (outperforming but losing steam), Improving (underperforming but turning around), or Lagging (underperforming and getting worse).

At the GICS sector level, only Technology is in the Leading quadrant. Three sectors are Weakening - Energy, Materials, and Industrials. Consumer Discretionary and Real Estate are Improving. Five sectors are Lagging - Comms Services, Utilities, Financials, Consumer Staples, and Healthcare.

The AI and semiconductor complex is the dominant leadership theme right now. Eight of the top fifteen ETFs in our 121-ETF universe are AI or semiconductor-related, all outperforming SPY and accelerating.

SMH and XSD (the equal-weight semiconductor ETF) are both in the Leading quadrant, along with digital infrastructure names like IDGT and DTCR. The equal-weight semis are outperforming the cap-weighted version, which suggests broad-based strength across the sector rather than just the heavyweights carrying the index.

SMH Chart

The black line is the 20-day SMA, the green is the 50-day SMA, and the red is the 200-day SMA.

XSD Chart

The black line is the 20-day SMA, the green is the 50-day SMA, and the red is the 200-day SMA.

Pretty much everything in the AI stack is participating - semiconductors, data centres, AI infrastructure, generative AI ETFs. The one exception is the software layer, which is still lagging (more on that below).

Most leading names are extended after the recent big move. But AI names are where the strongest momentum in the market lives, and these are the names I want on my shopping list for pullbacks into the SMAs, or if they base out and the moving averages catch up. I will post an AI deep-dive with specific names later this week.

IGV (the Software ETF) gained 13.94% and has just crossed into the Improving quadrant - but only barely. The gap between hardware and software in relative strength terms remains extreme - around 40 points. If I plot IGV relative to SMH, it’s still in a clear downtrend and has barely moved on this bounce. One week doesn’t change a trend. This is one to watch for confirmation over the coming weeks, not to act on prematurely. Lets see.

IGV/SMH Ratio Chart

South Korea (EWY) deserves a mention. It has the highest relative strength trend reading in the entire 121-ETF universe. That’s not entirely surprising given its heavy semiconductor exposure (Samsung, SK Hynix), but it’s worth noting as an alternative way to play the global chip cycle.

EWY Chart

In the mining and metals space, there’s a clear split. Lithium (LIT), rare earths (REMX), and uranium (URA) are all in the Leading quadrant. Gold miners (GDX), silver miners (SIL), copper (COPX), and broad metals (XME) are all Weakening - still outperforming on a longer-term trend basis, but the momentum is fading. The precious metals have had a massive run and look like they’re taking a breather. The lithium and rare earth names are being driven by a different set of factors altogether.

LIT Chart

Energy is where the rotation is clearly moving away from. XLE was down 3.37% in a week where SPY gained over 4.5%. XOP dropped 5.21% and USO fell 7.03%. The momentum picture across the energy complex has weakened sharply. The longer-term trend is still positive, but the gap between energy and the rest of the market widened significantly last week.

Worth noting - oil futures are higher today on Strait of Hormuz headlines. This is a fast-moving situation and could change the energy picture quickly. That’s the kind of thing that makes you stay open minded rather than getting married to a view.

XLE Chart

WGMI (the crypto miners ETF) is in the Leading quadrant, but when I drill into the 23 components, the strength is really coming from the names that have pivoted their data centre capacity toward AI compute workloads - HUT (Hut 8) and WULF (TeraWulf) in particular. HUT is the strongest component in the Leading quadrant, and WULF has one of the highest relative strength trend readings in the entire ETF at +76% year to date. Meanwhile the traditional crypto miners - RIOT, MARA, CLSK, HIVE - are mostly Improving or Lagging. So WGMI’s leadership seems as much an AI infrastructure story as it is a crypto story at this point.

On the speculative side, there were some eye-catching moves. ARKK gained 14.35%, ARKG was up 15.4%, and the IPO ETF gained 10.48%. QTUM (the quantum computing and AI ETF) was up 9.6%. These are right on the edge of the Leading quadrant and could cross over with another strong week - a very different situation from software, which only just scraped into Improving from much further back.

One more thing that I think is important context. The “avoid” list is paper-thin. Only three ETFs meet the strict criteria for deep laggards. That in itself is valuable information. In a weak or transitional market, you’d expect to see twenty or thirty ETFs in the danger zone. Narrow weakness is consistent with a strong temperature reading.

I’ll be sharing this rotation and temperature analysis each week going forward. The goal is to give you a clear, data-driven read on what the market environment looks like and where the strongest themes are.

As always, I am open to all possibilities. Stay open minded and manage risk tightly.

Hope everyone has a great week!

Cheers,

Marcus Grant, CFTe

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

Not the actual temperature obviously, but a model I’ve built that takes a bunch of different market data and boils them down to a single number between 0 and 10. Think of it like a thermometer for the overall market environment.

The short version: A reading of 5 or above is broadly favourable for risk-taking. The 5-6 range is actually the strongest zone empirically. Below 5, proceed with caution. Below 4 is the danger zone - the only temperature range that produces negative average returns. I publish this number at the start of my weekly analysis so you can see the overall environment before we get into individual charts.

The real value isn’t any single reading - it’s having a systematic framework that keeps me grounded in what the data is actually saying, rather than getting swept up in narratives and emotions. I still use it alongside chart analysis and judgment - it just forms part of my process, not the whole of it.

If you just want to know what the number means each week, check out the “At a glance - how to read the temperature” section below.

Share

How direction affects the reading

The model doesn’t just look at the number - it also tracks whether the temperature is rising, falling, or roughly flat compared to last week. This matters because a temperature of 4.5 that’s been rising from 3.5 tells a very different story than a 4.5 that’s falling from 5.5. The first is moving out of the danger zone. The second is heading toward it.

At two zones (4-5 and 6-7), direction matters enough that it changes the zone label itself. A reading of 4.5 that’s rising is called “Improving” - conditions are strengthening, worth testing the waters. The same 4.5 that’s sideways or falling is called “Cautious” - mixed or weakening. Similarly, a 6.5 that’s rising is “Strong” while a 6.5 that’s flat or falling is “Stable.”

At a glance - how to read the temperature:

7+ / Surge - Rare and exceptionally favourable - aggressive positioning, especially when coming out of a crash or big bear market.

6-7 Rising / Strong - Favourable and accelerating - aggressive positioning.

6-7 Sideways or Falling / Stable - Constructive but not accelerating - maintain exposure.

5-6 / Goldilocks Zone - The strongest zone empirically - normal to aggressive positioning, especially when rising.

4-5 Rising / Improving - Conditions strengthening - testing the waters, selective and not full size yet.

4-5 Sideways or Falling / Cautious - Mixed or weakening - very selective, tighten stops.

3-4 / High Risk - The true danger zone - very limited or no exposure, possibly some shorts.

0-3 / Extreme Stress - Rare. Capital preservation mode - no exposure, but watch for possible contrarian bounces.

The zone matters more than the precise decimal. And single-week readings in the middle zones should be treated with healthy skepticism until they persist - a reading that sustains for two or three weeks points to a genuine regime. The extremes are a bit different - a Surge reading coming out of a crash can be meaningful even if it only lasts a week or two, as we’ll see below.

Context matters at the extremes. A Surge reading coming out of a bear market or crash - like the 2020 COVID recovery - typically signals a genuine all-clear, because it means conditions are very good, while fear is still elevated. That’s a powerful combination. A Surge reading at the end of a long, low-volatility uptrend - like early 2018 - can signal something closer to a blow-off top.

So how does it work?

The model looks at 12 indicators across four pillars. Each pillar captures a different dimension of market health, and I weight them based on how much information I think they carry.

The idea isn’t original. Hedge funds and institutional research shops have been building composite condition indicators like this for decades. However, I wanted something I could build myself, understand completely, tune to my own trading style, and share the readings with you each week.

The first pillar is what I call Tape and Trend. This gets the most weight - 40% of the total score - because price and participation are the most direct measures of what the market is actually doing.

In here I’ve got the trend structure of SPY and QQQ (are they in confirmed uptrends, downtrends, or something messy in between?), a couple of breadth indicators showing how many stocks are actually participating in the move, and a momentum reading that tells me whether the market’s push is accelerating or fading.

When most stocks are going up and the trend is healthy, this pillar scores high. When breadth starts declining and the trend is breaking down, it scores low.

The second pillar is Sentiment at 20%. This one is interesting because it works as a contrarian signal. I use the VIX here - without going into exactly how it’s scored, the key insight is that very low VIX readings tend to signal complacency (slightly bearish), while very high VIX readings tend to signal the kind of extreme fear that historically precedes recoveries (slightly bullish). This isn’t a timing tool - it’s a condition gauge.

The third pillar is Monetary and Macro at 20%. This captures the financial plumbing - credit stress, bond market volatility, and US dollar strength.

When credit spreads are tight, bond volatility is low, and the dollar is stable or declining, it’s a friendlier environment for equities. When these start flashing warning signs, the environment can get more challenging. These are the kind of signals that can deteriorate well before the stock market reacts, which is what makes them valuable.

The fourth pillar is Regime at 20%. This is about what’s happening under the surface - are investors rotating into growth sectors or defensive ones? Is the market rewarding risk-taking or punishing it?

These internal rotation patterns often shift before the headline index does, so they serve as early warning indicators.

All 12 indicators score on a scale from -1 (most bearish) to +1 (most bullish). Within each pillar, the individual scores get averaged, then mapped to the pillar’s point allocation. The four pillars add up to give the 0-10 temperature reading.

The output looks something like this: “Market Temperature: 6.2 / 10 (Stable).” I publish this at the start of my weekly analysis so you can see the overall environment before we get into individual charts.

A few things this model is not.

It’s not a trading signal. A high temperature doesn’t mean “buy everything” and a low temperature doesn’t mean “sell everything.” It’s a condition gauge that informs position sizing and how aggressive or defensive I want to be.

If the temperature is 7+ (Surge), I’m more willing to hold positions through pullbacks and add to winners. Below 5, I’m tightening stops and reducing size - with how aggressively depending on whether conditions are improving or clearly deteriorating. At 3 or below (Extreme Stress territory), I’m in capital preservation mode.

It’s not a crystal ball. Statistically, this week’s temperature tells you almost nothing about what SPY will do next week - the forward correlation is essentially zero. The temperature and SPY’s weekly performance tend to rise and fall together in real time (concurrent correlation of 0.37), but the model isn’t forecasting the future.

That said, the components that drive the temperature - breadth, sector rotation, credit conditions - tend to change direction before headline price does at major turning points. That’s why the temperature peaked before SPY at every major top in the 10-year in-sample period (2016-2026). The model doesn’t predict the market, but it does give you an early read on whether the environment is shifting - and I use that to adjust my positioning.

It’s not perfect. No model is. It uses historical data to calibrate what “normal” looks like, and markets can behave in ways that break historical patterns. I treat it as one input alongside chart analysis, not as the final word.

The model was designed before it was tested.

I want to flag this because I think it matters. The model architecture - the four pillars, the 12 indicators, the weightings, the scoring logic - was designed and frozen before the full backtests were run. Several indicators were actually removed during the design process because they turned out to be noise or even wrong-signed (meaning they were actively making the model worse). I’d rather have 12 indicators that work than 17 that include dead weight.

Two backtests were then run in sequence. First, a 10-year in-sample backtest (2016-2026) to validate the model against the period it was designed around. Then, an 8+ year out-of-sample backtest (2007-2016) to test whether the model held up on data it had never seen. In both cases, I didn’t go back and tweak weights or swap indicators to make the numbers look better. The findings you’ll see below were all discovered in those backtests, not targeted by them.

What the 10-year in-sample backtest showed (2016-2026)

The model has been through a rigorous empirical audit against 10 years of weekly data - 522 weeks from April 2016 through April 2026, covering the 2018 corrections, the COVID crash and recovery, the 2022 bear, the 2025 tariff selloff, and the March 2026 pullback. All 522 weekly readings were independently cross-validated by a second system to make sure the calculations are correct.

The first finding is where I think the model earns its keep: giving you a heads-up when conditions are changing beneath the surface, before that change shows up in headline price.

At market tops, breadth typically narrows and sector leadership rotates weeks before the index itself rolls over. The temperature picks that up. Across the six major SPY drawdowns of 8% or more in the 10-year sample, the temperature peaked before SPY peaked in every case. In four of the six, the lead time was around 2-4 weeks. In two cases (the 2022 bear and the 2026 pullback), it was closer to 8 weeks.

A few concrete examples. Before the COVID crash, the temperature peaked at 6.92 on January 17, 2020. It first dropped below 5.0 on January 31 - nearly three weeks before SPY peaked on February 19. It briefly bounced back above 5.0 for a couple of weeks, but by February 28 it was below 5.0 for good and stayed there through the crash.

Before the 2025 tariff selloff, the temperature peaked at 6.66 on January 24, 2025. SPY peaked on February 19, nearly four weeks later. By February 28, the temperature was already below 5.

Going into the pullback we’ve just come through (March 2026), the temperature peaked at 6.98 on December 5, 2025 - nearly eight weeks before SPY made its closing high on January 27, 2026.

The pattern at bottoms is similar but usually with less lead time. During the 2022 bear, the temperature hit its absolute low of 2.42 (Extreme Stress) on September 23. SPY didn’t reach its low until October 13 - about three weeks later. By that point, the temperature had already climbed back to the 3.0-3.5 range. The model’s internals had started stabilising while price was still making new lows.

The 2025 tariff bottom showed a similar pattern but messier. The temperature hit its low of 3.24 on March 14 with SPY at 562, but SPY continued falling to around 482 (intraday) on April 7 - three weeks later. Even at the SPY bottom, the temperature held above its own low (just). But it wasn’t a clean, steady improvement - the temperature wobbled back toward its low that week rather than rising smoothly.

These are small samples and I’d caveat heavily against treating them as general rules. But they’re consistent with what the model is designed to measure.

The other finding is about conditions versus returns.

Over the 10-year sample, a strategy that held SPY only when the temperature was 5.0 or higher would have captured about 90% of SPY’s total return while only being invested 68% of the time. Maximum drawdown was cut from -32% to -14%.

During the weeks the model said conditions were favourable (5.0 or higher), the environment was genuinely better. The Sharpe ratio for those invested weeks was 1.32 vs 0.78 for buy-and-hold. The Sortino ratio - which focuses on downside volatility, which I actually find more meaningful since upside volatility isn’t what hurts you - was 1.95 vs 1.12. Even on the most conservative basis, treating out-of-market weeks as earning zero (when in practice you’d be earning something on your cash), the Sharpe ratio still improved to 1.09 and the Sortino to 1.61.

I’m not suggesting anyone use this as a mechanical in-out trading system - that’s not how I use it, and past performance is past performance. But the numbers are what convinced me that the model is worth taking seriously, and worth sharing publicly.

Does it hold up on data it was never built on?

A natural concern with any backtest is overfitting.

To test this, I ran the model on a separate period it was never designed on: August 2007 through April 2016 - over 450 weeks that include the Global Financial Crisis, the 2010 Flash Crash, the 2011 US debt downgrade, the European debt crisis, and the 2015 China Yuan devaluation. Same weights, same scoring logic, same thresholds. One indicator wasn’t available for the first few years of the earlier period, so its pillar ran on two inputs instead of three until the data became available - but no substitutions or adjustments were made.

The results held up. The concurrent correlation between the temperature and SPY’s weekly performance was virtually identical across both periods (0.380 out-of-sample vs 0.373 in-sample). The Goldilocks Zone (5-6) produced almost the same risk-adjusted returns out-of-sample as in-sample.

The model correctly dropped below 5.0 during the GFC and stayed there for most of the bear market. And on the exact week the market bottomed in March 2009 - after a 56% drawdown - the temperature jumped from High Risk (3.6) straight to Goldilocks (5.0). This was the eighth time during the bear that the model had crossed back above 5.0. The first seven lasted 1-8 weeks and all failed. The eighth one sustained for 47 weeks and reached Surge.

That persistence pattern is the key practical insight. Short-lived crossings above 5.0 during a bear market are traps. The genuine recovery sustains.

At major tops, the temperature peaked before SPY in five of six drawdowns - the only exception being the very start of the GFC in October 2007, where they peaked in the same week.

Across the combined 18 years and all twelve major drawdowns, the temperature peaked before SPY’s price peak in eleven of twelve cases.

Not everything generalised perfectly - a couple of individual indicators carried weaker signals in the earlier period, and the model’s behaviour when the temperature was above 5.0 but falling was more dangerous in the GFC era. Both of those findings improved my understanding of where the model is strongest and where I need to apply extra judgment. But the core mechanism - breadth, momentum, and trend as condition indicators - proved genuinely robust across two very different market regimes.

What about head fakes?

Across both the 10-year in-sample period (2016-2026) and the 8+ year out-of-sample period (2007-2016), the model dropped below 5.0 during every major drawdown.

During the 2022 bear, the model crossed above 5.0 on five separate bear market rallies - none lasted more than three weeks before the temperature dropped back.

The GFC was messier - which you’d expect from a 56% drawdown. There were seven false crossings above 5.0 during bear market rallies. Five of those lasted just one or two weeks - similar to the 2022 pattern. But two lasted longer (five and eight weeks), which is the kind of extended head fake you’d expect during a more severe, drawn-out bear. Even in that extreme, the model always dropped back below 5.0 before the worst damage hit.

So it can give brief readings above 5.0 during a bear market rally that don’t stick. But it doesn’t give a sustained all-clear while the market is falling apart. That distinction matters.

What about head fakes in the other direction? Yes, occasionally. The temperature can drop below 4.0 (into High Risk) and the market then absorbs the shock and recovers without a major drawdown.

A useful rule came out of the in-sample analysis: if the temperature drops below 4.0 and is still there two weeks later, it’s a genuine drawdown warning about 91% of the time. If it bounces back above 4.0 on the next weekly reading, the market usually shakes it off.

The out-of-sample period showed a similar pattern, though the discrimination was somewhat weaker during the GFC because even genuine warnings sometimes bounced briefly before conditions deteriorated further.

The broader principle holds across both periods: a reading that sustains for two or three weeks tells you far more than any single week’s number.

Following along

I’ll be sharing the weekly temperature reading as a regular feature going forward. Over time, you’ll get a feel for what the different levels mean and how they relate to actual market conditions. That in itself is valuable information.

Beyond the weekly readings, I’ll also be publishing deeper dives here on TheChartEdge - breakdowns of specific indicators, case studies from real trade decisions, and explorations of how the model behaves in different market regimes.

If you want the weekly readings and the thinking behind them, subscribe - it’s free.

As always, I am open to all possibilities. Stay open minded and manage risk tightly.

Cheers!

Marcus Grant, CFTe

Subscribe now

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

Here’s a chart of the COVID crash and recovery.

The black line is the 20-day SMA, the green is the 50-day SMA, and the red is the 200-day SMA.

And a chart of today.

As they say, history doesn’t repeat but it often rhymes.

As always, I am open to all possibilities. But if we are going to make new all-time highs, I think a fast pullback of around 5-6% or so would add fuel to the fire, as it did in the COVID period. It would shake out late longs and weaker hands, and get the bears excited to put on or add to shorts. If it happens, I will be looking to add long exposure.

So, what am I specifically looking for? This isn’t a prediction, just a possible scenario, which if it occurs sets up a good risk/return opportunity.

If we get a quick pullback to around 5580 and recover within a day or 2 above 5610 (this is the S&P 500 futures) I will go long in size, with a stop under 5580. If this scenario plays out it offers a great risk to return opportunity.

Updating some of the other charts I discussed in previous notes, they are all doing what one would hope if you’re bullish.

Credit spreads have come in big time.

VIX is under 20.

XLK/SPY (Tech relative to SPY) has repaired the damaged and this now looks like a failed topping pattern.

As does SMH/SPY (Semis relative to SPY)

SPY/EFA (SPY relative to developed markets outside the US)

This all looks great. But I have a bearish position on as well. It will act as a hedge to any new longs I enter and also profit if all goes to shit again (which may happen, always be open minded). I have put options on the DAX, with a strike price of 23,000 that expire on June the 20th.

Here is the DAX chart, which looks like it could become a failed breakout. If not that’s all good, as the options aren’t that pricey, so again a good risk/reward and a hedge on any new long positions. Even if it pulls back to 22,300-22,400 it’s uptrend is still intact, but the puts will very profitable, especially if we get a quick pullback.

Stay open minded to all possibilities and manage risk tightly. The next few weeks will be interesting.

Cheers,

Marcus Grant, CFTe

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

Let’s get into some charts.

The S&P 500 E-mini futures bounced right at the prior cycle highs from late 2021/early 2022 and the AVWAP from the 2022 low. However, there is potential resistance overhead at the AWVAP from the 2025 high and above that a declining 200-day SMA.

I’ll start with some good-looking charts.

Bitcoin is one of the best-looking charts out there now. It retested and bounced off the 2024 highs (in fact in didn’t quite touch those old highs) and is currently above a rising 200-day SMA. After a big move up early last week, it has been consolidating in a tight range for the last week or so, right at the lower end of its November to February range.

Copper had a failed breakout on March 26th and proceeded to crash about 25% in less than 10 trading days. However, it’s recovery since has been strong. I think this is a positive sign.

The Financials ETF, XLF didn’t quite touch its prior cycle highs (not shown, but it was close) and is now above a rising 200-day SMA. It is also above the neckline of the head and shoulders pattern it broke down from in early April. XLF is the strongest looking of the major SPDR sector ETFs. Only XLF, XLC, XLU and XLP are above their 200-day SMAs. However, RSI looks a little bit weak, only just above 50 (shown in the bottom pane on the chart).

The Communications Services Sector ETF, XLC retested and bounced off its prior cycle highs and is back above a rising 200-day SMA. However, it’s at potential resistance with the AVWAP from the 2025 high and the neckline of the head and shoulders pattern it broke down from in April, sitting just above. The RSI is also a little weak, just above 50.

The German DAX looks the strongest of developed international markets. It’s above all its SMAs and AVWAP from the 2025 high. However, its sitting at potential resistance where it broke down in early April.

The IEI/HYG ratio, which is used as an indicator for credit spreads, has come in significantly after spiking during the selloff. This is a positive sign.

The VIX has also come in after a big spike but is still slightly elevated.

Tech Software sector ETF IGV has had a nice bounce and reclaimed the prior cycle highs and its 200-day SMA. It still has some work to do though.

Now some not so good-looking charts.

Semiconductor ETF SOXX broke down from a large topping pattern in late February and lost its prior cycle highs in the recent decline. It has bounced and sits just below that level now. It has a lot more overhead supply to get through if it is to make new highs.

Semiconductor ETF SMH looks better than SOXX but also has a lot of overhead supply.

The S&P MidCap 400 Index is below its prior cycle highs with a lot of overhead supply.

Oil has broken down, which is probably not a good sign for global growth.

Lastly these ratio charts I showed in a previous post are still below prior support. It will be difficult for the S&P 500 to go on to new highs, without tech and semis participating, if not leading.

Tech (XLK) relative to SPY.

Semis (SMH) relative to SPY.

In conclusion I remain cautious with so much overhead supply in most markets. I wouldn’t be surprised to see the S&P 500 make a lower high somewhere below its 200-day SMA. If that occurs, I will be watching 5340-5380, to see if it can make a higher low in or above this area. If it can’t I think the probability of a retest of the lows increases. However as always, I will remain open minded and react to the price action. If the US and China, make a deal regarding tariffs, markets will likely surge. Although I don’t think there is a high probability of a comprehensive deal in the near term, but hopefully I’m wrong.

Cheers,

Marcus Grant, CFTe

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

Below is a chart of the USD/EUR & SPY year-to-date.

The US Dollar Index has also diverged significantly from the 10-year treasury yield. As you can see in the chart below, since 2023, they have followed each other quite closely, most of the time. However, in the last week or so, the 10-year yield has risen quite sharply, and the USD has done the complete opposite.

US Dollar Index chart:

Here are some individual charts of the major currencies in the US Dollar Index.

EUR/USD:

USD/JPY:

GBP/USD

USD/CAD

USD/CHF

I wouldn’t be surprised to see a decent mean reversion rally in the USD in the coming days or weeks, but things are so unpredictable at the moment, anything could happen. However, if the USD keeps crashing like this, I don’t think that will be good.

What do you think?

Good Trading & Manage Risk Carefully!

Cheers,

Marcus Grant, CFTe

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

I was stopped out of the 3 swing trades I mentioned in this post (link) and will sit on my hands observing for now. I think we must be open minded to further downside.

Although the undercut and rally setup can often provide a good entry, I am not yet convinced that the bottom is in. Personally, I want to see more evidence before putting on any new swing trades.

Here are some of the reasons I am not yet convinced. Yesterday’s rally was led by the more defensive sectors, XLP & XLU, while XLY, XLK & NDX lagged.

Semis (SMH) relative to SPY made a new lower low, under for what is now a completed topping pattern.

As did Tech (XLK) relative to SPY.

If SPY is to have a sustained rally, I think these 2 tops need to reverse and become failed tops.

Growth relative to value also made a new lower low. IWF is the iShares Russell 1000 Growth ETF, and IWD is the iShares Russell 1000 Value ETF. The top pane of the chart shows the IWF/IWD ratio, and the bottom pane shows the SPX.

Equal-weight consumer discretionary relative to equal-weight consumer staples also made a new lower low. RSPD is the Invesco S&P 500® Equal Weight Consumer Discretionary ETF, and RSPS is the Invesco S&P 500® Equal Weight Consumer Staples ETF. Again, the top pane of the chart shows the ratio, and the bottom pane shows the SPX.

These 2 ratios are a good measure of risk-on vs. risk-off and tend to track the SPX quite closely. However, not all divergences mean the SPX will follow, and there are other ratios of risk-on vs. risk-off that did not make lower lows yesterday. However, I will remain cautious and open-minded to the possibility of further downside until I get more evidence that things are starting to turn.

Hope everyone has a great week!

Cheers!

Marcus Grant, CFTe

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

The chart below shows EFA and SPY (total return) performance year to date.

Below is a relative chart, which shows the strong outperformance of EFA vs SPY since the beginning of 2025, despite underperforming substantially over longer time horizons.

Here is a chart of EFA going back to 2021 and it looks like this may turn out to be a failed breakout for a second time.

Below are the sector breakdowns within EFA. Notice there’s not a lot of technology.

Source: https://www.ishares.com/

Below are the geographical breakdowns by country.

Source: https://www.ishares.com/

Looking at the main indices of the countries that dominate the stock exposure in the EFA, only Germany looks any good.

Japan looks bad.

Although not as bad as most of the others, the UK looks like it’s in for another sideway consolidation at best.

France looks bad.

Switzerland just had a failed breakout above the 2021/22 highs.

Germany was looking good, but after breaking down yesterday could fall further from here, unless it can reclaim the horizontal support/resistance and 50 day SMA.

Australia also looks bad.

Hong Kong has been strong, so I decided to included it. However HK stocks are only a tiny weight in EFA. The HSI probably needs some time to consolidate for a while here. Which if it can do above the 50 day SMA would be very constructive. If not a fall back to around the 200 day SMA is not out of the question.

Part of the EFA outperformance in 2025 has been due to a weak US dollar. If markets continue to fall and the USD catches a bid in a “flight to safety”, this will hurt the performance of EFA, as it is priced in USD and unhedged. I’ll be watching the 104.65 level on the DXY.

Will international equities continue to outperform the US? I think it’s probably unlikely in the short to medium term. The major indices of the countries that make up the majority of the stock weightings in EFA, mostly don’t look very good priced in their local currency. If US indices have another leg down, I think international markets will follow, and the USD may catch a bid. On the other hand if US indices have a decent rally from here, it will likely be due to a rotation back into technology, which would also see EFA underperform. But lets see. Definitely one to watch.

Hope everyone has a great week!

Cheers!

Marcus Grant, CFTe

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

Looking at the SPY, it was rejected pretty hard after stalling at the AVWAP from the all time high. There was a confluence of potential resistance around this level, including the 200 day SMA and a previous horizontal support/resistance level, so it’s not surprising it didn’t just slice through this area on the first attempt.

However if SPY can hold 564-565 on any further pullback, the short term uptrend on the 65 minute chart is still intact and it may build for another attempt to break through 575. If we lose 564-565 however, which would be below the AVWAP from the recent lows and the gap fill from Monday’s gap up, we may see a retest of the recent lows and potentially further downside.

Following up on the trades I mentioned in my last post (link). I was filled on SPOT, which closed down slightly from my entry. NFLX & PLTR haven’t been filled, but I will leave both resting orders for now.

Happy Trading!

Marcus Grant, CFTe

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

Image: Made by ChatGPT

The SPY, QQQ and IWM are all still under their declining 20 and 50 day simple moving averages & perhaps even more worryingly under their 200 day SMA, with quite a lot of potential overhead supply. The fact that we’ve only had such a meager bounce off the March 13 low, and have spent 2 weeks under the 200 day SMA, is a little concerning. Also the fact we didn’t have a large capitulation and reversal day, has me thinking we may see a lower low or at least a retest of the March 13th low in the indices.

Here’s a look at the SPY:

QQQ:

And by far the worst of the three, the IWM:

There are however some individual stocks that have held up much better than the index ETFs. During a pullback or correction, stocks that show relative strength (and aren’t defensive stocks, like consumer staples etc.) are more likely to perform better when and if the overall market headwinds subside.

Below are the stocks I am looking at as good potential swing trade candidates to test the waters. Given the overall negative environment I will only be taking small starter positions. For me that is usually risking 0.5% or less of my account per trade. If they start working and I get traction, I will raise my stop losses and add exposure. If not, it’s time to sit on my hands again.

Firstly Spotify (SPOT):

Despite selling off sharply between March 3-10, it recovered quickly and is trading above both its 20 and 50 day SMAs and the AVWAP from the all time high. It also stayed comfortably above its 200 day SMA during the selloff.

Since I live in Australia I can’t put on trades live during US market hours (unless I want to stay up half the night). The pre-market price is currently $616, so I won’t place a buy stop order, as I don’t want to get filled in the 600s. I will place a limit order under the current price (Friday’s closing price was $599.94) at $582, with a stop loss at $554.50 and a tentative target of $650, with the possibility of raising my stop loss and trying to let it run to $700-750 if it gets through $650 and is acting well. Obviously it might run away from here anyway and I never get filled, but that’s OK with me. I would rather miss a trade than chase. If I don’t get filled overnight I will reassess whether to leave the resting order or cancel it, depending on the price action.

Second is Netflix (NFLX):

Netflix also sold off sharply between March 5-10, filling the earning gap from Jan 21/22, but has also recovered quickly and is now above its 20 and 50 day SMAs and the AVWAP from the all time high. I will place a buy limit order at $943, with a stop loss at $908 and a tentative target at $1050.

Lastly Palantir (PLTR):

This is a similar setup to the others. It sold off sharply between March 3-10, undercutting the 50 day SMA, but has recovered and reclaimed the 20 and 50 day SMAs and the AVWAP from the all time high (just). I will place a buy limit order at $86, with a stop loss at $79.5 and a tentative target at $118.

These 3 trades, if they trigger, are all likely to succeed or fail together. They were all leading stocks, recently making all time highs, and are quite volatile, with high ATRs, especially given they aren’t small companies. Therefore I am only taking small positions, risking 0.5% of my account on each trade. If the market does bounce from here, these 3 stocks should quickly approach their prior peaks. They were market leaders, and all actually bottomed a few days before the indices (March 10th vs 13th). They have also all recovered well since they bottomed on March 10. However if the indices roll over and have another leg down from here, I will be stopped out of these positions very quickly, but that in itself is valuable information that more patience will be required.

Hope everyone has a great week!

Cheers!

Marcus Grant, CFTe

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

"Don't try to catch a falling knife" in technical analysis is a metaphorical warning against buying a stock (or other financial asset) that is in a sharp, rapid decline. The "falling knife" represents a stock's price plummeting, often characterized by steep, near-vertical drops on a chart, and attempting to "catch" it symbolizes buying the stock in hopes of timing the bottom, expecting a quick rebound. The phrase cautions that such a move is risky because the downward momentum may continue, leading to further losses before the price stabilizes or reverses.

Image: Made by Grok

Since my last post about a month ago, declines in the major US indices have been quite rapid, and many previous high flying growth stocks that were leading the market have been smashed.

The SPY is down nearly 10%

The QQQ is down over 13%

The FANG+ Index is down nearly 20%

All three indices have sliced through their respective 200 day moving averages (not shown on the charts above), and look like they could fall further. As I alluded to in the title, I want to be very careful trying to catch a falling knife.

How am I planning to enter new index ETF positions?

For my long term account, my preferred scenario would be a large gap down on a bad news headline that reverses hard intraday and closes with the big hollow (up) candle. This would provide a tradeable (potential) bottom, where risk can be defined clearly under the low of that candle. Of course, the low may not hold, but if it doesn’t, I am OK getting stopped out. I do not want to hold positions during a large drawdown when the indices are under their 200 day moving average.

For swing / medium term trades I will use call options, so I can define my risk. At the moment I have a limit order for SPX options, that expire on 20 June 2025, with a 5700 strike price. They are currently trading just over $190. I have a limit order at $75. The SPX would have to fall a lot for those orders to be filled. Futures are currently just under 5600, so a dip under 5400 would probably be needed to trigger that order. I am not confident that will happen, but it certainly could. I feel we haven’t really had a big flush or panic yet. Despite falling a lot, there hasn’t been a big VIX spike, or other indications of extreme panic or capitulation.

I will keep this post short, but will try to write at least weekly from now on. I will do a post about non-US markets, interest rates and FOREX, as well as some individual stocks in the near future.

Hope everyone has a great week!

Cheers!

Marcus Grant, CFTe

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.

Looking at this 1 hour chart of the SPY you can clearly see the large sideways range it’s been trading in since the election gap up. If we can consolidate above 595 (or even better 600) this week, we could be setting up for a breakout to all time highs. However if we lose 595, a retest of 590 (Monday February 3rd’s gap down lows), and maybe even a setting a lower low towards 585 is possible. Beyond that a retest of the bottom of the range at 575 is not out of the question.

Seasonality suggests we could be in for some further choppy, downside action.

Source: Grant Hawkridge

Grant’s Takeaway: “February, on average, usually starts off positive, but the S&P 500 tends to decline shortly after Valentine's Day. On average, the month finishes relatively flat, with only 48% of days experiencing positive daily gains.

February is regarded as the second worst month of the year in terms of seasonality. Over the past decade, only 50% of February's have ended on a positive note. When we look at a longer time frame, the trend doesn't improve much; in the last two decades, just 60% of Februarys have finished with overall gains.”

Another great chart here from Grant, shows the tendency of the 3rd year of a bull market to be messy and sideways .

Source: Grant Hawkridge

Grant’s Takeaway: “Let's start by clarifying how I define a bull market:

A bull market is a 20% or more rally preceded by a -20% or more drop.

The current bull market has been ongoing for 581 trading days, resulting in a 69% gain. However, historically, after two years of strong market gains, the third year tends to be flat.

We are currently 78 trading days into the third year of this bull market, and it appears to be following its historical trend of remaining relatively flat during this period, as it has only gained just over 3% in four months.”

However zooming out on the SPY chart shows we are still in a strong and steady uptrend.

Even if we were to have a larger pullback to around 560-565 (a fall of around 7-8% from the all time highs) which would coincide with the 200 day simple moving average and the anchored VWAP from the April 2024 lows, the longer term uptrend would still be intact. If we were to have a larger correction and test this area, it would likely be an excellent buying opportunity for longer term holders/investors. Although if it did happen it would feel pretty scary at the time.

We should remember the SPY is only just over 1% from all time highs. There are also some good looking charts out there. The mega-caps are mixed on an individual basis, but the FNGS ETN, which tracks the NYSE® FANG+™ Index is pushing up again all time highs.

Here are the current components:

Speculative Tech/Growth also looks good. Below is the ARK Innovation ETF (ARKK), which is pushing up against 52 week highs.

Financials XLF and Communications XLC are also knocking up against all time highs. Although both are looking a little overextended here. Friday’s price action gapped up and rejected higher prices, closing at or very close to the lows of the day, so it wouldn’t be surprising to see some consolidation or a pullback here.

In conclusion, it’s likely we will continue to see some choppy action and maybe even a pullback in the short term. From a swing trading standpoint, I will continue to trade less and in smaller size until it becomes clear the uptrend has resumed. However, in my longer term portfolio, if we do get a larger pullback or correction I will be looking to buy/add SPY and other strong stocks or sectors.

Hope everyone has a great week!

Cheers!

Marcus Grant, CFTe

TheChartEdge is free today. But if you enjoyed this post, you can tell TheChartEdge that their writing is valuable by pledging a future subscription. You won't be charged unless they enable payments.

Pledge your support

Disclaimer: The content provided in this newsletter is for informational and educational purposes only and should not be considered as financial, investment, or legal advice. The information shared is based on our research and analysis, but we are not a licensed financial advisor, nor can we guarantee its accuracy, completeness, or timeliness. Market conditions and financial instruments can change rapidly, and any opinions expressed may not be suitable for all investors. Any opinions expressed and or securities mentioned do not constitute a recommendation to buy, sell, or hold that or any other security. You should conduct your own due diligence and consult with a licensed financial advisor or other professional before making any investment decisions. Past performance is not indicative of future results, and all investments carry the risk of loss. The authors and publishers of this newsletter are not responsible for any financial decisions made based on the content provided herein. By reading and or subscribing to this newsletter, you acknowledge and agree that you are using the information at your own risk.