Bears Just Got Their Worst News Of The Year

The bears had their best setup in months last week.

They had energy leadership, tech wobbling, and a clean rotation story that would have justified every doom-and-gloom take from the perma-bear camp.

They missed badly.

One key metric flipped in five trading days.

It just killed the bear case, and it’s pointing straight to where the next leg of leadership is already forming.

And I’ll walk you through all of it below.

The Trend Is Your Friend

Last week, I gave you one job. Watch the relative strength between tech and energy, because that would be the tell.

Here is what I wrote inside last week’s letter:

“If tech reasserts itself, stay long. The bull case is intact and we keep grinding higher toward new highs. If energy keeps leading while tech stalls, get defensive. That’s your early warning that the rotation is real and the rally is on borrowed time.”

Tech reasserted itself in a big way.

Energy now leads year-to-date by less than half a percent. A couple weeks ago, that spread was in the double digits.

That kind of swing in five trading days tells you everything about who is actually in control of this tape.

Why This Is The Worst News For Bears

Markets do not roll over while technology is leading from the front. The historical track record on that is about as clean as it gets.

When tech runs the board, capital is chasing growth, productivity, and earnings power. That kind of behavior does not show up at market tops.

Tops are usually built on defensive leadership. You see staples, utilities, and healthcare leading while the indexes quietly grind lower in the background.

None of that is happening right now.

Energy, healthcare, and consumer staples are not showing anything that resembles a real leadership profile. Energy held the top YTD spot for weeks, but it could not hold off tech once growth got moving again.

I would still love to see broader participation. Consumer discretionary and financials need to step up for this rally to feel complete.

The bear case does not need broad participation to die though. It just needs tech to keep leading, and tech is leading harder than it has all year.

The Setup Most Traders Will Miss

Utilities used to be the textbook defensive sector. Yield, stability, and capital preservation were the whole thesis for owning them.

That has quietly changed.

AI infrastructure is driving massive power demand. Utilities are now tied directly to one of the most aggressive growth themes in the market.

The sector that historically signaled defense is now positioned as a growth play. Most traders have not adjusted their mental model around that yet.

The overlap between tech and utilities is where the next phase of the AI trade is setting up. I broke this down in detail over the weekend, so if you missed it, go give it a read.

The Bottom Line

The trend is up and bulls are on parade. This continues until the denial dissipates.

Bears had their best setup of the year last week and watched it disappear in five trading days. Until the leadership profile changes, you stay positioned with the trend.