Experts were telling you for months that tech stocks would drive markets 20% lower. They said they saw similarities between 2008 and 2022. We did the detailed analysis in our premium service, as well as in our article, "Must-See Charts: 7 Timing Conclusions, 2008 Comparisons." We could not see this similarity, it was a narrative and not a fact-based conclusion.

We have been talking about an epic sector rotation for months. Based on our 2023 forecasts, which have even appeared in the public domain, we concluded that tech stocks would recover and take over leadership. We see the first signs of this prediction coming to life now.

We have warned many times that narratives create bias, which is often the basis for damage. In fact, it is one of our 7 Secrets of Successful Investing.

Astute readers may remember our market call which we published at the exact same moment the ‘entire investor community’ was thinking that an epic breakdown started, on Oct. 13. This can be seen in our article, "The Market Will Not Move 50% Lower Contrary To What The Gurus Are Telling You."

The narrative that sold was the bearish one. From a psychological perspective, it makes sense that this bearish narrative is one that sells easily simply because the most recent emotion in investors’ mindset is fear and uncertainty. Remember, the inner system of humans remembers most vividly what happened in the most recent past. It associates that particular emotion with the current environment.

One really important success factor for investors to master is to become emotionless, sort of detached. This is not easy, though. That said, let’s look at what the data is telling us, as opposed to listening emotions like fear and uncertainty.

The tech sector, as represented by the XLK ETF, is thoroughly testing its long-term uptrend. It did not break down. Let’s repeat that: the tech sector did not break down, its primary trend is up rather than down.

If we zoom into the same chart with the same chart patterns, we can see what this violent test of support looks like. Since October, tech stocks fell below their rising trendline, but they always recovered within three to five days.

Moreover, there is a rounded pattern in the making, right at support of the long-term rising trendline. This rounded pattern is bullish, not bearish.

From a very different perspective, we noticed that tech stocks took over leadership relative to the other key S&P 500 sectors. The XLK ETF was the strongest sector on Friday, Jan. 20.

Similarly, on Wednesday Jan. 18, a day that was dominated by selling, the tech sector, as demonstrated by the XLK ETF, was the one with the lowest selling pressure amongst all sectors.

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