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When stocks are in bear markets, there are certain characteristics that can easily be observed for anyone that’s curious enough. That is, certain sectors will do better than others.

I’m starting my 14th year in the “digital trading pits” now, and I’ll admit that I wasn’t always privy to this type of information.

But once it came across my desk, I incorporated it into my trading, and my results improved dramatically. 

Let’s talk about some of these market themes…

The Best Defense Can Be a Good Offense

I’ve been talking a lot about the emerging strength from the tech sector. Remember, this makes up 30% of the S&P 500 - the U.S. market lives and dies by tech.

This week, we had a slew of solid reactions to earnings results from big tech names - the most consequential one coming from Microsoft (MSFT).

We’re on the verge of seeing the tech sector as the top-performer in three of the last four weeks. This certainly isn’t something that we see in bear markets.

Meanwhile, the financial press continues to push the doom and gloom propaganda. I often find myself asking whether this is intentional or innocent ignorance. In reality, it doesn’t matter to me, and if you’re serious about trading, it doesn’t matter to you either - we need someone to take the other side of our trades.

Tech tends to lead out of market lows. For a while there, we were seeing consumer staples and utilities as the strongest sectors in the tape. That is slowly starting to erode. If bears want to keep their position alive, we need to see stronger bids in the defensive sectors. Otherwise, they’re going to get run over.

This is the moment for bulls to continue pressing the issue - run it straight down the hole.

Is it going to be a V- or W-bottom in this market? I can’t say for sure yet, but if Powell decides to join the party and lower rates, it’s going to be another tailwind for tech, and in my view, increases the odds that it ends up being a V-bottom.

As always, I’ll keep you posted on what I’m seeing underneath the surface,

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