“The risk of an activity doesn’t just lie in the activity itself but importantly in how the participants approach it.” Howard Marks
“Despite the advent of better climbing gear every year, the number of fatalities and accidents in climbing has not decreased. Why? Because better gear gives climbers a false sense of security.” Jill Fredston, an expert on avalanches.
“Well the kids don’t eat
And the dog can’t sleep
There’s no escape from the music
In the whole damn street.” Squeeze Box, The Who
The most important development in markets the past several weeks and again yesterday was/is the continuing deterioration in technology stocks in general and software stocks specifically.
It is a situation that has been underway for 7 weeks that became very pronounced on the first trading day of 2026 when IGV, the software ETF, smashed through its 200 dma on a trajectory to test its November 21st 52 week lows.
Following a backtest of its 50 day ma, IGV rolled over hard on Tuesday and again on Wednesday closing in sync with the low close for the move from November at the 101 region.
101 is a corner number on the Square of 9 and with this test of the November 101 low and IGV showing 3 Drives to a Low (in the minor trend), the presumption is a counter trend rally.
Perhaps.
The bears have been at the troth on this one…and Friday is a monthly OpEx.
And as we all know OpEx Pinball Squeeze Plays are the Algomatics favorite pastime.
Software isn’t alone when it comes to technology weakness, but it’s leading on the downside.
This weekends report for Monday, we’ll walk through some key names and how to identify their turns within the context of pattern recognition and the +1/-2 Momentum Method.
Wednesday was notable for breakdowns below their respective 50 day lines in SHOP, TWLO and CRM.
Yesterday we showed the following daily QQQ.
The Q’s snapped the Bottoms Line but reversed to close just above “the line”.
In so doing the Q’s reclaimed the 50 day ma….giving license to steal, er, rally overnight.
We must be mindful that Undercut & Rally patterns (ie false breaks) often perpetuate Squeeze Plays.
This COULD BE the Final Twist, the Denial Twist per yesterday morning’s report.
That said the Roadmap is pointing to a continued selloff for Friday.
In sum within the context of the split action in technology stocks, markets are being driven by fast moving breaking geopolitical and domestic news.
You know: the news breaks with the cycles, not the other way around.
As much as I give precedence to the charts over “news”, headlines are holding sway here.
Developments involving Venezuela, Greenland, Iran, and ICE actions have repeatedly shifted investor focus within hours of each other.
Then throw an investigation of Powell into the mix and it’s a Cuisinart of concern.
And then we have the first monthly OpEx of the year Friday.
Wednesday produced an unusual and rare combination of technical:
The DJIA fell 42 points, the SPX declined 36 and the NAZ dropped 238, yet market internals were decisively positive.
Net advances totaled +780 on the NYSE and 672 on the NAZ.
In addition, the McClellan Oscillators strengthened finishing at +37.76 on the NYSE (up 8.36) and + 16.06 on the NAZ (up 5.45).
Contrast this with a VIX and UVXY that moved up sharply and you have a smorgasbord of noise masquerading as signals.
The short-term presents an upside opportunity for the bulls to score a field goal into the weekend with the SPX rallying sharply off its 20 dma yesterday for a Holy Grail buy SETUP.
Be that as it may the Intermediate Term picture remains staunchly bearish.