As the majority of market commentary focuses on the collapse of AI tech-related stocks, there’s a new bull market making new highs.
To be clear, the market and its index aren’t new. In fact, the chart below begins in January 1900 with an opening price of $68.
What is relatively new are the stocks that are driving the and other important market indexes to new highs despite the collapse of the “Magnificent 7.”
These stocks shouldn’t surprise readers of this column, as we’ve been writing for months about how to identify the stocks participating in the great rotation in the market. More on the leading stocks and sectors later.
Do You See This Pattern?
When I looked at the 125 years of yearly candles above, a pattern jumped out. I could also describe it as a “lack of a pattern” that hasn’t occurred since the 1929-1932 bear market. More specifically, the pattern is most notable on red candles.
The pattern is a lack of wicks (lines) above a red candle body.
Candle Charts Explained: A red body (the thick part of the bar) represents the situation where the open of the year is the high of the body and the close of the year is the bottom of the body. The wicks are the lines that extend beyond the open and the close of the year to form the year’s high and low. A green body means the market closed higher than it opened for the period (one year here).
No wicks above the open on red bars means that years that closed lower didn’t trade higher than their open.
In the 1929-32 bear market, there were substantial wicks above the opening price. Since then, my observation is that they are rare, especially in down years.
So you can protect yourself by being cautious when markets trade below their January Calendar Range low, and you won’t miss the good years if you’re focused on being long above the January Calendar Range high.
Sectors and stocks are more volatile, but the Calendar Range trading rules work well on them too.
As you can see in the table above the only sectors trading below their January Calendar Range Low (Six Month) are two tech-related sectors ( and ). There are 9 sectors which are higher.
That’s a healthy bull market from a sector breadth perspective.
This breadth is why the Dow broke out to new highs (shown below).
Fortunately for the Dow, not all tech is going down, and it contains several healthy tech stocks that counterbalance its bearish tech stocks. As you can see from the year-to-date chart of the Dow components below, it’s broadly bullish.
Strength is broader than just the Dow. As you can see below the equal weighted S&P 500 () also broke out to new highs last week.
Furthermore, RSP has been demonstrating better momentum (Real Motion) than the since November 2025.
The New Bull Market, Same As The Old One, But Different
The bull market has matured into a new collection of leaders over the last several months. More recently, the last several weeks have tested the resolve of bullish investors as their favorite stocks have been correcting, and the expectations for have been declining.
Rather than running away from stocks, investors have rotated into lower valuations and other sectors.
About 60% of the have reported earnings for Q4 2025, and according to FactSet, 76% have reported EPS greater than estimates. This is slightly below the 5-year average and in line with the 10-year average.
Earnings season is on track to report double-digit year-over-year quarterly EPS growth. If this happens, it will be the fifth consecutive quarter of double-digit growth.
The earnings trajectory appears healthy and supportive of the broadening bull market thesis. However, the correction in many of the tech stocks isn’t based on companies missing earnings expectations or reducing earnings guidance. The “bad news” dragging down stocks is the “good news” that AI may actually improve productivity, which, unfortunately for some, will reduce hiring.
Right now, the AI narrative is under attack from all angles, it “costs too much to build out,” but when the R&D spending leads to a product functionality that works so well, it creates fear that companies will lose market share, and or hire fewer people.
Keep your eyes on the leading stocks and sectors of 2026, they’re not the same stocks and sectors that led 2023-2025, but they’re the new bull market now. It’s the same bull market as the last several years, but different.
Summary: Markets remain broadly risk-on as most indexes held bull phases (with leadership rotating into small caps and midcaps), sector breadth improved, and internals strengthened with the advance-decline line hitting new highs alongside strong seasonality into mid-February. However, -specific weakness, mixed volume confirmation, a negatively sloped new high/new low ratio, elevated volatility, and a sharp drawdown keep the backdrop cautious and prevent a full “all-clear” signal.
Risk On
- Three out of four indexes closed the week in bull phases, was the holdout. Overall, a bullish spread and we are seeing a rotation into the small caps, which are leading the indexes in YTD change. Both SPY and QQQ got oversold on real motion on Thursday and have come back into their bands. (+)
- The majority of sectors were up over the last five days. Technology and consumer discretionary were the only portions down. On balance, a risk-on reading. (+)
- Solar, considered more of a speculative play, is extremely strong. (+)
- Market internals significantly improved for the S&P 500, back to positive territory on the McClellan Oscillator and the cumulative advance-decline line made new highs. (+)
- The color charts (moving average of stocks above key moving averages) for SPY and is still mostly positive across all time frames. (+)
- The percentage of stocks above key moving averages all flipped stronger by the end of the week, particularly those above the 10-Day Moving Average. (+).
- The modern family looks very strong with the widening of this market. (+)
- Foreign equities remain very strong with large cap foreign equities putting in new highs this week. (+)
- Seasonal patterns for equities remain strong through mid-February, with some weakness towards the latter half of the month thru late March. (+)
Neutral
- Volume patterns aren’t confirming the move up on Friday and are mixed overall, with the SPY and QQQ skewing negative relative to IWM and DIA. (=)
- The color charts (moving average of stocks above key moving averages) is showing very mixed readings in the QQQs across all time frames. (=)
- Risk gauges remained at neutral. (=)
- Volatility spiked this week, elevating above its recent levels, though remains neutral overall. (=)
- Value continues to outperform growth with value making new highs and the relative performance widening. Growth remains in a strong warning phase. (=)
- Gold’s long-term bullish trend remains intact even as the volatility in it has spiked in the last couple weeks, perhaps spurred by the sell-off in crypto and carryover effect across all speculative activity. (=)
- The Dollar has stabilized and moved back into its trading range for the last 6+ months. (=)
- Rates remain in a broad trading range with no clear direction. (=)
Risk Off
- Market internals for the NASDAQ remain weaker than SPY and still showing negative values for several readings. (-)
- New high new low ratio remains negatively sloped and stacked. (-)
- Bitcoin’s sell-off accelerated this week to lows not seen since October 2024, though we had a strong snapback rally on Friday. It really needs to get above and hold $80k. (-)
Actionable Trading Plan (Next 1–2 Weeks)
- Stay net long, but tilt toward small caps and broad participation.
Favor IWM / equal-weight exposure and “widening market” themes since breadth and internals are improving, while keeping lighter exposure to QQQ until Nasdaq internals stabilize. - Prioritize leaders and risk-on sectors showing strength.
Focus new entries on the strongest areas (ex: solar/speculative momentum, industrial/value leadership, broad cyclical strength) and avoid forcing trades in weak pockets like mega-cap tech until it confirms. - Treat QQQ as tactical only (not core) until it improves.
If trading Nasdaq names, keep position sizes smaller, take profits quicker, and demand cleaner setups because QQQ remains in a warning phase with mixed color-chart readings. - Use tighter risk management because volatility is rising.
Assume wider daily swings: reduce leverage, scale into positions, and use hard stops on every trade (or trailing stops once profitable). - Add exposure on pullbacks, not on emotional breakout chasing.
With seasonality supportive but volume mixed, look to buy controlled dips in leading sectors rather than chasing big green candles.
. - Value > Growth is the current regime — trade accordingly.
Favor value-based ETFs/sectors and dividend/industrial strength, and avoid heavy growth concentration until relative strength turns back up. - Crypto is high risk — only trade it if you’re treating it as a short-term momentum play.
Bitcoin is damaged; treat it as speculative only, and only re-engage aggressively if it reclaims and holds key resistance (your $80k trigger).
