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It All Spends The Same
The market isn’t broken. It’s just not sexy.
As a whole, we are getting more defensive. That’s true.
But here’s the important part.
There are places to allocate while the fun stuff is stuck in no man’s land.
The boring areas are generating returns and breadth is holding up well.
It’s not our job to tell the market what should lead.
It’s our job to follow what’s leading.
Right now, the sexy stuff is messy.
And the boring stuff is beautiful.
Let’s get into it.
The Sexy Is Messy
When I say “sexy,” I mean the stuff everyone wants to own.
Tech. Discretionary. Financials.
These are the fashionable parts of the market.
The headlines. The AI conversations. The “what do you think about…” stocks.
But they’re messy….
$XLK – Technology (33% of the S&P 500)
Technology is stuck in a well-defined range.
Price is compressing inside a downward sloping channel, with repeated failures near the upper trendline and support being tested near the 200 day moving average.
Momentum has not confirmed strength.
RSI has been unable to sustain moves above the 60 to 70 zone and continues to make lower highs.
When 33% of the index looks like that, the S&P 500 is going to feel heavy.
Sexy area….messy setup.
$XLY – Consumer Discretionary
The sexy names of Tesla and Amazon dominate this space.
But the trades are not there.
Price attempted to break above the 120 area and failed.
The breakout reversed and rolled back toward the 200 day moving average near the mid-110s.
Failed breakouts are information.
You can fight that if you want.
But I’d rather be on the trends team than against it.
$XLF – Financials
Financials are even more telling.
We had multiple attempts to break above the 55 area.
Each one failed.
The most recent push higher turned into a textbook failed breakout, and price has rolled back toward the 200 day moving average near 52.
RSI has been living below 50, unable to shift into a bullish momentum regime.
If tech and financials cannot lead together, the index stalls.
That is exactly the environment we are in.
Here is the key point.
These are the names people want to own.
The headlines. The cocktail party tickers.
The “what do you think about AI?” stocks.
But the charts are not rewarding that right now.
And the goal is not to own cool things.
The goal is to make money.
The Boring Is Beautiful
Now let’s look at what is actually working.
These are the stocks nobody brags about.
The ones that do not dominate the news cycle. The businesses with steady cash flows.
And they’re quietly cranking.
$XLE – Energy
Who brags about owning energy at the bar?
No one. Grandpa stocks do not get bottle service.
But boy do they look beautiful.
It’s not flashy.
It’s not fashionable.
It’s just working.
$XLB – Materials
Materials. Does it get any more boring?
No hype. No CNBC panels. No group chats blowing up about aggregates and chemicals.
But look at the structure.
That is what healthy trends do.
They do not need attention.
They just keep paying.
$XLI – Industrials
Industrials remain in a clear bullish regime.
Soooo boring.
But beautiful.
RSI is holding in a bullish range, and price continues to make higher highs above both the 50 and 200 day moving averages.
Prior resistance has cleanly flipped into support.
No drama. No failed breakout. No chop.
This is not speculative growth.
This is steady rotation into real economy exposure.
And it is being rewarded.
$XLV – Health Care
Health care is breaking out and littered with opportunities.
Pullbacks have been shallow. Buyers are showing up.
Again, boring.
Again, working.
$XLP – Consumer Staples
Staple stocks.
You know… the beers and bubble gum companies.
Is that what you normally see in an aggressive risk on environment?
No.
But it is what is paying right now.
And the money spends the same.
My Two Cents
Owning cool stocks is fun.
Posting screenshots of AI names ripping is fun.
But what is cooler than stocks?
The profits we make from them.
If $XLB, $XLE, $XLV, and $XLP are trending cleanly while $XLK, $XLY, and $XLF are chopping and failing, the decision is not philosophical.
It is practical.
Allocate to what is going up.
Define risk on what is not.
The sexy are messy.
The boring are beautiful.
Anyway, that’s my two cents.
ALL GAS NO BRAKES \ EP. 8
This is my favorite show of the month.
We ripped through 30+ charts this week. I tried to keep it to 20. I failed.
🚀 Throw it on 1.5x speed and let it rip.
👍 Give it a like. It’s the easiest way to show me some love.
FREE - The Sunday Stalk List | Ep. 38
There are tons of opportunities in this market right now.
They just happen to be boring.
I ripped through 30 charts yesterday on All Gas No Brakes.
Tomorrow, I’ll break down more of what I’m buying in the Sunday Stalk List.
If you want clean charts, clear setups, and tactical insights, this one’s for you.
It hits your inbox every Sunday so you know exactly what to stalk for the week ahead.
Cheers,
Larry Thompson, CMT CPA