Stop Looking for the Next Sector Rotation. There Isn't One.

For months, the market's been playing musical chairs. Tech. Financials. Energy. Repeat.

But I'm here to tell you something nobody else is saying: The chairs are disappearing. And the music's about to stop.

I spent this morning staring at the advance/decline line, and it's telling a story that should scare the hell out of you. Every single day, we're getting this perfect 50/50 split - half the market up, half down. Sounds normal, right?

Wrong.

This isn't healthy rotation. This is musical chairs with one less seat every week. Money managers are literally holding on by a single thread right now. They've rotated through every playbook option, and they're running on fumes.

Let me break down what's really happening in the only three sectors that matter in the S&P 500:

Energy's up 20% this year. Sounds great until you realize the entire energy complex combined doesn't equal the market cap of one big tech company. It's like trying to hold up a skyscraper with a toothpick.

Financials just got absolutely destroyed. Down 8% year-to-date after being one of the better-performing sectors. These were supposed to be the beneficiaries of higher rates, remember? Now they're getting pummeled harder than a piñata at a kid's birthday party.

Tech? The generals are falling. Google's not up on the year. Apple just clawed back to unchanged yesterday. Microsoft's hanging onto the 390-400 level like grim death. Meta's nowhere. NVIDIA's flat.

You know what that leaves us? Nothing. Absolutely nothing.

Yesterday, IBM got taken behind the woodshed - down 13% in a single session. Twenty percent decline overall. Months of gains wiped out in days. But here's the part that should keep you up at night: This isn't about IBM's fundamentals.

This is about AI going from "the it trade" to "the it's-going-to-kill-me trade."

The market spent two years buying everything AI-related. Now it's starting to sell everything AI might destroy. And that list is a lot longer than anyone wants to admit.

When rotation dies, you get one of two outcomes: Everything rallies together, or everything sells off together. I'm positioning for door number two.

We've been testing 6850 on the S&P for what feels like forever. Every bounce gets weaker. Every dip finds less support. The overnight futures volume is telling me institutional players are hedging more aggressively - 185,000 contracts in a session with minimal price movement screams defensive positioning.

That's not rotation. That's preparation.

Consumer staples? Please. Even Walmart's starting to fade. Caterpillar's amazing, but one stock can't hold up the entire marketplace. When you've got financials crashing, tech struggling, and energy too small to matter, what exactly is supposed to carry this market higher?

I'm not forcing trades into this mess. Instead, I'm shopping for individual opportunities - companies that are going to get swept up in the coming storm regardless of their fundamentals. The rotation game trained everyone to think in sectors. But when rotation dies, correlation goes to one. Everything moves together. The good gets sold with the bad.

Stop looking for the next sector to rotate into. There isn't one. Start looking for companies that can survive what's coming. Because when the music stops, most chairs are going to disappear at once.

The advance/decline line is trying to tell you something. The question is: Are you listening?

So what am I doing about it?

I'm trading butterflies. Betting on expected move ranges. Profiting whether we go up or down... as long as we MOVE.

And I'm doing it live in the TheoTrade Chatroom. Every setup. Every adjustment. Every win and loss.

If you want to see how I'm positioning for what's coming...

To your success,

Don Kaufman

Update your email preferences or unsubscribe here

© 2026 Disclaimer: Neither TheoTrade or any of its officers, directors, employees, other personnel, representatives, agents or independent contractors is, in such capacities, a licensed financial adviser, registered investment adviser, registered broker-dealer or FINRA|SIPC|NFA-member firm. TheoTrade does not provide investment or financial advice or make investment recommendations. TheoTrade is not in the business of transacting trades, nor does TheoTrade agree to direct your brokerage accounts or give trading advice tailored to your particular situation. Nothing contained in our content constitutes a solicitation, recommendation, promotion, or endorsement of any particular security, other investment product, transaction or investment.Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. Past Performance is not necessarily indicative of future results.

Stop Looking for the Next Sector Rotation. There Isn't One.

0 Response to "Stop Looking for the Next Sector Rotation. There Isn't One."

Post a Comment