Relief Bounce or Sustainable Reversal?
The Great Rotation reverses as Technology, Financials, and Discretionary reclaim key levels. Key levels to watch.
Over the past two weeks, I published two special analyses regarding sector rotation, highlighting that the “Great Rotation” had become overextended. My thesis was clear: Technology, Discretionary, and Finance were overstretched to the downside, while defensive sectors like Healthcare, Consumer Staples, and Materials were overbought and due for a consolidation.
The market has validated this move this week: Staples are down -3.2%, Materials -2.8%, and Healthcare -2.0%. Meanwhile, Technology is in the green +0.8%, with Discretionary and Financials flattening out despite of the recent selloff. These conditions confirm the “stretched rotation” thesis based on technicals presented last week, and today we will use specific technical levels to determine if this trend has further room to run.
Precision Under High Volatility
I mentioned on Saturday: , and we did see that type of price action,
Volatility is a key theme today. We will analyze the likelihood of a sustained bullish continuation versus a relief rally that may quickly vanish. Recent moves demonstrate why price action is primary: the high volatility I highlighted last week, specifically the likelihood of rapid moves, played out across the high-probability setups.
I mentioned on Saturday: “Be mindful of potential reversals if initial or extended targets are reached rapidly”.
QQQ: Opened at $598.7, bounced, and printed indecision at the CWL on Monday before reversing to our bearish extended target of $590.0.
SMH & IWM: Both high-probability bearish setups reached their targets with precision. SMH hit $386.0 for a -5% move, also the extended target of $253.8 for IWM was hit for a -2.9% move.
AAPL: Reached $259.3, finishing just one dollar shy but moving -1.8% as expected.
Perhaps most impressive was PLTR. Despite my personal doubts about reaching the +6.1% extended target of $145.6 I marked in the setups blueprint since the model suggested it, and the model proved that markets don’t have emotions when the setup is strong; PLTR is currently trading at $153.0. Similarly, Visa (V) hit its bullish target of $326.1 before reversing today.
With the VIX remaining above 20 and the SPX still below its Central Monthly Level, discipline is mandatory. Despite the volatility, six of our high-probability setups reached their targets and the week has not ended. Only LLY and GLD were invalidated, with GLD moving north as expected on Monday but peaked at $492.0 before retracing, just short of our $497.8 goal.
Since the price was overextended on Tuesday, and dip buyers jumped in in the morning, yesterday afternoon, I sent an exclusive alert to paid subscribers noting that risk-reward had shifted in favor of the bulls and added specific price levels. This follows a similar catch last week when we identified bearish exhaustion on Monday. It was posted in the paid subscribers’ chat.
The critical questions for today: What is the current setup signaling? Is this rally sustainable, or is the rotation set to continue reversing back toward Growth?
In today’s publication, we cover:
Rotation Status: Tracking the shift from Defensives to Growth.
Technical Deep Dive: A close-up on SPX, QQQ, and SMH.
Volatility & Bitcoin: Assessing risk and ‘risk-on’ sentiment.
High-Probability Setups: An audit of our current targets.
Access today’s institutional-grade analysis below to stay ahead of this volatile market.
Let’s begin.