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AAII Bears is at 52%:

CNN Fear & Greed:

Consumer Staples are falling:

Lack of Volume:

Put/Call Ratios jumped on yesterdays selloff. CBOE’s Equity Put/Call Ratio is at 0.9

CBOE’s Total Put/Call Ratio is at 1.12

Sentiment

Sentiment, which mostly follows price, is coming down.

Investors’ Intelligence Bulls-Bears is falling:

Energy rally

As investors factor in “higher oil prices for longer”, energy stocks are rallying. The S&P 500 Energy sector is up a record 13 weeks in a row.

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Equities Options

HYG Options

Big jump in Put Volume for HYG. A lot of traders are buying downside protection on high yield bonds, which often trade like equities:

IWM Options

The past 2 weeks saw a big jump in IWM Put Volume as well:

Gamma Exposure (from Squeeze Metrics)

Gamma Exposure is quite low:

COT Report

S&P 500 Asset Managers’ Net Position

Asset Managers remain long S&P 500 futures, but are starting to back off from their long positions:

This was the largest 1 week decrease in Asset Managers’ Net Position (dollar value) since the COVID crash:

VIX Asset Managers

A key concern that I highlighted in December was the extreme positioning from Asset Managers towards vol. Asset Managers were extremely net-short VIX, in a way that resembled the August 2024 VIX blowup.

VIX spiked on Monday, but the spike did not match that of August 2024.

Volume (Lack of)

While some signs point to a market bottom, overall, we’re not quite there yet.

Meaningful bottoms tend to get a spike in SPY volume. There’s been no spike this time, implying that the selling has been orderly, and there’s been no fear yet.

Sentiment (from Trade-Futures)

S&P 500

S&P 500 DSI is coming down:

NASDAQ

NASDAQ DSI is coming down

VIX

VIX DSI increased along with VIX:

Financials vs Energy

Financial stocks suffered in recent weeks while energy rallied.

From Sonu Varghese:

With a new Fed chair incoming, investors were expecting the Fed to cut interest rates. Lower interest rates would have been a boon to financial stocks. The war + higher energy prices are driving up inflation expectations, which hurts the odds of rate cuts.

XLF Fund Flows: large outflows

XLE Fund Flows: large inflows

Crude Oil Daily Sentiment Index:

China

Chinese tech stocks have been trending down for months. KWEB became extremely oversold, and the dollar value of KWEB Calls-Puts fell to the lowest level in years:

India

Indian equities have been hurt significantly by the Iran war. INDA has seen record outflows in the last 2 weeks.

Zooming in, INDA is at support:

SENSEX breadth oversold:

Nifty 50 breadth oversold:

Korea

Korean equities spiked along with the Memory stocks rally. Now in pullback mode. Despite the pullback, EWY is still seeing inflows!

Dollar

The Euro is starting to reverse down and the U.S. Dollar Index is starting to reverse up.

Euro Commercials: extreme positioning being unwound:

Euro Large Speculators: extreme positioning being unwound.

USD Daily Sentiment Index:

Key question: is the U.S. Dollar Index starting to breakout?

The U.S. Dollar is acting as a hedge right now against the Iran war. S&P 500 down = U.S. Dollar up. If the U.S. Dollar breaks out, would that push the S&P 500 down even lower?

Breadth

McClellan Oscillators

The S&P 500 McClellan Oscillator is below -94. Breadth is very oversold; even moreso than during last April’s Liberation Day crash:

We can filter down for all cases within 5% of an All-Time High:

Similarly, the NYSE McClellan Oscillator is also very oversold:

Zweig Breadth Thrust Indicator

Such oversold breadth has created the setup for a POTENTIAL Zweig Breadth Thrust. There is no guarantee that we will get a Zweig Breadth Thrust - most potential ZBT’s fail to materialize:

Sentiment

Sentiment is coming down. This is no surprise - sentiment mostly follows price. Price down = sentiment down, price up = sentiment up.

AAII:

NAAIM Exposure Index:

Seasonality

From Ryan Detrick:

From Reformed Trader:

Seasonality is supposedly turning bullish. I am not a fan of seasonality: of all the indicators you can possibly look at, seasonality is the LEAST useful. In my opinion, most of seasonality is just an extreme case of data mining and has little predictive use.

Indian equities

Indian equities have taken a hit from the Iran war. Half of SENSEX stocks are now oversold (RSI under 30):

Crude Oil

Oil spiked, and everyone expects it to come back down (just look at the Term Structure). Crude Oil’s Daily Sentiment Index spiked along with price:

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Oil’s term structure is in extreme backwardation. Prior spikes in the past 3 years were topping signs for oil:

Investors’ Intelligence Bulls-Bears

From Matt Cerminaro

Source:

After a big pullback, Korean equities are rallying again.

From Callum Thomas

Source:

Tech capex accounts for almost half of all S&P 500 capex

From Citadel

Via Scott Rubner:

“Retail remains the strongest hand in the entire market. The magnitude and persistence of the buying activity (across both stock and options) has been extremely notable.

As we highlighted a month ago, January 2026 marked the largest net buying month on record on our platform. February flows, while below that January surge, still ranked as the fifth-largest net buying month in our platform’s history and the strongest in ~five years, since April 2021.”

“Amidst increasing geopolitical tensions, crude oil volatility has also severely increased, with OVX (crude oil VIX) spiking back to highs not seen since the beginning of the Russia/Ukraine war (2022).”

Options Flow

Intuit

This flow most likely represents a large institutional synthetic short or hedge on Intuit (INTU) using deep ITM puts. The trader aggressively bought the 700P (2500 contracts) and 600P (750 contracts) at the ask, which behaves almost like shorting stock because deep ITM puts have delta near –1. At the same time, the trader sold smaller amounts of 610P, 590P, 580P, and 550P at the bid, likely to partially finance the expensive deep-ITM purchases. The overall structure suggests a very large bearish positioning or portfolio hedge, likely by a fund protecting or offsetting a large INTU long, using options instead of directly shorting the stock.

ZScaler

This trade appears to be a large institutional synthetic short position in Zscaler (ZS) established using deep ITM puts that expire very soon (Mar 20, 2026). The trader aggressively bought 7,600 contracts of the 270P and 1,075 contracts of the 290P at the ask, paying about $100M in premium, but because these puts are extremely deep ITM and near expiration, almost the entire price is intrinsic value, meaning the options behave almost exactly like shorting stock with delta near −1. In total, the position represents roughly 867,500 shares of synthetic short exposure (~$135M notional). Given the very short time to expiry, this is more consistent with a short-term hedge.

EWY (Korea equities)

2 separate EWY options trades with bullish implications.

In the first trade, a buyer aggressively purchased 5,000 April 17, 2026 $150 calls at the ask, spending about $3.3M to gain upside exposure if EWY rises above $150 from its current level around $134.8, suggesting a bullish near-term view on Korean equities.

In the second trade, a different trader sold 600 January 2027 $125 puts at the bid, collecting roughly $1.2M in premium, which indicates a neutral-to-bullish stance, as the seller benefits if EWY stays above $125 and is effectively willing to own the ETF at a lower price if assigned.

EWZ (Brazil equities)

In the first trade, a trader sold 4,000 December 2027 $30 puts at the bid, collecting about $1.13M in premium, which suggests a neutral-to-bullish stance, as the seller profits if EWZ remains above $30 and is effectively willing to own the ETF at a significantly lower level than the current price around $37.5.

In the second trade, another trader aggressively bought 10,000 May 15, 2026 $41 calls at the ask, paying roughly $1.0M to gain upside exposure if EWZ rises above $41 over the next few months, indicating a bullish bet on a continued rally in Brazilian equities.

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How we got here

After the Liberation Day lows, equities rallied almost nonstop from April-October, with barely a meaningful pullback. Investors initially dumped equities on tariff fears, then quickly bought back what they had dumped once Trump’s “TACO” narrative took hold.

The relentless bid is demonstrated via massive inflows into the 10 largest equity ETFs.

By October 2025, inflows had reached levels comparable to late-2024.

Back in late-2024, U.S. equities moved sideways for several months before collapsing on Trump’s tariff shock. So far, we’ve replicated the first phase of that pattern: since October 2025, the S&P 500 has mostly chopped sideways, making marginal new all-time highs along the way.

In other words, to work off the speculative excess seen by October 2025, we’ve had a “Correction in Time” (sideways) instead of a “Correction in Price” (down) at the S&P 500 index level.

It’s unlikely that the S&P 500 repeats the second phase of that pattern (the crash). Without a major exogenous shock like tariffs, there’s little justification for a huge crash right now.

VIX: extreme positioning slowly being unwound

In December, I began highlighting the extreme short-VIX positioning among Asset Managers. The only other time positioning was this net-short was July 2024, just one month before VIX spiked in early-August 2024.

So far, we haven’t seen a volatility spike like August 2024. Instead, VIX slowly drifted higher in the past 2 months, settling just under 20.

Where we’re going

Options

As I noted on X, the Total Put/Call Ratio surged to its highest level since Liberation Day. This figure includes options activity across all U.S. exchanges (not just the CBOE, which is the Put/Call ratio more often cited on social media).

Why is the ratio rising? Put volume is gradually increasing while Call volume is decreasing.

Another way to analyze options data is to look beyond options volumes and examine total dollars transacted. To calculate this, we multiply the volume at each strike by the price those options traded at.

By that measure, significantly more $ flowed into Puts than Calls over the past week: the most since Liberation Day.

The S&P 500 may look calm - almost boring - at the index level. But beneath the surface, there’s significant turbulence. Some sectors and themes have declined sharply, while others surged.

This is extreme sector rotation. The Hindenburg Omen reflects just how bifurcated the market has become: an incredibly split tape.

When people hear “Hindenburg Omen,” they assume it signals a market crash is imminent. That’s wrong.

While some Hindenburg Omens are followed by crashes, most are followed by pullbacks and corrections. The average 2-3 month forward return after a Hindenburg Omen is only slightly negative: significantly worse than “random”, but not always catastrophic.

This time, we’ve seen the more constructive outcome.

Since the first Hindenburg Omen appeared in late-October 2025, previously high-flyers were sold, while laggards like Consumer Staples and Energy surged. That’s a healthier reset: a correction through time and sector leadership, not a broad index-level crash.

Speaking of rotation amongst sectors…

What’s been bought vs. what’s been sold

What’s been sold off (and now being bought)

Software stocks sold off sharply on fears that AI could disrupt their business models and earnings. The selloff was extreme, with RSI dropping below 20.

Such oversold conditions tend to attract mean-reversion traders, and this time they stepped in aggressively. Since the February 5 bottom, software etf IGV has seen record inflows as dip-buyers piled in.

Citadel’s data confirms this: Retail investors have been massive buyers of software names.

This raises an important question: if dip buyers are so aggressive, why haven’t software stocks staged a powerful bounce?

Because Retail buying is being offset by heavy Institutional selling. Institutions are using the bounce to reduce exposure, offloading shares to eager dip buyers.

As a rule of thumb, I’m wary of markets that become deeply oversold but fail to bounce vigorously. This is not a major bearish signal, but it is a warning sign for bulls.

Speaking of bullish Retail, it’s also worth noting that newsletter writers are still bullish, according to the Investors’ Intelligence sentiment survey.

In a long bull market, Retail traders and newsletter sellers get conditioned to buy every dip, like Pavlov’s Dog. It works… until the day it doesn’t.

Software stocks are deeply depressed right now, and Bitcoin isn’t far behind.

Bitcoin sentiment has fallen to levels last seen in 2022–2023, when Bitcoin was building a long, wide base.

If we get a bounce in software, we’ll probably get a bounce in Bitcoin as well. From Tom McClellan:

What’s been bought

Software and tech have weighed down the S&P 500. As investors reduced exposure to software and tech, capital rotated into smaller, previously lagging areas of the market.

Energy:

Energy flows:

Utilities:

Industrials:

Materials:

Consumer Staples:

Semiconductors:

VEU (international equities):

VXUS (international equities):

The irony according to Duality Research is that sectors with weak earnings growth outperformed YTD, while sectors with strong earnings growth have underperformed!

Speaking of earnings…

Earnings growth

There’s no clear catalyst for a broad, systemic crash right now, and that explains the current tape. Some sectors are selling off, others are rallying, and the overall index is going nowhere.

Unlike the dot-com era, this isn’t a case of stock prices being wildly detached from earnings. The main concern today isn’t “extreme overvaluation”. It’s the risk that earnings could decline if AI hurts traditional software/tech business models.

An interesting side-note: recent AI fears highlight the logic behind Warren Buffett’s long-standing caution toward technology from a long-term investment perspective.

Buffett prefers businesses with durable Moats and predictable staying power. For years, many investors argued that software companies had exactly that: strong competitive advantages and high switching costs. But technological shifts can erode those Moats faster than expected.

While Buffett was often criticized for avoiding much of tech, his broader point remains valid: what technological innovation giveth, technological innovation can take away.

Final thoughts on equities

My scenarios and probabilities:

1. S&P 500 goes up right now. 25%

2. S&P 500 swings sideways, up later in 1-2 months. 40%

3. S&P 500 make a deeper pullback or small correction (e.g. 7-12%). 25%

4. S&P 500 make a significant correction (15%+). 10%

The S&P 500 has been chopping sideways for months. A deeper pullback is possible, but the odds of a major correction remain low.

With that being said, any sustained move higher requires leadership from tech. The sector’s weight in the index is simply too large to ignore. Without participation from tech, we’re going to just see more of the same: a lot of volatility with marginal new all-time highs.

If tech re-gains leadership, we could see a slowdown in sectors such as Consumer Staples, Utilities, Materials, etc. That will cause the S&P 500 to once again outperform the equal-weighted S&P 500.

Dollar, Euro, and Precious Metals

2025 saw precious metals soar as the Dollar tumbled. Could the U.S. Dollar stage a partial comeback in 2026?

Examining the COT Report, Commercials are extremely short the Euro. The Euro accounts for 57% of the U.S. Dollar Index.

Meanwhile, Large Speculators are extremely net-long:

From a Mean Reversion perspective, this suggests that the Euro could pullback in 2026 while the U.S. Dollar rallies.

Data from Bank of America’s Fund Manager Survey confirms this extreme positioning: Fund Managers are record overweight the Euro….

… and extremely bearish on the Dollar:

Meanwhile, the U.S. Dollar Index sits on trendline support:

The Dollar’s decline last year coincided with a massive parabolic rally in precious metals.

GLD:

SLV:

Gold and silver are still supported by central bank diversification away from USD reserves amid ongoing geopolitical tensions: Russia-Ukraine, U.S.–China, Venezuela, Iran, etc. That longer-term structural bid will probably persist for years given how slowly central banks re-allocate, but a medium-term squeeze in crowded bearish-USD positioning could temporarily cap upside in precious metals.

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We’re in the middle of a Great Rotation. Capital is being re-allocated, which has pushed many stocks to new highs while others are sliding to new lows. Leadership is shifting. Many of the former high-flying tech and software names have been hit hard as investors rotate into other areas of the market.

Arguing about whether this is bullish or bearish skips the first and more important question: why is this happening in the first place? What’s causing this bifurcation?

To answer that, we have to look beneath the surface. Which sectors are moving higher? Which ones are breaking down?

Energy (XLE):

Massive inflows into XLE:

Utilities (XLU):

Friday saw historic Call Volume for XLU:

Industrials (XLI):

Materials (XLB):

Consumer Staples (XLP):

Semiconductors:

Even with all these sectors hitting new highs, the S&P 500 has barely moved since late-October 2025. Why?

Because the heavyweights - tech - have acted like an anchor on the index.

Large-cap tech (MAGS) is roughly back to its September 2025 levels and software stocks (IGV) have sharply declined.

It also doesn’t help that Financials, another major sector, have been essentially flat since December 2024.

As Michael Batnick recently noted, many stocks have fallen sharply even as the S&P 500 sits near all-time highs. In other words, some stocks are breaking down hard, while others are rallying enough to offset those losses and keep the S&P 500 Index elevated.

This kind of split market is unusual. The last time we saw a similar setup was in 2000.

We live in a world that’s increasingly dominated by tech. The weighting of large cap tech is at the highest in decades.

From Markets4Mayhem:

Non-tech stocks can rally all they want. But if the biggest technology names aren’t participating, a market-cap weighted index like the S&P 500 won’t make much progress.

An extreme example is South Korea. On the back of the AI and memory boom, a handful of stocks have driven nearly the entire move. Just a few companies account for almost half of the KOSPI. In markets this concentrated, “breadth” matters less. All that matters is what the top 5 stocks are doing.

*The KOSPI has surged, but the number of stocks hitting new highs hasn’t surged with it:

There are a few parallels between today and 2000. Defensive sectors like XLP (consumer staples) are rallying, while risk-on sectors like XLK (technology) are under pressure:

One thing I’ll always stress: the future is never “just like” the past. The next bear market won’t be “just like” the last one. The next bull market won’t either. Our brains are wired to spot patterns, sometimes even when there are none.

With all this being said, I don’t believe today is “just like” 2000. There are a few passing similarities, but there are more important differences.

When you see risk-on stocks selling off while defensive names rally, this resolves in one of two ways.

1. Scenario 1: The market rolls over, like 2000–2001. Weakness in tech spreads and drags the rest of the market down with it. I believe this is the less likely scenario.

2. Scenario 2: Software and large-cap tech rebound from oversold conditions and rejoin the broader advance. In my view, this is the more likely path.

The recent selling in tech has been largely indiscriminate, a reminder of how quickly sentiment can flip. Just a few months ago, investors were applauding large-cap tech for aggressive AI spending. Now the narrative has shifted, with markets questioning whether those AI investments will deliver acceptable returns.

In a healthy bull market, leadership typically comes from growth sectors, especially tech. When “old economy” or defensive sectors start to lead, that’s usually not a great sign. For this bull market to keep going, growth and tech need to regain leadership. If they don’t, that’s when you start to worry.

Technology:

NASDAQ 100:

Aside from Old Economy U.S. equities, where else has capital been flowing into? And could it rotate out of those areas and back into U.S. large-cap tech?

Emerging markets are a good example. EEM has seen its highest inflows in nearly a decade.

Massive inflows into ex-U.S. equities (large, mid, and small caps):

Similar chart for VEU:

VEU is up 8 weeks in a row:

Rotation back into U.S. tech could spark a more meaningful rally in the S&P 500 index. It’s worth noting that the total Put/Call Ratio across all U.S. exchanges spiked on Thursday:

And no, the spike in Put/Call is not just because of 0DTE’s. Here’s the same indicator, excluding 0DTE’s:

Connor Bates summed up the current market environment perfectly. Talk about “throwing the baby out with the bathwater”.

Stepping back and look at the bigger picture

Every so often, it helps to zoom out and look at the bigger picture. This doesn’t just help with understanding current market conditions. It also helps with improving your trading strategies.

We live in an era of Pump, Dump, and Rotate.

I started to notice this around 2018, and it’s become increasingly pronounced since COVID.

Momentum has always mattered, but capital today is more herd-like than ever before. Social media likely plays a role: everyone is watching and copying what everyone else is trading in real time.

Capital floods into a market, pushes it wildly higher, then pulls out and chases the next overlooked market. Then the cycle repeats.

Rather than a broad, steady rally, we’re seeing fast, aggressive rotations from one market to another.

I’ve already mentioned that capital has pumped ex-U.S. equities and non-tech U.S. stocks. But aside from that:

1. Bitcoin gave back all its post-election gains. Bitcoin often acts as a high-beta risk gauge: when “hot money” flows in, Bitcoin surges. When those flows slow down or reverse, Bitcoin stalls or collapses. That’s exactly what we’ve seen since mid-2025.

2. Silver pumped and dumped. Its parabolic surge really began in late-October, right as major U.S. indices peaked. Silver was an obvious target for the herd to pump. Silver is a much smaller market than gold and lagged significantly, with the Gold/Silver ratio near 90 (no historical precious metals bull market ended with such a high Gold/Silver ratio). Capital rotated in, pushed silver to the moon, and then left in a hurry.

A concern I’ve had since Q3 2025 was Bitcoin’s inability to make new significant highs. This is how the 2022 bear market played out:

The silver lining here is that Bitcoin is now deeply oversold, which increases the probability of a strong bounce. If that happens, stocks could rally as well.

Something to think about

From a trading standpoint, the message is clear: put more weight on Momentum, and less weight on Mean Reversion. Markets still mean revert, but only after pushing to bigger extremes.

1. What once topped out e.g. RSI 80 may now stretch to 85, 90, even 95 before finally turning Down.

2. What once bottomed at e.g. RSI 30 may now fall to 25 or 20 before finally turning Up.

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Friday was a historic day for precious metals.

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The S&P snapped a 7-month winning streak.

The Dow Jones Industrial Average is still up 8 months in a row:

The stock market’s momentum was strong from April-October. And while all streaks of strong momentum eventually end, they’re usually followed by a pullback and then new highs.

2026 is a Midterm Year, a seasonally weak year in the Presidential Cycle. But Midterm Years are quite bullish under 2nd Term Presidents (e.g. Trump in 2026).

I tend to be skeptical of seasonality and do not use it in my trading. Markets often stray far from so-called seasonal patterns, and setups without a clear underlying rationale deserve lower confidence. In my opinion, a large portion of seasonality reflects statistical randomness.

So is the coast all clear for bulls? No.

There are several short to medium-term bearish signals worth monitoring.

The past 2 months have seen massive equity inflows. The last comparable surge occurred in December 2025, after which stocks moved sideways for two months before breaking down amid Trump’s tariff announcements.

Similarly, consumers are incredibly bullish on stocks. According to the Conference Board’s Consumer Confidence report, 52% of Consumers expect stocks to go up in the next 12 months.

Such bullish sentiment was only matched in the November 2024-January 2025 period (last year). Back then, stocks went sideways for months before crashing under Trump’s tariff announcement.

Market Outlook, My Portfolio, & Trades

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