Better Spots, Harder Tape

Last week, the focus was rotation, reset, and waiting for the next better pitch.

The basic idea was that biotech had already worked, but the better entry was not going to be after everyone noticed it. I wanted to see the group pull back toward short-term averages and show whether buyers were still there. On the other side, AI, semis, and memory had just been hit hard enough that the bearishness got loud very quickly, and my view was that the first real washout could create a tradable bounce if the leaders started to stabilize.

That is pretty much what happened.

AI pulled back and bounced, which made sense after how quickly sentiment flipped. The group was crowded, a lot of people were leaning the same way, and once the selling became obvious, everyone wanted to declare the trade over. That usually creates a bounce before it creates a clean answer. At the same time, biotech has started to pull back toward the moving averages, which is exactly the area I was more interested in rather than chasing it higher after the first move.

So this week is not about changing the whole view. It is about updating the location.

AI gave the bounce, but I want to be more careful there now. Biotech gave the pullback, which makes the group more interesting again if the leaders can hold where they should. I like the pocket between the 9-21 EMAs. The broader market still looks fine, but I think the next phase will be much more selective than the last one.

The headline tape still looks good. Friday SPY was up over 1%, QQQ was up even more, equal weight was positive, and the Dow was green as well. Small caps lagged a bit, but they were not falling apart. If you are only looking at the indexes, it is hard to say the market is in bad shape.

Under the surface, the read is more useful. Robotics is still the strongest theme on my dashboard more recently but I still think it is possibly too early. Biotech is still dominant, even after starting to pull in. Software infrastructure had a big improvement and is also sitting in a strong spot. Financials and consumer momentum are emerging, which is a good sign for breadth. Semiconductors are neutral, while AI infrastructure and memory are improving but not back to clear leadership yet.

That is probably the main point right now. The market is not weak, but the leadership is more spread out. The AI trade is still alive, but it is not the same tape where every stock attached to AI, data centers, memory, power, or infrastructure just gets paid for existing.

Earlier in the year, the broad basket worked. Now I think the basket gets harder. There will still be names that lead and are hot to trade, but I expect more chop, more rotation, and more separation between the real leaders and the names that were just along for the ride. The easy momentum trades intraday across the board are probably going to take a nap.

Breadth has improved, and that is one of the better parts of this market. On my universe dashboard, as of Friday close about 44.7% of names are above their 20-day moving average, 44.4% are above their 50-day, and 55.6% are above their 200-day.

That is fine. It tells us the market is not only being held up by one or two mega-cap names. More areas are participating than earlier in the year, and that is why you have seen financials, software infrastructure, biotech, robotics, and consumer momentum all showing up.

At the same time, this is not a market where everything is breaking out together. Notice there were 26 new 20-day highs, but only 3 new 52-week highs. That tells me plenty of names are repairing or bouncing with prior levels, but not many are making fresh long-term highs yet. Nothing new here if you are scanning charts every day.

There were also 40 names up more than 3% and 37 names down more than 3%, so even on a strong index day there was still a lot of two-way action underneath. That is not a bad thing, but it does tell you this is not a completely shit tape. You can find opportunity, but you can also get chopped up if you are late to one group and early to another.

This is the kind of tape we track every day inside The Stable.

Not just what is green or red, but where leadership is shifting, where strength is real, and where the next cleaner trade might set up.

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This is the area where I want to use more caution now.

I do not think AI is dead, and I do think if that were the case the entire market would be pretty screwed. I do not think semis are finished. I do not think memory is suddenly going to reverse. But I do think the broad AI, semi, and memory trade is moving into a period where most names probably become harder to trade. Again, track these names daily and you can see when they are punching and when they are flat.

That is different from saying the theme is over. A theme can stay very real while a lot of the stocks attached to it chop, lag, or stop rewarding lazy entries and saving shitty execution. This happens all the time after a major run. The first move lifts almost everything. Then the next phase starts separating the actual leaders from the names that were just carried by the theme.

From a glance at dashboard I can see AI infrastructure is improving. Memory is improving. Semiconductors are neutral. That is not a bad look, but it is not the same as the group being back in full control. It tells me the space is trying to repair, or needs a breather, but even so, I do not want to treat every AI-related chart the same way and act like this is a bus stop for the mega trend to just start ripping again.

The bounce was good last week, but a bounce after a flush is not enough by itself. I want to see who can hold trend, who can reclaim key levels, and who can keep attracting volume after the first reaction. If a name cannot do that, I do not want to give it the benefit of the doubt just because the story is tied to AI. No spray and pray now.

For me, the cleaner trades will not be just “buy AI.” It is find the names that are still acting like institutions want them, springing off levels, and showing zip. The rest of the group can easily chop around for a while and frustrate people who are still trading it like the first half of the year. I am not trying to trade that, I want to be in the names that have some vitality.

One thing I will say is that the reason I am not more negative on the market is because some of the old guard are starting to look better.

NVIDIA is starting to look strong again. META is acting well. Apple is finally starting to matter in a more constructive way. If those names continue, I don’t know, maybe they can become a flywheel for the market again? Hopefully not just wishful thinking but they definitely were sold to help fund a lot of what had been going up this entire time.

NVDA is still the center of gravity for the AI trade. When it is working, it supports semis, AI infrastructure, data center sentiment, and the general idea that the AI cycle is still alive. That does not mean every semi name works, but it can pull attention back into the space and make people less comfortable being underexposed.

META matters because it ties together mega-cap strength, AI applications, ad growth, and the idea that the biggest companies can spend aggressively on AI and still be rewarded for it. That has been one of the big questions for the market. Or so they say… I simply like that it is showing strength now back above the 200 and reclaiming some defeated levels.

Apple matters because it has been dead weight at different points in this cycle. If Apple starts contributing instead of lagging, that changes the index math. It helps mega-cap sentiment, passive flows, and the general confidence people have in the market. It would also feel kind of weird if suddenly Apple was not strong anymore, given almost all of us have one in our pocket.

So I do not need every AI or semi name to work. I need the leaders to keep leading and the rest of the group to stop falling apart. If NVDA, META, and AAPL keep pressing higher, they can pull flows back into mega-cap growth and make the whole tape feel better. If those names fail while the broader AI and semi group is already uneven, then the market gets much more annoying.

Biotech is now more interesting than it was last week.

Last week, I liked the theme, but I did not love the entry. The group had already moved, and I did not want to chase it just because the read was working. The better setup was always going to be the first controlled pullback toward short-term moving averages.

Now we are closer to that.

Biotech is still dominant on the dashboard, but it has started to pull in. That is what I wanted to see. Not because weakness is automatically bullish, but because the first pullback after a strong move is where you find out whether the theme has real support or whether it was just a quick chase.

The ideal version is pretty simple. The leaders pull into the 9 or 21 EMA, or the pocket between, they hold above prior breakout areas, volume does not look like panic distribution, and the group starts to firm up while the weaker names shake out. That is much more interesting to me than buying the most extended candle after everyone has already noticed the move.

The risk is still the same. Biotech can be violent. Like…REAL VIOLENT. Some names are real businesses, some are trial stories, some are platform stories, and some are mostly sentiment. So I do not want to just buy the group blindly. I want the names with the best relative strength, the cleanest structure, and the best reaction into support. Before crypto, biotech small caps were the fastest things that could hit zero off a news update.

Either way, if the pullback holds, this theme gets interesting again quickly. Stable members know the names.

There are a few things under the surface that make me want to stay alert.

COR1M, the Cboe 1-month implied correlation index, is back in a zone where I start paying more attention. The expected co-movement between stocks is the lowest it has been in a very long time.

COR1M is basically a read on how much stocks are expected to move together.

When COR1M is high, the market is pricing in more “everything moves together” risk. That usually shows up during stress periods, when individual stock stories matter less and the whole index starts trading like one big position.

When COR1M is low, stocks are acting more independently. That can happen in healthier bull markets, or in markets where leadership is concentrated in a few strong groups while the rest of the tape does its own thing.

So when COR1M starts pushing higher, I pay attention. It does not mean the market has to fall apart, but it does tell you correlation risk is picking up, and that is usually when stock-specific comfort can disappear quickly.

TDEX, the tail risk index, is around 11.83. That is low, but not at the absolute basement levels we have seen before. To me, that means protection is not wildly expensive.

Same idea with VIX and VVIX.

I’ll keep this short and sweet since it is only something I keep an eye on but often has little impact on my trading.

The dollar is still something I want to watch. If the dollar starts ripping, it can add to an already wobbled market. Basing out above that year long range is a bit concerning.

Same with crude. I know that in general being long oil is being long an asset that governments have an interest in keeping lower, so its often easy to write off any kind of trends, but one of the last things we want to see is oil starting to regain momentum.

The market still looks fine, but I think the easy part is thinner now.

Breadth has improved. Rotation is real. Biotech pulled back into a more interesting area. Robotics and software infrastructure are strong. Financials and consumer momentum are improving. So all in all, not bad.

The main place banging trades is the worn out AI, semis, and memory names. The theme is still important, but I think a lot of names in that space may chop, lag, or need more time. I want to focus on the leaders and avoid forcing trades in weaker names just because they are attached to the same story.

For biotech, I want to see if this pullback holds. If the leaders defend the 9 or 21 EMA and start firming back up, that becomes much more interesting than it was when the group was extended.

For AI, semis, and memory, I want to see whether the bounce can turn into real leadership again. NVDA, META, and AAPL are the names I care about most for the broader market feel. If they keep going, they can become a flywheel again. If they fail, the market probably becomes much more choppy.

For volatility, I want to think about protection if it gets cheap enough. For oil, the dollar, and rates, I want them to stop being annoying. For breadth, I want to see more names turning into real highs, not just short-term repairs.

This is not a market where I think you need to make a huge prediction. It is a market where you need to know what is actually leading, avoid paying the worst prices, and be more careful about assuming the entire basket deserves the same treatment.

The tape is still good, but the next phase should reward better stock selection.

Trade safe.