A Simple 2-ETF System to Predict Daily Market Direction

by Chris Pulver | Oct 4, 2026

I’ve been tracking something for the last month and a half that’s helped me make sense of this relentless sideways chop — and it comes down to watching two instruments.

While most traders are analyzing dozens of indicators and sectors, I’ve simplified my daily market diagnostic to the Roundhill Magnificent Seven ETF (MAGS) and the VanEck Semiconductor ETF (SMH). They offer a quick read on the mega-cap and semiconductor stocks exerting an outsized influence on the S&P 500 (SPY) and other major indexes.

Why These Two Signals Matter

MAGS is an equal-weight basket of the Magnificent Seven stocks, while SMH tracks leading semiconductor companies. Their holdings include some of the market’s largest and most influential businesses, so strength or weakness across both groups can move SPY even when the average stock behaves differently.

The framework is simple. If one ETF rises while the other falls or remains flat, their competing signals often leave the broader market stuck in neutral.

If both fall, the indexes will probably struggle. When both rise, SPY tends to rise because two important leadership groups are pulling in the same direction.

That last scenario has been the rarest this year. It generally requires a catalyst broad enough to support mega-cap technology and chipmakers simultaneously — such as easing rate pressure, strong artificial intelligence spending or earnings that improve confidence across the Technology sector (XLK).

Those synchronized leadership days tend to produce cleaner index advances than sessions driven by only one group.

Over the last six to seven weeks, the more common pattern has been one group holding flat while the other moves slightly higher or lower. That’s the push and pull behind much of the sideways action.

Turning the Signal Into a Trade Plan

Recently, SMH was up about $10 in the morning and later extended that move to roughly $15. With MAGS also trading higher, the alignment gave me greater confidence that the market was setting up for an up day.

That signal doesn’t mean blindly chasing prices. It can also tell me when to defend an existing position.

In one setup, I had already collected $185 per contract in premium. Once both leadership groups confirmed upside strength, I could use part of that credit to add protection above the market. If the rally continued, the hedge could limit the damage. If the market stalled, the original premium still provided a cushion.

Equity options and index options can both serve that defensive purpose. Equity options can define risk through protective puts, call spreads or adjustments to an existing premium position.

Index options can hedge broader market exposure without requiring changes to every individual holding. Both require careful sizing because leverage can magnify losses as quickly as gains.

This isn’t a complete trading system, and it won’t predict every session. But when leadership is this concentrated, checking these two ETFs can clarify whether the market has coordinated strength, coordinated weakness or another day of internal conflict.

This is chess with the markets — recognize which pieces are moving together, then position for the board that’s actually in front of you.

I’ll see you in the markets.

Chris Pulver
Chris Pulver Trading

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