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I’m usually not the guy chasing laggards. But right now, there’s a setup building in some of the most beaten-down sectors — and it’s not about catching a falling knife. It’s about understanding how markets actually work.
Basic Materials (XLB), Utilities (XLU), Industrial (XLI), and Financial (XLF) are all lagging far behind the massive Technology (XLK) boom. And while most traders are laser-focused on the names making new highs, I’m starting to think these catch-up trades make a lot of sense.
This was actually one of the more interesting discussions during our Summer Stock Roundtable, where we spent time breaking down how money historically rotates downstream after major tech-led rallies.
If you want to catch the full roundtable and hear the complete conversation around sector rotation and catch-up trades, click here.
Tech doesn’t exist in a vacuum. The bigger it gets, the more it pulls the rest of the economy along with it. The AI buildout alone requires staggering amounts of steel, copper, concrete, and rare earths.
Copper miners like Freeport-McMoRan (FCX) and Southern Copper (SCCO), along with rare-earths play MP Materials (MP), all sit at the center of that demand and could see sharp moves as this expansion accelerates.
The Waterfall Effect That Creates Opportunity
XLK still has a real tailwind behind it. But the infrastructure required to support that growth fuels demand elsewhere.
Banks finance these projects, and investment firms underwrite them, which boosts XLF. The physical buildout then feeds demand into XLB and XLI.
That’s why the current lag in these sectors is so interesting. If XLK continues higher, history suggests money flows downstream.
Sector rotation isn’t just a narrative — laggards rarely stay laggards, because the best and worst performers almost never repeat in back-to-back years.
These trades should complement — not duplicate — your sector exposures. If you’re already overloaded in XLF, you don’t need more financial risk just because you like the rotation setup.
Panelists also caution that sector relationships and seasonal averages aren’t automatic payouts. They’re odds enhancers layered on top of disciplined process and smart position sizing.
Much of this rhythm comes from Wall Street’s own routines — rebalancing, deadlines, and predictable institutional behavior that quietly shape these cycles.
For traders looking for structure, an example is the defined-risk approach on FCX using a September $75/$85 call spread — a way to participate in a potential XLB catch-up without overcommitting capital.
Why Financials Matter More Than Usual
Financials have seriously underperformed during the push to all-time highs. That’s unusual. It’s very rare for the S&P 500 (SPY) to sit at highs without XLF joining the move, which makes this divergence even more compelling.
And the timing matters. The earnings season that hits in July often acts as the fuse for laggard rallies, which makes the coming months especially important for this rotation.
So while everyone else is chasing the same momentum names, I’m quietly building positions in the sectors no one wants — the ones that look forgotten, and the ones with real catalysts hiding in plain sight.
Because sometimes the best trades aren’t in what’s working today — they’re in what’s about to work tomorrow.
Now don’t forget to join us at 10 a.m. ET weekdays for Opening Playbook, and at 3:30 p.m. ET Closing Playbook!
Opening Playbook is a bridge for both new and advanced traders to go beyond outdated market narratives into deeper understanding, live at 10 a.m. ET Monday-Friday.
Nate Tucci
Tucci Trades
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. I Have an Overnight Breakthrough to Show YouÂ
There’s almost nothing better than waking up to fresh deposits in your account.
I know this because traders who were in on my no. 1 overnight setup have received the opportunity to see seven consecutive deposits.
That’s seven consecutive times where they were able to collect payouts worth 25% on average overnight.
Now, I can’t make absolute guarantees on the market here…
But if all goes as planned, we might keep this streak going as we continue into May.
We’re already lining up new trades, and if you’d like to see how you can join the next overnight opportunity…
Disclaimer: We develop tools and strategies to the best of our ability but no one can guarantee the future. There is always a risk of loss when trading. Past performance is not indicative of future results. From 10/02/24 to 05/07/26, the win rate was 84.3% on live published trades. The average return on option trades was 2.65% over a one-day holding period, with an average winner of 19.73%.
