🚨 I’ll be live at 10 a.m. ET with Graham Lindman🚨
We’ll discuss how to build confidence around a trade idea by stacking components — and share a five-step checklist to do just that [tap to join us for Opening Playbook]
Something unusual happened in the market that I need to share with you. Going back to late December and early January, we started seeing Technology (XLK) roll over while money rotated into Industrials (XLI), Energy (XLE) and Basic Materials (XLB).
Normally, when you see that kind of weakness in a market leader like Technology, you’d expect the broader indices to follow with a meaningful pullback.
I thought we’d get a healthy 5-8% correction, find a floor and then move higher. That’s usually how markets behave — sectors rotate, prices reset and you get a tradable bottom for the next leg up.
But that’s not what happened this time.
The Anomaly That Changed Everything
Instead, we saw the rotation unfold while the S&P 500 (SPY) remained essentially flat. That means every dollar leaving tech was almost perfectly flowing into cyclicals.
This kind of clean rotation is rare because it requires broad confidence underneath the surface, even as leadership names take a hit.
Here’s where it gets more interesting: When fear enters the market, correlations tend to move toward one. Sector distinctions stop mattering and selling becomes broad-based.
The fact that this rotation held together as long as it did tells us the market wasn’t trading from a place of panic — it was trading from a place of repositioning. Now, as volatility picks up, that correlation effect is starting to matter again.
What This Means for Current Market Action
What we’re seeing now is a catalyst-driven move to the downside that could be short term — or could finally deliver the 5-8% correction we’ve been avoiding.
When catalysts hit a market that hasn’t completed its natural corrective cycle, the reaction can feel sharper than it otherwise would.
It’s also important to remember that geopolitical events — even serious ones like war — aren’t inherently bearish for markets. Historically, markets often absorb those shocks faster than people expect because capital reprices risk and then moves forward.
The real challenge isn’t the headline itself — it’s the uncertainty before the dust settles.
This brings us to a critical point: We have to be patient here. The structure is still forming, and the market needs space to show where it wants to shake out.
When a correction is overdue and volatility rises, traders often rush to call the exact bottom. But patience usually pays better than prediction in conditions like this.
So the key question now is whether this catalyst-driven weakness finally gives us the correction we’ve sidestepped for months, or whether the rotation pattern continues to absorb pressure once fear settles.
Either way, understanding this unusual setup is crucial for positioning your trades with intention rather than emotion.
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!
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.
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