Friday brought us more selling across all sectors of the market. For months now, dating back to June 5, we have been stuck in a rotational market where tech and financials, among other sectors, move in opposite directions.
On the chart below, you can see how this has played out. During the green period in 2025, tech and financials were moving together and pushing higher. This was a full-blown bull market, the kind of environment where you want to be fully invested and riding stocks higher.
In the red-shaded area at the start of 2026, both tech and financials started moving lower together. That was the time to raise cash, hedge positions, and be more cautious. We then got another green period where both sectors moved higher together, but this time it lasted less than a month instead of most of a year like we saw in 2025.
After that, we entered the rotational market we have been dealing with since June. Tech moved higher in purple while financials moved lower, then financials moved higher in orange while tech moved lower. We got another stretch where tech pushed higher (purple), while fincials sold off. Now, at the start of October, we have another yellow zone where financials are moving higher while tech moves lower.
QQQ vs XLF Daily Chart
With the wild macro picture unfolding right now, it is no wonder we don’t have a raging, full-blown bull market. The uncertainty around interest rates, inflation, the election, data center financing, political opposition to data centers, the war in Iran, surging oil prices, skyrocketing bond yields, and a strengthening dollar all create a backdrop where some caution is warranted.
Tech has taken quite the beating. However, anyone who trades tech knows the pain can last much longer and go much deeper than anyone expects. Just because stocks have already fallen doesn’t mean they can’t fall further. Knowing that, it looks like tech is nearing some kind of bottom.
In my opinion, the best-case scenario would be a bearish week or two where financials and the broader market sell off alongside tech. It would give us another red box on the chart above, reset sentiment, push fear to a maximum, and open the door for another green stretch into the end of the year.
The goal is to get the whole market working together again, this time to the downside first, so we can potentially get a much healthier move higher afterward. A two-month run into the end of the year with tech, financials, and the rest of the market moving together would be a much better trading environment than what we have seen since June 5th.
Earnings Take Center Stage
This is a big earnings week, with MSFT, GOOGL, SKHY, NOW, VERT, GEV, INTC, AMZN, SNDK, and more reporting. The biggest market movers of the bunch will likely be MSFT, GOOGL, and AMZN, which report Wednesday and Thursday. All eyes will be on their capital expenditure numbers and what they tell us about the future of AI spending.
MSFT will likely be the ultimate winner in enterprise AI and is likely to stay cash-flow positive, which this market should like, as it continues investing in the space.
GOOGL should be a winner in consumer AI, but the spending required to compete is pushing them cash flow negative. Google needs to quickly get its Agentic AI products out there and competing with META’s Muse. Every major tech company will have its own version of this, and the race to build and deploy these tools is only getting more competitive and more expensive.
AMZN will likely put up strong numbers on the retail side, especially with consumer spending holding up and the company ramping up seasonal hiring. But retail is not the main story with Amazon anymore. AWS and AI are where the market will be focused, particularly when it comes to capital expenditures and the returns Amazon expects from those investments.
This week’s reports should go a long way toward determining whether tech can find its footing or whether the selling continues.
I’ll update these charts in my newsletters and videos just before earnings, so we can see where each stock stands technically heading into the reports.
