This market has been getting messier for a while.

We’ve talked about maintaining a defensive posture, and for a while we were still able to hide in those defensive names.

The boring was beautiful and it was just the sexy that were messy.

This week, that changed.

The bears finally landed a clean punch.

That doesn’t mean we need to jump straight to doom and gloom.

But I’m also not going to pretend this is a clean, healthy tape.

Intellectual honesty is what I’m building HostileCharts on.

And the truth right now is not what most want to hear.

So let’s get into it.

Like I mentioned, intellectual honesty.

The bears landed a clean one this week.

Twitter tweet

If you look at the market through equal weight, which better represents the market of stocks, the picture becomes clearer.

Energy was one of the only places holding up.

Energy leadership by itself is rarely the sign of a strong, healthy equity market.

One of the reasons I remained bullish, but realistic about this being a needy bull market, was that rotation was still giving investors somewhere to go.

If technology struggled, breadth could pick up the slack.

If the usual growth leaders stalled, defensive groups like materials, energy, health care, or industrials could keep things afloat.

It was not perfect, but it was workable.

The market of stocks was still offering some cover.

This week, that cover got thinner.

The very groups that had been helping stabilize the tape got hit as well.

Twitter tweet

That is what makes this feel different.

It is not just that MVPs were off the field, now the backups are getting tired too.

When offensive leadership is weak and defensive rotation begins to struggle as well, the market starts to feel like there is no place to hide.

A lot of people struggle in markets like this because they feel like they always need to be doing something.

But a shrinking buy list is information.

If fewer setups meet your criteria, that is not a failure of process.

That’s the process doing its job.

In a market like this, patience isn’t laziness and cash isn’t cowardice.

It’s simply an honest response to the environment.

And the reality is, a lot of people in this business need you active.

They need you clicking, trading, reacting, buying, selling, and constantly searching for the next thing to do.

Engagement is the product. Activity is the business model.

Investment is different. Investment requires patience.

It requires saying, “I don’t have to swing at this pitch.”

It requires admitting when the market is not offering much edge.

That’s where I want to live.

I’m not interested in forcing bullishness just because it sounds good.

For now, the honest read is simple.

Most people just don’t want to hear it.

The market is messy and there is less room to hide.

I’m perfectly fine waiting to see if the bulls can throw a counterpunch.

We don’t need to stay active just because someone else needs our engagement.

Anyway, that’s my two cents.

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It hits your inbox every Sunday so you know exactly what to stalk for the week ahead.

Go check out last week’s post and get on the list.

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Larry Thompson, CMT CPA

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The market isn’t broken. It’s just not sexy.

As a whole, we are getting more defensive. That’s true.

But here’s the important part.

There are places to allocate while the fun stuff is stuck in no man’s land.

The boring areas are generating returns and breadth is holding up well.

It’s not our job to tell the market what should lead.

It’s our job to follow what’s leading.

Right now, the sexy stuff is messy.

And the boring stuff is beautiful.

Let’s get into it.

When I say “sexy,” I mean the stuff everyone wants to own.

Tech. Discretionary. Financials.

These are the fashionable parts of the market.

The headlines. The AI conversations. The “what do you think about…” stocks.

But they’re messy….

$XLK – Technology (33% of the S&P 500)

Technology is stuck in a well-defined range.

Price is compressing inside a downward sloping channel, with repeated failures near the upper trendline and support being tested near the 200 day moving average.

Momentum has not confirmed strength.

RSI has been unable to sustain moves above the 60 to 70 zone and continues to make lower highs.

When 33% of the index looks like that, the S&P 500 is going to feel heavy.

Sexy area….messy setup.

$XLY – Consumer Discretionary

The sexy names of Tesla and Amazon dominate this space.

But the trades are not there.

Price attempted to break above the 120 area and failed.

The breakout reversed and rolled back toward the 200 day moving average near the mid-110s.

Failed breakouts are information.

You can fight that if you want.

But I’d rather be on the trends team than against it.

$XLF – Financials

Financials are even more telling.

We had multiple attempts to break above the 55 area.

Each one failed.

The most recent push higher turned into a textbook failed breakout, and price has rolled back toward the 200 day moving average near 52.

RSI has been living below 50, unable to shift into a bullish momentum regime.

If tech and financials cannot lead together, the index stalls.

That is exactly the environment we are in.

Here is the key point.

These are the names people want to own.

The headlines. The cocktail party tickers.

The “what do you think about AI?” stocks.

But the charts are not rewarding that right now.

And the goal is not to own cool things.

The goal is to make money.

Now let’s look at what is actually working.

These are the stocks nobody brags about.

The ones that do not dominate the news cycle. The businesses with steady cash flows.

And they’re quietly cranking.

$XLE – Energy

Who brags about owning energy at the bar?

No one. Grandpa stocks do not get bottle service.

But boy do they look beautiful.

It’s not flashy.

It’s not fashionable.

It’s just working.

$XLB – Materials

Materials. Does it get any more boring?

No hype. No CNBC panels. No group chats blowing up about aggregates and chemicals.

But look at the structure.

That is what healthy trends do.

They do not need attention.

They just keep paying.

$XLI – Industrials

Industrials remain in a clear bullish regime.

Soooo boring.

But beautiful.

RSI is holding in a bullish range, and price continues to make higher highs above both the 50 and 200 day moving averages.

Prior resistance has cleanly flipped into support.

No drama. No failed breakout. No chop.

This is not speculative growth.

This is steady rotation into real economy exposure.

And it is being rewarded.

$XLV – Health Care

Health care is breaking out and littered with opportunities.

Pullbacks have been shallow. Buyers are showing up.

Again, boring.

Again, working.

$XLP – Consumer Staples

Staple stocks.

You know… the beers and bubble gum companies.

B.E.A.utiful. 

Is that what you normally see in an aggressive risk on environment?

No.

But it is what is paying right now.

And the money spends the same.

Owning cool stocks is fun.

Posting screenshots of AI names ripping is fun.

But what is cooler than stocks?

The profits we make from them.

If $XLB, $XLE, $XLV, and $XLP are trending cleanly while $XLK, $XLY, and $XLF are chopping and failing, the decision is not philosophical.

It is practical.

Allocate to what is going up.

Define risk on what is not.

The sexy are messy.

The boring are beautiful.

Anyway, that’s my two cents.

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There are tons of opportunities in this market right now.

They just happen to be boring.

I ripped through 30 charts yesterday on All Gas No Brakes.

Tomorrow, I’ll break down more of what I’m buying in the Sunday Stalk List.

If you want clean charts, clear setups, and tactical insights, this one’s for you.

It hits your inbox every Sunday so you know exactly what to stalk for the week ahead.

Go check out last week’s post and get on the list.

Cheers,

Larry Thompson, CMT CPA

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We are still in a bull market.

The S&P 500 is in an uptrend.

The majority of stocks remain above their 200 day moving averages.

Still a Bull Market…But A Needy One….

But the character of this bull is changing….it’s getting needy.

Breadth has expanded, which is constructive.

The problem is the type of breadth expanding is not the type that typically drives markets to sustained new highs.

Leadership is softening, and the groups we want carrying the load are starting to stumble.

Leadership can take a breather but not breakdown….what was a want…is becoming a need.

Let’s get into it.

One of the most important charts this week came from Warren Pies at 3Fourteen Research.

His work looks at 63 day sector leadership going back decades and measures how the S&P 500 performs depending on which sector is leading.

The takeaway is simple.

Credit - Warren Pies of 3Fourteen Research

When defensive groups like Consumer Staples, Utilities and Energy are leading, forward returns tend to be weak to outright negative.

When offensive sectors like Technology, Financials, and Consumer Discretionary are leading, forward returns are materially stronger.

Right now, leadership is skewing toward Energy and more defensive areas.

Twitter tweet

Participation is fine. But the wrong players have the ball.

A Bull market can tolerate temporary defensive leadership. It cannot thrive on it.

This week the tone shifted from sideways digestion to something more fragile.

We are seeing failed breakouts cluster in offensive sectors.

That is where this moves from a want to a need.

$XLF ( ▼ 1.29% ) - Financials

Financials attempted to break above the multi month range near the 55 area and failed.

Price has now slipped back below the 200 day moving average and RSI is struggling around 50.

Failed Breakout……

That is not what you want to see from a leadership group.

We can’t lose Financials.

I do not care if Materials or Energy hold up.

Without Financials confirming, the bull market is on borrowed time.

Credit transmission, lending conditions, and risk appetite all flow through this group.

If Financials break….so does the Bull Market….

$XLC ( ▼ 0.83% ) - Communication Services

Communication Services also failed a breakout attempt near the 120 area.

Price is now pulling back toward the rising 200 day moving average near 111 to 112.

Failed Breakout……

This has been a core leadership area for much of the cycle.

Failed breakouts in former leaders are manageable if they resolve sideways and re-build structure.

They’re not manageable if they turn into lower highs and lower lows.

This week matters…..

$XLY ( ▼ 1.81% ) - Consumer Discretionary

Consumer Discretionary is printing the same story.

Failed Breakout…….

Repeated failures near the 120 to 122 zone. Momentum fading.

If Discretionary cannot regain momentum and instead loses trend support, that is a direct hit to the bull case.

This is a classic offensive sector. It needs to act like one.

We are still in a bull market.

But it is becoming more needy.

If the starters do not get back on the field soon, this turns from healthy digestion into something more problematic.

Failed breakouts either repair quickly, or they become breakdowns.

The way they go….the market goes…

Anyway, that’s my two cents.

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Believe it or not, this is a simple market.

It only feels complicated because people are trying to make it complicated.

Think about it, if you can make it complicated (a problem) many will have more success pretend to have a solution (their discord channel).

My goal is to keep this as simple as possible, but no simpler.

When the market requires nuance and complexity I won’t avoid it.

Right now, there are two trades.

If you want to understand what the market is actually doing, stop staring at cap weighted indexes and look at equal weight ETFs.

Equal weight is the closest thing we have to market democracy.

Every stock gets one vote. No special treatment. No outsized influence.

The message right now it simple…..UP.

RSP, S&P 500 Equal Weight, all time highs

EQWL, S&P 100 Equal Weight, all time highs

EQAL, Russell 1000 Equal Weight, all time highs

The 1000 largest stocks in the United States, representing over 90 percent of total market capitalization, are collectively in uptrends once you strip out weighting distortions.

That trade is simple. It’s up.

S&P 1500 % Above a 200 Day Moving Average

To beat it into your head a little bit more, let’s look at the S&P 1500 percent of stocks above their 200-day moving average.

The 200-day moving average isn’t anything special.

But it does a decent job giving us a clue about the longer-term trend of a stock.

Small caps (S&P 600), mid caps (S&P 400), and large caps (S&P 500) are all basically sitting at 52-week highs in this metric.

All higher than anything we saw in 2025, hovering right around 70 percent.

So think about it like this.

If you threw a rock at the market of stocks, you’d have a pretty high likelihood of hitting an uptrend.

It’s not more complicated than that.

Yes, are these areas of the market “boring”?

Are they less fun to tell your friends you’re invested in?

Sure.

But the money you make from them spends the same.

Now ask a different question. What’s struggling?

Not small caps broadly.
Not large caps broadly.
Not the market of stocks.

The area getting the most airtime, the most retail attention, and the most emotional attachment is the area under pressure….Tech stocks.

So anything giving technology too big of a vote is meddling sideways.

And this is where the problem shows up.

The S&P 500 is loaded with tech.

Twitter tweet

It is the largest sector by a wide margin, which means it gets a louder vote.

And here’s the part most people still miss.

If you combine Industrials, Materials, Energy, Health Care, Utilities, and Consumer Staples, all of those sectors together still carry less weight in the S&P 500 than Technology alone.

Read that again.

Six sectors.

The parts of the market actually doing the heavy lifting right now.

Still get a smaller vote than tech.

That’s why the index feels stuck even while participation is strong.

That’s why rotation feels “confusing.”

And that’s why Technology overexposure is being exposed.

This isn’t a mystery. It’s math.

The market does not care how innovative something is.

It does not care how exciting the story sounds.

We are not here to invest in what is cool. We are here for returns.

The market of stocks is doing its job. Participation is broad. Trends are intact.

Letting an interest in tech bog down portfolio performance is a choice, not a requirement.

Anyway, that’s my two cents.

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“You do not rise to the level of your goals. You fall to the level of your systems.”
– James Clear

This quote is the whole point.

Bottom fishing can work, but only when it’s treated like a system.

A repeatable checklist. Something measurable.

Something you can review, refine, and improve over time.

I’m still a trend follower at heart.

I prefer buying strength and buying pullbacks in strength.

But bottom fishing is a complementary tool.

It helps me identify laggards that can catch up when the market environment is supportive and rotation starts showing up under the surface.

Let’s get into it.

Bottom fishing is not a default setting. It’s a conditional strategy.

If the broader tape is hostile, most “cheap” stocks just get cheaper.

So before I even look at divergences or failed breakdowns, I start with the market regime.

“Market Regime” Chart

This is the foundational chart.

The top panel is SPY trending higher, but the bottom panel is the real tell, participation.

When the percentage of S&P 500 members above their 200-day starts breaking out and moving through that higher participation zone, it’s telling you the market is broadening out.

In plain English, breadth is improving.

That matters because it furthers the posture of being opportunistic.

It also frames the “why” behind bottom fishing in Bull Markets.

When participation is expanding, the rising tide is doing more of the work, and laggards have a better chance of mean reverting.

Key takeaway: A breadth breakout creates the opportunity set. This is where “time to be opportunistic” comes from, not from a story about one stock.

Stocks have to stop going down before they can start going up.

Momentum helps you quantify that transition….

The classic tell is: Price makes a lower low and RSI makes a higher low.

That does not mean buyers are in control. It usually means sellers are exhausted.

Price is still falling, but it’s falling more slowly.

That is the early clue that the pressure is changing.

Twitter tweet

XRT retail momentum divergence and follow through:
This is a clean example of the process working in real time.

At the moment of the call, XRT was making a lower low in price while RSI was putting in a higher low.

That was the alert, not the signal.

The signal came later as price stabilized, reclaimed key levels, and ultimately followed through, to the point that XRT went on to make new highs.

This is also where the coaching point matters.

Bottom fishing is not strictly “52-week low hunting.”

It’s a process about recognizing a change in behavior, then waiting for price to confirm it.

XHB and ITB Homebuilders and Home construction bottom fishing:

Twitter tweet

The homebuilder setup is a second example of the same momentum concept.

You can see the RSI higher low developing while price had been under pressure.

That divergence signaled seller exhaustion.

Then price stopped going down, went sideways, and eventually rotated higher.

This is exactly how these moves often develop.

They rarely reverse in a straight line. They tend to give you time.

Twitter tweet

Key takeaway: momentum divergence is the early warning that the down move is losing force. But the trade still needs confirmation.

This is where most people get the sequencing wrong.

They treat the divergence as the entry signal. I do not.

For me, the signal is the follow through after the failed move.

A failed breakdown, the “oops” pattern, typically looks like this:

• Price breaks a key level

• Panic selling shows up

• The breakdown fails quickly

• Price snaps back, then follows through

Failed moves can lead to fast moves because supply dries up.

Once sellers are done, the market does not need much demand to lift price.

LIT lithium ETF failed breakdown and follow through:

LIT is a clean case study.

Twitter tweet

After a long downtrend, the chart starts showing a meaningful shift, RSI not getting oversold, then a reclaim of a key level, then the “peek-a-boo” moment where price pushes through and holds.

From there, follow through did the heavy lifting.

The point is not that every move will look identical.

The point is that the sequencing, exhaustion then failure then follow through, is a repeatable framework.

Key takeaway: the divergence sets the stage, but the failed breakdown and follow through is the confirmation.

This is the most important step, and it is the part most people skip.

If you can’t define risk, you don’t have a trade. You have an opinion.

I treat each setup like a poker hand. You do not need certainty. You need defined downside, and a setup where the potential payout justifies the bet. This is also where journaling and measurement matter. If you track the risk/reward and the outcomes, you can actually improve your process over time.

Here are a few current examples that fit the “clean risk, defined levels” lens.

$ORLY O’Reilly Auto:

ORLY is a good illustration of why bottom fishing requires discipline.

Price has been below the 200-day, so the first job is not to predict, it’s to define.

The chart shows an attempt to stabilize after a failed breakdown area, with RSI improving and pushing toward that “RSI 50 as support” behavior that often shows up when downtrends start transitioning.

The takeaway is not that it must work, it’s that the levels are clear.

If it cannot reclaim and hold the key areas, you know exactly where you are wrong.

$XLE versus $SPY relative strength:

This is the same bottom fishing framework applied to relative strength, not just absolute price.

Energy has been in a long relative downtrend versus the S&P 500, but the chart shows RSI trying to lift and “peek-a-boo” above the range, which can be an early sign of seller exhaustion on a relative basis.

This is not a declaration that energy is now leadership.

It’s simply a way to monitor rotation risk and opportunity with a structured lens.

$FAST Fastenal:

FAST is a clean “catch-up” style candidate, where industrials have been strong broadly, but this name has lagged and is trying to reassert itself.

The chart shows RSI improving off a higher low and price pushing through levels that create a well-defined line in the sand.

That is what I want, a setup where I can quantify risk, and where follow through can turn a trade into a trend.

Two execution notes that matter here:

• Know where you’re out. Define the invalidation level before you enter.

• Consider time stops. Some bottoms do not become trends. If it does not act right within a reasonable window, it is often better to step aside and wait for the next clean setup.

Key takeaway: bottom fishing is not about being right. It is about risk being well-defined.

Bottom fishing is a tactic, not an identity.

It works best when it is deployed inside a supportive market regime, when breadth is improving, and when you let price confirm the shift.

1.) Start with the regime.

2.) Look for momentum exhaustion.

3.) Wait for the failed breakdown and follow through.

4.) Then quantify the trade with clean risk and clear exits.

Markets don’t reward ambition or conviction. They reward discipline and structure.

Build the system first. The trades take care of themselves.

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I’ll admit something upfront.

When I first started studying technical analysis, a lot of it felt… mystical.

Lines on charts, patterns with funny names, people acting like they could predict the future off a triangle.

I wasn’t hostile towards it but I was a skeptic.

Coming from a CPA background and living inside financial statements, my brain is wired for structure, process, and evidence. I wanted to know:
Is there actually something robust under all this, or is it just drawing shapes and telling stories?

Breadth work was the first area that flipped the switch for me.

Looking under the hood of the market and seeing how many stocks are actually participating in a move made the whole game make sense. It turned “the market” from this vague scoreboard on TV into what it really is: a market of stocks — thousands of individual decisions aggregated into clean, testable signals.

It was the moment where I finally thought,
“Okay… this isn’t voodoo. This is data. This is behavior. This is participation.”

And I was hooked.

I dove into the literature, studied the legends, earned my CMT, and kept digging.

And that’s when Tim Hayes’ quote really started to hit home:

Breadth lets you do exactly that.

It helps you understand what the market is doing without getting sucked into the endless narrative machine.

Once you internalize that, you stop trying to sound smart and start focusing on staying on the right side of the trend.

And honestly?

That shift alone has helped me ride this bull market far better than I ever would have without breadth work.

It’s what gave me the confidence to add when others were fearful, and to trust the market’s behavior rather than the headlines.

And after recording my weekly show yesterday breaking down my favorite breadth tools, how to align them with trend, and some of the tricks we have at our disposal today, I wanted to expand on it a bit more here.

Let’s get into it.

When we talk about “breadth,” we’re really talking about participation.

Are a lot of stocks going up, or just a few mega caps dragging an index higher.

One of the cleanest, and most powerful tools for that is simply New Highs minus New Lows.

You can run this on the S&P 500, the NYSE, the Nasdaq 100, the Russell 2000 – whatever universe you care about.

S&P 500: New Highs - New Lows

In a healthy bull market, you tend to see persistent net new highs.

On a chart, that looks like this: new highs in the top panel, new lows in the bottom panel, and the net line in the middle grinding above zero.

That’s the market telling you breakouts are working and breakdowns are failing. If you’re seeing five new lows and dozens of new highs in something like the S&P 500, that’s not bearish. That’s the hallmark of a bull market: breakouts resolving higher, breakdowns getting scooped back up.

Another one of my favorites is the percent of stocks above key moving averages.

Moving averages are just smoothed price data — simple tools to help us identify the trend based on the lookback period.

S&P 500 Trend Alignment with Moving Averages

I use this every single week in my Sunday Stalk List, and I add a twist: I break it down by sector to see where strength, weakness, and rotation are taking place.

It quickly tells me if the participation inside each sector is bullish or bearish, and whether I should be leaning more offensive or defensive in my setups.

Now — one nuance I dig into in the video is what happens when price chops sideways. Moving averages can get noisy there.

That’s why there’s another tool I love that handles those environments really well: the Bullish Percent Index.

I gave it its own segment in the video because point-and-figure signals remove the time component and give an incredibly clean read on participation when moving averages start whipsawing.

If you haven’t used BPI before, go check out that part of the video — it’s worth adding to your toolkit.

Breadth becomes exponentially more powerful when you pair it with price and trend.

You guys have seen me use this breadth and trend model over and over again because it gives you clean, repeatable signals for buying opportunities within an underlying uptrend.

Breadth alignment with trend is one of the best tools we have for optimal entries.

Twitter tweet

Take the chart above as an example.

SPY is in a clear uptrend, riding a rising 50-day and 200-day moving average.

Underneath that, the lower panel shows the percent of S&P 500 members above their 20-day moving average.

Every time that reading washed out toward the lower bound (near ~20–30%) while the bigger trend was still up, those dips became powerful buy-the-dip zones. You can literally see these little breadth “scoops” align perfectly with price lows.

That’s the whole idea:
Weak short-term breadth is not bearish if the long-term trend is bullish. It’s fuel.

This is also what a breadth thrust is at its core, strong reversion from weak participation back to strong participation inside an ongoing uptrend.

Recently, we saw exactly that: percent above the 20-day went from ~30 to >70 in a matter of sessions.

That is classic thrust behavior, and it told you buyers were stepping in aggressively.

Now let’s fast-forward to the 21st century, where you don’t have to manually rip through thousands of charts every week to understand breadth.

We have a secret weapon: ETFs as breadth proxies.

In practice, that means using equal-weight and thematic ETFs as simple, visual ways to see participation.

Start with equal-weight indexes.

$EQAL ( ▼ 1.25% ) Russell 1000 equal-weight ETF gives every stock one vote. Same deal with an $RSP ( ▼ 1.19% ) S&P 500 equal-weight or $EQWL ( ▼ 0.67% ) S&P 100 equal-weight fund.

Twitter tweet

In the video, I highlighted the S&P 100 equal-weight base that looks ready to break out. That’s the largest and most important stocks in the world, all contributing on an equal basis. Hard to call that bearish.

Then drill down into equal-weight sector ETFs.

Equal Weight Sector ETFs

Track one-week, one-month, and one-year performance and sort that list.

If equal-weight Technology, Communication Services, Consumer Discretionary, Industrials, etc. are leading, that’s offensive breadth.

Finally, you’ve got “breadth ETFs” for risk-on themes – things like robotics, innovation, software, homebuilders, or whatever basket you care about.

In this weeks video, I talked about a trade in $ARKQ ( ▼ 1.81% ) .

Twitter tweet

It’s packed with offensive names across semis, autos, software, aerospace, and so on.

When my broader breadth work told me we were at a tradable low in a bull market, and I saw ARKQ retesting a clean support zone in an uptrend with RSI holding 50, that set up a simple risk/reward long.

That’s the process: use broad and sector-level breadth to define the environment, then use these modern ETFs to express risk-on or risk-off views without overcomplicating it.

Breadth doesn’t have to be complicated.

Start with the classics, align them within the context of price, and revisit them consistently.

Do that and you’ll stop projecting your opinions onto the market and start reading what’s actually happening underneath the surface.

And nailing the what will make you more money than pinpointing the why

Anyway, that’s my two cents.

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The Sunday Stalk List

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It hits inboxes every Sunday so you know exactly what to keep an eye on for the week ahead.

Checkout last weeks post.

Cheers,

Larry Thompson, CMT CPA

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This week we really saw it — change.

And more importantly, we saw it happen quickly.

One thing I’ve said over and over is that in bull markets, it’s not the weakness itself that’s bullish in underlying uptrends.

It’s the reversion from weakness that carries the message.

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When things get washed out and everyone starts seeing the same “bearish data,” that’s usually right when the market flips.

And when that flip is fast, the signal gets stronger.

That’s when people start throwing around the word “thrust,” but honestly, the label doesn’t matter.

You don’t need a fancy name to understand what’s happening.

The logic is simple:

When short-term weakness inside long-term uptrends snaps back hard, buyers are regaining control.

This week was a perfect example.

Last week in the Sunday Stalk List, we talked about setups sitting right at “line in the sand” levels where a bounce could create tradeable lows.

Then earlier this week, I wrote about the Shake N Bake dynamic:
bull markets love to tempt bears with breakdowns that fail immediately.

Fast-forward a few days, and the market delivered exactly that.
A sharp reversal from fear followed by broad buying pressure.

This wasn’t a slow grind. It was fast. Violent. Persistent.

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Exactly how bottoming behavior tends to look inside an existing bull trend.

We got:

• the bounce
• the tradeable lows
• the failed breakdowns
• the breadth surge
• the fear reversal

Now the question becomes: Does this turn into the sustained year-end rally?

The early signs point that way.

Because when the underlying trend is up and the market gets a chance to break and doesn’t, that’s usually your tell.

This week wasn’t about one stat or a specific “thrust threshold.”

It was about the speed and intensity of the reversal.

Fast reversion from fear is one of the most bullish behaviors you can see inside an uptrend.

And that’s exactly what showed up.

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The Sunday Stalk List

If you want clean charts, clear setups, and tactical insights — this one’s for you.

It hits inboxes every Sunday so you know exactly what to keep an eye on for the week ahead.

Checkout last weeks post.

Cheers,

Larry Thompson, CMT CPA

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I ran through a mountain of charts on Thompson Two Cents Live yesterday.

But if you want to understand the consumer right now, you only need one… housing.

When you’re talking about consumer spending, you’re really talking about feelings.

Confidence. Stability. Momentum.

I won’t pretend to be an economist, but I do understand how to read charts and how the U.S. actually does business.

The U.S. economy runs on consumer spend.

That’s you and me swiping our cards on stuff we need… and stuff we don’t need.

Everyone is going to buy toilet paper. That’s staples.

But it’s discretionary spend that fuels growth.

Vacations, furniture, clothes, tech, eating out… the things you buy when you feel like your life is on stable ground.

It’s why I keep a close eye on the Consumer Discretionary vs. Consumer Staples Chart.

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And one of the biggest drivers of that “I can spend” feeling is housing.

Housing is the backbone.

When people buy a home, they’re not just buying drywall and a roof.

They’re signaling confidence in their job, their location, and their ability to provide in the future.

Sure, homeownership may not carry the same “American Dream” mystique it once had, but it’s still a major marker of stability.

This is where the K-shape economy shows itself.

The top branch of the “K” spends through anything.

Markets up? They’re spending.

Markets down? Still spending.

But the majority of Americans don’t spend based on markets.

They spend based on how secure they feel. 

And nothing drives that emotional security (or fragility) like the housing market.

Because when you buy a home, you don’t just sign a mortgage.

You unleash a wave of discretionary spending into the economy:

Most new homeowners drop $10,000–$20,000 in the first 3–6 months after closing.

Many economist have been talking about the K-shaped economy all year.

The bottom half (housing, retail, labor sensitivity) has been showing stress for months.

And, like clockwork, those early cracks in housing became a leading indicator for weakness creeping into the upper branch of the K—the part of the market everyone thinks is “untouchable.”

This is exactly why the economy ≠ the market.

The top 20 megacap stocks can stay strong long after the average household starts feeling pressure and they make up the majority of the stock market but not the majority of consumer confidence.

Their weight allows the S&P 500 to ignore the bottom half of the K for a while… until it can’t.

And this year we saw it: housing ($ITB/$XHB) started rolling over, then equal-weight retail followed, then consumer discretionary, and now failed breakouts are becoming the rule, not the exception.

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The message of the economy is finally showing up in the market.

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As stocks got whacked this week and several “lines in the sand” were taken out, the burden of proof - at least in the short term - has shifted to the bulls.

But there’s a twist.

Housing actually showed strength in the middle of the turmoil this week.

Reclaim the 200 Day and Follow Through Would Be Huge

A shining light in a messy tape.

Housing Bottom Would Be A Big Tell

If we get follow-through here, it could be the first sign that we’re closer to the end of this contraction than the beginning.

If this is the bottom, we’ll know soon enough.

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The Ugly, The Messy, The Saviors

Getting Great Feedback on this one already.

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The Sunday Stalk List

If you want clean charts, clear setups, and tactical insights — this one’s for you.

It hits inboxes every Sunday so you know exactly what to keep an eye on for the week ahead.

Checkout last weeks post.

Cheers,

Larry Thompson, CMT CPA

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JC Parets is one of the most well-known technicians in the world and for good reason.

He’s built a powerhouse research firm by using technical analysis to consistently stay positioned on the winning side of major trends.

He’s also been a mentor of mine and joined me on the show this week to rip through the charts.

One thing I’ve always appreciated about JC is that he wants you to think for yourself.

He doesn’t care if you agree with him. He cares about where you don’t.

That’s where you learn. That’s where the growth happens.

This week we worked through breadth, the Dow, volatility, and the places where our views overlapped and more importantly where they didn’t.

And of course, JC brought some magazine covers to remind us how sentiment extremes can keep you on the right side of the tape.

I wouldn’t miss this episode.

There’s nothing I could write today that gives you more context than what we covered here.

Throw it on at 1.5x and let it rip.

Drop a comment on what you think is the most bullish or bearish move the market could make in the weeks ahead.

Cheers.

The Sunday Stalk List

If you want clean charts, clear setups, and tactical insights, this one’s for you.

It hits inboxes every Sunday so you know exactly what to watch in the week ahead.

Check out last week’s list.

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Larry Thompson, CMT CPA

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No need to beat around the bush.

I’m buying stocks - right here, right now.

Last week, in It’s Time, I laid out the case that breadth expansion was the next phase of this bull market.

That’s exactly what started to play out this week.

As the indexes masked the breadth expansion because the one extended corner of the market finally took a breather.

This is that counterintuitive part of a bull market where things still feel a little “stinky.”

There’s hesitation. There’s doubt. But that’s when opportunity tends to show up first.

Here are three reasons I’m adding exposure now:

Short-term, things have been messy. But zoom out.

The long-term trend always takes precedence over the short-term noise.

SPY remains well above its upward-sloping 200-day and is currently hammering out a potential low against a rising 50-day moving average.

In an uptrend, the best risk/reward opportunities come when you’re buying at the lower end of the range, not chasing strength at the top.

Right now, that’s exactly where we’re sitting.

The Underlying Trend Is Your Friend

The chart below shows the S&P 500 % of stocks above their 20-day moving average.

Each time we’ve tagged these “washout” zones near 30%, breadth has dug in and renewed its strength.

But it’s not simply breadth at washout levels that’s bullish, it’s the reversion from those levels that tells the story.

When participation starts turning up from an oversold condition, that’s the signal.

In other words, this isn’t about catching a falling knife; it’s about recognizing when selling pressure has exhausted itself and started to improve.

Breadth Recovering From “Washout” Levels

This Short-term breadth expansion carried through across nearly every sector, from cyclicals to defensives.

The S&P sector breadth table below shows broad-based improvement on the shorter-term trend measures.

The kind of shift you typically see early in renewed advances.

Breadth Expansion This Week

Markets are a probabilistic game, not a certainty business.

I don’t have high conviction….yet.

We still need follow-through from this weeks hammer candle, but I love the hand that’s been dealt.

The risk/reward is clearly defined: using today’s low as the stop gives a small loss if wrong, and meaningful upside if right.

That’s how you win in trading, taking asymmetric bets when the setup is favorable and your downside is controlled.

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Markets reward discipline over perfection.

You’ll never catch the exact bottom, and that’s not the goal.

The goal is to position yourself when the odds swing back in your favor, even if it still feels uncomfortable.

Every bull market has moments like this where conviction feels low, but opportunity runs high.

That’s usually when the real move starts.

Anyways, that’s my two cents. 

🎥 Thompson Two Cents Live

I went live yesterday for about 20 minutes to break down when to change your opinion in a Bull Market and how to build conviction in your trading setups.

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The Sunday Stalk List

If you want clean charts, clear setups, and tactical insights, this one’s for you.

It hits inboxes every Sunday so you know exactly what to watch in the week ahead.

Check out last week’s list.

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Larry Thompson, CMT CPA

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As Bruce Buffer bellows before every fight…

It’s… TIME! ^{This video will get you hyped up}

Time for the market to make a decision.

Over the past couple of weeks, mega-cap Tech has been landing all the punches.

As I wrote last week, the “risk” of concentration wasn’t to the downside — it was to the upside.

And that’s exactly how it played out.

Tech ripped higher, pulling the index to fresh all-time highs.

Twitter tweet

Now, here comes the crowd noise: “Breadth is bad,” “It’s a melt-up,” “It can’t last.”

It’s always the same story.

When the market wins, but not the way people want, they call it a bubble or a top.

But this is the moment that defines every Bull Market.

When leadership has done the heavy lifting, and the rest of the field decides whether to step up.

And here’s the truth: only one corner of the market is even “extended.”

Using distance from moving averages, we can quantify it.

Tech’s the only sector stretched by any real measure.

Everything else? Coiled, resting, or basing.

So as people argue whether Tech will “roll over to join the rest,”
the better question is when will the laggards catch up?

In Bull Markets, leaders don’t roll over — they pull others higher.

So yeah. It’s TIME.

Time for the rest of the market to catch up.

I’m betting on catch-up, not collapse.

The percentage of S&P 500 stocks above a 20-day moving average is sitting near washout levels that have repeatedly preceded rebounds throughout this Bull Market.

Breadth Looks Ready To Rally

Risk metrics confirm it.

Equal-weight Consumer Discretionary continues to outperform Equal-weight Staples.

In simple terms, people are selling risk-off stocks at a faster rate than risk-on stocks.

That’s more indicative of the market catching its breath for expansion, rather than being ready to roll over from exhaustion.

Okay, with this backdrop, I want to be buying offensive areas of the market that offer well-defined risk/reward.

• Utilities (XLU) – Testing horizontal support and the 50-day moving average. I like adding strength here.

  

• Financials (XLF) – Lagging Tech (like everything else), but sitting right on long-term support. If we rally into year-end, this is where exposure makes sense with clear risk levels.

  

• Consumer Discretionary (XLY) – A classic cup-and-handle structure with a failed breakdown this week—saved by Amazon earnings. That low is your line in the sand.

  

•  Communication Services (XLC) – META earnings are out, and this group can now reset and grind back toward highs. I like this base around $117, using last week’s low as a short-term stop.

  

Here’s the thing. We’re in a Bull Market.

The goal isn’t to invent problems to worry about.

It’s to recognize opportunity and manage risk.

In Bull Markets, things tend to go right. It just never feels wise to say that.

One of the best writers of this generation, Morgan Housel, put it perfectly:

Twitter tweet

So, with that opportunistic mindset, we look for good setups.

The beauty of these setups is simple — you’ll know if you’re wrong quickly.

Risk is well-defined.

So with breadth washed out, positioning healthy, and leadership strong, it’s time to lean in.

Not blindly, but with intent.

It’s TIME to buy well-defined risk in the offensive parts of the market.

It’s TIME for this Bull Market to show who’s stepping into the ring next.

🎥 Thompson Two Cents Live

This week I breakdown the framework for the next leg higher in this Bull Market.

🚀 Throw it on 1.5x speed and let it rip.

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The Sunday Stalk List

If you want clean charts, clear setups, and tactical insights — this one’s for you.

It hits inboxes every Sunday so you know exactly what to keep an eye on for the week ahead.

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Cheers,

Larry Thompson, CMT CPA

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I’m tired.
Tired of people not contextualizing risk.

Yes, concentration is a risk in the market.
I’ve broken it down before and ran the numbers again today on the flight back to the States.

The top 10 stocks now make up over a third of the market.
The top 20 make up about half.
And the top 100 represent more than three-fourths of the S&P 500.

So yes… it’s a risk.
But not just to the downside.

People tend to frame risk as something that only hurts us.
But in a Bull Market, risk often lives on the upside.

When we spend all our energy preparing for what could go wrong, we miss what could go right.

And if we don’t take risk in a Bull Market then when the hell should we?

It always sounds smart to talk about risk.
It signals discipline, prudence, and wisdom.
But ignoring the potential for leaders to keep leading is just as flawed as ignoring downside exposure.

When the biggest names are breaking out, that’s not something to fear.

Knowledge cures fear.

I used to be terrified of spiders.

Every one of them looked like a threat until I learned that 99% are harmless.

The fear didn’t go away by avoiding them. It went away by learning.

Markets work the same way.

When you understand the structure, the breadth, and the flow of leadership, you stop fearing what you see.

Technical analysis gives us that logic.

It helps us interpret price action, identify risk, and most importantly put it in context.

So the real question isn’t only “what happens if the leaders falter?”

It’s also “what happens if they break out and keep leading?”

In a Bull Market, that’s the risk we want to take.

And it looks like that’s what’s happening.

Anyway, that’s my two cents.

Cheers,

Larry Thompson, CMT CPA

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I’m currently on my way to Manchester, England for the next week, but before heading out I spent all of Thursday dissecting my thoughts and running back my favorite show.

 ALL GAS NO BRAKES | Ep. 4

This series started as a once-a-month deep dive.

But when markets get messy, more isn’t optional - it’s essential.

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Not many people out there are giving you that kind of context for free — let alone 20 charts in a week, or even a month.

Those who support what I’m building deserve the same clarity and context that others pay hundreds, sometimes thousands, to access.

All I ask in return is that you share it with a friend who might benefit from a little extra context, because that’s how good analysis spreads.

Believe it or not, in a healthy bull market, the hardest thing to do is usually nothing.

It’s when volatility rises and breadth weakens that the real work begins.

In this episode, I cover:

• The major indexes and market structure

• Sector rotations and leadership trends

• Breadth and volatility signals

• A few setups I’m watching into next week

Long story short: the market is loud right now.

Earnings season is heating up, and traders are getting tossed around by the noise.

Source - @Brewmarkets

No need to play hero ball.
Define your risk.
Trade what’s in front of you, not what you hope comes next.

The market WILL resolve.
Not a matter of IF, but WHEN.

I’ll keep an eye on things from across the pond and post updates as needed.

Until then, stay disciplined and focused on process over prediction.

Cheers,

Larry Thompson, CMT CPA

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