Morning weakness moved the S&P 500 back down to support at the 100-day moving average. Fortunately, support has held to this point. This support has held several times over the last 3 months and remains a line in the sand for the bulls. A break below support would raise the specter of a greater market correction. As noted previously, the S&P has been flat over the last 4 months as we sit at the same levels as November of last year. The market rotation we are seeing is a very constructive way of working off any overbought readings from the leaders of last year. The market remains in a bullish part of the year and despite the weakness, we remain optimistic.
To illustrate the market rotation we have seen, a quick look at the relative strength of consumer staples vs consumer discretionary shows this clearly. Since early in 2026, consumer staples have been significantly outperforming discretionary stocks. The disparity is beginning to look a little overdone and a reversal of some significance would not be unexpected. In fact, we believe that discretionary stocks are likely to reverse to the upside over the coming weeks. What they do after any initial surge will determine if the rotation is longer lasting or simply a short-term adjustment to work off last year’s overbought nature of many of the discretionary names.
Our Point
Reading the headlines and listening to the talking heads on the financial channels, you would think we have entered into a bear market! However, a quick look at the major indices shows that they all remain a few percentage points from all-time highs. As we showed last week, a rising advance/decline line is not indicative of the start of a large decline. Obviously, markets are fluid and can change quickly. In fact, that is exactly why we choose to manage our client accounts actively and with technical analysis (responding to what markets are doing and not what we think they will do). If market conditions change, so will we! Today’s weakness can be attributed to a stronger than expected PPI (inflation report), increased tensions in the Middle East (Iran) and a weekend where anything might happen. As we mentioned last week, earnings from Nvidia would be widely watched and would be market moving. The Nvidia earnings did not disappoint as they handily beat all the expected metrics and continued to paint a rosy picture for future earnings. As has been the case for the last several Nvidia earnings reports, the stock rose in anticipation of earnings and fell on the actual earnings announcement. Buy the rumor, sell the news. The market reaction to the earnings indicate that the aversion to AI related stocks may continue for a few more weeks. While earnings season is mostly done, we do get two significant AI names (Crowdstrike and Marvell) next week that could move the technology sector. Additionally, the jobs report next Friday will be widely watched for indications of future fed interest rate policy. Any escalation with Iran will create additional market volatility. We made no changes to our holdings this week as we continue to wait for additional clarity on the tech sector. We have shifted some of our tech holdings into other better performing areas over the last several weeks but continue to believe that the demise of the AI trade is a little exaggerated. On a tax note, if you haven’t yet received your tax documents, Fidelity expects to release final 1099s over the next 2 weeks. With sunny skies and spring-like temperatures, it will be a good weekend to be outside. We plan to do just that most of the weekend! Enjoy yours wherever it finds you.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bills Asset Management (“BAM”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from BAM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. BAM is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of BAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.billsasset.com.
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About Bo Bills
Founder and Chief Investment Officer at Bills Asset Management. With over 30 years of experience in managed risk investing, Bo has helped countless clients achieve their financial goals while preserving capital.
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