Hey trader,
Has the market bottomed?
Was that the high in crude oil?
I can hear the cheers from Wall Street all the way here in Michigan.
But I’m more of a data over dogma kind of guy. And I wouldn’t be so sure that oil prices have topped out.
Energy is the top-performing sector across every single timeframe right now. One week, 30 days, year-to-date, and one year.
That kind of dominance doesn't happen by accident. It tells you exactly where money is flowing, and right now, it's flowing away from growth and straight into commodities.
I'm going to break down why that matters, what it signals about inflation, and what needs to change before this market can rip higher.
Energy Owns the Scoreboard
Energy (XLE) is leading all sectors across every major timeframe right now:
- 1-week performance: Energy (XLE) leads
- 30-day performance: Energy (XLE) leads
- Year-to-date performance: Energy (XLE) leads
- 1-year performance: Energy (XLE) leads
A clean sweep like that benefits one group and one group only. The bears.
Money keeps pouring into commodities while growth gets sold. Accelerating inflation is poison for stocks. Stable inflation is fuel.
Commodities outperform when inflation is heating up. Stocks outperform everything else when inflation is stable or cooling off.
Right now, we're firmly in the first camp. That's the bad news.
The good news is that this setup is pointing toward a theme for the next couple of years. Rotating between commodities and stocks will be essential to not just preserve wealth, but grow it.
And don't look to bonds for shelter. In this environment, they perform as poorly as cash. Long-dated bonds are actually worse.
The 60/40 portfolio is not going to save anyone in an inflationary regime.
What Needs to Change
Here's what has my attention. Despite all the hysteria, defensive areas of the market are getting sold harder than growth.
The Nasdaq sold off less than the Dow again last week. That's not what a true risk-off environment looks like.
Institutional money is not abandoning growth entirely. They're trimming the areas most vulnerable to rising rates and commodity prices. That's a meaningful difference.
The thing I need to see is simple. Growth has to sustain momentum across a full week. One or two good sessions don't count.
I need follow-through buying that holds into the close on consecutive days. So far, that's been elusive. Every bounce in growth has been met with selling by the end of the week.
Until that pattern breaks, patience is the right call. But when it breaks, the move will be fast.
Most traders are positioned defensively or parked in cash. When the rotation flips back toward growth, the underinvested crowd will be forced to chase.
I've seen this play out dozens of times. The turn never feels comfortable. It shows up when fear is still elevated and most people are waiting for "confirmation" that arrives too late.
Positions matter more than opinions. I have mine on, and you should too.
Stay tuned,
Gianni Di Poce