Hey trader,
Year-to-date, software stocks are down +20%. 5% was lopped off in a single session.
We are back to levels not seen since April of last year. The entire 2025 rally in software just got erased.
I’m excited.
This selloff is setting up the best buying opportunity of 2026.
Why Software Is Getting Destroyed
Remember back in the early 2010s when everyone said learn to code? Factory jobs were leaving.
Manufacturing was dying. The path forward was software.
I grew up in Michigan. I heard it constantly. Learn to code. Learn to code.
I chose finance and markets instead. I learned price patterns, currencies, and interest rates. I figured there would always be a finance department somewhere.
Then ChatGPT showed up a couple of years ago.
Now, AI can code pretty well. Not perfectly. You still need supervisory skills. I argue with AI all the time when researching topics I know well. But the writing is on the wall.
Software as a career and as an investment theme is facing serious headwinds.
Microsoft almost filled its earnings gap from April 2025. AMD beat on earnings and still got hammered. Fundamentals mean nothing right now. Perception and order flow are all that matter.
The NASDAQ has not hit a new all time high since October. That is four months of underperformance while the S&P 500 hit a new all time high last week.
Tech leads on the way up. It also leads on the way down. When tech fails to confirm new highs, that is a warning signal.
Last week, before Fed Chair Powell spoke, technology was actually outperforming. Then everything reversed sharply after his press conference.
The market is telling us it needs lower interest rates. It is not getting them.
When I Expect The Turn
I am looking for this correction to bottom by mid-March at the latest. It could happen sooner.
My target on the downside is the November 21st low on the S&P. I am not looking for a full breakdown. I am not looking for a bear market. I am looking for a 5-8% washout that shakes out all the longs and gets people fearful instead of greedy.
Every year has drawdowns. I went back and looked at the data from 2010 forward:
- 2010 had an 18% drawdown
- 2011 had a 21% drawdown
- 2018 had both a 12% and a 20% drawdown in the same year
- 2020 had an 8%, 9%, 11%, and 36% drawdown
- 2022 had seven separate drawdowns ranging from 6% to 19%
- Even 2024 had a 6% and a 10% drawdown
The only exception was 2017, which had two tiny 3% pullbacks. That was not normal.
This does not change the long-term trend. This does not change the intermediate-term trend. This is just a pause in the short-term trend. Once the fear hits, the buying opportunity arrives.
How I Am Positioned Right Now
I am sitting on 90% cash. In some accounts closer to 95% cash.
I took my first short position since launching the Trinity Trade in 2024. I have a QQQ put on for about six weeks out, targeting a retest of previous support. I also added a small SOXS position to hedge against further semiconductor weakness.
But let me be very clear about what a bearish Gianni means for you. It means get ready to buy the dips. That is the big trade. That is the big money right now.
When I say I am bearish, I am short with the intention of getting long. The real dollar signs are on the long side once this market bottoms.
I am also watching opportunities in the energy space. Crude oil is holding above the 60-62 support zone.
The Trinity Terminal has been picking up setups in the inflationary sectors.
Energy, consumer staples, and utilities are all outperforming while tech gets crushed. That is textbook risk-off behavior, and it tells me where to look when the turn comes.
Once this thing turns, you will be punished for not being bullish enough. I have seen it play out dozens of times. The people who call for crashes never make money on them because they are never positioned correctly.
Positions matter more than opinions. I have mine on. Do you have yours?
Gianni Di Poce
THEOTrade