Smart Money Traders Are Eyeing Those Old Economy Stocks
While the tech stocks go sideways, or worse, it's those old favorites that are making a comeback.
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The Market
Was there panic on Friday? Not that I saw. The closest thing I saw that resembled concern was that two days ago, the folks on television could not stop talking about the 12 or 13-day winning streak in XLK, and by Friday afternoon, no one seemed to like technology anymore.
But that’s anecdotal. Statistically, QQQ volume rose (to 75 million, so not bad, but we had two days of 100 million shares plus a few weeks ago). But there was barely a rise in the VIX. The put/call ratio couldn’t even get to 1.0. And I did not have one stock that broke an uptrend line or a 50-day moving average.
Let me take a step back and review where I think we are. I think we will continue to look back and see that the market began a transition in July and August. That peak right around July 4th is when so many stocks topped out. But more than that, it’s when several of the Magnificent Seven stopped leading. It's when we started to see a divergence among them.
Just take a look back, and you will see some peaked in July, many in early August. And those that went on to make new highs in the fall find themselves right back where they were last summer. No progress.
Tops are a process; they tend to take a long time to develop. I know many say bottoms are made in a day on panic lows, but if you look back, most bottoms are made by basing over time, and that panic low can often be the last gasp to the downside. Either way, back to the tech group.
The mega-cap stocks began the process last summer. In the fall, we had a huge bout of speculation run amok. We had penny stocks go wild. We had the quantum stocks, rocket stocks, AI stocks, etc. What I have termed unprofitable small caps flying upward, with many acting like it was 1999 again. I have likened it to the early part of 2021 with the SPAC-mania.
Then we had a correction in November. Let’s take two very different charts to see how that correction played out.
The Transports peaked in July (there it is again) and went sideways for months as they did not participate in the up move in the market for months. Now look at the November low (green arrow). It came nowhere near the October low. (You see? Bottoms are not really made in a day; it took months to develop this one).
Now look at the QQQs. While individual stocks were stalled or making highs, the QQQs went on their merry way upward from that summer peak. The November low was not a higher low as we had seen so many times since the April low. It was a lower low (than October). And instead of breaking out and leading as it has done throughout 2025 it lagged, moving to a lower high on this latest rally.
To me, that’s the easiest way to show the transition we’ve seen taking place in the market.
It’s possible the QQQs come down to that blue line and hold, or that they don’t even get there. But if we step back, we see for the first time this year a change where tech is not the leader during a rally and something, to use a phrase from two decades ago, old economy is a leader.
I will add one last item about all of this transition: Bitcoin has always been closely associated with technology stocks. The question always was which came first, the chicken or the egg. I don’t think it’s that simple. I do think Bitcoin represents a level of speculation in the market, and the fact that it is down on the year (yes, it is) and the best it could do (so far) off that spike low (and a low DSI) was not quite a 20% rally should also tell us something about that speculative peak in the fall.
In the last eight weeks, the S&P is flat. I think that’s because the index movers are stalled out. For the week ahead, I still think we see a pick-up in volatility.
New Ideas
I am going to do a few follow-ups today.
Let’s revisit a stock I have liked for a year now, and aside from that move in the first half of the year (another stock with a summer peak!), it has done nothing. Nutrien’s (NTR) weekly chart shows a head and shoulders bottom. It had a big week last week, so it’s hard to chase, but I would think this breaks out in 2026.
I want to circle back to Philip Morris (PM) , which we looked at last week, and I said I really wanted to like it. I have taken another look and see it is quite far into the apex of the triangle. If it is going to be a better stock, it needs to get out of this triangle soon (within the next few weeks). That means crossing 156. There is resistance all the way up, so it’s not necessarily a breakout, but it would finally change the pattern of the downtrend that has been in place since –wait for it—July.
Today’s Indicator
The new highs have improved of late, but that’s what happens when the market isn’t boxed in by a handful of mega cap stocks.
Q&A/Reader’s Feedback
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I do not like that spike high (at 500) or all the resistance overhead in Deere (DE) , but here too we have a stock that made a higher low recently (vs October), so the selling is likely done for now. I’m inclined to think it can get near 500, but then I would want to reassess. It might just be in a trading range for now (450-500), but I lean positive for now.
Amgen (AMGN) is a chart I liked in October, with that big base. It had a great run, met its measured target, and is now correcting. If it is going to have another good run, I think it needs to do some more basing into this pullback, perhaps as I have drawn in blue.
I can’t remember the last time I had so many requests to look at one stock, but Costco (COST) seems to be on many minds. There is definitely support in this 850-870 area, so if you want to bottom fish, you know where you are wrong (under 850). The stock just doesn’t seem terribly lively to me. It’s been a slow drip down since last summer (there it is again).
It’s oversold enough to bounce, but what I would love to see is a whack under 850 that recovers quickly (see July/August 2024). That would give me confidence that the selling is done.
I have been a huge fan of Johnson & Johnson ( (JNJ) ) most of this year. I believe I first recommended it in the fall of 2024. Right now, it is over-extended, so I cannot sanction buying it. I’d just call it a hold until it does something wrong (like make a lower high or break an uptrend line). There are other drug stocks like Pfizer that still have bases. Or if you want a Dow stock, there is still McDonald's (MCD) , which I recommended a week ago.
Every time I like Moderna (MRNA) , the stock pops and drops, so it hasn’t gone anywhere since the spring. Short term, a pullback toward that blue line is buyable (28-ish), but if we step back, this looks like a base in the making. It’s got a lot of work to do to complete the base, so timing is elusive (like first it would need to get to the top of the range in the mid-30s, then pull back again to the low-30s, etc., to give it a chance).
