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Introduction
A week ago, we laid out the case for a rebound in the Nasdaq 100 (NDX), S&P 500 (SPX), and semiconductor sector (SMH). All three bottomed the very next day and ultimately rallied far more than we initially anticipated. Over the weekend, we argued the advance was likely to continue but outlined several conditions we wanted to see before becoming more aggressive. Those conditions have now largely been met.
Some investors expect precise calls at every major turning point. That is not our objective. Our process is built around confirmation, not prediction. We seek to identify high-probability inflection points while waiting for sufficient evidence before materially increasing risk. Sometimes that means entering slightly after the exact low or exiting slightly before the exact high, but we believe that discipline produces better long-term outcomes than attempting to pick every precise top and bottom.
That philosophy has guided our work since inception. It is designed to keep investors aligned with the prevailing trend while avoiding the emotional temptation to make bold calls without sufficient evidence. Last week's reversal is another example. We correctly identified the likely turning point and positioned tactically for a rebound, even if the magnitude ultimately exceeded our expectations.
Just as importantly, this bounce came after one of our highest-conviction calls of the year. On June 28, we recommended shorting semiconductors while pairing the trade with a long position in software. As semiconductors became the epicenter of the largest momentum unwind on record, that trade protected capital while generating approximately 2,100 basis points of alpha versus a roughly flat S&P 500 in just one month. Last week's reversal provided the catalyst to close that position and begin looking for opportunities on the long side.
The market has now reached an important crossroads. Many of the technical hurdles we highlighted over the weekend have now been cleared.
So where does that leave us?
In our 8/2 report, we laid out a clear roadmap for what needed to occur before adopting a more aggressive stance.
We repeatedly highlighted the resilience in market internals and the Equal Weight S&P 500 (SPW) as evidence that the broader market remained healthy, while cautioning that technology and semiconductors needed to stabilize to avoid a broader "catch-down." Since then, both groups have stabilized and broken higher.
We expressed concern that the macro backdrop—particularly oil and interest rates—could become a meaningful headwind. Since then, both have begun to ease, relieving pressure on risk assets.
We argued that reclaiming key resistance levels would materially improve the technical outlook. Those hurdles were largely cleared on Monday and Tuesday.
Finally, we emphasized the importance of Follow-Through Days (FTDs). Yesterday, both the S&P 500 and Nasdaq delivered those confirmations.
Markets move quickly. They rarely provide enough evidence to reposition aggressively at the exact low. That is why we rely on confirmation rather than prediction.
The improving technical backdrop has also been reinforced by a more supportive fundamental narrative. Renewed confidence in the artificial intelligence trade and optimism surrounding the reopening of the Strait of Hormuz have fueled a sharp rebound in growth stocks. The Nasdaq 100 has rallied 9.3% in just four trading days—its strongest advance since April 2025. Despite that move, the group still trades at 22.3x forward earnings, one of its lowest valuation premiums to the broader market since 2017.
The growth reset has also pushed Semiconductors valuations back to a discount relative to the SPX.
The evidence we have been waiting for has now largely fallen into place.
The green light has been given.
Now let's look at the charts.
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