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The turbulence in stocks continued with the Nasdaq reeling from the tech wreck. It finished down 2.74%, while the Dow Jones Industrial Average and the S&P 500 finished down 1.91% and 1.94%, respectively. The rotation into healthcare continues to accelerate, and it's really the only sector offering abundant and attractive opportunities. Even so, this selloff looks extended and we are due for a bounce. Crypto, however, has some issues. It's basically do or die at this point.
We're entering one of the most bullish periods of the year from a seasonal standpoint. The back-half of November is historically one of the strongest times of the year, and after the turbulence of recent weeks, bulls have this to look forward to.
But this isn't all to look forward to this week, as the Thanksgiving holiday comes around on Thursday here in the United States. It's a day to give thanks for all that we have, but in reality, we should be practicing gratitude much more often than just for a day.
Over the years, I've found it more important to take these rest days when they come. With 24 hour trading coming in the future, we're going to have to find ways to unplug from the markets. That reset is key for keeping a clear and level head.
A rebound in the U.S. dollar during 2026 could prove bullish for domestic stocks by easing several headwinds that weighed on markets in 2025. A stronger dollar typically signals improving U.S. growth expectations and attractive interest-rate differentials, encouraging foreign capital inflows into U.S. assets and supporting higher equity valuations.
It also allows the Federal Reserve to keep cutting rates without fears of currency collapse or imported inflation. For U.S.-centric companies (which dominate the S&P 500), a firmer dollar reduces the translation drag on foreign earnings and calms concerns about competitive devaluation abroad.
And perhaps most importantly, a orderly dollar recovery often coincides with "U.S. exceptionalism" regimes in which domestic stocks outperform global peers, attracting even more allocation toward U.S. equities and creating a self-reinforcing bullish cycle.
This is the biggest shift I've seen at a sector level in months. Going back to the start of Q3, we now see healthcare (XLV) as the undisputed leader in the S&P, while technology (XLK) has dropped down to third place.
Utilities (XLU) are holding up in second place, so we now have a situation where two defensive sectors in healthcare and utilities are outperforming. This is not a strong signal for bulls in the near-term.
Bulls can rest on the fact that staples (XLP) are still near the bottom of the pack, and it wouldn't take much of a rebound in tech to bring it back into first place. But for now, we're better off exercising patience.
| 1 week | 3 Weeks | 13 Weeks | 26 Weeks |
| Healthcare | Healthcare | Healthcare | Technology |
Editor's Note: Healthcare's momentum keeps accelerating.
It's no secret that this market lives and dies by the tech sector (XLK). It represents around 30% of the S&P 500 (SPY), so when this sector isn't rising, and more importantly, outperforming, it's going to cause some headwinds.
Fortunately, this only looks to be a temporary bump in the road. The trend in this ratio below is very clearly to the upside, as it's been making higher-highs and higher-lows. We even look to be in the process of forming a higher-low here.
But let's not lose sight of the fact that the ratio broke out from the wedge formation back in the summer. This is a momentum pattern, and so once this pullback in the ratio is over, I'll be looking for tech to reemerge as the big mover in markets.
One of the big themes of 2025 was international stocks outperforming U.S. stocks by a wide margin for the first time in many years. However, with the prospect of a big rebound in the Dollar, could we see a reversion back to the trend that's dominated the past several years?
I'm looking at the ratio here between the S&P 500 (SPY) and a total world stock fund (VT). The ratio here is in a broader uptrend, but over the past couple of years, we've seen it consolidate into a symmetrical triangle formation.
I'm watching for a break above the upper trendline of the pattern, as that could lead to a big breakout from the triangle, and point to a continuation in the uptrend. This would lead to a major influx of capital back into the U.S. market.
I want to dive a bit deeper into some key credit ratios, because there's some growing stress that needs to be resolved sooner than later if this rally in stocks is going to continue. Yes, bonds and stocks are connected to one another in such a manner.
I'm looking at the ratio between junk bonds (HYG) and 3-7 Year Treasuries (IEI). The key here is to see HYG outperform IEI. In other words, junk bonds have to outperform Treasuries. This signals confidence from capital markets and strong liquidity conditions.
The ratio is coming back down after testing resistance of a saucer formation. Bigger picture, I think we will see a big breakout next year, but near-term, seeing this ratio drop does raise a cautionary signal. It's probably waiting for a signal from the Fed.
Junk bonds have a reputation of trading similar to stocks with respect to volatility. That said, they're still higher up on the capital ladder compared to stocks. Bulls need to see this ratio rebound if stocks are going to see a holiday rally.
The Fed watches ratios like these. In theory, rate cuts would help to ease the difficulty in bond markets and give junk bonds a boost. It looks like we got some favorable rhetoric from Fed officials in the past week too.
The downward drift in crypto continued last week, and we're still looking for more concrete signs of a bounce. To be clear – it looks like we're closer to the end of this decline than we are the beginning, but we still need to be alert for wide price swings.
Since Ethereum lost the key 3200-3300 level of support, it now becomes resistance. There are some serious technical headwinds now that Ethereum is below this zone. The next level it may test is in the 2600-2800 zone.
I don't think this changes much for the bigger picture in 2026. In fact, I am looking for Ethereum to be back at new all-time highs in 2026, and even testing the 6,000 zone. Let's see if it can get back into the descending channel soon.
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