US equities proved unable to recover from early minor losses in Monday’s trading, which makes sense when considering the underperformance in GLW, CIEN, LITE, MRVL, and INTC, though Energy jumped out to lead all sectors following APA’s earnings and crude’s bounce. Both WTI crude and long-term interest rates showed upward progress in Monday’s session, and while these might not continue to trend up sharply until the results of Wednesday’s CPI are known, it’s likely that the move in long yields has begun the process of pushing higher to new monthly highs, a move which in recent weeks had been put on hold given some of the weaker economic data. Overall, it’s right to stay bullish on stocks heading into/after CPI this week, as this recent stalling out has done little damage to a bullish short-term structure, and a push back to test former all-time highs looks likely this week before this rally begins to mature. Within sectors, Energy’s breakout looks tradable over the next month, while Software continues to be the preferred area to overweight within Technology. Dips remain buyable for those with near-term timeframes.
QQQ’s triangle should be resolved by a bullish breakout, leading back to test 740–745 before this rally begins to peak out
QQQ has shown some minor stalling out following its sharp rally from late July, but this merely has served to build a triangle pattern which should lead to gains back to test 740–745 as this triangle is resolved by a bullish breakout. The first key will be the move back above 724.66, and this should lead to a push up above 730 which should kick off this week’s rally. Given that CPI looks to be the most important economic event this week, one should look for evidence of Wednesday serving as a possible technical catalyst.
However, in the bigger scheme of things, I do suspect that the stock rally might begin to peak out once QQQ manages to exceed 740 to bring price back to its former all-time highs. Thus, this week’s gains, for now, could prove short-lived and would serve to complete a five-wave advance off the late-July lows. Backing and filling, if/when that occurs, likely does not prove too severe.
Invesco QQQ Trust (QQQ, 2-hour) — Triangle consolidation following the rally from late July should be resolved by a move back above 724.66
Today’s Energy breakout should allow for another month of outperformance as crude bounces
Today’s APA earnings and the bounce in crude have kicked off a very good short-term breakout for Energy. The equal-weighted Energy ETF by Invesco (RYE) is surpassing its minor downtrend from late July and should push higher as crude starts to bounce between now and September. APA was higher by 5% in Monday’s trading, but MPC, HAL, VLO, PSX, OXY, XOM, COP, BKR, and SLB all gained more than 2% on the session. Some of the highflyers like PSX, VLO, MPC, and EOG are top picks from this sector, while XOM is also making headway.
While I have Energy as a tactical Underweight for the second half of 2026, today’s bounce should allow for near-term outperformance which I feel lasts for another month as crude bounces. Thereafter, Energy likely starts to retreat and should underperform from October into year-end.
Whether to tactically overweight Energy depends on one’s timeframe and risk tolerance, as recent gains have been stronger on an absolute basis than relative to the equal-weighted ^SPX. Still, Monday’s move appears to be a short-term positive for the sector.
Invesco S&P 500 Equal Weight Energy ETF (RYE, daily) — Today’s surge is exceeding the minor downtrend from late July
Oil Services’ sharp August turnaround makes OIH the vehicle to favor over XLE
In recent days, the Energy rotation has brought about outperformance from the Oil Services sector, which had been a consistent laggard since April but turned up sharply as August has gotten underway. In the short run, it looks likely that OIH can indeed outperform XLE, and OIH actually has been making strides vs. the Exploration and Production subsector (XOP) as well, which might seem unusual if/when crude oil is getting set for a meaningful move higher.
Overall, I favor OIH at the current time as being an outperformer over XLE, but would suggest watching carefully for evidence of XOP starting to turn back higher on both a relative and an absolute basis. That has not yet happened.
Furthermore, any evidence of US stock indices starting to retreat would likely result in the defensive XLE showing better relative strength than OIH or XOP. However, in the next month, it’s likely that Energy outperforms before reversing back lower, and the former laggard OIH looks to be doing the heavy lifting as this shows some minor mean reversion.
VanEck Oil Services ETF vs. Energy Select Sector SPDR (OIH/XLE, daily) — This ratio has turned up sharply as August has gotten underway, following months of underperformance
Software’s minor breakout keeps IGV on track to test June highs at $108.03
As discussed in last week’s note, Software remains one of the better ways to play Technology in the near term, and today’s strength in DDOG, PLTR, CRWD, and PANW helped lift the S&P Software and Services Index (S5SFTW, Bloomberg) by +1.80% while causing a minor breakout in IGV, the iShares Expanded Tech-Software Sector ETF.
I like IGV to push up to test June highs at $108.03, and eventually get over this level to reach former all-time highs from late last year. Once June highs are exceeded, the area near $118 stands out as being the area to concentrate on for technical resistance.
Overall, Software remains an attractive part of Technology to overweight as stocks within both Semiconductors and Memory continue to show bifurcation and near-term volatility.
iShares Expanded Tech-Software Sector ETF (IGV, daily) — Today’s push is exceeding the downtrend from last October’s highs, with June highs at $108.03 the next test
BUG looks superior to HACK for those seeking cybersecurity exposure
For those trying to decide on the best way to play cybersecurity after having missed the run-up in PANW and CRWD, I like BUG, the Global X Cybersecurity ETF, and feel this is a better choice technically speaking than HACK, the Amplify Cybersecurity ETF.
BUG is a purer play on cybersecurity, as its index requires companies to derive the bulk of their revenue from cybersecurity. The portfolio is dominated by PANW (7.9%), OKTA (7.8%), CRWD (7.5%), FTNT (7.4%), and QLYS (6.1%), and while BUG is more top-heavy (top 10 = 61% of assets), it also skews further down the cap spectrum with heavier exposure across Small- and Mid-Caps like Tenable, Varonis, Commvault, and Netskope. HACK is more diversified, but it’s more large-cap, and has underperformed BUG since April.
BUG is just breaking out above July highs, which could help this outperform into Wednesday’s CPI data. Initial resistance lies near 45, and any pullback over the last few weeks of August would represent an attractive opportunity to buy dips, with $41–$41.75 being a key zone of support on weakness into late August.
Global X Cybersecurity ETF (BUG, weekly) — Breakout above July highs keeps this trending higher, with initial resistance near 45
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