Near-term Equity trends are bullish from late November lows, but have shown some consolidation during a time that often brings about choppiness in US equity indices during Mid-term election years. The underperformance in Magnificent 7” lately has resulted in underperformance out of Technology in recent weeks, while sectors like Materials, Industrials, and Energy have been strengthening. Meanwhile, outside of Equities, Precious metals continue to show stellar signs of strength, and both Gold and Silver have pushed back to new all-time high territory. Emerging markets have also been working quite well lately, and EEM is set to potentially record a new all-time weekly and monthly high close this month. Overall, US Equity trends remain positive, and stock indices look healthy. However, upside acceleration likely depends on more strength out of “Magnificent 7”, which has been lacking lately, despite Equal-weighted Technology having pushed back to new highs. My cycle composite for US Equities goes higher from mid-January into late February, which I feel could prove to be important as an area where SPX stalls out if/when this is reached into late next month. Bottom line, trends are bullish, and I anticipate that large-cap Technology should be close to bottoming out between Friday and early next week.
^SPX remains choppy in the short run, but despite consolidation in many “Mag 7” names, the broader market continues to look quite positive. DJ Transportation Avg, IWM 0.30% , MDY 0.26% , RSP -0.12% , DIA 0.21% have all pushed back to new all-time highs in the last couple of weeks.
However, this year has kicked off with some interesting rotation into Materials, Energy, and Consumer Staples in the last couple of weeks, which had largely been absent throughout much of 2025.
My ^SPX thoughts remain bullish, but similar to yesterday, I believe that in order to witness a sharp rally back up to 7050 and above, markets likely need to see more participation out of the large-cap Technology stocks. The weakness that was present in META 0.08% , MSFT -1.03% , and most of Software still hasn’t been properly erased, but that hasn’t seemed to matter when considering broad-based Technology, which barely missed closing back at new all-time highs on Thursday before some late-day weakness.
My expectation is that RSPT -0.68% (shown below, Invesco’s Equal-weighted Technology ETF) should push higher over the next 4-6 weeks and should eventually be joined by QQQ 0.26% and XLK 0.52% . At present, the sectors and indices with a heavy exposure to large-cap Technology have lagged in recent weeks. I take this to be temporary and should prove short-lived before this group also begins to turn back higher. Daily RSPT -0.68% charts are shown below.
Invesco S&P 500 Equal Weight Technology ETF
Small-caps have strengthened enough to break out of multi-year downtrends vs. SPY
The Small-cap outperformance has begun to grow more pronounced in recent weeks, as might have been expected with some consolidation in some of the largest Technology stocks.
While IWM 0.30% had moved to nearly four-year highs vs. the Equal-weighted S&P 500 in recent weeks, it’s now broken an intermediate-term downtrend vs. SPY 0.31% itself.
This looks important given that it began dropping back in 2021 and has trended sharply lower over the last 4.5 years.
My expectation is that January’s broadening out in performance to include Small and Mid-cap strength likely plays out for what can be expected in 2026 as a whole.
Large-cap Technology is expected to require consolidation this year, and Value likely could continue to outperform Growth.
In the short run, meaning the time between now and late February, I’m anticipating a bounce in “Mag 7” which might temporarily allow for strength in some of the larger capitalization stocks which have been hit the hardest like MSFT -1.03% , META 0.08% and even help result in strength in stocks which been more neutral of late, like NVDA 2.00% and PLTR 1.66% .
However, this Small-cap outperformance looks important and bullish for Small-caps to outperform Large-caps for the months to come, and it looks right to favor Small-caps and Mid-caps vs. Large for a tactical period of outperformance in the months ahead.
IWM/SPY
Emerging markets ETF looks set to potentially record a new all-time weekly and monthly high close this month
Don’t look now, but the iShares MSCI Emerging Markets ETF has just made a new all-time high close as of today. This is bullish and at current levels, with 6.5 more trading hours in the week, would also (at current levels) record a weekly all-time high close as of Friday’s close.
(Monthly all-time high close might also be possible, and we’ll discuss that at the end of January.)
As seen below, this chart looks eerily familiar to both the DJ Transportation Average as well as the Russell 2000 index ETF (IWM 0.30% ), which both just surpassed former peaks going back to 2021-2022.
Given that the US Dollar is likely to begin to turn back lower in the weeks to come, I am anticipating further near-term strength and possible outperformance from Emerging markets in the weeks and months ahead.
Mexico, South Korea, Argentina, and Brazil all stand out as being important areas that are showing above-average strength in the near-term.
While I eventually expect that China and India can also participate, these currently have lagged compared to some of the other countries’ equity markets listed above, and require a bit more strength to have equal amounts of conviction.
iShares MSCI Emerging Markets ETF
South Korea’s Equity ETF has pushed back sharply to new highs and likely continues to outperform
The iShares MSCI South Korea ETF (EWY -1.33% ) is also technically attractive, despite having gotten overbought in the short run in recent weeks.
I would include this in a basket of favorable Emerging Market ETFs, but would find this more attractive on any dip seen in the weeks ahead.
At present, this has been one of the stronger areas in the world, and some fundamentally oriented analysts have pointed out that South Korea might have some of the strongest earnings growth for 2026 of any of the Emerging market countries (likely because of Technology).
Overall, I like owning EWY -1.33% but feel that $120-$130 likely holds in the short run. Pullbacks down under $100 should represent an excellent opportunity to buy dips on technical corrections.
iShares MSCI South Korea ETF
