It was another solid session yesterday, masked by weakness in growth sectors. Technology (XLK) has retreated into correction territory, anchored down by semiconductors (SMH), not software (IGV).

Can Software Come Back?

Kristin Cabot, the former HR officer at Astronomer, who was caught with her (married) boyfriend at a Coldplay concert last year, is giving a speech on “Taking Back The Narrative.”  It’s a lot of chutzpah to be sure, and the tickets aren’t cheap. Still, America is famous for its comeback stories.

With that in mind, it looks like software stocks are generally oversold, but it's too early to be brave beyond trading. I suspect the big names will come back big time once the dust settles.

It Was a Good Day

Market breadth was convincingly bullish, with far more advancers than decliners on major exchanges and indices, except the NASDAQ Composite.

Fear Creeps Higher

The Volatility Index (VIX) is climbing, but the rate of change (ROC) underscores the lack of panic, as it's well below October and November spikes and the eruption from last year’s tariff tantrum.

The Fear & Greed Index has plunged back into the “fear” zone, significantly from just one week ago.

Something Has to Give

The S&P 500 (SPX) hasn’t been able to achieve a breakaway move to the upside, yet it's held up nicely around its 50-day moving average. Something has to give soon, however.

Beauty is in the Eye of the Beholder

The “Birth of Venus” is an undisputed masterpiece (I’ve seen it in person at the Uffizi Gallery), but I suspect some would not be impressed. That was my initial thought when Alphabet (GOOG/L) moved lower on its earnings release.

Look at these numbers:

Business is Accelerating

The company is on fire. Revenue is surging, and operating margins are surging. It was as good a quarter as one could have expected.  Perhaps this is the law of large numbers at work, or reflective of the market's guarded nature, but this stock should trade higher.

Management hiked capex dramatically: $175 to $185 billion, the Street was expecting $119.5 billion. 

Today’s Session

Liquidation Spiral

Those who have followed me for a while know I’m fond of saying “buying begets buying” and “selling begets selling.” 

We are amid the latter. Damage across several large market niches, including software, is now forcing the liquidation of companies with unquestionably strong narratives to cover margin calls. That, in turn, is nudging selling with huge profits, especially in high-beta and unprofitable names.

It's frustrating and creates risks of getting out of hand.

But it also creates opportunities.

I see early bids in semiconductor names and other recent earnings “winners.”  The good news is that buying the dip has worked like a charm, and there will be a mad rush to get into this dip.

I’m watching those software names at the heart of this current dilemma. Well-known names on the street are beginning to call the bottom, and there has been an unprecedented explosion in call buying. 

We are keeping our heads on a swivel and will be opportunistic.

Comments

I believe much of this is the culmination of the continual barrage of naysayers who exhibit their lack of vision and necessarily bias required to miss the magnitude of remaking our entire technology system. As you so well stated sometime ago, “Pessiments sound intelligent, optimists make money.” The thing I think is happening with regularity is the removal of the uptick rule requirement for entering a short position linked with hedge funds massive credit lines has created the opportunity for them to raid companies of choice at will. Would that there was someone with the knowledge and connections to educate the appropriate governmental authorities the correct this abomination to capitalism IMHO. Ray Weldon on 2/5/2026 9:19:28 AM

I have this seemingly crazy expectation (crazy by today’s market behavior) that companies which beat on top and bottom line and raise guidance beyond expectations to go up nicely, not down a ton. Ugh. Tom Woodall on 2/5/2026 9:25:40 AM

You're so interesting and informative! You bring all kinds of info into your commentary that's just so interesting! Thank you Charles! Lorin Kenfield on 2/5/2026 11:17:13 AM

The cash reserves are lying in wait for those early buy calls! Hoping the market thaws with the snow soon! Daria Schooler, MD on 2/5/2026 12:40:24 PM

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