Energy (XLE) stocks moved in tandem with crude oil yesterday, which edged higher on more saber-rattling in the Iran Conflict. I’m encouraged to see strength in Materials (XLB) and Industrials (XLI), while Technology (XLK) remains on autopilot. There are two areas of concern: Financials (XLF) are down 8 sessions in a row and significantly underperforming the S&P 500 (SPX).

Consumer Staples (XLP) got all the attention at the start of the year, but has struggled since the Iran Conflict.

Consumer Discretionary spending has also begun to nosedive.

Consumer Discretionary ETF (XLY) spiked until recently, but is now struggling to hold on.

“In the midnight hour she cried more, more, more.”

-Billy Idol.

The Momo Machine (SPMO) roars on, dominating the market across all styles, as investors play the chasing-performance game. This is not the “greater fool game.”

Fantastic Light Show

The underlying fundamentals of many of the hot momentum names have gotten so much better in the blink of an eye; it's hard to say these stocks are overvalued.

The optic space is a great example. The co-packaged optics (CPO) portion was $169 million in January and is now expected to reach $91 billion by the end of 2028. 

I keep thinking these names are overbought, even though they could be undervalued based on 2028 assumptions. That scenario creates great buy-the-dip opportunities, but these glass and photonics names won’t dip:

• Lumentum Holdings (LITE)
• Coherent Inc (COHR)
• Corning Inc (GLW )

Neither will memory names:

• Western Digital Corp (WDC)
• Seagate Technology Holdings PLC (STX)

It's been a fantastic show, indeed.

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