October 2, 2026
Preview from my weekly report*
Risk-off
sentiment dominated October, but November should bring a reversal.
Stock market sentiment swung
further to pessimism last week, which is bullish according to The Art of Contrary
Opinion. Over
the past three weeks, stock market pessimists imagined worst-case scenarios
regarding inflation, rising energy prices, possible Fed interest rate hikes, AI
negative free-cash flows, and financing of planned massive AI infrastructure
spending. In addition, on 11/3/2026, midterm
election gains by the Democratic Socialists of America might be seen as disruptive
to business.
Defensive sectors have attracted new investment flows based on risk-off sentiment while cyclical and growth sectors were sold. If the worst fears don’t materialize, however, there could be a rapid reversal of this short-term trend. From a longer-term perspective, short-term fluctuations, corrections, and shakeouts based on the fleeting emotions of the masses are normal and expected, but the underlying major trend tends to be quite durable when supported by strong earnings growth, as is the case now. We believe that it is most likely that our highest-ranked, strongest stocks will resume their major uptrends.
Technology
ETF (XLK) whipsawed back below its
50-day SMA on 10/29/2026, reconfirming a short-term correction or shakeout. XLK
remains above its rising 200-day SMA, and the main trend is bullish as long as
the 50-day SMA stays above the 200-day SMA. Look for support around the recent
lows around 166-169 and 156-160. Fundamentally, there is no evidence of a
slowdown in the strong demand for technology. Overinvestment concerns that have
been persistent since June suddenly resurfaced despite extremely strong earnings
and forward guidance, but these familiar fears tend to be temporary and fluctuate
with the emotions of the crowd. “Half of money managers say the AI boom has
years left to run”—Barron’s BIG MONEY POLL.
Energy Sector SPDR (XLE) jumped up to another all-time
high on 10/30/2026. XLE remains above its 50-day SMA and 200-day SMA, and the
rising 50-day SMA remains bullish as long as it holds above the rising 200-day
SMA. Previous resistance around 66 may provide support, and there is further
support above 60, 57, and 52. Short-term performance heavily depends on changing
geopolitical developments involving Iran.
Our Colby INNOVATION
Portfolio has delivered a 34.29% total return this year, more than 2.4 times
the performance of the NASDAQ Composite (13.90%) and the S&P 500® (13.14%).
A short-term, profit-taking, corrective wave in June and July reversed in
August on the back of outstanding earnings reports and extremely strong
earnings guidance for the foreseeable future. Demand for innovative technology
is expected to exceed supply for years ahead. The most dynamic INNOVATION
stocks appear well positioned to continue their bullish major trends.
All of our clients have made positive returns over the past 15 years while taking substantially less risk. We offer complete transparency, anytime access to your funds, and low fees. Your assets are secure, insured, and you keep control over your money. For details email info@colbyassetmanagement.com or call 646-652-6879.
This Technical Analysis is made possible by use of MetaStock software. Try it at no risk for 30 days. (Check out the new and improved version 19.) Click this link to save 7%–9% on MetaStock® software.
