Don't Go Chasing Waterfalls

Don't Go Chasing Waterfalls July 28, 2026

TECHNICAL STRATEGY Tactical Risk Shifting to RSP vs. SMH/QQQ Jonathan Krinsky, CMT WHAT YOU SHOULD KNOW: ( The Philadelphia Semiconductor Index (SOX) has fallen ~26% from its June 22nd all-time high. That is a 50% retracement of the entire rally that began on March 30th. While we continue to see downside risk towards the 200 DMA, from a tactical standpoint as we head into the heart of earnings season and the FOMC announcement tomorrow, this is not the spot to be pressing sales in semis. Rather, we now see more tactical risk in

This report is intended for Unauthorized distribution prohibited. the broad market, specifically the equal-weight S&P (RSP). After a -15% move in favor of QQQ into mid-June, the 40-day rate-of-change in RSP vs. QQQ is now nearly +15% which is about as high as it's been in the last 20+years. This likely reverts with RSP 'catching down' to the move in QQQ rather than the other way around. We have been constructive on areas like healthcare (XLV), REITs (VNQ), and insurance (KIE). These have all made nice moves of late, but we think a big part of their strength was due to positioning unwinds on the opposite side of the semi/AI trade. This is different from a fundamental rotation because if it was 'forced' buying on the way up, it's liable to a swift reversal when the unwind has run its course. ■ Don't Go Chasing Waterfalls. SOX is -26% from its 6/22 all-time high. That is a 50% retracement of the entire rally that began on 3/30. While we continue to see downside risk towards the 200 DMA, from a tactical standpoint as we head into the heart of earnings season and the FOMC announcement tomorrow, this is not the spot to be pressing sales in semis. ■ More Risk Now in Equal-Weight. Equal-weight S&P 500 (RSP) has been a nice run in the face of the semi/AI unwind, but it's now hitting the top end of its trend channel. We would look to start fading this move here. ■ The Pendulum Has Swung Both Ways. After a -15% move in favor of QQQ into mid- June, the 40-day rate-of-change in RSP vs. QQQ is now nearly +15% which is about as high as it's been in the last 20+years. This likely reverts with RSP 'catching down' to the move in QQQ. ■ RSP vs. QQQ back into heavy resistance. It's been a nice run for equal-weight, but likely needs some consolidation. ■ Why Can't The Unwind End Quietly? As we discussed on Sunday, this low-vol vs. high-beta extreme has precluded some meaningful broad market drawdowns. While there have been periods of a 'quiet unwind', given the amount of dispersion and volatility under the surface, we just don't see this period ending without a more violent drawdown on the index level. ■ Apple Getting Ripe. Apple (AAPL, not rated) has been working through a rising trend channel since 2020. It's once again at the upper end off that channel suggesting a pause or more likely pullback is the next meaningful move. ■ Healthcare (XLV) has been a favorite sector and while the trend is one of the best in the market right now, at this point we wouldn't chase strength. ■ REITs (VNQ) continue their history of a strong July, but like healthcare, we would begin to scale back on new buys here. ■ A very nice move for insurance (KIE) out of this range. Similar story in that medium- term trend is strong, but starting to get worried about what happens after the unwind runs its course.

PLEASE READ: IMPORTANT DISCLOSURES AND ANALYST’S CERTIFICATION APPEAR IN APPENDIX WWW.BTIG.COM

Source: BTIG and Bloomberg for all charts

BTIG, LLC Jonathan Krinsky, CMT (