Advisory Swing and Options Trader for the Week of 1-20-26

Last week, we noted that it was options expiration week, with significant open interest clustered around the 7,000 strike on the S&P 500, both calls and puts. That level did exactly what heavy options interest often does—it acted as a lid.

Post-Expiration: The Spring Is Coiling

The 7,000 strike contained the upside. Prices briefly dipped below 6,900, but buyers stepped in immediately, pushing the S&P back toward the middle of its range, where it closed just slightly below its open.

What stands out now is the contraction.

The distance between swing highs and swing lows continues to narrow. Ranges are compressing. That “coiling spring” behavior often precedes a move of consequence, and it frequently occurs after options expiration—not during it.

S&P 500 ETF Daily Chart - Options Expirations Marked.

In the Green Room, I showed past examples of post-expiration behavior. These are not explosive moves, but tradable ones, particularly for short-term swing traders who understand price structure, context, and risk.

This is where money management separates professionals from guessers.

NASDAQ 100: Another Coil, Different Message

We’re seeing similar compression in the NASDAQ 100, tracked by the QQQ. The range has been narrowing for over six weeks, tightening even more recently.

Range-bound markets eventually break out to the upside or downside. What’s equally important is understanding that initial breaks often fail. False breaks are common and often provide the clearest information about who is actually in control.

Patience here matters.

Markets change. They always do. That’s part of what makes them endlessly fascinating—and humbling—no matter how long you’ve been doing this.

Leadership Under the Surface Is Changing

What’s unusual is seeing Apple, Microsoft, Meta, and Netflix decline while the NASDAQ 100 remains flat. Historically, that’s not normal.

Dig a little deeper, and the picture gets more interesting. Software stocks like TEAM, INTU, APP, ADBE, and QCOM have been hit hard. That raises an obvious question: What’s holding the index together?

The answer is structural.

The NASDAQ 100 is capitalization-weighted. Nvidia, which has gone sideways, and Google, which has edged higher, have provided enough ballast to keep the index from rolling over.

There’s also a bigger theme at play. AI is boosting semiconductors, but at the same time, it’s changing the economics of software—what’s needed, what’s obsolete, and what it costs companies to keep up.

This is rotation, not collapse.

Financials: Earnings Reactions Raise Eyebrows

Earnings season added another layer of complexity last week, especially in financials.

Some of the weaknesses can be traced to President Trump’s comments about capping credit card interest rates at 10%. That explains the pressure in American Express, Visa, and MasterCard, all of which have yet to report.

What was more surprising was the post-earnings selling in JPMorgan, Bank of America, and Wells Fargo, while Goldman Sachs and Morgan Stanley surged.

Same sector. Very different messages.

That contrast matters.

Are Some Cylinders Starting to Sputter?

Last week, we said the markets were firing on all cylinders. This week, it’s fair to ask whether a few of those cylinders are beginning to sputter.

The encouraging answer comes from two areas that have historically lagged but often play “catch-up”: Small Caps (Russell 2000) and Transports. Both have been leading recently and show no signs of breakdown.

Add to that the NYSE Composite, which made a new all-time high last week, and the broader picture remains constructive.

Rotation Is Vicious—and Revealing

One of last week’s premarket titles was “Rotation Is Vicious.” That remains true.

If you want proof, look at last week’s top performers within the NYSE Composite: beaten-down restaurant stocks that suddenly caught fire—KRUS, DRI, TXRH, CAVA, CAKE, SHAK, CRBL, YUM, and SBUX.

These names were left for dead not long ago. Now they’re extended in the short term and due for pullbacks—but the rotation itself is meaningful.

Undervalued alone isn’t enough. Cheap can always get cheaper. But when money rotates aggressively into areas like this, it often reflects a growing belief that economic conditions for the middle-class consumer may improve—and that spending will follow.

What’s Ahead This Week

Earnings continue, shifting focus from banks to Netflix, Intel, Johnson & Johnson, GE, and United Airlines. The heavyweight tech names—Apple, Microsoft, Meta, Tesla—come later in the month.

On the macro side, PCE inflation (Thursday) is the key report, along with GDP growth and jobless claims. Markets are currently pricing roughly 50 basis points of rate cuts in 2026, so surprises here matter.

The World Economic Forum runs all week, and yes—AI will dominate the conversation.

There’s also the lingering possibility of a Supreme Court ruling on tariffs, which has been delayed twice already. The administration sounds confident. Markets will decide whether that confidence is justified.

S&P Sector ETFs – Daily Charts - To See a Larger Image,

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S&P Sector ETFs – Weekly Charts - To See a Larger Image,

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S&P Sector ETFs – Sorted by Weekly Percent Change This Week

Last week’s percentage changes.

The percentage changes tell you which sectors were the strongest or weakest on Friday and for the week, month, quarter, and year.

There are seven columns after the percent changes in the sector listed above.

You can see the ETFs that are the strongest getting stronger or weakening.

• Close above or below the 20-MA.
• Close above or below the 20-MA 5 Days Ago. C>20 -5
• Close above or below the 50-MA.
• Close above or below the 50-MA 5 Days Ago. C>50 -5
• 20-MA above or below the 50-MA.
• 20-MA is pointed up, and the close is above the 50-MA

With many stocks extended in the short term, the risk of consolidation or a pullback is rising. At the same time, stocks that have already been weak may not be finished moving lower if broader markets soften.

Those trapped in sideways ranges that were unable to participate during recent strength are particularly vulnerable during any short-term market weakness. Sideways markets tend to resolve with force, and laggards rarely get a free pass when pressure appears.

Importantly, our internal market gauges have not shifted to risk-off. Sentiment remains neutral, which leaves room for additional intermediate-term upside. That said, short-term corrections are inevitable. They always are.

Adding to the possibility of near-term adjustment was the decisive move higher in interest rates last week. On Friday, the 3-month, 2-year, 5-year, and 10-year Treasury yields all pushed higher together. The message from the bond market was clear: the Fed is not in a hurry to cut.

Fed cuts are liquidity, and liquidity is what markets thrive on. When the belief that another cut is imminent fades, the “party mode” can change quickly, and markets begin to adjust rather than accelerate.

Whether the move in yields—driven by bond selling—is a function of higher inflation expectations, stronger economic growth, or a mix of both, will be clarified over time. What matters right now is that the bond market, which had been indecisive and choppy for weeks, is finally resolving its indecision.

Rotation may continue to shuffle money out of winners and into laggards, keeping the broader indices contained within a range, perhaps a wider one. That type of environment favors selectivity, patience, and disciplined risk management, not prediction. It can be very good for Credit Spreads.

There will be no shortage of headlines capable of moving markets this week. As always, our focus will remain on price, structure, and risk, not opinions.

The chart above shows the Dow Jones Industrial Average through the lens of Master Trader Technical Strategies.

The Dow Jones Industrial Average continues to hold its uptrend and has been consolidating gains from two weeks ago.

Now that options expiration is behind us, we’ll see whether it can push through consolidation into new all-time highs.

Four Dow components report this week: 3M, Johnson & Johnson, Travelers, and Procter & Gamble.

Major Support remains aligned with the rising 50-day moving average. In strong markets, price does not revisit that level quickly. Any retracement should hold near the 20-MA, roughly around 48,400.

In the strongest scenarios, the Dow would not close below last week’s Bottoming Tail aligned with the 20-MA.

That’s the line in the sand.

Money Management for Trading and Investing

Proper money management for investing and Trading starts with position-sizing based on the amount of money you are willing to risk on a signal trade.

CLICK HERE to review these Master Trader Guidelines and Basic Money Management and Position Sizing Table.