Master Trader ETF Investment Trader for the Week of 2-2-26

There was a lot of big news of the week:  Trump threatening 100% tariffs on Canadian goods;  gold, silver and many metals tanking after setting new highs; the US dollar continuing its selloff Monday and Tuesday; the Federal Reserve holding rates unchanged at Wednesday’s policy announcement; President Trump’s nomination of former Federal Reserve governor Kevin Warsh to succeed Jerome Powell as chair of the central bank (and helped fuel a nasty intra-day selloff on the markets on Thursday followed by a bullish retracement); consumer confidence declining to 84.5 in January, the weakest since 2014; MSFT and the software sector continuing its selloff; and the UNH/HUM sector getting punished on news of lower reimbursement rates; increasing military presence near Iran (and increased threat of possible bombing and a regional war); rising oil prices; many earnings announcement from FAANG companies; and a partial government shutdown started over funding of DHS/ICE.

After all of that news and volatility, the SPY, DIA, QQQ finished little changed although the IWM was weaker, closing down 1.5%.

Over the last two weeks, most indices and sectors have displayed persistently choppy, uneven price action. This is not a market rewarding broad exposure or passive participation. Instead, it is demanding selectivity, timing, and risk control.

Leadership has narrowed, rotations have been abrupt, and reactions to news have been exaggerated in both directions.

That environment persisted last week.

Wednesday was one of the calmer reactions to the FOMC meeting in many years.   The Fed kept rates unchanged as expected.   Powell said the data no longer justified additional near-term rate cuts. Officials pointed to accelerating growth, moderating inflation pressures, and a more solid labor market, and removed prior language about downside employment risks.

The next rate cut is not expected until the June meeting, which would be under the next Fed chair (Powell’s term ends in May), with a total of two cuts for the year.

Gold and silver gapped to all-time highs on Thursday before tanking.  The metals have rocked since 2025 as capital rotated out of fiat currencies and sovereign bonds and into hard assets with the dollar weakness, geopolitical stress, unconscionable U.S. debt from no fiscal discipline, and uncertain U.S. policy.

However, the bubble popped in the short term right from Thursday’s gap higher.  A violent selloff sent prices crashing to their biggest one-day dollar decline on record.  Silver prices fell 31%, their sharpest drop since March 1980, when the Hunt brothers tried to corner the market.

Regardless of the narrative attached to the move—whether it was Fed speculation or political commentary—the price action itself was textbook: an overextended trend meeting panic liquidation. When markets reach that point, the bullish reasoning is over. It becomes a “sell at any price” event.

Microsoft’s earnings and guidance triggered a sharp drop. The stock gapped lower by nearly 10%, and the damage didn’t stay contained! Software ETFs such as IGV and XSW were dragged into bear-market territory (IGV is more than 20% below its October high), with no meaningful bottoming action evident. That type of price behavior implies further downside risk rather than immediate stabilization.

Bitcoin and Ethereum both broke below two-month support levels. Sideways consolidation since mid-October resolved lower last week, signaling buyer exhaustion. Unless these moves prove to be breakdown failures—and quickly—the path of least resistance points to lower prices, potentially through a waterfall-type decline. As we finalize this report, /BTC is trading at 77,500, a big drop from Friday's price at 4 ET. 

Looking ahead, economic data next week—particularly inflation-related reports—could easily act as a catalyst for another short-term swing. If the S&P 500 decisively breaches 6,900, the odds increase for a move toward 6,800.

Internal market gauges remain neutral, which is important. They are not signaling risk-off, but they are not providing a strong tailwind either. Breadth remains below the zero line, confirming that most stocks are underperforming, even as indices hold up.

That divergence is both a warning and an opportunity. If money rotates into laggards, breadth can improve without indices collapsing. If it doesn’t, leadership deterioration becomes more dangerous.

Nothing changes in how we operate. We will continue to trade the same price patterns, manage risk the same way, and let the market—not opinions—tell us when opportunity is present.

If you're not in the Green Room with us, log in to YouTube, Facebook, or Twitter to get our pre-market review at 9 AM ET. If you can't make it, you can view the recording.

Good trading.

TREND MATRIX

I reviewed the Trend Matrix in the video below

S&P Sector ETFs – Sorted by Weekly Percent Change

Other ETF Sectors – Sorted by Weekly Percent Change

VIDEO REVIEW OF ETF SECTORS - Click lower right to open Full Screen.

NEW ETF TRADE IDEAS

2/2:  State Street Real Estate Select Sector SPDR ETF (XLRE) - Over $41.52, consider buying a half lot of the ETF.    Buy Setup and reversal at the 20/50/200-MA, bullish weekly/monthly.  Stop $40.24.