Make or Break
Support Is Hanging by a Thread
I write my Market Milestone Newsletter every Thursday night, and last Thursday SPY had just closed right on top of the 100-day SMA. Despite some up-and-down action this week, we are essentially right back at the same level we were at a week ago, once again testing this key level on SPY. It’s make-or-break time for the bulls.
SPY Daily Chart
QQQ already broke. The recent bifurcation in the market, with rotation into defensive names, made me cautious as the true market leaders were leading us lower. If we now get a breakdown of key support in DIA and SPY, that would give us full alignment across the major indices — it would just happen to be bearish alignment within a corrective path.
QQQ Daily Chart
Despite being at the same price level as last Thursday, the developments this week have leaned bearish. QQQ broke down after retesting and rejecting at its 100-day SMA. RSP put in a massive bearish engulfing candle, giving back an entire week’s worth of bullish progress. DIA rejected right at the very obvious $500 target level.
The Dow at $50,000 was all over the news last Friday as people celebrated the bull market. Anyone who doesn’t follow markets closely was told that this confirmed we are in a bull market. Of course, longs in DIA were going to use that key psychological level to sell into strength. Hype and headlines are often perfect sources of exit liquidity.
Because of this, I wrote a full newsletter last Saturday explaining why a 5% pullback in DIA was likely and why that breakout probably wasn’t the best place to buy.
Psychological levels matter. Look at how SPY has struggled around the $700 level. Go back and study what happened when SPY first hit $600 — it became a supply zone for months before tariff headlines accelerated the downside. I am not saying every round number causes a selloff. But $50,000 on the Dow was a widely celebrated milestone. That, combined with a 1.618 extension target, bearish RSI divergence, and the SPY/DIA divergence I discussed last week, all pointed toward at least short-term weakness.
DIA Daily Chart
While we are seeing increasing signs that a larger correction is likely developing, the SPY and DIA are still hanging on to critical levels, if only by the skin of their teeth.
The levels that need to hold to allow for a push higher into March — and possibly April are clear: the 100-day SMA on SPY, $492 on DIA — the open of the bullish candle that drove the move to $500 — and $600 on QQQ. QQQ has already broken initial support, and a decisive move below $600 would strongly suggest that a short-term top is in and that the April–October advance has transitioned into a larger corrective phase.
MAGS (the Magnificent 7 ETF) has been diverging from SPY for months and continues to make lower lows and lower highs since late October. XLF (Financials) broke its 200-day SMA on Friday — a sign that the sector may have topped and is unlikely to help SPY push to new highs right now. XLY (Consumer Discretionary) gapped below its 100-day SMA, retested it from underneath, rejected, and is now moving lower.
XLF Daily Chart
Meanwhile, XLB (Materials), XLI (Industrials), XLE (Energy), and XLP (Consumer Staples) have been pushing higher. But many of them are approaching levels where they likely need a retest, and even if they continue higher, they probably cannot offset weakness in the trillion-dollar tech leaders.
The bottom line is that QQQ, DIA, and SPY are all sitting right on key support. If they break, I believe it will mark the first meaningful wave of weakness since the April 2025 lows.
XLE Daily Chart
Not all sectors move together, which is what makes trading both challenging and profitable. Many names topped months ago and have already corrected significantly. Those stocks are more likely to bottom before the broad indices do. A number of charts are extremely oversold and due for at least a B-wave bounce.
My focus over the next few months will be on fundamentally strong names nearing what seem to be at least short-term lows, as well as the very strongest relative-strength leaders.
Now, I normally wouldn’t group BTC, SLV, and MSFT together — but I’m going to here. What they have in common is that I believe each may have one more swing lower before a meaningful B-wave bounce, and possibly new lows afterward to complete larger corrective structures.
Bitcoin
I write extensively on Bitcoin, so I won’t rehash everything here. Needless to say, everyone watching the chart wants BTC to tag the 200-week SMA, which has historically marked major bear market lows. I don’t think it will be that clean or that easy. I was hoping we might get that flush on February 6th — that may have offered the kind of obvious reset everyone is looking for — though even then I would have expected eventual downside rotation.
I’m still tracking my red and blue paths. In the red path, either the low is already in — which seems unlikely if equities and tech continue to weaken — or we break below the 200-week SMA by roughly 5% to 15%, flushing into the high $40,000s or low-to-mid $50,000s before a B-wave bounce. While it’s always possible that a B-wave bounce evolves into a new bull cycle, that’s not my base case right now. Either way, that’s why I prefer accumulating near the end of A waves. I plan to add in the mid-$50,000s down into the high $40,000s on a break of the 200-week SMA, fully aware that if the more bearish blue count plays out, we could see a swift move toward $38,000 without much of a bounce first.
BTCUSD 3 Day Chart
iShares Silver Trust (SLV)
SLV topped on February 29th and was one of the cleanest shorts I’ve taken in years. After a blow-off move, assets rarely return straight to new highs. Instead, they typically enter a large, choppy corrective pattern — much like what happened in 2011.
If this analog holds, we likely drop back toward the 100-day SMA and potentially double bottom around $55. If that level holds — though Wave A could extend as low as $45 — I could see a gradual climb back into the $80–$90 range that mirrors the 2011 June-to-August advance. Depending on the structure and depth of this current corrective wave, the B wave could even push to new highs, which again is why I prefer positioning near the end of A waves.
SLV 4 Hour Chart with 2011 Analog
Microsoft (MSFT)
Last but certainly not least is MSFT. It has been caught in the broader software unwind for a while now and has cascaded lower since its January 28th earnings report.
That said, it does appear to be approaching a potential low. I bought shares on the gap fill at $397 and quickly entered a collar three days later, structuring the trade so I either win small or win big. In steep downtrends, I prefer to protect aggressively, and that discipline has paid off over the past few sessions as weakness has continued.
MSFT also held up better than many of its peers on Thursday’s big bearish day, which reinforces my belief that a tradable low is getting closer.
If we flush into the anchored VWAP at $383, the 200-week SMA at $374, and fill the gap near $367, I plan to add. I think lumping MSFT into the broader “software apocalypse” narrative is short-sighted. Longer term, I expect it to remain one of the dominant AI leaders. However, that doesn’t mean it avoids a larger corrective structure. Like BTC and SLV, any relief bounce we get will likely resolve into a lower high, followed by a final lower low to complete the full corrective wave. My expectation is that MSFT eventually finishes that correction somewhere below $350.
If that scenario plays out, I expect to have already locked in gains and managed risk appropriately — assuming, of course, we don’t see a straight-line collapse that eliminates the opportunity to protect profitably.
MSFT Daily Chart
