Issue No. 15 · Wednesday · September 2, 2026
What’s Inside:
At a Glance - A “weight of the evidence” look at the current market environment, as well as my Regime map.
The Call - A deeper dive into what I am seeing.
Under the Hood - Current market internals, sector breadth, and intermarket analysis.
Sector Watch - Which sectors pass/fail the screening process.
Current Screen - Which stocks pass the screening process.
What I Am Watching - Stocks I am watching that are approaching a passing grade in the screening process. Plus, what changed from last week.
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At a Glance
Market regime: Risk On
The Call - The AI Trade
It is starting to look like the AI trade is about to become the main focus of investors again.
After a choppy summer, where a lot of the focus was not on AI growth, but on oil prices, inflation, and what the Fed will do next.
As a result, the AI trade was mostly ignored and avoided by investors.
However, when we look at the rotation of the various components that make up the AI universe (these are companies that will directly benefit from the buildout and growth of the AI space), the setup for a rotation back into the AI theme is beginning to form.
Below is a Relative Rotation Graph (RRG) of components (using ETFs as proxies) that make up the AI theme:
You will notice that the leading edge of the rotation is in the lower-left, “lagging” quadrant.
I get asked, “Shouldn’t we avoid anything that is lagging?”
Not necessarily. As I have written in the past, RRGs typically rotate in a clockwise fashion, from weakness to strength and back.
To help illustrate this concept, here is the above RRG chart of the AI theme in rotation:
Based on my research (and others have done similar research), the best opportunities occur in the lower left, lagging quadrant. (Think: Buy Low, Sell High)
Taking a closer look at the individual components in the AI theme can further help in distinguishing the areas that are starting to show improvement; I like to look at selling exhaustion.