The biggest story in 2026 hasn’t been the indexes.
It’s the spread underneath them.
You don’t even have to leave technology to see it. Software stocks just closed at new multiyear lows. At the same time, semiconductors are at all-time highs.
Same sector. Completely different reality.
And here’s what makes it even more interesting. The market held up just fine last week. Stocks acted well. Crypto acted well. Risk appetite didn’t look like it was under pressure at all.
So what’s going on?
Is the market telling us it’s perfectly happy to move forward without software? That whatever damage needed to be done has already been done?
Or is software the part of the market that’s actually telling the truth, and everything else just hasn’t caught up yet?
That’s the question right now.
And how we answer it is going to dictate everything from here.
The “K-Shape” in Tech
My friend Riley Rosebee put it perfectly this week.
AI isn’t just a theme. It’s creating a split.
A real one.
Inside technology, you’ve got two completely different markets moving at the same time.
On the surface, nothing is happening. The S&P 500 and Nasdaq 100 have gone nowhere since late October. No real progress. No real damage either.
Just chop.
But underneath?
That’s where the story is.
Semiconductors have been ripping higher the entire time. Meanwhile, software has been getting destroyed.
That’s your “K”:
This is usually the kind of language economists use when they talk about winners and losers in the real economy.
That’s not our game. We’re not trying to solve the economy. We’re trying to make money.
And this is the environment we’re dealing with.
A market that looks fine at the index level, but is making clear decisions underneath the surface.
The only question now is what it means.
Because this kind of divergence doesn’t just sit there forever.
Sacrifice or Canary?
This is it.
Is software warning us? Or is it being sacrificed so everything else can keep going?
Because if this is a canary, then the message is clear. Liquidity is drying up. Risk is getting repriced. And what’s happening in software eventually spreads everywhere else.
But if it’s not?
Then this is absorption.
And the market is doing what it does best. Taking a hit, redistributing the damage, and moving on without it.
Look at what actually happened this week.
Equal-weight technology just made new all-time highs. Small-cap tech did, too. Mid-cap tech as well. Both versions of semis are at new highs, the equal-weight index and the market-cap-weighted.
That’s not a market breaking down.
That’s a market rotating.
All of that strength, while software is down more than 30% in a matter of months and just closed at fresh multi-year lows.
If that kind of destruction was going to take everything with it, it would have already happened.
It didn’t.
So maybe the market already made its decision.
Software isn’t the signal.
It’s the sacrifice.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs