How to Trade Through Market Turbulence

"Stocks plunge"

"markets in turmoil"

"Investors panic"

You've seen and heard them all.

Every time the markets aren't moving higher they seem to be on the brinks of collapse - if you ask any journalist.

But we're not here to talk about them, we want to focus on what's controllable.

• What is the market doing right now?
• Where weakness is actually showing up
• How to apply it to your own portfolio.

What Is the Market Doing Right Now?

The chart above shows the sector breakdowns and their Year-to-Date performance, alongside the S&P 500.

As you can see, the S&P 500 has remained practically flat this year — currently up 0.61% YTD.

Meanwhile, we have $XLE (Energy) up 22.5%, $XLB (Materials) up 17.41%, and $XLP (Consumer Staples) up 15%.

I think you get the idea — defensive groups have been leading the charge so far this year.

Now look at the other end of the spectrum: $XLF (Financials) is down 7.59%, with Technology and Consumer Discretionary falling as well.

S&P 500 Remains flat on the year

We just determined that the S&P 500 has remained relatively unchanged. As you can see from the chart, we are at the same levels we were back in October 2025.

We also just saw that some groups are leading the pack, while a heavy portion are holding the index back.

And we’re talking about major components — Technology, Financials, Consumer Discretionary. These are all large weightings inside the S&P 500.

That helps explain why the index has been relatively flat.

Where's the weakness showing up?

Let’s look at Financials first.

Everything flows through banks. In the U.S., as well as across the world, they finance everything. That naturally makes this group important. Those are the facts.

The chart is showing $XLF (Financials) breaking down below its 2024 highs, with the lowest close since November 2025.

The line below is XLF relative to the S&P 500. It’s also failing below those November levels.

On both an absolute and relative basis, Financials are lagging right now.

That’s something to keep in mind as this plays out. If Financials are rolling over, will other groups begin to follow? Or is this simply part of the rotation within this bull market?

Software Getting Beat up

Here's one more chart I wanted to bring up. Looks very similar to financials but has already been dropping faster than financials.

With all the AI talk and hype these software companies have been getting crushed this year.

I was running my 52 week lows scanner last night and it was littered with software stocks.

• Software is below its November 2022 Vwap lows.
• below its 2021 cycle highs
• falling below 2019 lows

It's been a brutal start in software.

How do I apply this?

Now that we know there are areas of the market breaking down, how do we handle it?

First, identify the sectors or industries showing weakness.

Once we know the groups we’re looking at, check your portfolio. Review your holdings by sector and determine how much exposure you have to those areas.

Then go into your individual positions. If you are overweight any of these sectors, evaluate each chart. Which names are breaking down? Which look weakest?

The goal is to cut out laggards — anything that is dragging on your portfolio.

There may still be stocks within these sectors that are holding up.

You might also have an entry price that is well below the current market value. In that case, you can begin deciding where to trail stops and manage risk appropriately.

The purpose of this exercise is to start at the top.

Find where weakness is.

Determine how exposed you are.

Act accordingly.

Always have a plan.

 

Your fellow trader,

Lu