Pay Attention to What Isn’t Breaking
Semis in 2020, energy today — the quiet leaders always show themselves early.
One of the most reliable — and most misunderstood — patterns in markets is simple:
The groups that show relative strength on the way down almost always lead the next leg higher.
This isn’t theory.
It’s what happens in every major cycle.
“Strength begets strength, weakness begets weakness.”
— Market proverb
If you want to understand where the next bull leg is going, don’t obsess over the stuff falling apart.
Pay attention to what isn’t breaking.
Lesson 1: Relative Strength Writes the Future
Look at the semiconductor chart during the COVID crash.
📈 Chart: Semiconductors vs Dow 30
When the world was falling apart in early 2020, semiconductors went down the least.
Not by a little — by a lot.
While the Dow got crushed, semis held their 40-week moving average far better. They broke less, they recovered faster, and they were the first to make new highs.
This is exactly what leadership looks like:
They get hit less during the storm
They stabilize first
They break out before the rest of the market even catches its breath
That’s why the semis chart is so important: it’s a literal instruction manual for how relative strength behaves in real time.
“Markets don’t hide their leaders — they whisper them.”
Lesson 2: Energy Is Whispering the Same Thing Right Now
Fast-forward to today.
Even this week — when almost everything got hit — energy barely flinched.
📈 Chart: XLE Energy ETF
Energy is holding right under the same multi-year resistance zone (97–101) that capped the sector in 2008, 2014, and 2022. But unlike last year, it keeps pressing into the ceiling instead of rejecting from it.
That is not weakness.
That is accumulation.
When a sector refuses to go down while the index is red, that’s relative strength — the #1 ingredient for future leadership.
We saw the same behavior in international markets this week.
Brazil, Chile, Poland, South Africa — all holding up way better than the S&P.
Leadership keeps showing up where most people aren’t looking.
Lesson 3: When Something Holds Up in a Sell-off, Pay Attention
This is the part newer traders miss.
They look at what’s falling.
Experienced traders look at what isn’t.
Energy didn’t budge this week.
Even with the S&P under pressure, XLE’s drawdown was minimal. That’s not random — that’s buying pressure.
If energy can continue doing what semiconductors did in 2020 — declining less, basing tight, refusing to break — then it’s setting up to lead the next few quarters.
The market tells you the future by how it behaves in the present.
Energy is behaving like a leader.
International markets are behaving like leaders.
Metals are behaving like leaders.
The S&P? Not so much.
The Takeaway
If you want to know where the next leg up will come from, don’t wait for CNBC to bless it.
Just look at what’s holding up while everything else is cracking.
Semiconductors taught this exact lesson in 2020.
Energy is teaching it again right now.
When the selling stops — even temporarily — the leaders will be the ones already pressing against highs.
And if energy keeps doing what it’s doing?
Over the next couple of quarters, this may be the sector that rips first.
Against All Odds Research
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