David Hay — Haymaker Daily: Rotation, Not Correction
A short technical/breadth Daily: despite the concerning technicals flagged in recent Dailies, several breadth signals argue a major rotation is more probable than a significant correction — the regional-bank ETF KRE breaking out toward a five-year-resistance / all-time-high test at ~80, the cumulative advance/decline line at fresh peaks (unlike early 2008 and early 2022), and small caps + the equal-weight S&P at new highs. The playbook: hunt pulled-back, range-expanded sectors still in uptrends — XLE the named one.
One-line take: A technical/breadth Daily arguing that a major rotation, not a significant correction, is the more probable path for U.S. equities — even after all the cautionary Dailies. Three tells: (1) KRE, the regional-bank ETF, has completed a multi-year breakout and sits just under five-year resistance; a push above 80 would be a fresh all-time high, "an even more positive development." (2) The cumulative advance/decline line keeps making fresh peaks — the direct opposite of early 2008 and early 2022, when both KRE and the A/D line were rolling over even as the index sat near all-time highs (i.e. no bearish breadth divergence this time). (3) Small caps and the S&P equal-weight index are also at new highs. The playbook that follows: look for sectors that pulled back after a clear upside range expansion but remain in long-term uptrends — XLE, "Haymaker favorite," is the named qualifier. Both KRE and XLE are Positive here.
1. Stocks & names mentioned
| Ticker | Name | Research | View | What he said | At |
|---|
| KRE | SPDR S&P Regional Banking ETF | QT · SA · STK | Positive | An "encouraging indicator": the regional-bank index has completed a multi-year breakout and is "not far from breaking above five-year resistance." A penetration above 80 would mark a new all-time high, "an even more positive development." Its firmness (vs its early-2008/early-2022 rollovers) is cited as evidence of rotation over correction. | read ↗ |
| XLE | Energy Select Sector SPDR ETF | QT · SA · STK | Positive | "Haymaker favorite" and the named example of the rotation playbook — a sector that has pulled back after achieving a clear upside range expansion but remains in a long-term uptrend. The ETF of leading energy enterprises; the kind of name to be "searching for" if the breadth signals are correct. | read ↗ |
"View" is Haymaker's stance in this post. Referenced only (no ticker assigned): "small-cap stocks" and "the S&P equally weighted index" (both cited as at new highs — no specific fund named, so deliberately not given a ticker), and the S&P 500 cumulative advance/decline line (a breadth indicator, not a security). Research: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis.
2. Talking points
The thesis: a major rotation is more probable than a significant correction
- Recent Dailies have flagged "various concerning aspects" of U.S. stock-market technical and fundamental behavior, but Haymaker argues "several important features" point to a major rotation rather than a significant correction.
Tell #1 — the KRE multi-year breakout, nearing a five-year-resistance / all-time-high test
- The regional-bank index KRE has completed a multi-year breakout and is "not far from breaking above five-year resistance."
- A penetration above 80 would represent a new all-time high — "an even more positive development."
Tell #2 — the cumulative advance/decline line keeps making fresh peaks (the anti-2008 / anti-2022 signal)
- The cumulative advance/decline line "continues to attain fresh peaks."
- This is the opposite of early 2008 and early 2022, when both KRE and the cumulative A/D line "were turning down even as the stock market was close to all-time highs" — i.e. there is no bearish breadth divergence this time.
Tell #3 — small caps and the equal-weight S&P at new highs
- Similarly, small-cap stocks are notching new highs, "as is the case with the S&P equally weighted index" — breadth confirmation beyond the cap-weighted megacaps.
The playbook — buy pulled-back, range-expanded sectors still in uptrends (XLE)
- If these breadth signals are correct, "it may behoove investors to be searching for those sectors which have pulled back after achieving a clear upside range expansion but remain in long-term uptrends."
- One that qualifies is Haymaker favorite XLE, "the ETF of leading energy enterprises."
3. In plain English
A jargon-free note on the two named ETFs. (Companion to the table above; renders on each ticker's consolidated page.)
KRE — SPDR S&P Regional Banking ETF Positive
KRE is a basket of regional (small and mid-sized) U.S. banks. Bank stocks are a live read on the health of credit and the economy, so when they are strong it usually means the market's plumbing is fine. Hay's point is chart-based: KRE has broken out of a multi-year trading range and is now pressing against a ceiling it has failed to clear for five years (around 80). If it pushes through that level it makes a brand-new all-time high — a bullish sign. The key contrast is that in early 2008 and early 2022, banks and market breadth were quietly weakening while the headline index was still near its highs (the warning before a fall); today they are doing the opposite, breaking out, which is why he reads this as money rotating into new leadership rather than a market about to correct.
XLE — Energy Select Sector SPDR ETF Positive
XLE holds the big U.S. energy companies (the major oil and gas names) and is a long-standing "Haymaker favorite." Hay uses it as the textbook example of what to buy if this is a rotation: a sector that had a strong run (a "clear upside range expansion"), then pulled back — but whose long-term uptrend is still intact. In other words, a healthy dip in a still-rising group, rather than a broken one. If breadth is confirming a rotation, these pulled-back-but-still-uptrending sectors are where he'd hunt, and energy is the one he names.
Summary derived from the paid Haymaker newsletter (text in transcript.txt) for personal study. Not investment advice. © Haymaker / David Hay for source material.