Category: Uncategorized

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Small caps tend to outperform in the first few weeks of the new year. This is exactly what has happened so far. Russell 2k (IWM) is up 8% year-to-date. The Nasdaq 100 is up 1%. The divergence is significant. We don’t get to see it often. The optimists will say that this is just another sector rotation, and QQQ will likely be the next one to break out as small caps consolidate. This scenario wouldn’t surprise me, but I am also leaning on the cautious side. It doesn’t take a lot of buying power to move small caps when compared to large caps, so seeing pullbacks and fading in the latter is a red flag.

In the meantime, the industries that the government defines as strategically important enough to invest directly in them are clearly leading year-to-date – space, crypto, nuclear, rare earth metals, semiconductors, AI tech, energy infrastructure, and drones. Everything else is choppy and lagging…

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It is no news that small caps tend to outperform in early January. It has happened again this year. Russell 2k (IWM) tested its 50-day moving average on January 2nd, and then it went straight up, making a new all-time high. Also, not surprising – the big lift came from sectors that lagged last year – energy, financials, and beaten down groups like nuclear, robotics, crypto, space, rare earth metals, etc. This basically happens in the first few weeks of almost every year. 

The large-cap indexes, QQQ and SPY, are lagging behind small caps but are also near or at new all-time highs. 

AMZN is pushing higher in anticipation of the Supreme Court decision on tariffs. SHOP might also benefit alongside other retailers. After a brief consolidation, GOOGL broke out to new all-time highs. TSLA tested its 20-week moving average, where it found support. NVDA pulled back to its 20-day moving average, where buyers stepped in. Both are lagging the market indexes but are likely to set up at some point if the market remains strong. 

Memory chip stocks started the new year just like they finished the previous one – leading the market. SNDK is up 800% since last August. MU is only up 200% for the same period.

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MarketSurge powers the charts in this video.

The first trading day of 2026 offered a wide variety of action. Big tech stocks gapped up and then sold off, while the small-cap index Russell 2k (IWM) found support near its 50-day moving average and finished strong. This could be the foundation of the January effect, which benefits small caps. 

Unlike the rest of tech, semiconductors, which are the backbone of the AI revolution, had a strong start to the new year. SMH gained 4% to finish near its all-time highs. Memory stocks like Micron (MU) and Sandisk (SNDK) gained more than 10%. BIDU is not known as a semiconductor stock, but it actually owns Kunlunxin, which is a leading TPU chip manufacturer in China, and it is expected to go public in 2026. BIDU gained 14% on Friday, and it is currently the strongest Chinese stock.

The real bottleneck in AI is not processing power but electric power. The start of the new year saw strength in a large array of energy stocks. CEG, which is a top natural gas and nuclear play, gained 4%. GEV, which provides grid solutions and power-generation systems, bounced near its 20-day simple moving average and gained 3%. Bloom Energy (BE) designs and manufactures “energy servers” that use an electrochemical process to convert fuels—such as natural gas, biogas, or hydrogen—into electricity without combustion. Their systems provide a “plug-and-play” solution that allows businesses, particularly AI data centers, to bypass traditional grid interconnection delays. BE bounced near its 20-week moving average and gained 13% on January 2nd. Other energy plays like TLN, NRG, and BWXT also had hefty gains. 

Solar also had a strong start to the year. The solar ETF, TAN, gained 5% in one day, boosted by strong performance in FSLR, CSIQ, ENPH, SEDG, JKS, SHLS, etc. I’ve said it here before – at 5 cents per kWh, solar is by far the cheapest source of electricity. China knows that and installed 300 GW in 2025. The US is expected to install 300GW of solar in the next five years. 

In other words, AI remains the top market theme at the start of 2026. The difference this year is that the wave is not lifting all boats – some are sinking, some are treading water, but select few in the semiconductors and energy space are pushing higher. 

I wish you a happy and very successful 2026!

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Disclaimer: Everything I share is for educational and informational purposes only, and it should not be considered financial advice. Read my full disclaimer here.