The Monday Morning Playbook: Week of September 2, 2025

Good morning,

Here’s how I think about technical analysis vs. trend following.

Trend followers don’t care about a lot of “technical” things that I look at. Seasonality, breadth, intermarket analysis. Doesn’t matter to them.

They have a system designed for their time horizon, and if it’s in an uptrend, they’re long and if it’s in a downtrend, they’re short. Life is simple and they don’t have to worry about reversals because the system tells them when they’re out.

I see that appeal but that’s never been how I do things.

However.

I do believe that all good technical analysis is firmly rooted in trend following, and all that other “stuff” can never add up to be more important than the underlying trend. The trend triumphs over everything and that’s why when it comes to the ETF models, I try to never be underweight a relative uptrend and never overweight a relative downtrend.

So how do you square opposing trends and technicals? It’s not a sexy answer, but sometimes you want to just be closer to neutral and make sure that your portfolio’s relative performance isn’t riding on bets you don’t want to make.

This philosophy, which long-time followers have likely heard many times, is top of mind for me this week because, as I go through all my charts, I see a lot of places where I’m tempted to bet against the prevailing long-term trend.

A few examples of things we’ll walk through today that have compelling “technicals” but bad long-term trends:

• Energy stocks and oil

• Volatility

• Small caps relative to large caps

• Healthcare stocks

And on the other side of the coin, tech stocks took a hit last week as Nvidia failed to break out following earnings.

But that doesn’t mean there aren’t places where the trends and technicals aren’t aligned.

Two out-of-benchmark bets in our ETF models, China and gold miners, continue to pay. And financials are bouncing back in a big way, a topic discussed in last week’s Stock Trends report, providing a tailwind to small caps.

Investors need not worry about concentration risk or what will happen over the next 10 years. As long as you focus on what “is happening”, your portfolio will take care of itself.

A reminder that the September Trade Report will be out later today, and following this philosophy, both our ETF models have outperformed over the trailing one, three, and twelve months.

This week’s report will review:

• Nvidia’s risk to the S&P 500

• Equal-weight index technicals

• Small caps and banks benefitting from the steeper yield curve

• Fixed income

• Seasonality and sentiment

• ETF movers

• and more!