& SECTOR ROTATION ANALYSIS

Monday, February 10, 2026 – 6:45 AM PST

Timothy McCandless – Protected Wheel Strategy

SECTION 1: MARKET OVERVIEW

Pre-Market Status (Monday 6:45 AM PST)

SPY Futures: $6,955.00 (+0.03%) | FLAT – Friday’s close $690.62

QQQ/Nasdaq Futures: 25,170.75 (+0.03%) | FLAT – Friday close $609.65 (+2.11%)

Russell 2000 Futures: 2,677.90 (0.00% unchanged) | Friday close +3.60% = STILL +7.5% YTD

VIX: 17.76 (Friday close, -18.42%) | Compressed from Thursday spike

10-Year Treasury: ~4.22% (Friday close) | THE SILENT KILLER: Stabilizing after volatile week

KEY OBSERVATION: Pre-market FLAT = Weekend digestion. Friday’s strong rally (+1.92% SPY, +3.60% Russell) NOT extending yet. First 30 minutes (6:40-7:10 AM) will CONFIRM or DENY if The Great Rotation continues.

Friday’s Action Recap

• SPY +1.92%, QQQ +2.11%, Russell +3.60% = Risk appetite RETURNED after Thursday selloff
• VIX crushed -18.42% (from 21.77 → 17.76) = Fear spike REVERSED
• Russell +3.60% OUTPERFORMED SPY/QQQ AGAIN = Small cap rotation still INTACT
• Critical stat: Russell 2000 +7.5% YTD vs Nasdaq ~flat YTD = THE GREAT ROTATION OF 2026 confirmed

SECTION 2: SECTOR ROTATION STATUS

🟢 STRENGTHENING SECTORS (Hunt Collars Here):

1. MATERIALS (XLB) – +9.05% YTD | RS: SECTOR LEADER | Volume: ELEVATED

• Real assets (gold, metals, copper) showing ‘outstanding’ performance
• AI infrastructure copper demand = Multi-year driver
• Geopolitical uncertainty + inflation hedge = Sustained institutional buying
• Key names: FCX (copper), NEM (gold), LIN (industrial gases), ALB (lithium)

2. INDUSTRIALS (XLI) – Strong | RS: IMPROVING | AI buildout = Physical reality

• $540B hyperscaler capex 2026 (Goldman Sachs) = Multi-year predictable catalyst
• Data center cooling, power infrastructure, heavy machinery = Growth drivers
• Key names: GE (aerospace), RTX (defense), CAT (machinery), VRT (cooling)

3. ENERGY (XLE) – Outperforming | 48.3 GW power demand from data centers

• Natural gas (CNG, EQT) primary bridge fuel for AI infrastructure

4. HEALTHCARE (XLV) – Schwab OUTPERFORM | Defensive + Growth combo

• LLY ‘firing on all cylinders’ + defensive recession hedge qualities

🔴 WEAKENING SECTORS (AVOID New Collars):

1. TECHNOLOGY (XLK) – ~Flat YTD | RS: MIXED | Distribution pattern

• SOFTWARE: COLLAPSED 20%+ – AI disrupting SaaS models
• ‘Red Tuesday’ January wipeout ($300B) = Sector sentiment broken
• SEMICONDUCTORS: Bounced Friday (+NVDA, TSM) but NEED 3+ DAYS confirmation
• Monday test: Does Friday chip bounce get Day 2 follow-through? Or dead cat?

2. CONSUMER DISCRETIONARY (XLY) – Schwab UNDERPERFORM | Lower-income stress

• Avoid – consumer pressure not resolved

3. FINANCIALS (XLF) – Mixed | Credit card rate cap proposal = Policy uncertainty

• Strong Q4 earnings BUT regulatory risk high – wait for clarity

ROTATION TYPE: THE GREAT ROTATION OF 2026

MONEY FLOW:

• FROM: Software (-20%), High-multiple SaaS, Mega-cap tech
• INTO: Materials (+9.05%), Industrials, Energy, Small caps (Russell +7.5%)
• Pattern: ‘Physical Reality’ over virtualization – AI needs REAL infrastructure (copper, power, cooling)

SECTION 3: FINVIZ SCAN + SECTOR ALIGNMENT

YOUR SCAN CRITERIA: Mid/Large cap >$1B, Above 20D/1D SMA, 0-10% from 52-week high, Up last week, Ascending pattern, Weekly options

YOUR EDGE – SCAN + SECTOR ALIGNMENT:

When you run your FinViz scan this morning, you will see CLUSTERING in Materials and Industrials.

• EXPECTED: 6-10 Materials stocks meet your criteria
• EXPECTED: 4-8 Industrials stocks meet your criteria
• INTERPRETATION: This is NOT random. This is institutional ACCUMULATION visible in your scan.

WHY THIS MATTERS:

• Materials +9.05% YTD = SECTOR LEADER
• 6-10 stocks from ONE sector in your scan = Systematic institutional buying
• Your scan criteria = Strong momentum + Near highs + Up last week
• Conclusion: Materials has BOTH sector leadership AND individual stock momentum = BEST SETUP

Expected Scan Results by Sector

MATERIALS (XLB) – 6-10 stocks expected ⭐

• FCX, NEM, LIN, ALB, APD, DD, CTVA = High probability to appear
• Look for: Copper miners, gold miners, industrial gases, lithium producers

→ YOUR TRADE: 

• IF FCX appears in scan: Priority #1 collar
• Sector +9.05% + Individual momentum + Rich premium (2.5-3.0% ATR) = IDEAL
• Setup: Buy 100 shares + Sell weekly call 5% OTM + Buy monthly put 10% OTM

INDUSTRIALS (XLI) – 4-8 stocks expected ⭐

• GE, RTX, HON, CAT, BA = High probability to appear
• Look for: Aerospace, defense, heavy machinery, data center infrastructure

→ YOUR TRADE: 

• IF GE appears in scan: Priority #2 collar
• $540B capex = Predictable multi-year revenue, not speculative AI bet

TECHNOLOGY (XLK) – 2-4 stocks possible ⚠️

• NVDA, AMD, TSM = May appear IF Friday bounce continues
• SOFTWARE NAMES UNLIKELY – Down 20%+, broken momentum

→ YOUR DECISION: 

• IF chips appear in scan: WAIT for 3+ days follow-through
• Friday = Day 1 bounce. Monday = Day 2. Need Day 3, 4, 5 confirmation before collar
• Sector RS deteriorating = Don’t fight the trend for one green day

SECTION 4: MONDAY’S COLLAR OPPORTUNITIES

Priority 1 – Execute IF In Your Scan

✓ FCX (Freeport-McMoRan) – IF in your scan

• Sector: Materials (XLB) – +9.05% YTD LEADER
• Premium: RICH (2.5-3.0% ATR) – Excellent for weekly call selling
• Catalyst: AI data center copper demand + geopolitical hedge
• Morning Watch: 6:40 AM – Does FCX get VOLUME + HIGHER PRICE?
• Your Edge: Selling rich premium in THE strongest sector with visible institutional accumulation

✓ GE (GE Aerospace) – IF in your scan

• Sector: Industrials (XLI) – AI infrastructure beneficiary
• Premium: GOOD (1.8-2.2% ATR) – Weekly options liquid
• Catalyst: $540B hyperscaler capex = Multi-year visibility
• Your Edge: Predictable government-backed revenue, not speculative AI bet

Priority 2 – Backup Plays

• NEM (Newmont): IF in scan – Gold mining, Materials sector
• LIN (Linde): IF in scan – Industrial gases for AI infrastructure
• RTX, CAT (Raytheon, Caterpillar): IF in scan – Industrials strength

AVOID – Even IF They Appear

• SOFTWARE NAMES – Sector down 20%+, broken momentum, AI disruption = Distribution
• SEMICONDUCTORS – Wait 3+ days confirmation, Friday = Day 1 only
• CONSUMER DISCRETIONARY – Consumer stress unresolved

SECTION 5: 10-YEAR TREASURY – THE SILENT KILLER

Current: ~4.22% (Friday close) | NEUTRAL ZONE

Trend: Stabilizing after volatile week (Thursday 4.12% low → Friday 4.22%)

THIS WEEK’S WILD RIDE:

• Thursday: Yields PLUNGED 10 bps on weak jobs (JOLTS, claims, Challenger, ADP)
• Friday: Bounced 4 bps as risk appetite returned
• Markets pricing 58 bps of cuts 2026 (first cut June, possible second September)

IF YIELDS FALL (below 4.10%):

• Helps: Small caps (floating rate debt relief), Real Estate, Utilities
• Collar Impact: Materials/Industrials STILL best (growth-driven, not rate-sensitive)

WATCH LEVELS:

• 4.30% = Resistance. Break above = Rate cut expectations fade, Materials/Small caps may pause
• 4.10% = Support. Break below = Rate cut acceleration, helps small caps further

SECTION 6: 6:40-9:00 AM INSTITUTIONAL FLOW WATCH

First 30 Minutes (6:40-7:10 AM PST) – CRITICAL

TODAY IS THE TEST: Pre-market FLAT means institutions waiting. First 30 minutes will CONFIRM or DENY if Friday’s rotation momentum continues. This is your decision window.

1. Do Materials (XLB) and Industrials (XLI) get VOLUME + HIGHER PRICES?

• If YES: Rotation continues = EXECUTE FCX, GE collars
• If NO: Rotation pausing = WAIT, don’t chase Friday

2. Does tech (chips) show Day 2 follow-through or distribution?

• Watch: NVDA, AMD, TSM for volume AND direction
• Chips HIGHER + VOLUME = Maybe AI beneficiary thesis alive
• Chips FLAT or LOWER = Friday was dead cat bounce

3. Russell 2000 vs SPY – which LEADS the open?

• Russell LEADS = Rotation confirmed, small/mid cap strength continues
• SPY LEADS Russell = Mega-caps reclaiming, rotation weakening

Decision Timeline

• 7:10 AM: IF Materials/Industrials strong with volume = EXECUTE Priority 1 collars
• 8:00 AM: Confirm morning thesis or adjust. IF sector fading = WAIT
• 9:00 AM: Final positioning. IF no clear setup = NO TRADES (discipline > forced execution)

SECTION 7: BOTTOM LINE – YOUR EDGE TODAY

Monday’s Thesis

THE GREAT ROTATION OF 2026 is real (Russell +7.5% vs Nasdaq ~flat YTD). Friday’s rally was Step 1. Monday morning is Step 2 – THE TEST. Your edge = Hunt collars in sectors with INSTITUTIONAL ACCUMULATION (Materials, Industrials) confirmed by BOTH sector leadership AND your FinViz momentum scan clustering. Pre-market flat = Weekend digestion. First 30 minutes decide if rotation continues or pauses.

Execute If Confirmed

• Primary: FCX collar IF in your scan AND Materials gets morning volume + strength
• Primary: GE collar IF in your scan AND Industrials maintains Friday momentum
• Secondary: NEM, LIN, RTX, CAT IF in scan and primary names unavailable

Your Unique Edge

YOUR METHODOLOGY WORKING:

• FinViz Scan: Shows you which individual stocks have momentum
• Sector Rotation: Shows you which sectors institutions are BUYING
• OVERLAP: When scan + sector ALIGN = HIGH PROBABILITY
• Today: Materials (+9.05%) + 6-10 scan hits = NOT RANDOM = INSTITUTIONAL ACCUMULATION

Retail chases tech bounces (fighting distribution). You hunt where institutions are ACCUMULATING (Materials/Industrials). That’s your edge.

RISK LEVEL: MODERATE

Pre-market flat = Uncertainty BUT:

• Fundamentals strong: 79% S&P 500 beating earnings, earnings growth 11.4%
• VIX 17.76 = Elevated but not panic
• Rotation = Broadening rally (healthy), not defensive flight

PREMIUM ENVIRONMENT: GOOD TO RICH

• Materials: 2.5-3.0% ATR = Rich premium
• Industrials: 1.8-2.2% ATR = Good premium

Russell 2000 +7.5% YTD vs Nasdaq ~flat YTD

This is THE GREAT ROTATION OF 2026. Follow the money. Execute with discipline.

Commentary compiled: Monday, February 10, 2026, 6:45 AM PST

Data: Pre-market futures, Friday Feb 7 close, sector rotation analysis

Execute after 6:40 AM open confirmation. Discipline > Forced trades.