TECH ROTATION CONFIRMED – SEMICONDUCTORS LEAD

MORNING MARKET COMMENTARY

TECH ROTATION CONFIRMED – SEMICONDUCTORS LEAD

Tuesday, February 17, 2026 – After Presidents’ Day

Timothy McCandless – Protected Wheel Strategy

⚠️ PLOT TWIST: Your scan shows 65% TECHNOLOGY (13 of 20 stocks) = Chips/Hardware ROTATION. This is NOT the Industrials/Russell rotation we expected. This is semiconductors + hardware DIVERGING from software. VIX 20.85, 10-Year at 4.03% (2-month lows), Tech led DOWN on Monday close. AI disruption fears persist BUT your scan says institutions buying SELECT tech.

SECTION 1: MARKET OVERVIEW – TUESDAY AFTER LONG WEEKEND

Monday Was Closed – Friday’s Close Carried Over

• Friday Close: S&P 500 essentially flat after worst week since November
• CPI Effect: Cooled to 2.4% but tech STILL sold off (AI disruption fears)
• Russell 2000: +1.2% Friday BUT momentum unclear over 3-day weekend
• Megacaps: -1.1% Friday, Amazon longest slide in 20 years

Tuesday Morning – Tech Selling Continues

QQQ: ~$598-601 (down from Friday), tech led market DOWN

Russell 2000: ~2,638 (+0.3% early), small caps holding Friday gains

VIX: 20.85 (elevated, AI fears persist)

10-Year Treasury: 4.03% = 2-MONTH LOWS (flight to safety)

MARKET CONTEXT: 10-Year Treasury at 2-month lows (4.03%) = Flight to safety. VIX 20.85 = Fear elevated. Tech leading market DOWN = AI disruption anxiety NOT resolved by CPI. This is a ‘risk-off’ environment DESPITE rate cut hopes.

SECTION 2: YOUR SCAN ANALYSIS – 65% TECHNOLOGY

65% TECHNOLOGY (13 of 20) = CHIP/HARDWARE ROTATION

Your Scan Breakdown:

TECHNOLOGY – 13 of 20 Stocks (65%)

🔶 SEMICONDUCTORS & EQUIPMENT (5 stocks):

• TER (Teradyne): $89.28, -1.22% – Semiconductor test equipment
• GFS (GlobalFoundries): $30.33, -1.85% – Chip foundry
• ENTG (Entegris): $83.50, -1.63% – Chip materials
• FORM (FormFactor): $137.82, -1.57% – Chip test equipment
• NXT (Nextpower): $31.21, +4.90% – Solar tech (ONLY green chip)

🔶 COMPUTER HARDWARE & STORAGE (3 stocks):

• WDC (Western Digital): $28.77, +1.78% – Data storage, AI beneficiary
• STX (Seagate): $48.10, -0.16% – Data storage
• GLW (Corning): $72.34, -0.33% – Glass/optical components

🔶 COMMUNICATION EQUIPMENT (2 stocks):

• CIEN (CIENA): $357.63, -0.05% – Optical networking
• LITE (Lumentum): $182.37, +5.99% 🔥 – Optical components

🔶 OTHER TECH (3 stocks):

• CGNX (Cognex): $84.91, -2.28% – Machine vision

INDUSTRIALS – 4 of 20 Stocks (20%)

• VRT (Vertiv): $70.69, +2.80% 🔥 – Data center infrastructure (AI play)
• FTAI (FTAI Aviation): $64.99, +1.55% – Aviation leasing
• QXO (QXO Inc): -$26.73, -1.26% – Industrial distribution
• TEX (Terex): $20.43, -1.49% – Construction machinery
• GXO (GXO Logistics): $217.52, -0.12% – Logistics

OTHER SECTORS – 3 of 20 Stocks (15%)

• THC (Tenet Healthcare): $15.07, +1.00% – Healthcare
• SN (SharkNinja): $26.38, -0.55% – Consumer Cyclical
• MOD (Modine): $122.43, +1.85% – Auto parts
• NE (Noble Corp): $32.67, -4.32% – Energy (oil drilling)

🚨 RED FLAGS IN YOUR SCAN:

• 65% Technology BUT 9 of 13 tech stocks RED (69% distribution)
• ONLY 4 green tech names: LITE +5.99%, NXT +4.90%, WDC +1.78% (3 stocks only)
• Semiconductors: 4 of 5 RED (TER, GFS, ENTG, FORM all down)
• VRT (Vertiv): +2.80% = ONLY Industrial above +2%
• Overall: 13 of 20 stocks RED (65% distribution)

SECTION 3: WHAT THIS SCAN MEANS

THIS IS DISTRIBUTION INSIDE A BOUNCE

What Your Scan Is Telling You:

• NOT Rotation: This isn’t The Great Rotation (Industrials/Russell)
• NOT Accumulation: 65% distribution (13 RED) = Institutions SELLING bounce
• Counter-Trend Bounce: Tech 65% concentration BUT most stocks RED
• Monday’s Lesson: Remember Feb 10? 35% RED = NO TRADES saved you. Today: 65% RED = WORSE

Why This Is Dangerous:

• VIX 20.85: Fear elevated, AI disruption anxiety NOT resolved
• 10-Year 4.03%: 2-month lows = Flight to safety AWAY from tech
• Tech Leading Down: QQQ down Monday, selling resumed Tuesday
• Chip Stocks RED: If chips (AI beneficiaries) selling off, who’s buying?

SECTION 4: YOUR DECISION – NO NEW TRADES

PRIMARY RECOMMENDATION: WAIT

Why NO Trades Today:

• Distribution: 65% RED (13 of 20) = Institutions SELLING the bounce
• No Sector Strength: 65% tech BUT 69% of tech stocks RED = Fake concentration
• Counter-Trend: Tech bounce AGAINST The Great Rotation (Russell/Industrials)
• Risk Environment: VIX 20.85, 10-Year at 2-month lows = Flight to safety
• Your Edge Gone: You win when 40%+ ONE sector + ALL green. Today: 65% tech but 69% RED

IF You MUST Trade (Not Recommended):

Option 1: LITE (Lumentum) – HIGHEST RISK

• Price: $182.37, +5.99%
• Why: Strongest in scan, optical components for data centers
• Risk: VERY HIGH – One green name in sea of red, counter-trend

Option 2: VRT (Vertiv) – LESS RISK

• Price: $70.69, +2.80%
• Why: Data center infrastructure, AI beneficiary, Industrial (on-thesis)
• Risk: HIGH – Still fighting overall distribution

RECOMMENDED POSITION SIZE: ZERO. If you trade anyway: 25% of normal size. This is HERO TRADING in a distribution environment. Your Monday Feb 10 discipline saved you – do it again.

SECTION 5: 10-YEAR TREASURY – THE SILENT KILLER SCREAMING

4.03% = 2-MONTH LOWS = FLIGHT TO SAFETY

• What It Means: Money FLEEING risk assets (tech) into bonds
• Friday High: 4.276% → Now 4.03% = -24.6 basis points
• Translation: Investors choosing 4.03% SAFE returns over risky tech
• AI Disruption: THIS is why yields falling – fear, not rate cut optimism

Why This Kills Your Trade:

• Tech Competition: Why buy LITE at +5.99% when bonds pay 4.03% SAFE?
• Risk/Reward: 65% distribution + VIX 20.85 + 4.03% risk-free = Bonds win
• Your Edge: Requires institutional BUYING. 10-Year says they’re SELLING

SECTION 6: WHAT TO WATCH – WAIT FOR THE TURN

What Would Make You Trade Tomorrow:

• 1. Scan Shows 40%+ Industrials/Healthcare: Back to The Great Rotation
• 2. Tech Concentration BUT <20% RED: Real accumulation, not distribution
• 3. VIX Drops Below 18: Fear subsiding, risk-on returns
• 4. 10-Year Rises Above 4.20%: Flight to safety ending
• 5. Russell 2000 +1%+ Day: Small caps leading again

Wednesday Watch List:

• Fed Minutes: Wednesday afternoon – Could move markets
• Tech Earnings: Palo Alto today, could shift AI sentiment
• VIX Movement: If drops below 18 = Risk appetite returning
• Your Scan: Run again 6:40 AM Wednesday – Look for sector shift

SECTION 7: BOTTOM LINE – YOUR DISCIPLINE SAVES YOU

YOUR METHODOLOGY WORKING – THIS IS A NO-TRADE DAY

Today’s Scan Told You:

• 65% Technology: Looks like opportunity
• BUT 65% RED: Distribution, not accumulation
• Semiconductors: 4 of 5 RED = Even AI plays selling
• Only 4 Strong Names: LITE, NXT, WDC, VRT = Too few to build portfolio
• Environment: VIX 20.85 + 10-Year 4.03% = Risk-off

Your Edge Requires:

• Sector Concentration: ✅ YES (65% tech)
• Institutional Buying: ❌ NO (65% RED = distribution)
• Clean Momentum: ❌ NO (counter-trend to rotation)
• Low Volatility: ❌ NO (VIX 20.85)
• Result: 1 of 4 requirements met = NO TRADE

DECISION: WAIT

RISK LEVEL: VERY HIGH (if you trade anyway)

PREMIUM: N/A – Not trading

65% Tech BUT 65% RED | VIX 20.85 | 10-Year 4.03% | Distribution

This is Monday Feb 10 all over again – but WORSE. 65% distribution vs 35% then. Your scan just saved you from a counter-trend trade in a risk-off environment. Wait for The Great Rotation to return: Industrials/Russell/Healthcare 40%+ with <20% RED. That’s your edge. This isn’t it. 💪

Commentary compiled: Tuesday, February 17, 2026

Run your scan again Wednesday 6:40 AM. Look for sector shift.