In something straight out of a James Bond movie, Nvidia (NVDA) CEO Jensen Huang was allegedly seduced by a Chinese spy, who may have used him to get access to Nvidia’s cutting-edge AI chips for restricted Chinese companies.
It’s too early to determine what this means for Huang, Nvidia or for the larger AI infrastructure boom.
But that hasn’t stopped investors from acting first. They’ve been punishing Nvidia’s shares and bidding up its chipmaking rivals.
And that wasn’t the only huge story last week.
The bigger news was how violently the market reacted to Tuesday’s midterm elections. Six out of the 11 market sectors finished lower last week, taking the S&P 500 Index down with them.
As I’ve said all year, as goes the tech sector, so goes the market. The State Street Technology Select Sector SPDR ETF (XLK) dropped 8.2%, pulling the S&P 500 down nearly 3%.
Still, tech wasn’t the week’s biggest loser.
was. That title went to the distinctly gritty, old-school energy sector. The State Street Energy Select Sector SPDR ETF (XLE) got absolutely bludgeoned, plummeting 12%.
Democrats generally aren’t as friendly to traditional fossil fuels as Republicans are. So it looks like investors took the blue wave as their cue to take profits.
Should we follow them out the door or take this as an opportunity to buy the dip?
I’ll answer that in a moment. But first, let’s zoom out and look at how each of the 11 sectors has performed this year.
Even after last week’s brutal shellacking, energy remains the best-performing sector by a country mile. XLE is still up almost 44%.
It’s also telling that technology has dipped in the rankings. For most of this year, XLK was in a two-horse race with XLE. But after several weeks of churn, the tech ETF is treading water in the middle of the group.
And the State Street Communications Select Sector SPDR ETF (XLC) – which is dominated by tech behemoths like Meta Platforms (META) and Alphabet (GOOGL) is the only sector that’s actually in negative territory for the year.
To be clear, XLK’s 14.5% return is nothing to sneeze at. It’s still beating the S&P 500’s 10.9%.
But as we head into the home stretch of 2026, the trend is hard to miss. Old-economy sectors that have nothing to do with tech are taking the lead.
Of course, if you’ve been following along, you already knew that. My Green Zone Power Ratings system has been steering us toward these sectors all year.
Great!
But what is the system telling us to do today?
Let’s take a look…
Communications Make a Comeback
After a brutal couple of weeks, communications stocks came roaring back last week. Is this a dead cat bounce? Or is the sector ripe for a durable rally?
Let’s see what my system says.
As I do every week, I ran my customary screen of the biggest movers in the sector that were still within 10% of their 52-week highs. The idea is to look for solid, market-leading stocks that are getting stronger.
As I mentioned earlier, it’s been a rough several weeks… and very few stocks in the sector were within 10% of their highs.
I loosened that criteria, and here’s what I came up with:
One stock stands out above the rest. AppLovin (APP) saw its shares skyrocket 71% last week.
AppLovin helps app developers sell advertising to their users. APP shares suffered this year when results came in tepid and investors feared that AI would completely disrupt the company’s business model.
But two recent developments have helped the company rebound.
To start, AI fears have subsided as investors no longer worry that the entire software sector is at risk of extinction. Second, AppLovin knocked the cover off the ball when it reported earnings last week, vastly outperforming analyst expectations.
So, what now? Should we ride this comeback story higher?
My system is recommending caution. AppLovin rates a “Bearish” 22.
In fact, most of the big movers from last week are rated either “Bearish” or “Neutral.” The only “Bullish” rated stock on the list is Rupert Murdoch’s Fox Corp (FOXA), parent company of Fox News and Fox Sports.
What Happened to Energy?
Last week was brutal for energy, and it comes down to politics. With the Democrats taking over both houses of Congress – and with voters citing the Iran war as one of the main motivations – crude oil prices declined in the belief that the war would be coming to a swift end.
Beyond that, Democrats have traditionally been more hostile to fossil fuels and more demanding with environmental regulations.
While all of that is true, it’s important to remember that domestic energy policy isn’t likely to change any time soon, as the federal regulatory agencies are still under President Donald Trump’s authority.
And even if the war ends tomorrow, it’s important to remember that energy stocks were trending higher long before the war started.
Regardless, I’ll leave the political handicapping to others. Instead, let’s see what my system has to say.
I ran my customary screen of the sector’s biggest losers for the week that are still trading within 10% of their 52-week lows. The idea is to find beaten-down gems that look poised to recover.
Even after last week’s rout, I can’t say that energy stocks are “beaten down.” Most are nowhere near their 52-week lows, so I had to relax that criteria.
Here’s what I came up with:
There’s a lot of green here. Six out of the nine stocks rate as “Bullish.”
So, until the market proves otherwise, my system is telling us to buy the dip in energy.
To good profits,
Adam O’Dell
Editor, What My System Says Today
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