Technology stocks exploded higher last week.
The State Street Technology Select Sector ETF (XLK) was up a monster 8.2%.
After spending most of 2026 in the red, last week’s burst brings the tech sector firmly into positive territory for the year.
The State Street Communications Select Sector ETF (XLC), which includes “Magnificent Seven” members Alphabet (GOOGL) and Meta Platforms (META), was also up 4.5%.
It looks like tech is back!
That’s good, right?
After all, I’ve said repeatedly throughout 2026 that the S&P 500 Index cannot realistically sustain a rally without participation from the tech sector, as tech and communications together make up around half the index.
The problem is that some of the tech stocks screaming higher are junky names that my Green Zone Power Ratings System recommends avoiding. And that’s not the only sign we’re seeing that should make any sober investor pause…
Remember Allbirds (BIRD), the maker of environmentally conscious running shoes?
Well, selling shoes is a brutally competitive market, as the company was struggling against both established competitors like Nike (NKE) and trendy upstarts like On Holding (ONON).
So, it did the only “logical” thing and shuttered its shoe business to go into AI!
Yes, you read that right. A shoe company is now an AI company, NewBird AI.
We saw similar behavior back in 2017, when Long Island Iced Tea Corp. renamed itself Long Blockchain Corp. to get in on the Bitcoin craze.
That went about as well as you might imagine… The company died an unceremonious death when it became clear they had no business model.
AI is extremely competitive and requires very real expertise. No one in their right mind would expect a newbie failed shoe company to make a success of it. And yet, investors bid up the shares by 876%.
Do these investors believe in the strategy?
I doubt it. It’s far more likely that they’re chasing a fast-moving stock and looking to sell to a greater fool.
And to be clear, there is nothing wrong with chasing a hot stock. Momentum is one of the six core factors of my Green Zone Power Ratings system.
But for momentum to be sustainable, I need to see a healthy and growing underlying business. And suffice it to say, I don’t see that in a failed shoe company.
Key Insights:
- Technology continues to rip higher as war jitters give way to AI mania.
- Some of the best-performing stocks are also the “junkiest.”
- We should follow our system and keep a level head.
Buyer Beware
I love looking for opportunities in new technologies. And my system has proven that many of the highest-quality companies are in tech.
Technology tends to create natural monopolies and durable networks that are all but impossible to leave.
Want to ditch your iPhone?
Sure, you can. But you’ll lose access to your photos and documents in iCloud.
Tired of Facebook or Instagram?
Great! Delete the apps. But good luck finding all of your friends and contacts on another network.
All of this is true. And yet virtually none of the best-performing tech stocks from last week rate well on my Green Zone Power Ratings system.
I ran my customary screen of the biggest movers in the tech sector that were also still within 10% of their 52-week highs last week. The idea is to look for solid, market-leading stocks that are getting stronger.
Here’s what I came up with:
Every stock on this list is a play on AI hardware. And all but Arista Networks (ANET), Dell Technologies (DELL) and Seagate Technology Holdings (STX) are specifically involved in making chips.
That’s not a bad thing, of course. Demand for chips, in general, has never been higher. But the buying here seems to be indiscriminate.
Take Microchip Technology (MCHP). This is one of the worst-rated stocks in the entire universe that my Green Zone Power Ratings system tracks. It rates a 5…out of 100! And not a single one of its six factor ratings is “Bullish.”
Then there’s ON Semiconductor (ON), which was up a blistering 21% last week. ON has a successful niche business as a maker of semiconductors used in cars and specifically electric vehicles.
I recommended ON in Green Zone Fortunes back in January 2000, and my readers walked away with a 210% profit a little over three years later.
But today?
It rates a “High-Risk” 17 on my Green Zone Power Ratings system.
Going through the list, there is only one stock rated “Bullish” – DELL.
Does any of this mean a crash in tech stocks is imminent?
No.
But it does tell me that we need to pick and choose extremely carefully.
As Warren Buffett put it, “Only when the tide goes out do you discover who’s been swimming naked.”
There’s not much to sustain the rally in junk shares. When sentiment shifts, you don’t want to be left holding the bag.
Again, I’m no anti-tech Luddite.
My portfolios have more than their share of tech stocks. But I pick and choose carefully using my objective ratings system, and I recommend you do the same.
When Will Energy Bottom?
Energy continues its losing streak, finishing at the bottom for the third week in a row. But might there be some solid bargains after the sell-off?
Let’s take a look.
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.
Well, after the run-up in energy stocks for most of this year, there weren’t many stocks anywhere near their 52-week lows, so I had to relax the criteria.
Here’s what I came up with:
We see a lot of the same names from last week. I’ll repeat today what I said last Monday:
Six out of the nine stocks rate as “Bullish,” and not a single one rates as “Bearish.” Coterra Energy (CTRA) is the standout here, rating a “Strong Bullish” 90 out of 100.
The point is, no bull market moves in a straight line.
There are always corrections along the way.
The energy bull market is no different than any other in that respect. Until my system says otherwise, I’m treating this dip as a solid buying opportunity.
What I believe we are seeing today is a normal market correction within a longer-term energy bull market.
There will be setbacks.
But if past energy bull markets are any guide, this one still has a long way to run.
To good profits,
Adam O’Dell
Editor, What My System Says Today
