Correlation Breakdown

On Friday, during a face-ripping rally, the S&P 500 rallied nearly 2% and erased a week of losses.

The week’s trading revealed that a rotation out of high-flying tech into defensive names is well underway. The Dow, which includes broader, non-tech-related stocks, is starting the week above 50,000 for the first time in its history.

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The correlation between S&P 500 sectors indicates capital flight from tech into other sectors. (Source: Sentiment Trader)

Prior breakdowns in S&P 500 correlation have signaled market weakness. Most notably in the tech wreck of 2000-01.

“We’ve got our eyes peeled for further signs of a tech selloff,” notes our portfolio director, Andrew Packer. “Take some profits off the table, and expect more big swings.”

If markets sell off in earnest, the correlation between sectors will get back into whack… as everything gets sold off in unison.

~ Addison

P.S. On Friday, Andrew, Mark Jeftovic, and I dug deep into the bitcoin and crypto selloff on Grey Swan Live! We unpacked a set of signals in crypto and Dollar 2.0 digital assets that rarely appear together — and almost never by accident.

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As a proxy for the space, bitcoin is down close to 50% after another pullback over the weekend. Now is a good time to know what the sell-off means for gold, silver and the companies we still recommend in our Dollar 2.0 thesis. Check out the replay in the members section of the Grey Swan website.

On Friday, during a face-ripping rally, the S&P 500 rallied nearly 2% and erased a week of losses.

Turn Your Images On

The correlation between S&P 500 sectors indicates capital flight from tech into other sectors. (Source: Sentiment Trader)

Prior breakdowns in S&P 500 correlation have signaled market weakness. Most notably in the tech wreck of 2000-01.

“We’ve got our eyes peeled for further signs of a tech selloff,” notes our portfolio director, Andrew Packer. “Take some profits off the table, and expect more big swings.”

If markets sell off in earnest, the correlation between sectors will get back into whack… as everything gets sold off in unison.

~ Addison

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Through the first 41 trading days of 2026, the S&P 500 traded within a 2.7% range — the narrowest start to any year since 1928. The first 41 days of 2008 spanned roughly 35%. In 2020, the range ran near 15%. Even the placid 1950s never opened this tight…

Since the Iran attack began, global markets have been chaotic. Despite some wild intraday swings this week, the U.S. stock market has held up well. When bombs go flying, capital moves from frontier markets to safer shores. And even though the U.S. has been the one to aggressively move against Iran, capital that was going to foreign markets has shifted back to New York.

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