The Week Ahead 1/26/26
Dangerous Waters
“People somehow think you must buy at the bottom and sell at the top. That’s nonsense. The idea is to buy when the probability is greatest that the market is going to advance.” - Martin Zweig
Last week reminded us how quickly sentiment can flip. We came into the shortened week leaning cautious, locked in profits on our post‑MLK puts, and then spent the next few sessions trading the SPY levels we mapped out as volatility spiked and price ping‑ponged between support and resistance. By Friday, hedging flow and a pick‑up in dark‑pool activity were hinting that it might be time to dial back risk, and that caution looks even more justified after a weekend full of fresh geopolitical and domestic headlines—from renewed unrest in Minnesota to nuclear‑intelligence allegations out of China, rising Iran tensions, and shutdown odds pushing higher.
Now we roll into a pivotal stretch with some of the market’s biggest earnings on deck and an FOMC decision layered on top, all against a backdrop of elevated event risk. This is the kind of tape where having a clear plan for multiple scenarios matters more than having a bold prediction: know your key levels, your triggers to get more offensive, and your lines in the sand for cutting risk if the tape breaks.
With a very public tug‑of‑war between the Fed Chair and the President layered on top of geopolitical flashpoints and a messy domestic backdrop, the path forward is anything but clear. As each headline gets resolved, some of that risk premium bleeds out, but markets rarely wait politely for clarity—they lurch and reprice in advance, often violently. Until the fog lifts, this is a tape where respecting uncertainty and trimming excess risk isn’t fear; it’s key.
Market recap
The week opened with weakness and steadied after Trump back tracked his talk around EU Tariffs and Greenland.
Our levels worked throughout the week to navigate the volatility
During the sell off the Magnificent 7 reached previous oversold reads where markets have found support. This is an interesting read but notice it only goes back to 2023
When I throw my own indicators on it, not nearly as strong a read at current levels, although I do think it supports a buy the dip scenario if we see MAGS names oversold into earnings.
Macro & Policy Watch
FOMC rate decision and Powell press conference
Big‑cap earnings (mega‑cap tech and key sector leaders)
Yen volatility and any fresh signals from the Bank of Japan, this is important to watch as it correlates directly with market performance during this cycle
U.S. government shutdown headlines and funding‑bill progress
Fed liquidity actions, including overnight repo usage
Ongoing public tension between the Fed Chair and the President
Escalation risk in the Middle East (Iran and regional proxies)
Geopolitical flare‑ups tied to China tensions and intelligence leaks
Domestic unrest/violence headlines and any market‑moving fallout
The Setup
With a weekend full of fresh headline risk and Friday’s late‑day hedging flow, I’m coming into the week expecting an initial risk‑off open, and Bitcoin’s overnight weakness is already echoing that tone. The playbook from here is less about guessing the exact gap and more about tracking how price behaves into and through the FOMC and heavyweight earnings: does early selling get absorbed and set the stage for a squeeze higher as event risk clears, or do we see failed bounces that confirm a deeper de‑risking into the end of January?
Mid Term years are expected to be volatile as seen below. The odds remain high for not just one, but two corrections this year.
But don’t forget the importance of a positive January, a negative month drastically reduces average performance historically for the market.
I shared this last week but a great spot to share again as we think about how do we want to be positioned into all these key events. Low and behold, like clockwork we have seen volatility start to spike.
With recent weakness in MAGS I wouldn’t be surprised to see an updated chart of fund flows showing some reducing risk but this still signals as an opportunity to ask, is now the time I want to be full risk on?
Sector Watch
Crypto - Bitcoin continues to underperform and the 4 year cycle remains alive and well. The thesis is still valid that the introduction of Wall Street and ETF’s to the sector can break this cycle but the price action will have to tell the story.
China - Looks Strong, watch for volatility off this recent news around a top Chinese General sharing nuclear intelligence with the US
Metals - longer term there is a strong thesis for continue strength in the sector but sentiment might be starting to reach euphoric levels
Energy - plenty of bullish flow, performing strong and plenty of catalyst around Iran escalation and geopolitical risk in general. It has had plenty of false breakouts of late, but could that be coming to an end? Should XLE tag the 51 area soon that will be a key watch to see if it rejects.
Software - incredibly oversold and finished the week with some strong bounces in a few of the key names, such as ServiceNOW
Final Thoughts
My base case for the week is that early weakness becomes a double‑edged sword: it can offer clean swing entries into FOMC and the biggest earnings, but it’s also surfacing more red flags by the day. In this kind of tape I only want the highest‑conviction setups, managed with a tight leash, until we get clearer signals from the broader market. That means smaller position sizes, fewer trades, and a strong preference for reacting to how price and flows evolve around FOMC rather than trying to front‑run what comes next.
I hope you found this content valuable and a restack or share is always appreciated. If you want access to my weekly trade idea’s, research reports, and real time updates consider joining our paid sub group. Cheers!
