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Since its inception in January 2026, the Colby INNOVATION Portfolio has delivered a staggering 18.69% total return, more than doubling the performance of the NASDAQ Composite (7.29%) and tripling the S&P 500 (5.70%).

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Market Overview: U.S. stock price indexes continue to demonstrate bull market strength.  

The equal-weight S&P 500 ETF (RSP) jumped to a new record high. The large-cap NASDAQ 100 ETF (QQQ) also rose to a record high at 1:31 pm on Friday before profit-taking in the last hour trimmed the day’s gain. The large-cap S&P 500 ETF (SPY) and the Small-Cap ETF (IWM) both rose to within a single point of their record highs. The Mid-Cap ETF (MDY) recovered most of its loss this month but still lags about 15 points below its May high of 685.50.

Sector and Market Rotation

The equal-weight ETF (RSP) outperformed the large-cap S&P 500 ETF (SPY) over the past six trading days— likely a short-term rotation rather than a major trend change. Previously, the large-cap S&P 500 ETF (SPY) outperformed the equal-weight ETF (RSP) every week for seven weeks from 3/30/2026 to 5/14/2026. And longer term, SPY has outperformed RSP since 2015—a major trend. We always give the major trend the benefit of the doubt.

The Technology ETF (XLK, 180.39) continues to strongly outperform all other sectors, up more than 41% over the past eight weeks since its low closing price of 127.50 on 3/30/2026. Earnings reports have exceeded expectations, and fundamental analysts remain bullish. The pessimism surrounding AI from November through March has reversed, placing significant pressure on short sellers.

In contrast, the Energy Sector SPDR (XLE, 59.49) underperformed the S&P 500 ETF (SPY) since 3/30/2026 as it consolidates steep gains from 1/5/2026. XLE remains in a strong position above its 50-day SMA (now at 58.43) and above its 200-day SMA (now at 49.68). The next major move for XLE likely depends on unpredictable geopolitical developments and global oil supply news.

Financial, Utilities, Retail, and Materials sectors have been underperforming.  Investors are worried about rising inflation and rising interest rates, which are unfavorable for these sectors.

International equities are giving mixed signals. The Emerging Markets ETF (EEM) rose to a new all-time high on Monday 5/11/2026, confirming a major bullish trend. However, the EAFE ETF (EFA) continues to lag behind. EEM has outperformed EFA since June 2025, and current trends suggest EEM outperformance will continue.

The China Large-Cap ETF (FXI) remains in a bearish position, falling below both 50-day and 200-day SMAs, and is underperforming EEM and EFA. FXI also has underperformed the S&P 500 for 19 years since 2007--a major long-term trend. Technical conditions continue to point to persistent underperformance by FXI, so exposure should be avoided.

Currencies, Crypto, Commodities, and Fixed Income

The U.S. Dollar Index ETF (UUP, 27.77) appears to have encountered resistance around its March high at 28.00. Critical support may be found around its 50-day SMA (at 27.58) and 200-day SMA (at 27.55). Longer term, the dollar has remained in a major downtrend for more than three years since its peak of 30.76 on 9/27/2022.

Crypto-related stocks are in unfavorable trends and should be avoided. The iShares Bitcoin Trust ETF (IBIT, 42.96) fell to its lowest level since 4/29/2026, flashing a short-term sell signal. Longer term, IBIT remains below its 200-day SMA, and the 50-day SMA is in a bearish position below the 200-day SMA. The iShares Ethereum Trust ETF (ETHA, 15.57) continues to underperform IBIT and is in a weaker position below both its 50-day and 200-day SMAs.

Precious and industrial metals have been choppy since the blow-off tops on 1/29/2026. Copper (CPER) reversed to the upside last week and remains in strong position above its rising 50-day and 200-day SMAs. In contrast, Silver (SLV), Gold (GLD), and Gold Miners (GDX) have declined below their 50-day SMAs, which calls for cautious risk control. As a group, metals have continued to underperform the major stock price indexes since 1/29/2026 and clearly are not where the action is now.

Energy markets reversed to the downside last week but remain technically bullish. WTI Crude Oil Futures (nearby contract CLN26, 96.60) and Oil ETF (USO, 140.92) have held above their 50-day SMAs and 200-day SMAs. Significant oil price trends appear to remain tied to unpredictable headlines regarding global oil supply.

U.S. fixed income remains bearish. On Tuesday, 5/19/2026, the Long Bond ETF (TLT) and the U.S. Note ETF (IEF) fell to new 52-week lows, confirming bear market trends. In March and April, TLT, IEF, and the U.S. Aggregate Bond ETF (AGG) triggered "death cross" sell signals when their 50-day SMAs crossed below their 200-day SMAs. The technical structure suggests continuing downside risk and underperformance.

Momentum and Breadth for the U.S. stock market show improvement for the short term.

Of 38 major markets we track each week:

• 74% are above their 50-day SMAs, up from 63% a week ago.
• 79% are above their 200-day SMAs, up from 71%.
• 74% maintain a bullish long-term configuration (50-day SMA above 200-day SMA), unchanged from 74%.

Within the S&P 500, 58.0% of stocks trade above their 50-day SMAs (up from 44.2% the previous week), and 59.4% are above their 200-day SMAs (up from 52.4%).

The Cumulative Daily Advance–Decline Line (A/D Line) rose above its 20-day SMA and remains in a strong position above its 50-day SMA and 200-day SMA.

Net New Highs rose to +46. Readings above zero for new highs minus new lows are bullish.

Sentiment Indicators show cooling optimism, which is encouraging from a contrarian perspective. The AAII Bulls/Bears survey indicates moderate pessimism, with 39.3% bullish versus 43.6% bearish. The Put/Call Ratio at 0.49 is below its 10-year mean of 0.62, indicating moderate optimism. The VIX Index at 16.70 is below its 10-year mean of 18.79, indicating moderate optimism. The CNN Investor Sentiment Index has been showing diminishing optimistic Greed, now at 59, down from 71 on 4/20/2026. In March, it ranged from 14 to 18, placing it deep in the Extreme Fear zone, a condition that has historically been bullish. Sentiment currently remains far from extreme levels that might justify a contrarian bearish view.

See The Colby Global Markets Report (click here) for our complete analysis of global markets and specific investment rankings.

A strategy emphasizing both capital preservation and return on investment appears most rational and prudent at this time.

Every day, we measure and weigh objective technical and quantitative data in order to judge the Reward/Risk probabilities of trend continuation or reversal. Our goal is to protect your assets from major risks while capitalizing on an improving investment outlook. We always put our clients' best interests first.

Consider exploring our professional fiduciary asset management services to protect and grow your wealth. We are happy to discuss your goals and concerns and answer your questions.

For a free consultation, contact: Bill Anderson Phone: 646-652-6879
Email: anderson@colbyassetmanagement.com

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