Weekly Market Digest — Week Ending 2026-02-06

Week at a glance

SPY-2.1%

QQQ-4%

IWM-1.5%

DIA+0%

VIX20.3700008392334+2.9 pts

LeadersXLPXLBXLE·LaggardsXLKXLCXLY

1) Executive Summary

This past week presented notable volatility in the markets, with a pronounced sell-off in technology stocks impacting broader indices. SPY declined by 2.07%, QQQ fell by nearly 4%, and IWM dropped 1.47%, while the DIA remained relatively stable with a minuscule decrease. Consumer Staples (XLP) led the sectors with a 4.1% increase, while Technology (XLK) lagged significantly, tumbling 5.7%. The VIX rose sharply, signaling heightened investor fear.

Major indices — weekly return %

2) What Drove the Tape

The significant driver of the week was the sharp decline in technology stocks, primarily fueled by new AI tools from Anthropic that may disrupt existing tech models. This catalyzed intense selling pressure in large-cap tech names. Additionally, the Energy and Consumer Staples sectors gained favor, buoyed by earnings beats and defensive positioning.

Key levels & internals

SPY week high$696.96

SPY week low$675.79

XLP +4.1%XLB +2.5%XLE +2.3%XLK -5.7%XLC -3.2%XLY -3.0%

3) Internals & Key Levels

Internals reflected broad weakness with SPY's range between 675.79 to 696.96. Key support levels for SPY are near 675, while resistance is seen around 696. For QQQ, support is near 594.76, with resistance around the 630 mark.

Volatility (VIX)

20.3700008392334+2.9 vs prior week

Options tone: elevated

4) Volatility & Options Tone

Volatility surged, with the VIX closing at 20.37, up from 17.44. Options markets indicated a cautious tone, with implied volatilities increasing, particularly in tech-heavy ETFs like QQQ, reflecting hedging demand amidst the tech rout.

5) Next Week: Macro & Earnings Catalysts

Next week lacks scheduled macroeconomics and earnings events, necessitating a focus on price-based signals. Price trends and sector rotations derived from this week's movements will be influential.

Sector rotation — weekly return %

XLK -5.7%XLF -0.3%XLE +2.3%XLY -3.0%XLP +4.1%XLI +1.8%XLV +0.1%XLU -0.3%XLB +2.5%XLRE -0.5%XLC -3.2%

6) Sector Migration & Rotation Analysis

Rotation was stark, as capital shifted from underperforming sectors like Technology (XLK, -5.7%) and Consumer Discretionary (XLY, -3%) to Consumer Staples (XLP, 4.1%) and Materials (XLB, 2.5%). This trend suggests a defensive repositioning amidst uncertain tech outlooks.

If / Then

Scenario-based levels from the watchlist — use the narrative below to plan entries and exits.

7) Watchlist: If/Then Scenarios (5–10)

If SPY breaks below 675, then look for potential downside continuation towards 660.
If QQQ fails to retake 630, then monitor for further weakness that may target 590.
If XLE maintains momentum with RSI > 70, then expect sustainability above 52 with potential resistance at 55.
If XLB holds above key support at 50, then consider resilience towards a potential test of 53.
If VIX remains above 20, then anticipate continued market volatility, particularly in tech sectors.
If XLK fails to reclaim 138, then further downside towards 130 may unfold.
If XLY continues below 118, then expect momentum to test 115.
If defensive sectors (XLP, XLU) continue leading, then a risk-off sentiment may persist in the near term.

Regime snapshot

Above 50 EMA5/11

Above 200 EMA0/11

RSI > 702

Sectors11

RSI > 70 blocks new LEAPS entries per overlay rules.

8) Leveraged Wheel Overlay

Current RSI levels like KO's 80.7 block new LEAPS entries. With XLK showing negative trends, avoid longs as the 50 EMA remains below the 200 EMA. Conversions aren't eligible due to missing extrinsic data, but current trends suggest maintaining defensive inventory positioning.

Charts and key levels — Indices, Sectors