Tech Tumbles, Defense Rallies

Fresh news and strategies for traders. SPY Trader episode #1420. The market finished a rough week marked by a significant tech selloff (QQQ, XLK) and a decisive shift toward defensive sectors (XLP, XLE). Drivers included geopolitical headwinds for Nvidia, the government shutdown, and plummeting consumer sentiment, confirming a broad riskoff phase requiring tactical defensive positioning.

Episode Transcript

(00:00):
Welcome back to Spy Trader !
I’m your host , Barry Cashflow , and it is 5 am on Saturday , November 8th , 2025 , Pacific time .
We are diving deep into a very rough ending to the trading week .
The stock market just finished a significant pullback , driven largely by fear , stretched valuations , and a sharp rotation out of highflying technology stocks .

(00:24):
The indices clearly illustrate this shift .
The Nasdaq Composite and the Invesco QQQ Trust , QQQ , led the losses , plunging sharply — QQQ dropped 1.9% on Friday alone .
The S&P 500 ETF , SPY , took a moderate hit , finishing the week negative , while the Dow Jones Industrial Average outperformed the others , thanks to stability in its defensive components .

(00:50):
This divergence points directly to the sector action .
Technology , tracked by XLK , was a significant laggard .
Communication Services , XLC , also showed considerable weakness .
But where did the money go ?
Right into defense and value .
Consumer Staples , XLP , Energy , XLE , and Utilities , XLU , were the market leaders , signaling an unambiguous shift toward riskoff sentiment .

(01:17):
Diving into the drivers , several headwinds hit simultaneously .
The ongoing , longestonrecord U.S.
federal government shutdown weighed heavily on broader sentiment .
Compounding this , the University of Michigan consumer sentiment index tanked to 50.3 in November , its lowest reading since 2022 , with inflation expectations ticking up to 4.7% .

(01:42):
We also saw reports of surging layoff announcements — over 153,000 in October — pointing to a cooling labor market .
While the Fed recently cut rates by 25 basis points , cautious forward guidance failed to stem the selling .
On the corporate side , the tech selloff was triggered by specific news .

(02:03):
Nvidia , NVDA , plunged over 4% on Friday after reports surfaced that the U.S.
government would block the sale of a key scaleddown AI chip to China , striking at the core of AI growth enthusiasm .
Highmultiple stocks like Tesla , TSLA , also dropped 4% as profittaking widened .

(02:24):
On the positive side , Expedia , EXPE , jumped 17% on strong earnings , reminding us that companyspecific fundamentals still matter .
So what does this mean for traders ?
The market is undergoing a significant shortterm riskaversion phase .
The severe weakness in QQQ and XLK means investors believe AI valuations became too stretched , especially with a new geopolitical headwind hitting companies like Nvidia .

(02:54):
The strength in XLP and XLE confirms the rotation toward stability — investors are favoring noncyclical stocks like CocaCola or commoditylinked giants like Exxon Mobil .
Given this environment , tactical defensive positioning is smart .
First , increase exposure to defensive sectors like Consumer Staples via the XLP ETF .

(03:18):
This provides insulation against economic slowdowns .
Second , for fixed income resilience , consider core bond holdings like the Vanguard Total Bond Market ETF , BND , as a hedge against equity volatility .
For those with a longer time horizon , the pullback should be viewed as an opportunity .

(03:39):
While volatility remains high for the Invesco QQQ Trust , QQQ , the ETF remains the primary vehicle for longterm technology exposure .
This dip could be a chance to buy into the secular AI trend at a lower price point .
Finally , capitalize on the rotation into value and commodities by looking at the Energy Select Sector SPDR Fund , XLE .

(04:03):
That’s all for today’s Spy Trader .

Stay safe out there , and remember (04:06):
cash flow is king !