THE CARA PLAYBOOK — February 12, 2026
Post-Market Analysis | Strategic Guidance for Professional Allocators
Playbook Thursday:
One day ago, we declared “The Great Rotation” confirmed. Today, that rotation failed. Yesterday’s leadership—Energy, Materials, Industrials—opened green and sold off into the close (XLE -0.62% 1D, XLB -0.47% 1D). The anticipated “pullback for entry” became a distribution event. Capital did not rotate to cyclicals; it hid in defensives (XLU +1.48%, XLP +0.92%). The Nasdaq entered correction territory (-2.04% 1D). The tape is no longer rotating—it is de-risking. Yesterday’s playbook directive to “add Energy on weakness” is suspended. We are moving from “Cyclical Exceptionalism” to “Defensive Repair.”
I. SESSION SUMMARY & REGIME ASSESSMENT
The Rotation Failed; Capital Hid.
Yesterday’s Call vs. Today’s Reality:
Yesterday we wrote: *”Energy/Materials INSTAT 100... the market is screaming: rotate into commodity-aligned cyclicals.”* Today, those same sectors posted negative 1D returns. Breadth within Energy narrowed sharply (pipelines held, majors sold off). This is not healthy consolidation—it is failed follow-through.
Regime Re-Assessment:
Yesterday (Feb 11): Cyclical Exceptionalism. Rotation conviction, credit healthy, VIX crushing.
Today (Feb 12): Defensive Hiding. Capital preservation, not reallocation. Utilities/Staples extended, Transports in breakdown, Tech in correction.
The Critical Error Risk:
Yesterday’s playbook identified Vertiv (+36% 1W), Suzano (+13% 1D), and Korean financials (+8.6% 1W) as “extended—buy on pullbacks, not chases.” Today’s tape suggests those pullbacks are not entry points. They are the start of distribution in previously crowded momentum names. We must respect the velocity reversal.
II. PRIMARY MARKET DRIVERS
1. The Freight Recession Signal (Yesterday’s Warning, Today’s Capitulation)
Yesterday we flagged: “Transport bifurcation extreme—rails strong, airlines collapsing. If rail strength doesn’t persist, broader industrial thesis weakens.”
Today: Rails broke. Union Pacific (UNP) -1.83% 1D. CSX -1.94% 1D. LSTR and CHRW crashed -15%. This is not bifurcation—it is cyclical demand destruction. The industrial thesis is now impaired.
2. Defensive Overcrowding (Yesterday’s Contrarian Call, Today’s Reality)
Yesterday we had no defensive leadership. Today, Utilities (XLU) and Staples (XLP) are the only sectors with positive 1D returns and INSTAT >90.
Implication: The market is hiding in the two most crowded defensive trades. This is late-cycle behavior, not early-recovery rotation.
3. Geographic Divergence Intensifies (US Pain, Asia/LatAm Momentum)
Yesterday we wrote: “Global ex-US equity leadership unmistakable.”
Today: KOSPI +3.13% 1D. EWY +4.2% 1W. Brazil (ABEV, SUZ) INSTAT 100.
Implication: The US is the problem. This is not a global systemic de-risking—it is US-specific equity culture unwind (AI/EV/SPAC) against non-US strength. Do not fade KOSPI. Do not fade Brazil. But do not add US cyclicals.
