THE CARA PLAYBOOK — Sunday, February 9, 2026
Pre-Market Intelligence | Strategic Guidance for Professional Allocators
Processing note:
Until I resolve the problems I have faced with Substack/Stripe, all publications (Navigator, Playbook, INSTAT, and Portfolio) will be published free here at BillCara.com. I have a lengthy article to come on the issues and what I am doing to resolve them. I am pleased with INSTAT and Navigator, semi-pleased with Portfolio, and still working on Playbook. Here is what I was planning to publish before the Super Bowl when I was distracted by the increasingly difficult situation in my use of the Substack platform.
Playbook Sunday
Markets close the week in deliberate rotation, not disruption. Thursday’s employment data (143K payrolls, 4.0% unemployment) confirmed a balanced labor market and removed any urgency for Fed easing. The regime is clear: late-cycle barbelling — institutional capital is simultaneously adding cyclicals (transports, industrials, energy) and building defensive ballast (staples, utilities, gold). Software and communications are absorbing severe multiple compression as AI monetization narratives fail to deliver visible revenue. This is professional rebalancing, not panic.
I. OVERNIGHT CONTEXT & REGIME ASSESSMENT
What Happened Overnight
Asia Close: Japan extended leadership — Mitsubishi Corp +15.3% on the week, Komatsu +19.3%. Korean financials surging (KB Financial +10.4%). China/HK remain weak (Tencent -9.7%, Alibaba -8.4%).
Europe Mid-Session: Transports and industrials firm; software under pressure mirroring US trends.
US Futures: S&P futures flat near 6,796 (100-day MA support); Nasdaq underperforming on continued tech rotation.
Regime Call: Transitional — Late-Cycle Barbelling
This is not risk-off, but it’s not indiscriminate risk-on either. Capital is rotating from duration and growth toward cash-generative quality and defensive hedges. Credit healthy (IG/HY spreads constructive), curves stable, VIX declining (-6.7% on week). Professional money is repositioning within a late-cycle framework, not fleeing.
II. PRIMARY MARKET DRIVERS
Rates & Credit
US 10-Year: Consolidating in tight range; no breakout, no collapse — consistent with “higher for longer” Fed stance
Curve: Stable; no inversion stress
Credit: Constructive across IG, HY, and convertibles (INSTAT 82 on converts) — this contradicts any recession narrative
MOVE Index: +7.5% on week but below stress thresholds
Currencies
DXY: Firm but not surging — consistent with balanced growth/policy mix
EM FX: Resilient; BRL, MXN stable despite higher US yields — carry trades intact
Commodities
Gold: $4,979 (+5.0% on week, +13.5% YTD) — functioning as portfolio hedge against real yield volatility
Oil: Energy leadership intact; Marathon Petroleum +15.2% on week (+24.8% YTD) on supply discipline
Metals: Industrials metals stabilizing; copper not screaming but not collapsing
Policy & Event Risk
Fed blackout period continues; next move March at earliest (42bps total cuts priced for 2025)
No major geopolitical shocks; Middle East elevated but not escalating
Earnings season ongoing — tech/industrial/financial reports key near-term catalysts
III. EQUITY MARKET STRUCTURE & LEADERSHIP
Index Behavior
S&P 500: Holding 100-day MA (6,796) — key support level
Nasdaq: Underperforming on growth/software rotation
Transports: Screaming leadership — Delta +14.4%, Southwest +14.2%, FedEx +14.6%, Old Dominion +16.9% on week
Breadth: Bifurcated — industrials/materials/energy advancing; software/comms declining sharply
Sector Rotation Map
SectorSignalCommentaryTransportsLeadingAirlines, logistics surging on Main Street demand and pricing power — this validates real economy momentumIndustrials/MaterialsLeadingCaterpillar +10.4% (26.7% YTD), Steel Dynamics +12.7%, chemicals rallying — reshoring and capex themes confirmedEnergyLeadingMarathon Petroleum +15.2% on week; OPEC+ discipline + geopolitical support sustaining sectorFinancialsConstructiveRegional banks, Korean/Japanese financials strong — higher-for-longer supports NIMsTechnologyMixed/BifurcatedSemis/AI infrastructure holding (AMD, NVDA, SMCI); software collapsing (Salesforce -9.9%, ServiceNow -13.9%, Oracle -13.2%)CommunicationsWeakState Street Comm Services -3.6% on week — advertiser caution, regulatory overhangDefensivesBid PresentStaples, utilities, gold all firm — not panic, but prudent hedging
Key Instrument Signals
Transports (DJTA): Broad sector leadership — Delta, Southwest, American, Alaska, FedEx, Old Dominion all +12-17% on week. This is a Main Street demand signal, not speculation.
Amazon (AMZN): -12.1% on week, -8.9% YTD. High-multiple platform names facing valuation reset where AI monetization hasn’t materialized.
Salesforce (CRM): -9.9% on week, -27.8% YTD. Severe multiple compression in enterprise software — market differentiating infrastructure (semiconductors) from applications.
Gold Miners (GDX/GDXJ): +3.4-3.6% on week, tracking gold’s breakout. VanEck Junior Miners confirming bullion strength.
XPO Logistics (XPO): +37.6% on week — extraordinary move suggests specific catalyst or violent repricing of cyclical leverage. Watch for fundamental news.
Silicon Laboratories (SLAB): +45.0% on week — likely M&A speculation or product cycle announcement. Extreme move requires verification.
IV. INTER-MARKET WARNINGS & ANOMALIES
✅ Gold + Yields Both Consolidating: Gold holding gains despite stable yields — confirms this is hedge demand, not just dollar weakness
✅ Energy Strong + Software Weak: Classic late-cycle rotation — tangible assets and cash flow favored over duration and growth narratives
⚠️ Credit Healthy While Software Bleeds: Credit spreads constructive (no systemic stress) even as high-multiple tech faces severe selling — this divergence says: rotation, not recession
V. TODAY’S PLAYBOOK DIRECTIVES
Strategic Posture: Rebalance — Barbell Cyclicals + Defensives
Late-cycle environments reward balance sheet strength, pricing power, and thematic alignment. The market is punishing high-multiple growth without visible revenue acceleration while rewarding cash-generative quality. This is not a market for passive broad beta — it’s a market for disciplined positioning.
Tactical Guidance
Buy/Add
Transports (DJTA exposure via ETF or select names): Main Street demand validated by airlines + logistics leadership. Entry on any pullback to support. This is a leading indicator, not a lagging one.
Industrials/Materials with Capex Themes: Caterpillar, Steel Dynamics, select chemicals exposed to reshoring and infrastructure. YTD gains are strong, but multi-year secular tailwinds intact.
Gold (GLD, physical, or quality miners GDX): $4,979 level holding; maintain 8-12% portfolio allocation as hedge against real yield volatility and policy uncertainty. Add on dips toward $4,900.
Japan Equities (EWJ or select names): Mitsubishi Corp, Komatsu, Mizuho Financial showing structural strength. Corporate governance reforms + measured BoJ normalization = multi-quarter theme.
Select EM (Mexico, India, Korea): iShares MSCI Mexico (EWW), Indian banks (HDFC, ICICI), Korean financials (KB Financial) — all benefiting from nearshoring, reform, and AI supply chain positioning.
Trim/Sell
Unprofitable Software / High-Multiple SaaS: Salesforce down 27.8% YTD, ServiceNow -13.9% on week. If you’re overweight enterprise software without visible AI revenue, trim exposure. Exit on rallies.
Communications / Ad-Dependent Platforms: Sector SPDR -3.6% on week. Regulatory overhang + advertiser caution = continued pressure. Reduce to underweight.
China/HK Equities: Tencent -9.7%, Alibaba -8.4% on week despite policy easing. Property stress and geopolitical headwinds persist. Wait for technical stabilization before re-entry.
Watch List
AMD, NVDA, SMCI: AI infrastructure holding but volatile. Watch for confirmation that semis can decouple from broader software weakness. Entry only on technical support confirmation.
XPO Logistics: +37.6% on week is extreme. Wait for fundamental catalyst disclosure before chasing.
Renewable Energy (Vestas, etc.): Showing early stabilization after severe drawdowns, but execution risk and financing conditions remain. Not actionable yet.
Risk Management Check
Raise Cash to 10-15% if you’re fully invested — late-cycle volatility is repositioning-driven but can be sharp
Trim Tech Overweight: If tech >25% of portfolio, reduce to 18-20% and redeploy into cyclicals or defensives
Correlation Check: Avoid over-concentration in single thematic exposure (e.g., all AI, all energy)
VI. MARKET QUALITY & TECHNICAL HEALTH
S&P 500: Holding 100-day MA at 6,796 — key support level. Break below would signal deeper rotation; hold here keeps uptrend intact.
VIX: Declined 6.7% on week, closing below key thresholds — volatility receding, but dispersion rising (sector rotation extreme).
Breadth: Bifurcated — advancers/decliners mixed, but new highs in industrials/materials/transports offset by new lows in software/comms.
Late-Day Behavior: Watch for gap-and-fade vs gap-and-go Monday — if software stabilizes, rotation may pause; if selling accelerates, rotation deepens.
VII. THE WEEK AHEAD
Key Events Next Week
Monday: Corporate earnings (tech, industrials, financials)
Wednesday-Friday: Fed speakers (watch for any clarification on March rate path)
Ongoing: Q4 earnings season — revenue growth vs margin performance will dictate sector leadership
What Could Change the Regime?
Shift to Risk-Off: Employment or inflation surprise forcing Fed hawkish pivot; credit spreads widening; S&P breaking 100-day MA
Shift to Risk-On: Software finding technical floor; breadth improving; small caps participating
Closing Note
This week confirmed the market is rewarding durability, not duration. Transports, industrials, energy, and select EM are leading because they have visible earnings, pricing power, and balance sheet strength. Software and high-multiple growth are being punished because AI monetization narratives haven’t delivered revenue. Credit is healthy, curves are stable, and gold is hedging — this is late-cycle barbelling, not crisis.
Discipline, context, and process — the only edge that endures.
— Bill Cara
Strategic Investor | 50+ Years Global Markets
Disclosure: The Cara Playbook is published by Bill Cara, a licensed fiduciary investment manager (retired). This publication represents financial journalism and educational content. It is not personalized investment advice. Readers should consult with their own financial advisors regarding their specific circumstances. The author may hold positions in securities discussed.