Rotation, Selectivity, and Risk

2026 may favor selective stock alpha as index returns compress, metals cool, and digital assets remain technically fragile

Key Takeaways

2026 tradfi index returns may compress, favoring stock-specific alpha
Metals show exhaustion risk, while select AI leaders consolidating into 2026
BTC remains bearish below $93k, with downside risk toward $70k–$60k support

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Digital Asset Commentary

As the calendar turns to 2026, investors & traders are reflecting on a highly volatile year in which both the S&P 500 (SPY) and Nasdaq 100 (QQQ) closed with double-digit gains. Consensus forecasts now point to more muted index-level returns in the year ahead, with alpha increasingly dependent on individual stock selection rather than broad market exposure.

The strongest performers in 2025 were the metals complex, particularly gold & silver, along with related mining equities. Price action across these assets suggests parabolic advances, raising the likelihood of pullbacks or extended consolidation phases into 2026. Several AI leaders that surged in the first half of the year, such as NVIDIA, have either consolidated tightly for months or formed technical patterns resembling falling wedges, potentially setting the stage for renewed upside in 2026.

Digital assets present a markedly different picture. BTC has failed to act as a strong market leader, trading roughly 30% below all-time highs and down approximately 6% on the year. Critics have seized on this relative underperformance, often overlooking BTC’s substantial multi-year outperformance since both 2020 & 2022. Entering 2026, technical conditions across the asset class remain decisively bearish. BTC must reclaim and hold above the $93k level to attempt meaningful mean reversion. So far, each upside attempt over the past month has been met with swift rejection.

Price action since October resembles a classic bear-flag formation, which carries downside risk toward the $70k area. Longer-term models, including the popular power law framework and the 200-week moving average, point to potential structural support near $60k. January may prove pivotal in determining whether 2026 develops into a sustained bearish year for digital assets or whether recent pressure has been driven primarily by tax-loss harvesting and positioning adjustments.

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