The Silver Lining of the Software Sell-Off

Editor's note: Weak markets can lead to great opportunities. And Ten Stock Trader editor Greg Diamond sees volatility ahead for stocks in the coming weeks. In today's piece, adapted from his February 9 Weekly Market Outlook, Greg looks to tech and the broad market for signals of what's ahead – and reveals why now could be a great time to start trading.

"Never play macho man with the market."

Paul Tudor Jones learned that the hard way... In 1979, the legendary trader lost 70% of his clients' equity on a single trade.

He got overly aggressive with a bid in the cotton market. But that early failure fueled his later successes.

It also inspired some contrarian viewpoints... For one, Jones found that strong markets are often the best times to sell.

The recent "SaaSpocalypse" may be showing us the opposite... There's opportunity to buy in weak markets.

You see, investors have been selling technology stocks in a frenzy due to fears around artificial intelligence ("AI"). Some believe AI will make software companies obsolete – and break down the very foundation of Big Tech.

That's probably a bit of an overreaction. In time, AI and software companies may be able to coexist. But we can't predict the future, so we need to prepare.

In today's issue, I'm examining the tech space, as well as the broad market. The common thread is volatility.

Let's get started...

Get Ready for Some Volatility 

"SaaS" refers to Software as a Service technology. It allows users to access software over the Internet without buying and installing programs on local devices. That way, they can access applications from anywhere... And they pay a regular subscription fee instead of buying once.

The iShares Expanded Tech-Software Sector Fund (IGV) tracks some of the biggest software firms (and SaaS platforms) around, including Microsoft (MSFT) and Adobe (ADBE).

IGV soared more than 1,000% between August 2011 and late 2025. It rallied admirably in September and October... but then plummeted for several months...

As you can see, IGV found a floor below its April 2025 bottom in late February. (See the red arrows above.) Then, it reversed course and has now gained 14% from its low.

The April and May time frame is when I expect it to make even higher lows. And then we'll likely see a lower high into this time frame with another leg down thereafter.

Now let's pivot to the Vanguard Total Stock Market Index Fund (VTI), which tracks the overall stock market...

VTI has been chopping up and down since December 2025, forming a channel-like pattern. (See the two black dashed lines above.) In early February, it broke below the "support" level of the lower dashed line, signaling that things could get interesting moving forward.

In the chart above, I've outlined two possible scenarios... in red and blue.

In red, VTI could rise slightly, tank in March, and then bounce back a little. But overall, the market would turn down, below the 320 level. (The red vertical lines mark key time factors.)

In blue, VTI would rally a bit. But it would ultimately chop around in April and May and then turn down, below the 330 level. Believe it or not, that's the best-case scenario for the broad market through the middle of 2026.

The recent SaaSpocalypse isn't just bad news for Big Tech. It's pulling the overall market down into April 2025-like lows.

All this is sending a clear message... 2026 is primed for massive volatility. That'll set up some fantastic trading opportunities.

But for now, be patient... and don't give in to any "macho" tendencies.

Good investing,

Greg Diamond

Editor's note: Greg Diamond predicts extreme volatility for U.S. stocks. After tracking this setup for more than a year, he has pinpointed the exact week the market will top out. He warns that for some unlucky investors, the ensuing crash could erase all the gains of the past three years. But if you play it right, you'll not only preserve your capital... you'll have the opportunity to walk away with some serious gains.