Tremendous Software Rebound
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A few weeks ago we highlighted early signs of a rebound in software stocks. Some early leaders (FTNT, ZM, TEAM, TWLO, DDOG, etc) were experiencing technical breakouts or strong reactions to earnings results. After battling the lows and lagging the broader Nasdaq for most of 2026, more software stocks are now breaking out in a major way.
After a -37% selloff from the Sept peak, IGV held the lows during the March selloff (while the rest of the market crashed). This type of relative resilience is a sign of burgeoning leadership. The ETF reclaimed the 200-day moving average this week on a large bullish candle:
MSFT, the second largest holding in IGV, formed a tight consolidation (circled in red below) and broke out this week. It now has a “higher-lows” pattern that suggests buyers are stepping up their bids. Nice setup for a medium-term trade.
The entire cyber-security software space is having a moment. Here is the weekly chart of PANW (third largest holding in IGV) breaking out of a 2.5 year consolidation on incredible strength. A bit too late to chase it up here, but just highlighting the trend in leading groups. Peers CRWD and FTNT are also making similar breakouts.
ORCL and PLTR, two former leaders that the market has left for dead, made large bullish candles this week and staged incredible comebacks. They are both at or above their respective 200-day averages.
SNOW, another leading software company, gapped up over 30% on strong earnings results this week. The following day, it held the gap and continued to climb. Other recent earnings winners (e.g. OKTA, DDOG, DOCN, INOD) continue to hold trend and move upward.
We shared the below chart two weeks ago. What we’re potentially witnessing is an unwind and squeeze of extreme bearish positioning (grey line) in software. Triggered by recent earnings results that are wildly favorable compared to pessimistic estimates. It seems fears of AI disruption and doom have been overblown.
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