Trump’s State of the Union & The Market’s Next Move

BY BILL GRIFFO

February 25, 2026

Hey Income Hunters,

Markets are sitting at all-time highs… but the internals are flashing warning signs.

Retail investors are still bullish. Margin debt has crept higher. Yet the S&P is stalling under a major resistance parallel — what technicians call distribution. Institutions appear to be selling into strength while the headlines remain optimistic.

Sound familiar?

We wrote in Powell Surrenders… Year-End Blow-Off Ahead and our portfolio is still net long looking for a final parabolic move higher.

That liquidity and political pressure could fuel another melt-up before cracks widen in 2026. Now we have a fresh catalyst: Trump’s State of the Union address.

And this one could matter more than most so we will look at a sector that has been beaten down but may be ripe for a significant bounce higher…

The Setup: Rounded Top vs. Oversold Software

Technically speaking: The S&P is forming a rounded top under major resistance.

But here’s where it gets interesting…

While the broad index stalls, software stocks have been absolutely trounced.

Adobe, Oracle, and even Microsoft, which must be considered a software stock —are trading down 30–50% from recent highs.

RSI readings are at deeply oversold levels. Several are trading back to support zones not seen since 2018–2023…

I have been buying Microsoft (MSFT)… Why?

Microsoft (MSFT) is arguably the largest and most dominant enterprise software company in the world.

Over 70% of Microsoft’s operating profit is software-based recurring revenue. From a portfolio strategy standpoint, 2 things I really like are:

It’s fundamental value + balance sheet strength
Long-term AI + enterprise exposure with safety
Technically we could be forming a Positive RSI Divergence

Trump May Provide the Spark?

State of the Union speeches often include:

Pro-growth rhetoric
Tax incentives for innovation
Deregulation talk
Infrastructure & AI competitiveness initiatives
Domestic tech leadership against China

Remember what we discussed in China Cuts Off the U.S. Military …

Tech and rare earth competition are now national strategy issues.

If Trump emphasizes:

Accelerating AI dominance
Corporate tax adjustments
Onshoring incentives
Regulatory relief for software & cloud firms

…software stocks could catch a headline-driven relief rally.

Not a new bull market.

But a tradable high probability swing trade bounce.

The AI Fear Trade May Be Overdone

In our recent AI piece AI vs Wall Street we highlighted how long-term AI is a massive winner even though in the medium term it will cause white collar lay-offs.

However, Markets tend to overshoot both ways:

Chip stocks: crowded long
Software stocks: panic liquidation

This mirrors 2025’s “Deep Seek” scare when chip stocks collapsed on fear AI would need less hardware. They bounced sharply afterward.

History doesn’t repeat… but it rhymes.

Valuation & Technical Value Zone

Several major software names are now:

Trading near multi-year support
Back to pre-AI-hype valuation multiples
At RSI levels historically associated with bounces

We are not calling the long-term bottom.

We are identifying a 3–6 weekswing trade opportunity for 10–25% relief moves in select oversold software names.

The Bigger Picture for Long-Term Investors

Let’s zoom out.

We continue to see:

Liquidity tailwinds in 2026
Political pressure on the Fed
Structural AI disruption risks
Geopolitical tension with China

So how do we allocate?

Tactical (Next 1–3 Months)

Look for bounce setups in oversold software
Own a small hedge by owning put protection on SPX on rallies under resistance
Continue accumulating Gold and Silver on corrections and rebalance during strength