MarketSmith powers the charts in this video.
Bull markets rotate through sector rotation. This is exactly what we saw last week. Small caps followed through while large caps consolidated their recent gains. Towards the end of the week, we even had some old highflyers popping up – GME, BBWI, APRN, BYND, and PTON. Those are not even A.I. or quantum computing related. They are just highly-shorted former octane momentum stocks. When they reach for the bottom of the barrel, there is usually a rug pull around the corner. The timing of this signal is rarely exact. From a strictly psychological point, it makes sense – when there’s too much froth in the market, we tend to see a sudden pullback that scares people out. The FOMC meeting this Wednesday might be an excuse for it.
The overall uptrend for the large-cap indexes SPY and QQQ is still intact. A slight pullback to their 20-day moving averages would be completely normal. Dips during rising markets highlight potential future winners. The stocks that try to break out or go sideways while the indexes decline are likely to outperform when the indexes recover.
A.I. is still the hottest narrative in the market. We are at a stage where it is not driven by just a few stocks like NVDA, MSFT, GOOGL, AMD, and ADBE. Smaller, more speculative names are starting to perk up – AI, SOUN, YEXT, UPST, IONQ, QBTS.
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