MarketSurge powers the charts in this video.
Bull markets correct through sector rotation. The S&P 500 and the Nasdaq 100 have basically gone sideways in a wide range since mid-May. In the meantime, the so-called Magnificent 7, which involves the biggest companies in the world, are down about 10%. The semiconductor index has experienced a significant increase in volatility. Its upside momentum has diminished. We saw another proof of it last week, when Micron had the best earnings report in its history. It helped SMH and QQQ to gap up, but those gaps faded quickly.
Money has rotated into other areas of the market. Small caps, as represented by the IWM, are holding near their all-time highs, led by biotech and financials. We saw a shade of more defensive rotation towards the end of last week, when healthcare and consumer staples started to outperform notably, and the most oversold groups attempted to bounce. Those rotations are a normal part of the cycle. They might not offer multi-week 50-100% trending moves, but they provide 5-day trend opportunities that last 10-20%. We have to take what the market is offering. It is normal for the AI leaders to spend some time in a sideways range and build new bases after the significant appreciation earlier this year.
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