MarketSurge powers the charts in this video.
Anything AI is still in a correction mode. AI stocks led the market on the way up in the first half of the year. Lately, they have been leading it on the way down. After testing its 50-day moving average, the Nasdaq Composite broke down and might be on its way to test its 200dma or its summer lows near 660. The semiconductors ETF, SMH, is already at its 200-day moving average and only 4% away from its summer lows. The S&P 500 is also below its 50dma but has held a lot better than QQQ because of rotations into energy, retailers, healthcare, and consumer staples.
The big question that remains is whether the groups that are currently showing relative strength will also crack or whether they can lead the market higher. Healthcare and consumer staples are defensive sectors. They lead when the market is in capital protection mode, which happens during corrections. If crude oil and energy stocks continue to make new multi-year highs, inflation expectations also rise, which means more rate hikes and a headwind for the rest of the market.
Software stocks have been incredibly resilient so far. The software ETF, IGV, is still trading above its June high. Compare that to the semiconductors SMH, which is more than 20% below its June high. We saw that resilience last week, when most software stocks had a powerful bounce while anything AI-related was under heavy pressure. This group could lead if the correction ends next week. It is also a group that is likely to be targeted if the correction persists.
My subscription service includes a Discord room and private X feed with options and stock ideas, emails with concise market commentary, real-time market education, the Momentum 40 list of market leaders, and much more. See what subscribers say about my educational service.
Check out my free weekly email to get an idea of the content I share with members. See how my ideas/alerts performed.
You can find my trading books on Amazon here.
Disclaimer: Everything I share is for educational and informational purposes only, and it should not be considered financial advice. Read my full disclaimer here.
