A Chaotic, Corrective Change in Character
Here's why the highly visible Magnificent Seven, mighty Nvidia and semiconductor sector taking a hit actually has me feeling more positive.
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Corrective action in big-cap technology names continued on Monday, with the Nasdaq 100 QQQ losing about 1.3% and the S&P 500 slipping 0.3%. Both indexes closed at the lows of the day for the first time since April 30.
Money rotated into the DJIA, which gained 0.7%, and the Russell 2000, which added 0.4%. Breadth was positive, and new highs exceeded 300 names.
Despite the positive internal action, the overall market had a negative feel as the highly visible Magnificent Seven names acted very poorly, and the mighty Nvidia NVDA dropped more than 6%. The semiconductor sector was hit with a loss of more than 3.4%. These stocks have been the main driver of the market for quite a while and covered up much of the weakness. It was a significant change in character to see the leaders act poorly all day and close at the lows.
The big question is whether the small-caps and DJIA names can continue to show relative strength as corrective action hits the headline names. For many market commentators, the Nasdaq 100 has been the only thing that mattered and been the basis for a sustained bull market. It was never a bull market for most stocks, but will they finally be respected a bit more now that they are looking better?
It is a very chaotic mix, and it makes me feel more positive about the market because fundamentals and stock picking will eventually matter more when investors actually do something other than pile into the Magnificent Seven.
Opportunities are being created, but they look dreary and dull, so it is important to pay attention and be ready to act as things develop.
Have a good evening. I’ll see you Tuesday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
