The S&P is at an all-time high on four stocks.
Nvidia was flat on the year a week ago. It’s now up 18%, which on a $5.5 trillion dollar company means it added close to a trillion dollars of market cap in six or seven trading sessions.
Microsoft was down 25% at one point. It came ripping back and added almost a trillion of its own.
Amazon was unchanged on the year and is now up 20%. Throw Google in there at 15% if you want to get crazy.
Four products account for nearly everything going on inside the S&P 500. One little tiny basket.
I don’t find this warm and fuzzy at all. Not even a little bit.
The sector that got us to this all-time high is collapsing while we sit here.
Semiconductors are up 51% on the year, and they are the reason the S&P 500 is where it’s at. Almost everything the S&P has done is brought to you by the semiconductors.
Look at Intel. A 40% decline off the high, and we’re coming right back inside the downtrend.
The SMH looks identical, and so do Micron and AMD.
I’m not into the technicals and I couldn’t care less about them.
But you’ve got a marketplace sitting at an all-time high while the group that got it there is in the middle of falling apart, and I’m not sure anything we say or do is going to stave that off.
So how is the S&P holding up? Rotation.
Semis come down, money moves into Microsoft. Money moves into Nvidia. Money moves into anything and everything just to prop it back up, and the rotations have been fierce.
Now ask the question nobody is asking. Where do you rotate to next?
You can’t rotate forever. Nvidia just ran 20% in a week and it is the largest market cap on the planet, and nobody’s sitting here questioning that.
A week ago it was breaking the lower edge of its expected move and looked like it was going to break down through it.
They are going to run out of room really quick.
The other thing worth knowing is that the tools most people use to check this are broken right now.
Advance decline line came in stellar this morning while the ticks were scattered and useless. Then the market improved through the session and the advance decline line went down.
We had 76 products to the upside and dropped to 59 while the tape got better.
So the internals traders have leaned on for years just aren’t there right now, and I don’t mean unreliable. I mean gone.
From my seat it’s easier right now to figure out where we rotate out of than where we rotate into, and I think a few of the big tech names are advantageous for short positions.
I won’t touch one that just reported. I’d rather miss a decent trade than step in behind that momentum.
Watch 29,000 in the Nasdaq. Below that, all hell breaks loose, and we’ve seen it break loose recently.
To your success,
Don Kaufman
P.S. Are you tired of making donations to the market? If you want to change that, it starts with a plan. And if you don’t have one, you can steal mine.
