Gianni Di Poce caught the handoff last week. Software outperformed semiconductors.
Chips beat tech. Tech beat the S&P 500. Software beat all of it.
That order matters more than the headline highs. Semiconductors carried the second quarter by themselves.
The S&P 500 and the Dow ripped to fresh all-time highs last week. Stocks eased back Monday and again today.
The Nasdaq has not joined the all-time high party yet. It still outperformed both the S&P 500 and the Dow on a percentage basis. Gianni calls that a risk on signal.
Look at the math underneath the tape. Technology makes up around 34% of the S&P 500. Ten or eleven stocks account for over 40% of the index.
Inside the tech sector, semiconductors are roughly 40% of the weight. Software is roughly 20%.
Gianni wants semiconductors to do nothing into year end. That is his best case scenario. Software takes leadership from there and the bull market gets extended.
He has been running through names in the software space. Some already broke out. He is seeing moves that project rallies north of 100%.
The popular narrative says AI kills software. Gianni flips it. He calls AI the pruner of the sector.
Software companies that leverage AI grow because of it. The ones that cannot survive it disappear. He sees that pruning as healthy.
Here is what Gianni broke down in today’s session:
- Software was the top performing sub-sector under the tech umbrella last week. Microsoft, Palantir, and Salesforce all moved. Salesforce is trying to break out of its rut.
- Wednesday’s inflation report is the tightrope. June printed negative. Friday’s jobs number came in weak. Gianni no longer expects the September rate hike the market was pricing.
- Crude oil has gone nowhere for a month. Crude drives inflation expectations, so Gianni is looking for another soft print. Bonds rip and the dollar falls if he is right.
- Bitcoin looks heavy on the surface. Continuation drops it to 53,000 or 56,000. A break above 66,000 to 67,000 sends it running quickly.
- Meta has done nothing in almost two years. Gianni is watching it closely as a rotation candidate with real risk reward.
The dollar has been weakening for weeks. That weakness explains the resiliency in equities. Serious bear markets do not start while the dollar falls.
Precious metals had a good week and they move again on tomorrow’s number. Gold miners are lagging slightly. Silver miners are holding up better than silver spot, which Gianni reads as a good sign.
He is also watching biotech, quantum, and the rare earth names pulling back today. He wants dip buying opportunities there.
The rotation trade is early. That window is the opportunity.
