The advance decline line looked beautiful this morning. The market sank.
That combination is the whole story right now, and almost nobody is reading it correctly. Let me show you what I watched happen at the open, because it tells you where this is headed.
The NASDAQ took a real hit this morning, down about 2%. The chips got smoked. AMD was down 7%, Intel almost 8%, SMH off nearly 4%.
Even Caterpillar took a 3% hit, trading right alongside the chips.
You would think a NASDAQ down 2% drags the S&P down with it. It did not. The S&P was off about seven tenths of a percent, holding together while the chips bled out.
How is that even possible? Rotation. Money poured out of the chips and into everything else.
Old tech nobody has wanted for months. Amazon, Microsoft, healthcare, staples, the financials. Anything that was not a semiconductor got bought.
Here is where it stops being healthy. They were not buying that stuff because they wanted it. They were buying it out of desperation.
I am not even going to call it a rotation anymore.
I am going to call it a desperation rotation.
My colleague Jeff Bierman put it perfectly this morning. This manic rotation is your money managers telling you the rally is almost over.
Look at the financials. They are going to crack all-time highs, and not because they are good.
They are going to crack because everybody else just sucks that much more. That is the whole reason.
And those same financials are holding the risk from a pile of data centers that are never going to be built.
One of the big ones just had its funding pulled the other day when BlackRock walked. The banks are right in the epicenter of that.
Here is the tell that matters most, and I want you to sit with it. The advance decline line was excellent all morning, and the market sank anyway. The harder we went down, the harder they tried to rotate.
That is not strength. That is the market treading water while money runs in circles looking for somewhere to hide.
Once the financials crack that high, there is nowhere left to rotate to.
I have seen this movie before. In the summer of 2000 the Dow would be down 200 while the NASDAQ was up 200, then flip the next day.
The advance decline line looked great the whole time. Those rotations lasted weeks. Then they did not.
I think this one ends the same way, and badly.
You rotate and you rotate, and eventually you stop rotating and you just pull everything at once.
I am not giving you an S&P level today, and I am not going to pretend there is one. We have not moved higher in nine weeks. You are stuck in the middle of the range, and the only real question left is when the rotations finally break.
Of course, that doesn’t mean there are not trades out there. And more importantly, opportunities to make money.
And that’s what I do in the live room each morning, if you’re not a member, click here to get started.
To your success,
Don Kaufman
