Hey trader,
Last week broke the usual holiday pattern. The indices moved in completely different directions from one another.
Sector rotation accelerated faster than I expected. That shift is the entire story heading into this week.
Stick with me and you’ll see where the next leg of this rally is coming from. It runs straight through the market’s second-largest sector.
Tech is catching its breath in the near-term. The crowd is finally waking up to how big the coming move in healthcare and biotech could be.
The headline last week was a heavyweight sector roaring back to life.
Here’s how the leaderboard stacks up.
The Long-Awaited Rotation
|
Performance Leader |
1-week |
30-day |
YTD |
1-year |
|---|---|---|---|---|
|
Sector |
Financials (XLF) |
Healthcare (XLV) |
Technology (XLK) |
Technology (XLK) |
Tech has lost some of its mojo here in the near-term. The primary culprit for the drop in Tech has lost a little of its mojo lately. The main culprit is semiconductors.
They pulled forward so much future return so quickly that a breather became inevitable.
The best thing tech can do over the next few weeks is trade sideways. We don’t want to see it roll over just yet.
None of this worries me. Leadership handing off from one group to the next is how bull markets stay alive instead of burning out all at once.
Financials were the real winner last week. That matters more than the headlines suggest.
Consider how rarely a financial crisis unfolds while the world’s biggest banks are flexing. JP Morgan, Goldman Sachs, and Bank of America are all showing real strength.
Trouble rarely brews when those three are leading the tape.
Even regional banks are closing in on their all-time highs from 2021. That group has been dead money for years.
A breakout there would confirm this move is broad. It would not rest on a handful of names.
Where The Real Opportunity Lives
Healthcare keeps grinding higher. Biotech is flashing some of the best risk-reward setups in the entire market.
Both leaders look bullish. The difference comes down to how much upside is left on the table.
Here’s how I’m sizing them up:
- Financials bring strength and stability, though the easy gains there may already be behind us.
- Biotech carries far more room to run, with return potential that stands out across the whole market.
This is where positions matter more than opinions. I would rather own the group with the bigger runway than chase the one that already ran.
If tech keeps resting while financials keep leading, the healthiest version of this rally is the one playing out right now.
Here’s your move for the week. Watch the financials and biotech setups closely. Keep some capital ready for any pullback, because rotations like this tend to create the cleanest entries.
Take Care,
Gianni Di Poce
