Stock Market Indices Rotate – Reversing Haves & Have Nots
As I have been discussing for a few weeks, the stock market’s leadership and regime have changed. The first chart is the NASDAQ 100 which is chock full of the sexy, AI and mega cap stocks. It peaked a month ago. More important, please focus on that blue arrow from last week where the index opened sharply lower. The longer the index goes without regaining the 30,500 level, the more significant the downside potentially becomes and below the June low around 28,250.
On the flip side, the mid and small caps are the beneficiaries of mega tech pausing. The Russell 2000 is below and it has been strongly leading, something I always like to see. It just made an all-time high on Thursday. The S&P 400 looks similar. This is also known as the rally broadening out if you’re wanting a label. For now, rallies in the NASDAQ 100 should be sold and declines in the mid and small caps should be bought.
And while questions and comments regarding SpaceX have diminished, I still get at least one or two a day. The limited trading history is below. Our Unloved Gems strategy did buy a half size position last week, one that I intend to rent not own. For all the chirping about SpaceX being the “next Google” or the “next Nvidia” or the “next Apple”, the stock is in the exact same place as the IPO and down 33% from its peak. Again (and again and again), there is a reason I usually wait 3-6 months before buying IPOs, let alone hot ones.
The stock market is and has morphed, at least in the short-term. Rotation is healthy. It’s when money leaves that big problems occur. I am keeping a close eye on the chart below which is basically the higher risk stocks versus the lower risk stocks. Bulls do not want to see the higher risk stocks significantly underperform.
As for my 2026 forecast for a 10%+ correction in Q3, it remains one scenario that needs more work to be confirmed.
On Friday we sold PCY.
