The US stock market leadership chain (SOX > NDX > SPX) shows Tech weakening
SPX is going to be due for a correction at best and a bear market at worst. The question I have is whether the bear starts before or after the US presidential election. My guess? After.
However, an interim correction to clear the excesses (possibly for future bull activity) could come about at any time. Excesses you say? Yes, excesses, as casino patrons fly into Nvidia stock (NVDA) and its little brother and former holding of mine, Super Micro (SMCI) on AI-mania, they are pumping the Semiconductor sector as a whole. Plus don’t forget, the Biden admin may just have a Semi CHIPS Act announcement up its sleeve at the right time.
Anyway, as to the leadership chain that has kept us on the right side of things for so long now, there is Semi pulling back while firmly in leadership mode (SOX/NDX & SOX/SPX) and Tech in a stance to roll over vs. the broader stock market (NDX/SPX). One interpretation of this could be the very internal market rotations we have been anticipating as possible, if not likely, in NFTRH over the last several weeks.
One distinction to make is that NDX/SPX is rolling over, but has not yet rolled over.
Bottom Line
The US stock market may be experiencing internal rotations at best (and more likely, in my opinion), or preparing to see its leadership fail prior to a significant correction or bear market at worst (less likely, but whenever you’re dealing with “excesses” and sentiment risk, quite possible). Again, my guess is that the market will not get an overly painful correction until Q4. But that is why we look through hidden windows into the internals like the above (combined with several other indicators and touch points).
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