The Rotation Out Of Semiconductors And Into…

The S&P 500 (SPX) just closed the week at an all time high. Tech had almost nothing to do with it.

The semiconductors took a hit all week long. The money carrying the index went into sectors nobody has wanted to touch since the summer.

That’s a sharp break from the last few weeks. The Nasdaq (QQQ) led the S&P 500 back to record highs with a straight shot higher of about 10%.

This week the Nasdaq finished basically unchanged. The semis did worse.

Meanwhile the market bought everything that was oversold. Financials, consumer staples, and utilities all ripped off their lows.

The SPX still came within 8 points of the upper edge of its expected move. That’s 8 points on a $7,800 product.

I don’t think one week of weakness means the great Nasdaq fade is underway. Next week will decide it.

Here’s what I broke down in tonight’s video:

The SMH is closing outside the lower edge of its expected move. AMD and Micron (MU) sit right at their lower edges. Intel (INTC) posted almost a two standard deviation move to the outside.
Broadcom (AVGO) had a strong bid early in the week and faded hard. NVIDIA (NVDA) finished about halfway to the lower edge of its expected move.
Consumer staples went straight down from late August before this week’s rally. I faded the XLP move today with a put spread because I think it comes back down.
Utilities have been slaughtered since July. The XLU rallied way outside its expected move this week.
Goldman Sachs, Morgan Stanley, and JPMorgan report earnings next week. The financials’ bounce after two months of selling could be short lived.
TLT tagged the lower edge of its expected move three weeks in a row before bouncing. I don’t think bonds are done selling, and I see TLT going under 100.
Regional banks haven’t bounced at all. If KRE does bounce, I’m looking to short it because these banks hold a huge amount of bonds and notes.
The SPX is pricing about a $95 move next week. I expect the volatility to come from the Nasdaq.