S&P 500 only moderately corrected Thursday‘s strong rally broadening, with prior leaders (XLK, XLC and XLY) going down. Chiefly in case of consumer discretionaries, this is an aberration as much XLE going down – most welcome buying opportunities in the sectors as consumer is strong, its balance sheet not fading, and LEIs are turning up with manufacturing going strong (same for trade, look at KOSPI if in doubt).

Stock market is seeing rotations that leave more sectors advancing, and even if tech and communications catch up on a short-term basis, in this phase of the upleg, greater gains are to be made elsewhere – I mentioned discretionaries, financials, and due to inflation raising its head slowly, also in materials with energy. Just very select tech too. Russell 2000 needs rates to retreat to shine more, and the Fed is nowhere close to being forced by economic slowdown to cut rates, as there is no such economic soft patch.

There is power in reasoned simplicity – economy isn‘t slowing down, job market is performing, PMIs are improving, global liquidity and easy monetary conditions prevail. Strong NVDA earnings beat caused much appetite to invest elsewhere as well, and the earnings driven rally continues – Q4 earnings haven‘t been disappointing, and neither was the overall guidance.

Recession is far away in the era of fiscal dominance as talked in quite a few latest analyses, and yields while rising, are yet nowhere near killing the stock market advance – expect though volatility to increase when tax season gets underway.

S&P 500 and Nasdaq Outlook

(Click on image to enlarge)

I‘m afraid this was as good a correction as we could get – S&P 500 hesitant Friday lacks volume (conviction). 5,065 is not on the table – 5,080s at worst would be reached before the opening bell Monday as there may be some unfinished job in Nasdaq bottom searching. Tech is unseated from the unassailable prime leadership for now, after NVDA did its job. 5,125 was almost touched Friday, and will be overcome in the nearest sessions ahead – HYG is slowly waking up after NVDA too.

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