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Salesforce’s (CRM) results yesterday took down the entire software group today, leading to another noticeable divergence between indexes. This time, the S&P 500 was down about 60 bps, and the equal-weight RSP ETF was higher by about 45 bps—the reverse of Tuesday.

The rebound in the RSP ETF didn’t accomplish much, and the ETF is still below the 50-day moving average. So it yet to be see if there has been a rotation in the market yet.

I noted on Tuesday for subscribers:

We have also seen the SPYG to SPYV ratio surge lately, which tells us that either value stocks are cheap or growth stocks are expensive. Given the PE ratios for the S&P 500 growth and value indexes, it seems more likely that growth stocks are expensive relative to value.

So today, at least, that was relevant, with the ratio reversing, after the ratio moved above the Upper Bollinger band and saw the RSI climb over 70, and the ratio hit the lower side of a big uptrend. I’m not sure at this point that we are going to see a rotation out of the Growth and into Value; we could simply see growth fall faster than value, or value stocks rise faster than a growth stock. But all of the scenario seems to suggest we could be a a place where value outperforms growth, and at least if we see it start to happen, we know why.

The S&P 500 found some support around 5,220 today and will need to gap lower to keep the selling going. That will depend on the PCE report. Typically, before an event, we talk about volatility crushes, but in this case, I don’t think the VIX1D is high enough to create a meaningful implied volatility crush. It finished the day at just 12.3.

For the S&P 500, things don’t get interesting until we get below 5,150. So, there is still plenty of room for the index to go before we start thinking about anything else.

Meanwhile, tomorrow’s PCE data will be vital because it will tell us a lot about the trends in inflation we have seen to start the year, and more importantly, it will move rates.

Which way rates move is another question entirely. The 2-year has undoubtedly moved to the upper part of the trading range, and it would seem that it is in a better position to move above 5% than it was at the beginning of last week. But we could just as quickly be back at 4.75% by the end of the day tomorrow as well.

DELL is the disaster de jour tonight, falling almost 18% after it posted results. I can’t say that I have thought much about Dell since I was in college and owned it in 1999 and 2000. However, the results seem less than impressive given the rally’s size, and the guidance was the same, in my opinion. The lesson here is that if you want to play in these names with big AI rewards, you have to be willing to accept the significant risks that come with it.

So, after we get the data tomorrow, I think we will be in a better position to assess things.

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