Massive rotation warrants paying attention as February gets underway

Near-term Equity trends are short-term bullish, and the two-day decline to close out the month of January for Equities failed to cause sufficient technical damage to trends that would alter the bullish path.  Both SPX and QQQ are likely to rally back to new highs in the first week of February.  However, as discussed lately, markets have been undergoing severe rotation across many sectors and even within Technology itself.  The increase in cross-asset volatility is a bit disconcerting, given that sentiment and positioning remain bullish, and this past week’s carnage across the Precious metals and various parts of Tech Software should serve as a warning of what might be very possible in other parts of the market within the next couple of months. Warsh’s nomination resulted in a spike in the US Dollar, though this looks to prove short-lived and likely paves the way for the next move lower in DXY in the weeks to come. As for the Metals, the severe downside volatility might have washed out some of the speculative sentiment, but still should allow for a rally higher following this week’s selloff. Overall, with regards to risk assets, it’s right to remain bullish, but increasingly more selective, and I feel like bounces in Software and Semiconductor stocks over the next couple of weeks might provide an opportunity to consider diversification out of these groups for those who have a 3-5 month time horizon.

For now, despite some of the choppiness in the broader market, trends are likely to push even higher into the month of February, and it remains too early to expect any meaningful market peak.  Financials, Industrials, Healthcare, and Discretionary underperformance lately should begin to stabilize into early next week and push higher. 

Moreover, the good news is that stocks like $NVDA and $AAPL both still look pretty bullish at this time technically, and represent over 15% of $SPX.  Software is growing close to intermediate-term support, which likely can serve to cushion the decline in this sub-sector, while sectors outside of Technology, like Financials, are at/near support and should bounce after a lackluster month.

checkout-thomas-lee image
checkout-logo image

Become a Member To Access Fundstrat Research

Fundstrat Direct gives individual investors access to Tom Lee's research, previously only available to banks and hedge funds.

Monthly

$199/mo

First Month Free

Join Now

Annual

-15% $2,028/yr

List Price $2,388

Savings: $360/yr

Join Now

Why Join Fundstrat Direct?

Fundstrat Direct helps you invest confidently with the same research banks and hedge funds use to navigate the market.

Daily Strategy Icon

Daily Strategy from Tom Lee & Team

Stay ahead of consensus with daily updates on key developments & catalysts and opportunities ahead.

Real-Time Market Alerts Icon

Real-Time Market Alerts

Analysis on market-moving events and actionable opportunities delivered instantly from us to you.

Curated Stock Lists Icon

Curated Stock Lists

Choose the portfolio that best suits your investment style, preferred asset class, and time horizon.

Monthly Market Update & Top Ideas Webinar Icon

Monthly Market Update & Top Ideas Webinar

Attend engaging webinars with Tom & team featuring our top ideas and near-term market outlook.

Daily Technical Strategy Icon

Daily Technical Strategy

Receive tactical opportunities, actionable signals, and fundamental analysis from our proven research team.

Live Analysis on Your Holdings Icon

Live Analysis on Your Holdings

A monthly webinar featuring live analysis on member-submitted stocks and questions.

Disclosures (show)

Events

Trending tickers in our research