The S&P 500 (SPX) closed fractionally in the red, but yesterday was a great session that saw rotation from hot stocks into other parts of the market rather than to the sidelines. Software (IGV) fetched the most action, but wasn’t alone.

Momentum Swings Both Ways

S&P 500 High Beta (SPHB) and S&P 500 Momentum (SPMO) turned lower amid volatile shifts, underscoring how hot stocks are moving in the opposite direction.

But high Beta Momo attracted buyers into the close, underscoring just how delicious buying the Momo dip has been.

Big Pond

Bottom fishers had a lot of names to choose from – some would argue 490 names. The buying was widespread with lots of green on the screen.

The red flag from market breadth was more new lows than highs on the NASDAQ. It goes to show this has not been a dart-throwing rally.

The NASDAQ Composite just eased out of an overbought Relative Strength Index (RSI) reading, but there could be more weakness, as the next serious area of support is around 25,000.

Peace in the Middle East

I’ve been hearing about peace in the Middle East for decades, but perhaps we are actually closer to it becoming a reality. The Iran Conflict will wind down, and in its aftermath, new alliances and fresh thinking will emerge to prevent future threats and bullying.

Today’s Session

The market remains under pressure as the hot names continue to cool.  South Korea (KOSPI) is getting hit again and is down 13% since Friday.

One issue in Korea is that investors are maxed out, and the same holds true for global fund managers, with only 3.9% dry powder.  Historically, cash below 4.0% is a sell signal.

Inflation worries have spiked, and that’s creating headwinds for the market.

Even with all of the would-be speed bumps, we see money routing into software and other areas of the market that have been hammered.

This is hugely positive.

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