A year ago, the market raced into the “extreme fear” zone, but last week, the Fear & Greed Index was in the shadow of “extreme fear.” Now, the gauge is on the cusp of escaping the fear zone. Also, last week, retail investor sentiment surged overwhelmingly bearish.

Broadening Out

The atmosphere in which investors begin to question technology leaders and move into other market niches feels like the old concept of “burn the boats.” Money is not going to the sidelines, but there is extreme unease and anxiety in the air. Ultimately, it’s a good thing for the market.

Coming into this week, 64% of the S&P 500 (SPX) was outperforming the market, and 47% on an equal-weight basis.

Yesterday, there were more declining than advancing sectors, but three growth sectors led the charge. Besides the weighting system that favors these names, there is a feeling of comfort in their leadership. Investors see these names as de facto safe havens and key to their economic future.

Back to the Future

The Fourth Industrial Revolution is a beast. It’s a lot more than “Mag Seven.”  Yes, artificial intelligence (AI) is the dominant storyline now, but there are several storylines. I was extremely surprised and impressed by the resolve of the software (IGV) names after a Datadog (DDOG) downgrade sent them reeling early in the session.

There are even more niches within the themes below. Investors should view them as “gold in them thar hills.”

Breadth & the Next Breakout

Market breadth was impressive and evenly spread.

The S&P 500 held at its 50-day moving average and is on the cusp of a major breakout, just when everyone was getting used to the notion of a summer swoon.

Today’s Session

The market is looking at a bifurcated open, with tech moving lower on Samsung's monster earnings report.

Samsung posted $58.4 billion in profits ahead of the consensus of $55.6 billion.  The company posted 171 trillion won revenue; the street was looking for 172 trillion won. 

The stock got slammed 7% in Korean trading.

The knee-jerk reaction and guessing game are creating a buying opportunity, at the very least, a major trade soon.  But the tone right now is adding fuel to the rotation trade.

The good news is money is staying in the market, not fleeing to the sidelines.

There are opportunities across the market spectrum, but there are greater assumptions about lifting small caps than there are about when the AI trade will end.

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