It was momentum or bust yesterday. There was a lot of faded green on the screen, as it was clear that the momentum (SPMO) trade is still the most coveted. I don’t understand the weakness in Utilities (XLU) and Real Estate (XLRE) – and Materials (XLB) haven’t been this cheap in years.

Semiconductors Try To Reboot

The market rebounded, but couldn’t seduce cash off the sideline, so the bounce faded into the close, and only 36% of the S&P 500 (SPX) finished higher. Chip names dominated the session – again.

Technology (XLK) dominated the top advancers board, but 10 tech names were responsible for 63% of Friday’s sell-off.

The Semiconductor Index (SOX) was 76% above the 200-day moving average, going into Friday's session.  It is still elevated, but has come down to a 58 Relative Strength Index (RSI) reading, which for many is a “buy signal.” But there is plenty of room on the downside, and it wouldn’t change the overall upward trajectory.

Leverage Risk

According to Nomura Asset Management, leveraged exchange-traded fund (ETF) rebalancing played a major role in Friday’s selling.

$53 billion in total stock selling pressure, including:

• $23 billion from Semiconductors
• $18 billion from Technology
• $5 billion from “Mag Seven”

I’m not a fan of levered ETFs, especially those that are three-, four-, or five-times levered. They have become increasingly popular with retail investors.

It's playing with fire, and they are now part of the risk profile for when the wheels wobble.

Jensen Saves the Day

Jensen Huang weighed in on the market, telling investors to ‘buy the dip.’

                           

Magnanimous

Last October, Qualcomm (QCOM) made big waves when it unveiled a new artificial intelligence (AI) chip to rival Nvidia (NVDA).

Last night, Jensen told an audience to “buy Qualcomm.” The stock initially popped to $237 a share.

I’m not sure how to read the sessions ahead of SpaceX, considering the magnitude of the deal, but I would like to see buyers return today, even if they are a little tepid.

Today’s Session

Nothing but great developments in the AI ecosystem.  Each morning, I’m reading reams of information and news that point to a longer-lasting cycle than the street currently expects.

UBS just increased its semiconductor revenue growth projections. It's looking for memory revenue to peak late 2026 or early 2027.

Yet the industry continues to bulk up as if demand will not ebb (see below). 

I think the industry knows best.

Also, this morning, space stocks look compelling as it appears SpaceX is greatly oversubscribed and will be priced tomorrow.

This is indeed an exciting time to be alive.

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