It's Our Time

"stock pickers market"

​​Since the start of the year, it’s been hard for stock pickers to keep up. Either you own big tech, or you are falling behind. Thursday last week, that changed, and it seems to be to stay. Let’s explain with some charts.

SPY 0.00%↑ If you look at the top 5 holdings of the S&P 500, they will make up over a quarter of the index. This is what is meant by cap-weighted. Looking at this vs the equal weight version RSP 0.00%↑ , which is not biased toward the big tech names, you can see how the rest of the market lagged.

Thankfully, the rotational strat held all five all-year (yielding 44% so far this year) so we had some exposure there. The other strategies have been trying to keep up.

On Thursday, we had a flip where we saw a sell-off in big tech, but the rest of the market took the baton and ran. Let’s next check out QQQ 0.00%↑ showing big tech and IWM 0.00%↑ , which is 2,000 small-cap names. 

You can see that as big tech sold, almost everything else in the market rallied. 

So, what does this mean for investors and traders moving forward? 

It looks like money is rotating. Investors and institutions are selling large-cap names and taking bets across the markets with those gains. This rotation is what we often see in bull markets, and it is healthy overall, but it changes our job. 

If you are someone who has been addicted to holding big tech names only you have been rewarded for it. That might be coming to an end. 

I will be looking through my algos and scans to find what’s next. Ensure you are signed up to follow my progress and use our chat to share your own.