New Highs Pile Up as Investors Rotate Back into Big-Cap Tech

The major indices continue to move deeper into new high territory, but the Russell 2000 sputtered out and gave back a chunk of its large gains from Thursday. The weakness in smaller stocks was reflected in poor breadth, with just 32% of stocks in positive territory at the close of the day.

The Magnificent Seven MAGS picked up the slack and pushed ahead 1% while the S&P 500 tacked on a 0.2% gain. Apple AAPL and Palantir Technologies PLTR were standout performers with gains of more than 3%.

The inability of small caps to build on a strong day isn’t a big surprise. That has been the pattern for a very long time, but the good news is that there are some good pockets of momentum in small stocks, and traders are buzzing about certain themes like quantum computing and nuclear power.

Bearish hopes were crushed this week when the market failed to deliver a "sell the news" reaction to the highly anticipated Fed interest rate cuts. With the indices looking expensive and technically extended, conditions were ripe for some selling into unsurprising news, but "sell the news" has been a failed tactic all year as the market has consistently traded higher on positive economic news despite technical conditions.

New all-time highs are bullish, but the irony is that they tend to trigger packs of top-calling bears. They simply cannot resist telling us that disaster awaits anyone who thinks a strong market at its high might go even higher.

The great likelihood is that there will be some consolidation and choppy action as we await third-quarter earnings, but markets like this tend to stay sticky to the upside and do not collapse unless there is some very surprising negative news.

I’m bullish and looking forward to some good trading and stock picking.

Have a great weekend. I’ll see you on Monday

At the time of publication, DePorre had no positions in any securities mentioned.