.Technical Stock Market Briefing for Day & Swing Traders – By Harry Boxer, Technical Market Analyst

Last week U.S. stock indexes rebounded from a modest setback the previous week as the NASDAQ and the S&P 500 surged to new record highs set last month. Renewed enthusiasm over artificial intelligence lifted technology stocks, and the NASDAQ’s 2.4% weekly return outpaced the more modest gains for the S&P 500 and Dow

Last week NVIDIA, the artificial intelligence (AI) industry leader , briefly joined the $3 trillion dollar market capitalization, topping Apple and becoming the second most valuable company. Just three stocks (Microsoft, Apple and NVIDIA) now account for 20% of the index, and their outsized gains have helped the S&P 500 reach its 26th all-time high this year.

Unlike last year’s very narrow gains, more sectors are participating on the upside, a positive sign for an extension of the bull phase. European indexes are keeping pace with the U.S. stock market, while 10 of the 11 S&P 500 sectors are up year-to-date (real estate is the only sector lower). Compare that with the last three months prior to the tech bubble peak in 2000, when seven sectors were lower even as the broader market kept hitting new highs. Certainly, a negative divergence that eventually caused a major market selloff, as we all know.

Major stock indices hit more new record highs last week on signs that the economy, labor market, and central bank policy are normalizing. A gentle economic slowdown is preferable as it alleviates some upward pressures on inflation.

After lagging the previous week, the U.S. large-cap growth index outperformed its value counterpart by a wide margin, extending the growth style’s year-to-date leadership. The growth index returned about 2.7% for the week while the value benchmark was down 0.8%. Smaller-cap stocks lagged large-cap counterparts by a wide margin again, extending a recent run of underperformance for smaller stocks.

Since a recent high on May 15, the small-cap benchmark was down 3.7% as of Friday’s close; its large-cap counterpart was up 0.3%.

The latest data on the labor market suggests that although employment conditions remain strong they are gradually loosening. The ECB and Bank of Canada kicked off their rate-cutting cycles. While it still appears that there is no urgency in the U.S. right now, it appears likely that the Fed won’t be far behind in starting to reduce rates later this year.

With the new, broader industry sector participation, traders may want to complement growth stocks with cyclical and value-style investments going forward.

In any case, it’s always advisable to closely monitor the technicals and “Trade What You See, Not What You Think”

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