Technical Stock Market Briefing for Day & Swing Traders
| By Harry Boxer, Technical Market Analyst
Tech Stocks Reverse, Markets Pull Back
The big technology stocks that led major U.S. stock indexes higher the previous week reversed course, dragging the market lower amid skepticism about AI prospects. The NASDAQ bore the brunt of the sell-off and ended the week down 3.0%; the S&P 500 and the Dow fell 1.6% and 1.2%, respectively. The Russell 2000 Index finished down around 1.9% for the week; over the two-week period, it fell a cumulative 3.3%.
Recent volatility underscores the risks of historic market concentration, with the top 10 stocks now representing over 40% of the S&P 500’s market cap. Since ChatGPT’s release in late 2022, the Magnificent Seven have soared nearly 190%, lifting the S&P 500 by 75%, but also creating unprecedented market concentration. Bubble concerns are emerging, but today’s tech leaders are profitable and cash-rich while the Fed is loosening its policy.
$NVDA Hits $5 Trillion as AI Sector Rotates
At the center of this rally is NVIDIA, the cornerstone of the AI ecosystem, which recently became the first company in history to surpass a $5 trillion market cap. For context, that’s larger than five of the S&P 500’s 11 sectors and equal to 60% of the entire Russell 2000 small-cap universe.
While enthusiasm around AI continues to fuel trader interest, it also has the potential to amplify volatility, especially when a handful of mega-cap technology stocks dominate index performance.
The skepticism around high-flying stocks, especially after seven consecutive months of gains in the tech-heavy Nasdaq, led to some profit-taking. In essence, AI excitement looks to have collided with valuation reality, prompting a sector rotation.
Bitcoin and Volatility on the Move
The price of Bitcoin, the most widely traded cryptocurrency, fell below the $100,000 level on Tuesday for the first time in more than six months. Bitcoin’s price edged upward later in the week, but its Friday afternoon level of around $103,500 was still down sharply from the record high of around $126,000 reached about four weeks earlier.
A gauge that tracks investors’ expectations of short-term U.S. stock market volatility briefly surged to a three-week high at midday Friday before pulling back and finishing about 10% higher for the week. Despite the rise, the Cboe Volatility Index remained far below levels reached in April, when uncertainty about tariffs sent the index soaring.
Technical Levels to Watch
Technical levels to monitor closely in the days ahead are chart support near SPX 6620–30, 6588, and KEY support near 6550. If that should be taken out, then next is 6449 and 6344. On the upside, resistance appears to be near 6730, 6810, and 6920.
In any case, we will always “Trade What We See, Not What We Think.”
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