"REVENGE OF THE NERDS" - Small/Mid Caps Soaring, Mega Cap Tech Dying

 

"REVENGE OF THE NERDS" - Small/Mid Caps Soaring, Mega Cap Tech Dying

Market Rotation - THE BIG STORY

• S&P 500 YTD: +1.5% | Mid-cap 400: +6.4% | Russell 2000: +7.8% | NASDAQ: +1.2%
• Equal weight S&P: Broke out, up 2%
• Mid-caps: Broke out 5 days ago, "on the move"
• Small caps: "On the move"
• Regular S&P: STUCK - 689 in late October, 692 today (3 months, no gains)

Gary: "Change of complexion. Big stuff out. Rest in. It got accentuated today... from start of the year. Revenge of the nerds."

Why S&P Stuck: 8 stocks = 30%+ of index, 6 of them "heading South"

💀 THE 8 MEGA CAPS - BRUTAL STATUS

• Apple: Bearish, down $2 today
• Microsoft: "Really bearish", down $3 today
• Meta: Bearish
• Netflix: "Really bearish", up early, finished down
• Tesla: "Somewhat on bearish side", up early, finished down
• Broadcom: Under 50-day, not working
• Amazon: "Hasn't done a thing in a year", up bunch early, finished +$1.50
• NVIDIA: "Done nothing since August", up $6+ early, finished +$3.90
• Google: ONLY bullish one, but down today!

Gary: "If you own all the big tech, you're losing money, regardless of what the market's doing. It got worse today."

🔴 SOFTWARE - "KEEP AVOIDING"

Down Today:

• Salesforce: -$6
• Microsoft: -$2
• Oracle: -$4
• HubSpot, Workday, CrowdStrike, Guidewire, Snowflake: "Getting run over"

Gary: "Avoid software. Mega cap tech. Seriously. The Mag 7 or the Mag 8 or whatever they call it."

📊 Today's Action - Big Reversal

• NASDAQ: Up 250 early, finished +58 (gave back 200 points!)
• SOX: Up 300 early, gave back 163, closed +78.37
• Mid-caps: +1%+ | Small caps: +1%ish | Transports: +1.6%
• S&P: Only +0.25%

🏦 Banks - Weird Earnings Action

Goldman Sachs:

• Down $16 pre-open to ~$920
• Rallied $924→$945 in first minute
• Finished +$43

Morgan Stanley:

• Down $1 pre-open
• Up $6 first bar
• Finished +$10.50

BlackRock: +$64 on earnings

Yesterday: Wells Fargo, JPM, Bank of America all got smacked (Citigroup recovered today)

Gary: "Beats the hell out of us how that goes."

🔥 Semiconductors - Taiwan Semi CAPEX News

Catalyst: Taiwan Semi reported, mentioned CAPEX (capital expenditures) - "how many chips are going to be needed"

Equipment Stocks Jammed:

• KLAC: Up $137 early to $1,571
• ASML: Finished +$68 (was up $95)
• Taiwan Semi: Up $25 early, finished up <$15

Also rallied AI names (came off highs)

🏠 Housing - Government Injection

• Government did something with $200M
• Housing stocks turned up
• Top Bill (BLD): Broke out $462 three days ago, $500 already (earnings down every quarter!)

🛢️ Oil - Trump Backs Away

• Oil prices: -$2.95 (Trump backed away from Iran threats)
• Oil stocks: "Not so bad" (expected worse)
• Airlines: Up | Hotels: Up | Cruise lines: Down

🎯 Gary's Positioning & Thinking

What He Owns:

• SPY (S&P 500): Bought late April after Liberation Day crash, still holding but thinking about it
• QQQ: Sold weeks ago (8 stocks = 60%+ of Qs, acting poorly)
• Mid-caps: Just bought ("not normal for me")
• Dow: In it ("I never do that")

His Concern: "I'm not sure [S&P] can really get going if these eight don't. In fact, you've got six of them that are heading South still."

His Thinking: "Since [small/mid] have been so much weaker versus the other, don't you think the relative strength is going to be better for a while also? I think there's a shot."

Gary's Key Quotes

"Change of complexion. Big stuff out. Rest in."

"It got accentuated today... from start of the year, it's got accentuated. It's quite the wow if you ask us."

"Revenge of the nerds. It's the best way I can put it."

"If you own all the big tech, you're losing money, regardless of what the market's doing. So I hope you listen to that also, because it's been bad. It got worse today."

"Avoid software. Mega cap tech. Seriously. The Mag 7 or the Mag 8 or whatever they call it."

"The only thing we don't know: duration, how much. We'll stay on top of it."

"Markets change. The job is to follow the change and deal with the change. But I needed lots of proof. We're getting more on a daily basis."

"Reasoning, don't care. Outcome, everything."