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The market’s been on a tear lately, but I’m seeing warning signals that have me stepping back from tech positions — even with all the bullish momentum around us.
We’ve watched the S&P 500 (SPY) climb from recent lows to current levels in just eight trading sessions, and that kind of vertical move is touching my ATR-based deviation bands.
When I see price action stretch this far this fast, it’s historically been a red flag that precedes pullbacks.
But here’s what’s really concerning me: Tech isn’t leading this rally despite the broader market strength. That’s a dangerous divergence.
Tech’s Failure to Lead Is the Real Warning
The Nasdaq 100 (QQQ) isn’t driving performance right now, and the Magnificent Seven (MAGS) stocks aren’t pulling their weight. When you’ve got the SPY pushing higher but technology lagging, that tells me institutional money isn’t flowing where it typically does during sustained rallies.
The Semiconductor (SMH) sector isn’t leading either, which adds another layer to this tech weakness. If semiconductors can’t participate in a broad market rally, that’s usually a sign that the move lacks the foundation to continue.
My current watch list reflects this caution — there are almost no tech names on the long side right now. Instead, I’m seeing setups on the short side in consumer staples, including names like Chipotle (CMG), Constellation Brands (STZ), Kroger (KR), Albertsons (ACI) and Sprouts (SFM).
Why This Matters for Your Trading
Here’s the thing about sector rotation — when money flows out of technology, even a two to three day cooling period can be painful for momentum traders. And right now, this market feels like it’s moved too much too fast.
I’m not calling for a crash, but I am saying this…
Chasing extended tech positions when the sector isn’t leading is a recipe for getting caught wrong-footed. The smart play here is patience.
Watch for divergence between Mag Seven performance and the broader indices. When that gap widens, it usually resolves with the market catching down to tech’s performance, not the other way around.
I hope that helps!
Roger Scott
Roger Scott Trading
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