In my last note, we talked about this technical reversal signal in Nvidia.
As you can see, this "outside day" has indeed predicted a reversal in the stock. It's now down 10% from Thursday's close.
And as we also discussed in my Thursday note, due to the disproportionately heavy weighting of Nvidia in the S&P 500 and Nasdaq, those key indices also put in reversal signals.
With that, we discussed the prospect that these signals could trigger a (needed) rotation, and broadening of market performance.
With the behavior of stocks over the past three days, that seems to be developing. To open the week the Nasdaq and S&P 500 were down, the Dow, Russell (small caps) and equal weighted S&P 500 were UP.
Unsurprisingly, with a rotation from expensive to cheap, the best performing sector of the day was energy.
The energy sector clearly represents the best value. It's expected to contribute almost 7% to S&P 500 earnings in Q2 (with the largest upward revision), but makes up just 3.5% of the index by market cap (as you can see in the graphic below). And that market cap representation within the index is near historic low levels.
