Summary
- Technology sector momentum gauges have turned negative for the first time since January 16th, led by weakness in smaller-cap stocks.
- Market breadth is historically narrow, with mega-caps driving index highs while a majority of stocks have moved below their 200-day moving averages.
- Rising bond yields and sector rotation signals suggest increased risk and the need for tactical portfolio adjustments.
- NVIDIA dominates the semiconductor sector, representing 51% of market cap and acting as a bellwether for major indices with earnings out May 20th.
Introduction
The vertical line on a chart is almost always followed by a vertical line in the other direction. Speed kills in both directions.” ~ Paul Tudor Jones
The most dangerous thing is to buy something at the peak of its popularity. At that point, all the favorable facts and optimistic interpretations have been built into the price.” ~ Howard Marks
Timing matters, and it matters greatly. I have spent the last 35 years trading, researching, and constructing algorithms to identify and leverage the value across fundamental, technical, and behavioral finance models. Of the ten portfolio models designed for optimal portfolio mixes for members to beat the market at Value & Momentum Breakouts, eight come from enhancing well-tested anomaly research in published financial journals. All of the models continue to outperform the S&P 500 in live forward testing here on Seeking Alpha, and again this year.
Whether you are into dividends, ETFs, long-term value, forensic accounting anomalies, CFO insider trades, or aggressive short-term breakout picks, most of what I do is point investors to opportunities here on Seeking Alpha for large short- and long-term gains with a long track record of success based on your risk preferences.
A Third Major Signal for 2026
In my last market article we discussed the weekly S&P 500 gauges that gave us the most extreme positive reversal ever in my multi-year data set. The ceasefire announcement with Iran created a swing from max negative lows on March 30th to highs of positive momentum that we had not seen since March 28, 2024.
Previously to that signal in my March market article, I discussed the negative signal from January with the best signs for confirming early market bottoms as we approached peak negative MG values in March (red lines). Dip-buyers had been adding through the longest negative signal of 5 consecutive S&P 500 weeks of declines since 2022.
Our S&P 500 momentum gauges reflect the largest stocks and fund flows in the market and react to the MDA [multiple-discriminant analysis] cycle conditions of all 500 stocks in the index. This ratio of the most extreme positive (Segment 6) and extreme negative (Segment 2) gives us the momentum signal changes daily, weekly, and monthly.
Current weekly S&P 500 Momentum Gauges remain highly positive with low negative momentum values that have been increasing for the past four weeks. However, as we will discuss next, the bellwether Technology sector has turned negative along with a majority of the sector gauges, triggered mostly so far by the smaller cap stocks.
The First Negative Weekly Technology signal since January 16th.
The Technology Momentum gauges weekly signal is turning negative for the first time since January 16th. This represents an equal weighted measure of MDA stocks with more stocks in Segment 2 negative acceleration than Segment 6 positive acceleration for the first time in four weeks. Much will depend on the reaction to NVIDIA (NVDA) earnings May 20th after the close.
