Yesterday, there was a moment when it appeared the entire stock market would finish higher, but despite a valiant effort, large-cap growth continues to be thrashed about.

By the closing bell, small-caps continued their domination, as the ruling class of the stock market held on for dear life.

Even with the performance of the last two weeks, Wall Street remains skeptical. Many think this is the consequence of hedge funds being maxed with long mega-cap names and max short small names. Yet, there have been massive inflows, which underscores the nature of the stock market these days to focus on the short-term only.

Ironically, momentum investors chased mega-caps higher and are now eschewing those names to chase small caps.

Putting the Move Into Perspective

The July drubbing of Big Tech and reversal of small-caps have seen the NASDAQ-100 (NDX)’s monumental lead over the Russell 2000 ETF slip back to January’s level of de minimus gains.

It is something to behold.

However, this adjustment is a blip on the radar compared to the freefall of the NASDAQ-100 in the aftermath of the implosion of Technology and Telecom in 2000.

The bottom line is this move is still too premature to offer a verdict.

Moreover, we know the Big Tech names in question today are of a higher caliber than those of the ‘Tech Bubble.’

More Frustrations

Market breadth was better in all categories, but the market finished its intraday highs after the kind of intraday reversal that sparked rallies into the closing bell.

Market Breadth	NYSE	NASDAQ
Advancers	1,847	2,537
Decliners	937	1.687
New Highs	178	213
New Lows	29	108
Up Volume	2.48 billion	3.26 billion
Down Volume	2.04 billion	2.78 billion

Broad Market Blues

Only four sectors finished higher, and many names that rallied on earnings news gave back gains and morphed into losers (we had our fair share).

Energy (XLE), Industrials (XLI), Financials (XLF), and Materials (XLB) are the sectors the book says we want to own as the economic tide turns and the Fed begins cutting rates.

It’s Happening

This is a handy reminder from the Carson Group that there are pullbacks of 5% and one of 10% in any given year. So far, in 2024, the S&P 500 has only experienced a single pullback of 5.4%.

Technical Handicapping

The S&P 500 is nearing oversold using the Relative Strength Index (RSI), but selling volume has increased. The last upside breakout came with a close above 5,400. I expect 5,400 to 5,350 (small gap) to be the big downside tests.

Today’s Session

Personal income came in at +0.2%, which is down from +0.4% in May which also was the consensus.

Personal spending came in at +0.3% was in line with consensus, but down from +0.4%.

Real Personal Spending (adjusted for inflation) was +0.2% down from +0.4% and below consensus of +0.3%.

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