The market made a very impressive intraday rebound yesterday, although the S&P 500 (SPX) failed to climb into positive territory. Only 22% of the index finished higher, but some of the year's hottest stocks regained their swagger.

Heat Map & Market Breadth

The Chinese government gave selected companies the option to buy a limited number of Nvidia (NVDA) chips. But there wasn’t much green on the screen.

Semiconductors came roaring back, but Financials (XLF) and cyclicals took it on the chin.

However, it was tough sledding throughout the session with new lows overshadowing new highs. It is something to keep an eye on. More new lows than highs is ugly stuff, no matter how well it might be masked by a few megacap names moving higher.

Mo Makes a Move

Early in the session, momentum (SPMO) was the only factor in the green, and then, after plunging lower buyers showed up again at the close.

There was some tire-kicking in large-cap growth and quality.

Momentum is great when it's moving higher and a “back-of-the-neck ride” when it's moving lower – especially since it moves down faster than it moves higher.

Momentum was slammed to its 50-day moving average and held.

Against the S&P 500, momentum was slammed even harder. That was good news in the sense that money that fled momentum found shelter in other parts of the market.

The artificial intelligence (AI) trade hinges on hyperscalers spending all their cash, and more chip companies getting the lion's share of that cash.

The Chips Are Cooking

Within the chips, up to 50% is flowing into memory, so while the runups were the stuff of dreams (who needs the lottery), the pullbacks have been sharp as well.

NVDA is getting a big chunk of that cash, but its stock has gotten no love, and it has gotten cheaper.

At some point, NVDA will make a monster rally. In the meantime, I think you need exposure to chips, especially equipment names, memory, and storage.

Today’s Session

Major indices are opening slightly higher. The key today will be holding through the close and picking up buyers throughout the day.

Lots of folks may throw in the towel on software with the latest major downgrade on Salesforce (CRM) from KeyBanc.

That cash should flow into hardware and semiconductors.

SK Hynix’s US listing is seven times oversubscribed and was guided to a price at $149 per ADR today, shares will begin trading tomorrow and open up a new avenue to the memory niche.

Oil is also moving in the right direction in spite of continued skirmishes in the Middle East.

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