I tell you what, if I have to type the word rotation too many more times this year, I may lose my mind. You know how, when you’re buying a house and have to sign your name 100 times in a row, you start questioning how to spell your own name? That’s about how I’m feeling with this word. This market has been all about rotation since June 4, and it doesn’t seem to be quitting.
The rotation trade held up once again on Monday, with RSP and DIA pushing higher while SOXX gapped below its 100-day SMA. AI names were hit hard, with many of the most popular high-beta plays down double digits.
SOXX Daily Chart
However, part of Monday’s wild price action can be attributed to the fact that it was Columbus Day. SPY traded just 18.53 million shares, its lowest full-day volume in 20 years. For comparison, on October 11, 2004, which was also Columbus Day, SPY traded 20.25 million shares.
The bond market was closed, bank earnings are right around the corner, and we’re already in a choppy consolidation period. Monday’s price action was bound to be a little wonky. When volume is this light, it doesn’t take as much selling pressure to push prices lower, and individual stocks can make bigger moves than they might under normal trading conditions.
Tuesday’s price action should give us a better read on how the rest of the week might unfold.
Big Tech Holds Up as Semis Struggle
To sum up our current market action, Big Tech is holding up fairly well, keeping QQQ strong and just off its all-time highs. SPY is holding up even better because, in addition to Big Tech holding firm, we’re seeing rotation into other areas of the market, including utilities, energy, financials, and consumer staples.
SPY Daily Chart
Semiconductors and the broader AI trade have been weak lately, and most semiconductor charts look like they could see more selling back toward the July lows. Only some of the largest names, including NVDA, TSM, and AMD, have pushed back toward all-time highs as investors continue to favor them over smaller, higher-risk names in the group.
If those leaders finally give way and the smaller names see another leg lower, it could drag QQQ down further. However, SPY could hold up relatively well, just as we saw in June and July, when weakness in certain areas of tech was offset by strength elsewhere in the market.
QQQ Daily Chart
Still Bullish, But Risk Is Elevated
I’m still bullish overall, and I’ll use a broader market drawdown, particularly in some of the strongest tech names, as an opportunity to add exposure. That doesn’t mean buying blindly. I’ll continue to respect key technical levels and use them to define and manage risk.
Some of the AI names that went almost straight up will be harder to manage from a technical perspective if they start breaking down. When price moves that quickly, it leaves behind very few established pivots and support levels to trade against. That makes it harder to identify where a trade is invalidated and where to place a logical stop.
SOXX’s move from $368 to $468 is a perfect example. Price moved through that level in 19 trading days, so the chart has relatively little historical price action there, leaving limited horizontal support. If SOXX breaks below its 200-day SMA, the technical risk increases significantly because there are fewer established support levels to lean on.
For now, I’m playing the rotation, respecting the key moving averages, and staying patient for better buying levels in tech.