The Bottom Line:
- NVDA is overheated and pulling back, but the broader market is not following suit, indicating money rotation rather than fleeing the market.
- Bulls want to see a bounce in semiconductors, and the size of the retracement will provide information on the potential for a bear flag or tightening range.
- XLF and IWM are bouncing as semiconductors top out, and their reaction to a semiconductor bounce will be important to watch.
- Bears need to confirm daily downtrends and lose weekly EMA12 in QQQ and SPY to take control, while bulls want to see XLF and XLV hit all-time highs to show market breadth.
- The cannabis sector is getting a bounce, with GTBIF and TCNNF being potential plays for Florida legalization in the fall, but a weekly lower high is still the most likely result of the current bounce.
NVDA Pullback Signals Money Rotation, Not Market Exodus
Semiconductor Sector Pullback and Market Rotation
The semiconductor sector, led by NVDA, continues to experience a significant pullback, raising questions about the broader market’s direction. However, the current market behavior suggests a rotation of money rather than a mass exodus. While NVDA has dropped 18% from its all-time high, the S&P 500 is only down 1.5%, indicating that money is not fleeing the market entirely but instead rotating to other sectors.
Bullish Signs and Key Sectors to Watch
Bulls are finding comfort in the fact that the S&P 500 and NASDAQ are testing their daily EMA 12 support levels. The financial sector (XLF) has shown bullish action since NVDA topped out, suggesting a rotation of funds. For the market to remain strong through the summer, bulls want to see XLF and the healthcare sector (XLV) hitting all-time highs in early July, demonstrating a broadening of the market’s breadth.
Short-term Expectations and Bounce Retracement
In the short term, traders are looking for a potential bounce in the semiconductor sector after a third gap-down opening. The size of the bounce retracement will provide crucial information about the market’s direction. If the bounce is weak and sets a lower high, it may confirm a bear flag pattern. However, if the bounce exceeds 50%, it could shape up a tightening range. Bulls will also be watching the reaction of XLF and the Russell 2000 (IWM) during the semiconductor bounce to gauge the strength of the rotation.
Semiconductor Bounce: A Crucial Indicator for Bulls and Bears
Semiconductor Bounce: A Crucial Indicator for Bulls and Bears
The next major piece of information traders are watching for is the bounce in the semiconductor sector. After a significant drop, aggressive semi bulls are scouting for hourly oversold bounces. However, some traders are patiently waiting for a potential third gap-down opening before looking to play the bounce. If a bottom is found, the size of the bounce retracement will be crucial in determining the market’s direction. A weak bounce that sets a lower high would favor confirming a bear flag, while a bounce of 50% or more could shape up a tightening range. If the bears can confirm a daily downtrend as a result of the next bounce, the weekly EMA 12 becomes a visual target for both SMH and NVDA.
Sector Rotation: XLF and IWM in Focus
As the semiconductor sector looks for a bounce, traders will be closely monitoring the reaction of the financial sector (XLF) and the Russell 2000 (IWM). These sectors have been bouncing while semiconductors topped out, and their behavior during the semiconductor bounce will provide valuable insights. If XLF and IWM start pulling back when semiconductors get a daily or shorter-term hourly oversold bounce, it could be a red flag for the broader market. Traders with long positions in IWM will be cautious, as a weekly lower high is the most likely scenario in the current equilibrium. If semiconductors bounce and IWM heads back down towards its lows, it may prompt some traders to exit their positions.
Cannabis Sector: Potential Opportunities and Risks
The cannabis sector has been experiencing some bounce, with GTBIF confirming the highest price in a month and TCNNF being another play for the potential for Florida legalization in the fall. Traders who re-entered positions last week are seeing positive results, but they remain aware that a weekly lower high is the most likely outcome of the current bounce. As the bounce retracement size is monitored, traders are considering whether to let their positions ride into the fall or lock in profits and reposition for a weekly higher low entry. The cannabis sector’s strength is related to the Russell 2000 (IWM) strength, and recent news about Pennsylvania’s legalization efforts has also contributed to the positive sentiment.
XLF and IWM React to Semiconductor Moves: What to Watch
Semiconductor Bounce: A Crucial Indicator for Bulls and Bears
The next major piece of information traders are watching for is the bounce in the semiconductor sector. After a significant drop, aggressive semi bulls are scouting for hourly oversold bounces. However, some traders are patiently waiting for a potential third gap-down opening before looking to play the bounce. If a bottom is found, the size of the bounce retracement will be crucial in determining the market’s direction. A weak bounce that sets a lower high would favor confirming a bear flag, while a bounce of 50% or more could shape up a tightening range. If the bears can confirm a daily downtrend as a result of the next bounce, the weekly EMA 12 becomes a visual target for both SMH and NVDA.
Sector Rotation: XLF and IWM in Focus
As the semiconductor sector looks for a bounce, traders will be closely monitoring the reaction of the financial sector (XLF) and the Russell 2000 (IWM). These sectors have been bouncing while semiconductors topped out, and their behavior during the semiconductor bounce will provide valuable insights. If XLF and IWM start pulling back when semiconductors get a daily or shorter-term hourly oversold bounce, it could be a red flag for the broader market. Traders with long positions in IWM will be cautious, as a weekly lower high is the most likely scenario in the current equilibrium. If semiconductors bounce and IWM heads back down towards its lows, it may prompt some traders to exit their positions.
Cannabis Sector: Potential Opportunities and Risks
The cannabis sector has been experiencing some bounce, with GTBIF confirming the highest price in a month and TCNNF being another play for the potential for Florida legalization in the fall. Traders who re-entered positions last week are seeing positive results, but they remain aware that a weekly lower high is the most likely outcome of the current bounce. As the bounce retracement size is monitored, traders are considering whether to let their positions ride into the fall or lock in profits and reposition for a weekly higher low entry. The cannabis sector’s strength is related to the Russell 2000 (IWM) strength, and recent news about Pennsylvania’s legalization efforts has also contributed to the positive sentiment.
Bulls vs. Bears: Key Levels and Sectors to Monitor
Semiconductor Sector Weakness and Market Resilience
Despite the significant pullback in the semiconductor sector, led by NVDA, the broader market has shown resilience. While NVDA has dropped 18% from its all-time high, the S&P 500 is only down 1.5%, suggesting that money is rotating to other sectors rather than leaving the market entirely. This rotation is evident in the bullish action of the financial sector (XLF) since NVDA topped out.
Key Levels and Sectors to Monitor
Traders are closely watching the daily EMA 12 support levels on the S&P 500 and NASDAQ. If these levels hold, it could be a positive sign for the bulls. For the market to maintain its strength through the summer, the financial sector (XLF) and healthcare sector (XLV) need to hit all-time highs in early July, indicating a broadening of the market’s breadth.
Semiconductor Bounce and Sector Rotation
The short-term focus is on the potential bounce in the semiconductor sector after a third gap-down opening. The size of the bounce retracement will provide crucial information about the market’s direction. A weak bounce setting a lower high would favor confirming a bear flag, while a bounce exceeding 50% could shape up a tightening range. Traders will also be monitoring the reaction of XLF and the Russell 2000 (IWM) during the semiconductor bounce to gauge the strength of the rotation. If these sectors pull back when semiconductors bounce, it could be a red flag for the broader market.
Cannabis Sector Bounces: Potential Plays and Likely Outcomes
Cannabis Sector Bounces: Potential Plays and Likely Outcomes
The cannabis sector has been experiencing a bounce, with GTBIF confirming the highest price in a month and TCNNF being another play for the potential for Florida legalization in the fall. Traders who re-entered positions last week are seeing positive results, but they remain aware that a weekly lower high is the most likely outcome of the current bounce.
Monitoring Bounce Retracement Size and Profit-Taking Decisions
As the bounce retracement size is monitored, traders are considering whether to let their positions ride into the fall or lock in profits and reposition for a weekly higher low entry. The cannabis sector’s strength is related to the Russell 2000 (IWM) strength, and recent news about Pennsylvania’s legalization efforts has also contributed to the positive sentiment.
Risk Management and Market Correlation
Traders in the cannabis sector are positioned comfortably, essentially risk-free unless massive gap-downs occur. However, they are patiently waiting for more information to determine their next moves. The sector’s performance is closely tied to the broader market, particularly the Russell 2000 (IWM), so traders must remain vigilant and adapt their strategies accordingly.
