Yesterday, the US midterm elections were held, and the results overwhelmingly favored Democrats.
The market will need time to digest the results' impact on the economy, markets, and individual sectors.
But the main theme I am watching is whether we will see the typical post-election rally, as well as how volatile it will be as investors adjust their portfolios in an attempt to take advantage of future changes in policies:
Leading into yesterday’s elections, technology stocks had been declining, in some cases severely, on worries about higher interest rates and the rising costs associated with the AI buildout.
As the bad news was being absorbed by the markets and AI-related stocks were being repriced, the momentum of the technology sector (XLK) vs. the S&P 500 was actually starting to slowly improve:
At the same time, the momentum of the sectors that have been leading the market started to weaken.
This week, it will be important to watch how the technology sector, still the largest sector in the S&P 500 index, reacts.
Source: State Street
The tech sector (XLK) broke below cloud support (which is now overhead resistance) and is trying to find price support near its VWAP (Volume Weighted Average Price) from its March low:
New here?
The Rotation Report is a daily look at where money is moving in the market. Friday’s full report is always free.
Subscribe for free: