The S&P 500 showed continued momentum into the end of the week after spending the early part consolidating sideways. The pullback was shallow, barely testing the 10-day moving average — a strong indication of underlying demand. Friday’s strong close near highs further reinforces the presence of aggressive buyers.
The Nasdaq (QQQ) outperformed relative to other indices this week, likely driven by a combination of prior relative weakness during the correction and continued strength in mega-cap tech earnings. Notably, QQQ has yet to see any meaningful pullback, remaining extended above short-term moving averages — a sign of strength, but also something to be mindful of from a risk perspective.
The Russell 2000 (IWM) lagged slightly, spending the week consolidating sideways with progressively tightening price action. While it hasn’t kept pace with large caps, the structure remains constructive within the broader uptrend. The tight weekly close suggests potential for expansion in the near term.
Themes in Play
SMH (Semiconductors) – Continues to lead this rally. Price is becoming increasingly extended from key moving averages, which is typically unsustainable in the short term. Ideally, looking for a pullback or period of consolidation before considering new entries.
UFO (Space/Satellite) – Sold off through most of the week, with selling pressure increasing into the close. Currently finding support around the 21-day moving average. Still within a constructive structure — if support holds, this could present opportunities after consolidation.
QTUM (Quantum Computing) – The ETF resumed momentum late in the week following a brief pullback. However, many of the more explosive individual names (e.g., IONQ, QBTS, QUBT) are now pulling back toward the 21-day moving average. This type of action is healthy and could set up the next leg higher if support holds.
IBLC (Blockchain) – Continued to consolidate constructively, forming higher lows with tightening price action. A breakout attempt on Friday failed, but overall structure remains intact. Watching for a cleaner breakout with volume.
LIT (Lithium) – Pulled back to the 10-day moving average. Price action remains somewhat volatile but is beginning to tighten. Prefer to see further consolidation before any actionable setups.
REMX (Rare Earths) – Experienced a pullback throughout the week and is now testing support around the 21-day moving average. Similar to LIT, looking for tighter price action before considering entries.
Key Observations
While the broader trend remains clearly bullish, this week highlighted a potential narrowing in market breadth. Strength appears increasingly concentrated in mega-cap tech and AI infrastructure, while small- and mid-cap indices, as well as equal-weighted indices, are beginning to consolidate or pull back.
This divergence is worth monitoring. Narrow leadership can still drive markets higher, but it often reduces the overall conviction behind a move.
Another factor to consider is volume. Despite strong price action, volume has not meaningfully expanded. This could suggest that institutional participation is somewhat cautious, potentially waiting for pullbacks rather than chasing extended price.
That said, price remains the primary indicator — and current price action is undeniably strong. These observations are not bearish signals, but rather contextual factors to remain aware of.
Focus for the Week
This week, my focus will be on:
- Monitoring for improved breadth, particularly participation from small- and mid-cap stocks
- Watching for continued momentum in blockchain-related names
- Looking for buyable pullbacks in leading AI infrastructure and semiconductor names