Undoubtedly, large technology companies are the leaders of the bull market - but they also have companions.
Although the main indices rose slightly in October this year, the third quarter earnings of Bank of America (BAC) and Goldman Sachs (GS) drove these indices higher, with both companies reporting a significant increase in investment banking fees.
More importantly, since the panic caused by the yen on August 5th, they have risen alongside the other three sectors - technology, non-essential consumer goods, and industry - outperforming the S&P 500 index. All four sectors have risen by about 15%, with technology having a slight edge. (From a technical perspective, this low point is crucial as it marks the bottom of this year's largest decline - a fairly normal 8.5%).
After the panic caused by the magnificent 7 in the technology industry, the phrase 'technology leads again' seems familiar - perhaps a little unsettling. However, unlike other periods of this current bull market (now in its second year), technology stocks also have some companions, thanks to inflow of funds or rotation into other industries.
This is a process as old as the open market. Just asTechnical AnalysisAs the godfather Ralph Acampora once said: "Industry rotation is the lifeblood of a bull market."
Ralph's nephew Jay Woods, the New York Stock Exchange Executive Floor Director and Chief Global Strategist at Freedom Capital Markets, said, "Funds have not left the market, they have just shifted from one industry to another," Woods said, emphasizing the strong performance of software stocks. He specifically highlighted cybersecurity stocks such as CrowdStrike (CRWD) and Cisco (CSCO) - both of which had once fallen but are now in a leading position.
Woods reviewed the round trip journey of Cisco returning to the peak of the internet bubble.
"I hate Cisco now," Woods said. "I liked it in 1999, and now its price is the same as in 1999. That's great."
In fact, the current leading position of the technology industry is in stark contrast to earlier this year when Mag Seven stocks were dominant. Despite the year-round leader Nvidia (NVDA) rising 30% since its low point on August 5, IBM (IBM) has also followed closely - emerging from the ashes of traditional tech stocks to hit new highs.
In fact, since the yen hit a low point, more than 20 stocks in the S&P 500 Index have outperformed Nvidia, with electrical utilities company Vistra Corp. (VST) and United Airlines (UAL) leading the way, rising by 85% and 70%, respectively.
Many of these stocks were just lagging behind in the bear market of 2022 and were left behind. But even in the overextended stocks, there are still potential winners.
"Make me a five-year weekly chart for utilities. Talk about a nice rounded base and then a breakout," Woods said, adding, "[These] are no longer your grandparents' utilities."
