Market Dynamics Shift as S&P 500 Soars and NASDAQ 100 Stalls

The S&P 500 Index is on a post-election upswing, confidently exceeding crucial resistance levels, but the NASDAQ 100 finds itself lagging.

Is Market Leadership Changing?

Following the S&P 500’s notable resurgence through April’s channel resistance, analysts are questioning the current market structure. Notably, JPMorgan analyst Jason Hunter poses an important question: Is this a sign of a lasting shift in market leadership, or just a temporary slowdown for the NASDAQ, which has yet to surpass its August rebound high?

Key Indicators and Support Levels

The S&P 500 holds firm with a bullish outlook, supported by levels in the 5600s. Resistance points are currently identified at 6166 and 6194. Conversely, as the NASDAQ 100 grapples with its August high, Hunter indicates that its lagging performance amid a broader market rally might suggest a shift away from tech domination.

If the NASDAQ 100 does not manage to break through its recent resistance, it may imply that sectors apart from tech, such as communication services, could be taking the lead.

Related: iShares Semiconductor ETF (SOXX) Approaches Death Cross Despite Recent Gains: Should Investors Worry?

Communication Services Surge Amid NASDAQ Struggles

Interestingly, while the overall NASDAQ 100 faces challenges, the Communication Services sector is thriving, providing good news for investors in the iShares U.S. Telecommunications ETF IYZ and the SPDR S&P Telecom ETF XTL. In contrast, tech and semiconductor stocks have struggled, hovering just below their respective resistance levels, which is concerning for holders of the Vanguard Information Technology ETF VGT, Technology Select Sector SPDR Fund XLK, Invesco QQQ Trust Series I QQQ, and the Invesco NASDAQ 100 ETF QQQM.

Hunter believes that if the rally persists, hardware stocks could gain traction, bringing them back in line with the broader market. The pivotal question remains: Will these sectors improve, or will they continue to fall behind during the market’s positive momentum?

The Semiconductor Sector Under Pressure

Notably, semiconductor stocks have been underperforming. The Philadelphia Semiconductor Index (SOX) is encountering strong resistance at the 5397 July peak and the 5537 78.6% retracement level.

While the index remains above the crucial 4997 200-day moving average, Hunter is monitoring the possibility of a breakthrough at these resistance levels.

Should semiconductors continue to struggle, it would reinforce the narrative of sustained underperformance for this sector that has persisted since mid-summer.

On the flip side, if bullish sentiment can propel semiconductors past these barriers, it may spark a rally that rekindles tech’s dominant position.

Investors in the VanEck Semiconductor ETF SMH, the iShares Semiconductor ETF SOXX, and the Direxion Daily Semiconductor Bull 3x Shares SOXL should closely observe their investments during this time.

Looking Ahead

Despite current challenges, Hunter retains a measured optimism about the potential for tech stocks, especially semiconductors, to regain their leadership role as the post-election rally continues.

However, if the semiconductor sector falters further, it could confirm that tech dominance might diminish, at least temporarily, in the broader market narrative.

For now, key levels to monitor include the 5397 July gap for the SOX Index and the 21433-22306 range for the NASDAQ 100.

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This image was created using artificial intelligence MidJourney.