Today’s market action continued to highlight the ongoing rotation beneath the surface.
The Dow posted a solid gain, while the Nasdaq remained under pressure as semiconductor stocks struggled again, leaving the tech-heavy index about 10% below its intraday peak.
The real story is that investors are still shifting money from high-flying technology names into more traditional sectors. That trend has been building for weeks and remained firmly intact today.
Looking ahead, the spotlight now turns to earnings from Microsoft, Meta, Amazon, and Apple, along with Wednesday’s Fed decision.
I expect rates to remain unchanged, but the market will be listening closely for clues about what comes next.
By the close, reports of progress toward easing tensions around the Strait of Hormuz helped improve sentiment, allowing the Nasdaq to recover much of its earlier loss while the Dow finished strongly. Meanwhile, bond yields and the dollar fell, while gold and Bitcoin also moved lower.
With the Fed and Big Tech both taking center stage this week, will they reignite the technology trade, or will this market’s changing leadership continue?
After opening higher, the S&P 500 and Nasdaq quickly reversed course as semiconductor stocks came under heavy selling pressure, overshadowing the relative calm that followed the weekend’s pause in hostilities between the U.S. and Iran.
Chipmakers led the retreat. The VanEck Semiconductor ETF (SMH) tumbled 3.7%, extending Friday’s losses. AMD and Teradyne each fell more than 7%, while Micron Technology dropped over 6%, weighing heavily on tech sentiment.
One bright spot came from the energy market. Easing tensions in the Middle East sent Brent crude futures sharply lower, with September contracts falling nearly 7% to around $90 per barrel.
Under normal circumstances, cheaper oil would provide a tailwind for stocks, but investors remained focused on broader market risks.
Meanwhile, geopolitical uncertainty is far from disappearing. Ukraine’s reported strike on an Iranian commercial vessel in the Caspian Sea added another layer of tension, prompting Tehran to denounce the incident as a “hostile and criminal act.”
Investors now face a critical week packed with potential market-moving events. Earnings reports from Amazon, Apple, Meta, and Microsoft will put the spotlight on corporate spending and the return on massive AI investments.
After Alphabet’s disappointing report last week, traders will be watching closely for signs that AI-related spending is starting to generate meaningful results.
The Federal Reserve also takes center stage on Wednesday. While most economists expect the next rate hike to come in September, markets are increasingly considering the possibility that the Fed could act sooner, adding another layer of uncertainty.
By the closing bell, even falling oil prices weren’t enough to lift the broader market. The S&P 500 and Nasdaq finished lower, while the Dow managed to hold onto a modest gain. The Mag 7 erased all their early advances, highlighting the market’s lack of conviction.
Elsewhere, bond yields moved lower, the dollar traded mostly sideways, gold rose but slipped back below the $4,100 level, and Bitcoin bounced around before finishing above Friday’s close.
For now, traders remain locked into a headline-driven market, reacting to every geopolitical development, earnings release, and Fed rumor.
With a major Fed decision and several mega-cap earnings reports just days away, will this week’s events finally provide a clear direction for the market, or simply add another layer of uncertainty?
Do you want to know which ETFs are hot and which ones are not? Then you need my High-Volume ETF Cutline report. It tells you how close or far each of the 311 ETFs I follow is from its long-term trend line (39-week SMA). These are the ETFs that trade more than $5 million a day, so they are not some obscure funds that nobody cares about.
The report is split into two parts: The winners that are above their trend line (%M/A), and the losers that are below it. The yellow line is the line of shame that separates them. You can see how many ETFs are in each group and how they have changed since the last report (216 vs. 213 current).
CHIP STOCKS SINK NASDAQ AS GEOPOLITICAL RISKS RATTLE MARKETS
[Chart courtesy of MarketWatch.com]
Moving the market
It was a challenging end to the week for the major indexes, with the Nasdaq once again taking the brunt of the selling pressure as weakness in semiconductor stocks weighed heavily on the tech sector.
Chip stocks got off to a shaky start after Intel initially rallied on better-than-expected second-quarter results, only to reverse course and finish down 4%.
The selling spread across the sector, with Broadcom and AMD each losing 2%, Micron dropping 6%, and the VanEck Semiconductor ETF (SMH) falling 2%. After months of leading the market higher, semiconductors found themselves firmly in the crosshairs.
The broader market remained on edge following Thursday’s selloff, when the Dow tumbled more than 500 points and both the S&P 500 and Nasdaq suffered their largest one-day declines since late June.
Disappointing reactions to earnings from Tesla and Alphabet have raised questions about whether the market’s biggest winners can continue carrying the rally.
Adding to investor unease were rising geopolitical tensions in the Middle East. President Trump indicated he is considering a major military response against Iran as the conflict continues to expand into the Red Sea region.
Markets dislike uncertainty, and right now traders are being forced to react to a constant stream of geopolitical headlines that can change sentiment in a matter of minutes.
By the closing bell, the Dow managed to stay in positive territory, while the S&P 500 finished little changed.
The Nasdaq, however, ended lower under the weight of chip stocks. For the week, all three major indexes finished in the red, with the Mag 7 notably underperforming the rest of the market.
Outside of equities, bond yields moved higher alongside oil prices, while the dollar posted its strongest weekly performance in more than a month.
Gold recovered to finish above $4,000 an ounce, although well below its intraday highs. Bitcoin briefly tested its mid-June highs before fading and ending the session roughly flat.
One development that may deserve more attention is the growing disruption to global shipping routes in the Middle East. Traffic through the Strait of Hormuz has slowed dramatically as tensions in and around the Persian Gulf intensify.
With only six ships passing through the strait on Thursday, the lowest level since early May, the potential impact on energy markets and future oil prices is becoming harder to ignore.
With earnings season losing some momentum, geopolitical risks rising, and markets increasingly reacting to each new headline, the key question remains: Can traders keep their confidence in stocks, or is a more cautious stance beginning to make sense?
Out of the 1,800+ ETFs out there, I only pick the ones that trade over $5 million per day (HV ETFs), so you don’t get stuck with a lemon that nobody wants to buy or sell.
Trend Tracking Indexes (TTIs)
These are the main indicators that tell you when to buy or sell Domestic and International ETFs (section 1 and 2). They do that by comparing their position to their long-term M/A (Moving Average). If they cross above, and stay there, it’s a green light to buy. If they fall below, and keep going, it’s a red light to sell. And to make sure you don’t lose your shirt if things go south, I also use a 12% trailing stop loss on all positions in these categories.
All other investment areas don’t have a TTI and should be traded based on the position of each ETF relative to its own trend line (%M/A). That’s why I call them “Selective Buy.” In other words, if an ETF goes above its own trend line, you can buy it. But don’t forget to use a trailing sell stop of 12%, or less if you’re feeling nervous.
If some of these words sound like Greek to you, please check out the Glossary of Terms and new subscriber information in section 9.
DOMESTIC EQUITY ETFs: BUY— effective 5/20/2025
Click on chart to enlarge
This is our main compass, the Domestic Trend Tracking Index (TTI-green line in the above chart). It has broken above its long-term trend line (red) by +7.00% and remains in “Buy” mode, with our holdings being subject to our trailing sell stops.
Stocks had a rough day as a combination of rising geopolitical tensions, surging oil prices, and disappointing reactions to major earnings reports sent traders heading for the exits.
The biggest catalyst was a sharp jump in crude oil after Yemen’s Iran-backed Houthi militants claimed attacks on two Saudi oil tankers in the Red Sea, reigniting fears that the Middle East conflict could broaden.
Adding fuel to the fire, President Trump threatened strikes against Iranian infrastructure, further rattling markets and pushing energy prices sharply higher.
Brent crude surged 6% to move back above $100 per barrel, while West Texas Intermediate (WTI) climbed 5% to top $91. Both benchmarks reached their highest levels since before the U.S. and Iran reached a ceasefire agreement last month.
Higher oil prices also spilled over into the bond market. Treasury yields climbed, with the 10-year yield hitting its highest level since January 2025, while a stronger dollar added another headwind for risk assets.
Earnings season did little to calm nerves. Alphabet slid 7% after raising its 2026 capital expenditure outlook to as much as $205 billion, highlighting the enormous costs associated with the AI arms race.
While the company pointed to strong AI demand, investors appeared increasingly concerned about just how much hyperscalers are spending to stay competitive.
Tesla fared even worse, tumbling more than 13% after reporting a significant second-quarter earnings miss. Investors were especially disappointed that operating expenses grew faster than revenue, raising fresh questions about profitability.
Gold was unable to attract much safe-haven interest despite the geopolitical backdrop, slipping while remaining above the psychologically important $4,000 level.
Bitcoin also joined the risk-off move, falling below $65,000 and tracking weakness in technology stocks, even as spot Bitcoin ETFs attracted more than $1 billion in inflows this week.
Meanwhile, Peter Schiff noted that the 30-year Treasury yield has climbed to 5.18%, its highest level since April 2006. Back then, U.S. national debt stood at roughly $8.35 trillion. Today, it’s approaching $39.6 trillion.
If borrowing costs continue moving higher, how sustainable does that debt burden become over the long run?
