This is one of the oldest dad jokes on Wall Street, and it sticks around for a reason.
You can’t have a party without chips.
That applies just as much to markets as it does to a kid’s birthday. When technology is leading, the semiconductors have to be involved. If they’re not, something is missing.
Last week, we saw the strongest evidence yet that this move is real. The equal-weight technology index just closed at a new all-time high. The small-cap and mid-cap tech Indexes did the same.
That tells us participation is expanding. It’s not just a handful of names carrying the load.
The only group that hasn’t confirmed yet is large-cap tech. It’s still more than five percentage points away from new highs.
But here’s the part that matters.
Semiconductors already got there.
Both the cap-weighted and equal-weight versions of the chip indexes just closed the week at their highest levels ever.
And if the chips are leading, you already know what that means.
The party is on.
Chips: Highest Weekly Close Ever
You can’t have tech without chips. This is where it starts.
And if only one version of semis was making new highs while the other lagged, that would be a problem.
That kind of divergence is what you see when things are breaking down.
That’s not what’s happening.
Both the cap-weighted and equal-weight semiconductor indexes just closed the week at new all-time highs.
The biggest names are working. The average stock is working. Participation is there.
That matters.
Because this isn’t just a handful of mega caps dragging everything higher. This is strength across the entire group:
So is this bearish for tech? Probably not.
Does this alone mean everything is perfect and it’s time to go all in? Not by itself.
But when you combine it with new highs in small-cap tech, mid-cap tech, and equal-weight tech, it’s a different conversation.
That’s a lot of evidence pointing in the same direction. Especially when you consider what’s not working.
Software has been a disaster. Across the board. Big caps, small caps, doesn’t matter. That group is still near the lows.
And yet technology as a whole is holding up just fine.
That should tell you something.
Because if tech can do this with software dragging, what happens if software simply stops going down?
And if it actually starts going up? That’s the part nobody is thinking about.
The chips already are. They’re not waiting around for permission. They’re not asking for confirmation.
They’re just making new highs. And if the chips are leading, you already know what that means.
The party isn’t coming.
It’s already started.
This Week in Everybody’s Wrong
On Monday, we took a stroll down memory to revisit my Gold Bug past.
Turns out I’ve been a trend-follower almost since the beginning of my career.
And the precious yellow metal makes a great denominator.
On Tuesday, we noted that the Marine Transportation Index had just closed at a new all-time high on Monday.
Ships don’t care about narratives, they just keep moving.
Here’s why it pays to look for reasons to be bullish.
On Wednesday, we explained what’s commonly referred to as the “beachball effect” and its relevance for stocks.
It’s a bull market, but investors are bracing for a collapse.
Bottom line, when the kind of pressure that’s building gets released…
On Thursday, we looked back so we can look forward.
Right now, everybody is looking for the next disaster.
Meanwhile, the opportunity is in the last disaster.
On Friday, we assessed the state of a revolution in global financial markets.
You can participate in crypto the same way you’ve always participated in stocks.
On Saturday, Jason Perz returned to share more insight about the current market landscape.
You remember “Fight Club,” right?
Do you remember the one rule about Fight Club that actually matters?
Have a great Sunday.
We’ll see you Monday morning…
Stay sharp,
JC Parets, CMT
Founder, TrendLabs