If you just listened to the headlines, you’d think technology is rolling over and dragging the entire market down with it.
That’s the narrative.
But the data tells a different story.
Small-cap technology stocks have now risen for four straight weeks. Not exactly what you’d expect from a group that’s supposedly “breaking down.”
And that’s really the point.
When people say “tech is weak,” what they usually mean is a handful of mega-cap names aren’t doing the heavy lifting they used to. But beneath the surface, something else is happening.
This is a market where smaller, under-the-radar techn stocks are quietly holding up and, in many cases, leading.
If you’re only looking at the large-cap indexes, you’re missing it.
But if you dig just a little deeper, it’s hard to ignore.
The Retest That Matters
Last month we laid out three charts that could make or break this bull market. Emerging markets, Dow Transports, and small caps.
Not opinions. Just levels that mattered most.
So far, all three have done exactly what you’d expect to see in a healthy uptrend. They pulled back, found support at former resistance, and held.
That’s the behavior of a market that’s resolving higher, not rolling over.
Now look at small caps specifically:
The Russell 2000 came right back into those post-COVID highs and did the work. It came back, tested those levels, and held.
That’s your successful retest. But here’s where it gets interesting.
Small-cap technology didn’t even need to go there.
While the broader index was busy checking in again at those key levels, tech within small caps was already moving higher. It never really pulled back. Tech just kept outperforming.
That’s not what weakness looks like. That’s leadership.
And if that’s where the strength is showing up, then that’s where we want to be looking as we think about what comes next.
Bull Market Is in the Smalls
There are two big takeaways here.
First, from an idea-generation standpoint, we don’t need to wait around for some rotation back into “technology.”
It’s already happening.
Small-cap tech has been working. By owning stocks in this group, you’re not anticipating strength. You’re participating in it.
And it’s not just there.
Mid-cap technology is right behind it, with the S&P MidCap 400 IT Index sitting about 1% from new all-time highs on a weekly closing basis.
Then you drill down even further.
Names like Fastly (FSLY) and Applied Optoelectronics (AAOI). Sub-$10 billion market caps. Not exactly what the headlines are talking about.
But they’re holding up better than almost anything else in the market. And this isn’t just a couple of names.
There are more than 40 technology stocks in the Russell 2000 up more than 20% this year. Six of them have already doubled.
That’s not weakness. That’s leadership.
The second takeaway is the bigger picture.
If small- and mid-cap technology are leading, and the Russell 2000 is holding above all that former resistance, this isn’t some fragile market hanging by a thread.
This is a bull market doing exactly what bull markets do. And the only way to participate in all that upside is by owning stocks.
When people tell you “tech is selling off” and dragging the market down, understand what they’re actually describing.
A handful of mega caps.
Meanwhile, under the surface, technology is leading. You just have to look.
Fortunately, most people won’t.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs