GOOD MORNING

Equity markets were flat on Wednesday as markets digested the previous day’s gains. The S&P hovered near an all-time high and may move up to set a new high soon, but there is risk. The rally has become long in the tooth and ready to correct. The S&P 500 is setting new highs but diverging from indicators, suggesting growing weakness within the market. In this scenario, a small 5% 5o 10% correction would be healthy and set the market up to resume the rally by mid-year.

Tech continues to drag on the markets. Rallies in NVIDIA, Advanced Micro Devices, Meta Platforms, and other mega-cap tech were driving the rally but are now struggling with resistance. If these stocks can’t sustain their uptrends, the S&P 500 will likely stall at current levels. With mega-caps looking overbought, investors have begun to turn to small and mid-caps where value can be found.

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