Equal Weighted Indexes Tell A Different Story For Software and Tech.

1.) SOFTWARE – So the big hullabaloo in market talk these days is that AI is going to kill software. Sure, it might kill some software, but not likely the industry. We’ve seen this sort of thing before. The advent and growth of the internet didn’t eliminate technology companies. It reshuffled the leaderboard. I would say AI is doing the same today. Leadership inside software is changing. Lots of investors have become bearish on software for the wrong reasons… most are looking at the market-cap weighted index. In those indexes, the largest companies have an outsized influence on performance... in both directions. That’s exactly what’s happening today. Remember, Microsoft (MSFT) fell more than 35% from its highs last year. Oracle (ORCL) fell more than 65%. Looking at the industry through the lens of the equal-weighted index gives you a different picture. This doesn’t look like a dead industry. It just looks like rotation. Market-cap weighting tells you how the biggest companies are behaving. Equal weighting tells you how the average company is behaving.

2.) QQEW – What’s that? That’s the Equal-Weight Nasdaq 100, and it too just closed at a new high. That’s a remarkable development considering how much attention has been paid to the weakness in some of the large technology stocks. This is a signal of broad participation in the market, and that isn’t something you see in a market that is falling apart. Instead, it’s evidence that money continues flowing into technology, just not necessarily into the names that dominated the last cycle. Healthy rotation.

3.) GOLD – Gold is sensing the potential for a little stagflation this month and was up +4.23% yesterday. However, even after that, gold is still down -9.24% over the last 3 months and continues to trend bearish (downward bias). Gold is hitting resistance right now at the low end of its trend range at $4,290. So far, it is failing at this level, and indicators suggest a test of $4,125 wouldn’t be too surprising. For gold buyers, slowly accumulating on dips here is likely okay. However, those buyers will likely need patience since buying any asset class in a bearish trend carries an increased degree of risk and volatility.