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As of mid-day Friday, June 8th, the broad stock market (NYSEARCA:SPY) is breaking out into the new all-time highs.
However, the well-known leadership of the market, has started to sell-off. Specifically, the semiconductors (NASDAQ:SOXX) (NYSEARCA:SMH), Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG), Netflix (NASDAQ:NFLX) and Tesla (NASDAQ:TSLA) are currently down more than 1%.
At the same time, the Russell 2000 index (NYSEARCA:IWM) is up almost 1.5%. This is very interesting, given that large speculators hold the biggest short position in Russell 2000 in 6 years.
So what do we get from this?
There are two possibilities: 1) we are finally getting a rotation from a narrow leadership to a broader market, which will make the stock market rally more sustainable longer term; or 2) the broader stock market sell-off has just started, masked with the short squeeze in small stocks.
My opinion is that the broader stock market sell-off has just started, and that Russell 2000 is going through a short squeeze.
To validate a rotation from tech leadership to a broader sectors, we need to get some kind of a positive fundamental trigger, which would be reflected in rising yields on 10Y T-Bonds (NYSEARCA:TLT).
I will continue to follow the situation update as it unfolds.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.