Market Direction Model - Model switches to CASH/NEUTRAL on February 3, 2026

Published:

3 Feb 2026 13:27 ET

Model switches to CASH/NEUTRAL.

Selling pressure as per the price/volume action of the NASDAQ Composite has pushed the model into a cash signal.

Main Reasons for the Decline Today

Tech and software sector selloff
The biggest driver is a sharp drop in software and cloud-related stocks. PayPal (PYPL) plunged 15–18% after disappointing Q4 earnings, weak 2026 guidance, and a CEO change. This triggered broader selling in peers like ServiceNow, Salesforce, and other cloud/software names (down 5–7%). Traders are rotating out of high-valuation tech/software amid fears of slower growth and AI disruption in the sector.

Rotation out of mega-cap tech / AI stocks
Nvidia (NVDA), Microsoft (MSFT), and other AI leaders are down 2%+ each, extending recent underperformance. The market is shifting toward small-caps (Russell 2000 holding up better), value stocks, banks, consumer staples (e.g., Walmart, Pepsi), and industrials after months of tech dominance.

Earnings reactions and digestion
Mixed early reports: Some beats (e.g., Palantir strong yesterday) are being overshadowed by misses or cautious guidance. Investors are parsing a heavy week of tech earnings (Alphabet and Amazon later this week) in a high-valuation environment.

Other minor factors
A partial government shutdown (now in its fourth day) is delaying some data releases (e.g., JOLTS jobs report), adding slight uncertainty. No major new macro shocks or tariff news is dominating today, but the broader rotation theme is clear.

Bottom Line- This is primarily sector rotation and profit-taking in overbought tech/software, not a broad market crash. The Dow's resilience and strength in non-tech areas show underlying risk appetite remains intact — it's just shifting away from the "Magnificent 7" and high-growth names for now. Markets can reverse quickly on fresh earnings or news, so watch the close and upcoming reports.

This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2026 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.