The rotation out of tech and into other lower PE and PE-expansion areas of the market was made obvious by the breakouts in both the Dow and NYSE Composite Indexes on Friday. The Dow closed above the 50,000 level for the first time in history while the NYSE Composite broke out in a strong move to all-time highs.
Evidence of the rotation into other, perhaps less glamours areas of the market is also seen in the action of the Dow Jones Transportation Index, which broke out decisively early in the week amid the big tech selling and streaked to a series of new all-time highs by Friday's close.
Gold and silver both corrected sharply as they now attempt to establish new price plateaus. Gold via the SPDR Gold Trust (GLD) is attempting to stabilize as it consolidates along 20-dema support as volume declines while the more volatile silver via the iShares Silver Trust (SLV) posted an MAU&R at the 50-dma on Friday, which we reported on, as silver sold down to a low of $63.99 an ounce overnight on Thursday before ending the week at $77.98, a 21% rally off the Thursday evening lows.
The rebound in tech on Friday from an oversold position created some interesting Ugly Duckling set-ups in certain names. For example, here we see Advanced Micro Devices (AMD) posting a price U&R along the December and January lows of its prior base. After plummeting five straight days to the downside, Nvidia (NVDA) on Friday posted a price U&R at the 177.61 January 20th low before closing back above the 50-dma to post a moving average U&R at the line as well. Finally, the move also qualified as a bottom-fishing pocket pivot. Whether any of these hold up over the next few days remains to be seen, but over the weekend Goldman Sachs (GS) reported that in single stocks, U.S. hedge funds and other investors engaged in the highest level of shorting on record during the past week. This level of shorting exceeded levels seen during the 2020 crisis, the 2022 bear market, or the April 2025 crash, and could set up a sharp short squeeze from here.
We reported on Taiwan Semiconductor (TSM) as a potential pocket pivot on Friday morning but by the close, volume had tapered off to produce a trendline flag breakout on 33% above average volume. This remains valid as a breakout using the 10-dma as a selling guide.
If indeed a big short squeeze continues to push the market higher, most set-ups will likely be of the Ugly Duckling variety, such as U&Rs, MAU&Rs, BFPPs and BFBGUs. More clarity in this regard will likely be forthcoming this week, so we see no reason to rush into the market aggressively unless one can find proper long set-ups that allow one to maintain tight risk-management. Stay tuned.The Market Direction Model (MDM) switched to a CASH/NEUTRAL signal on Wednesday, February 3, 2026.