Weekly Winning Streak Could Come to an End

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I think the nine-week rally ends this week, but that doesn't mean the ES isn't going higher. As mentioned last week, the overall price action since last Wednesday has been institutions selling the big tech names and “smart money” taking money off the table. 

Helping that idea is growing doubt that the big tech stocks that powered last year's rally can keep going up. While there was a Nasdaq reweighting last year, it doesn't seem to have cured the problem. The so-called Magnificent Seven stocks continued to make up a large percentage of the index. 

Last year, the Mag 7 represented about 30% of the S&P 500’s market value and was responsible for much of the index’s 24% gain for the year. 

I understand that we live in a new world trading order where nothing stays the same for very long, but with the big money piling into tech last year, the enthusiasm hasn't dulled. I have always said that the new year — especially after a big move up or down — tends to adjust. 

While I remain bullish, I also think some type of pullback is necessary. 

Over the last couple of months, we have also seen what I call an algo blip. The ES is trending in its range, and out of the blue comes a 10 or 20-point drop. I think this has something to do with order flow, exhaustion, and the low level of bids. They are mini-algo washouts that generally recover quickly, but that's not the pullback I am looking for. I have a feeling we get into some type of lower trading range and just chop up and down.