JUL · ISSUE 28 · July 9, 2026
ROTATIONThe index falls, but money rotates underneath
The hot basket bleeds while the rest of the market rises. It looks like a drop; it's a change of seats.
MOMENTUM BASKET
-23.5%
in just 5 sessions
EQUAL-WEIGHT
ATH
new record high
STOCKS GREEN
283
of the S&P 500 that day
THE NUMBER
-23.5%
↓ the momentum basket in 5 days, at 5.2x the index's volatility
The momentum factor (the AI and semis basket that led everything) fell 6% on the session and 23.5% in five days, with Samsung down and noise about a cheaper AI chip. But the equal-weight hit record highs and the net MOC was a buy: money isn't fleeing, it's changing seats.
DATA
ZOOM IN-23.5%
-23.5%
▼ in 5 sessions · -6% in the last one alone
The most expensive stuff correcting hard is not the same as a market falling apart: money left the semis bubble and moved into the laggards.
The hot basket falls at 5.2x the index's volatility: when the expensive reverses, it does so fast. July seasonality for momentum is -1.4% on a 10-year average.
- VOLATILITY
- — How much an asset moves; more volatility means sharper drops and rallies.
- REVERSION
- — The tendency of the very expensive to move back toward its average.
READ
EDITORIALRotation isn't the same as a top
“When each stock moves on its own instead of all at once, it's a selection phase: money rotates between sectors, it doesn't leave the market.”
With one-month implied correlation at two-decade lows, the market rewards picking stocks, not running out of equities.
- IMPLIED CORRELATION
- — How much stocks move together; at lows means each goes its own way.
- BREADTH
- — How many stocks rise versus fall; it measures the market's internal health.
TREND
5 SESSIONSThe hot basket's five-day fall
The sinking line is only the hot basket. The flat line above is the broad market, which held.
The momentum basket over the past week. As it sank, the rest of the market held at record highs.
- FACTOR
- — A group of stocks sharing one trait (momentum, value, quality).
- ATH
- — All-Time High: a new record high.
THE TWO READS
ROTATION vs TOPHealthy rotation or the start of a top?
ROTATION SIGNALS
The market changes seats
- 283 S&P 500 stocks green despite the index falling.
- The equal-weight at a new record high.
- Net MOC of +$4,000M in buying: money coming in, not out.
SIGNALS TO WATCH
What could go wrong
- The hot basket falls at 5.2x the index's volatility.
- A cheaper AI chip pressures US semiconductors.
- If the 30-year bond tenses up, healthy rotation can turn into broad selling.
The same drop can be read two ways. Today's internal data tips the balance toward rotation.
- SECTOR ROTATION
- — Capital moves from one sector to another with the phase of the cycle.
- HYPERSCALER
- — A large cloud and AI infrastructure company.
THE FLOW
FROM WHERE TO WHEREWhere the money moved in the rotation
The money doesn't vanish: it leaves the most expensive and looks for what hasn't risen yet. That's a rotation in motion.
Indicative split of the flow: out of the hottest names and into what had been left behind.
- LAGGARD
- — A stock that has fallen behind the market and still has room to run.
- DEFENSIVE
- — A sector that holds up better when the economy cools (pharma, staples).
WATCHLIST
5 KEY ETFsFive ETFs to track the rotation
| MTUM | 215 | ▼ -4.0% | Momentum ETF: exactly the hot basket that's deflating. |
| SOXX | 292 | ▼ -4.5% | Semis: the focus of the correction, pressured by a cheaper AI chip. |
| RSP | 195 | ▲ +0.3% | S&P equal-weight: at highs, the face of the healthy rotation. |
| XLV | 148 | ▲ +0.6% | Health care: one of the destinations for money leaving AI. |
| KIE | 58 | ▲ +0.2% | Insurance: a stable sector, a typical recipient of defensive rotation. |
Side by side, they tell the story of money leaving the expensive names for the laggards.
- ETF
- — A listed basket that tracks an index or an asset type.
- SEMIS
- — Semiconductor companies; very sensitive to the cycle and to AI.
CLOSE
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- MOMENTUM
- — The basket of what has risen most; it swings harder than the index.
- EQUAL-WEIGHT
- — A version of the index where every company carries the same weight.