A Deceptive Stock Market Euphoria? Analyzing the Rebound and Sector Rotation

We had quite a scare overnight, but frankly, what followed looks like a fantastic comeback. While I've been a trader for over 30 years, observing such resilience remains fascinating: after a nocturnal drop, the indices erased their losses to reach symbolic peaks. But behind this apparent euphoria, we must understand the structure of the movement so as not to get trapped by the general mood.

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A Rebound Defying Gravity

To put it simply, last night was turbulent, but the wake-up call was explosive. On the Nasdaq, we touched 25,200 points in the dead of night before climbing in a straight line to stall – logically – at the symbolic level of 26,000 points. It's clean, it's technical.

Same observation elsewhere:

• The S&P 500 went back above 7,000 points.
• The Dow Jones gained 1,000 points in a straight line (about 2%), going from 48,600 to over 49,600.
• In Europe, the DAX 40 is taking back 2% and teasing 25,000, while the CAC 40 returns to the top of its usual range.

Basically, if you were buying yesterday, it was almost impossible to lose money, the bullish will was so powerful.

Why This Sudden Euphoria?

Thanks for asking, because that's where it gets interesting. Actually, several factors aligned to sweep away last week's doubts:

1. Artificial Intelligence Reassures: Fears about AI profitability have dissipated. The demand is there.
2. Chipmakers Explode: SanDisk gained 15%, AMD 4%, and Micron over 5%. It's a powerful engine.
3. Earnings Anticipation: Giants like Alphabet (+1.68%) and Amazon (+1.53%) are rising even before their publications, a sign of blind confidence from investors.
4. Solid Macros: The US economy is doing well, and corporate earnings are exceeding expectations (11% growth versus 9% expected).

The Rotation Towards "Small" Caps

However, there is a crucial nuance to grasp. The index outperforming everyone isn't the Nasdaq, it's the Russell 2000. Since the start of the year, the S&P 500 has gained 2%, while the Russell leads with a 6% leap.

Investors are neglecting the top of the basket a bit (the stars that are too expensive) to seek growth in more modest companies. Well, when we say "modest" in the United States, we're talking about businesses worth a billion dollars… in other markets, these would be leaders! But this rotation proves that managers have a strong conviction about the global health of the US economy.

The Cold Shower: Gold, Bitcoin and Disney

Not everything is rosy, though. While stocks are blazing, other assets are suffering from worrying inertia.

On the Gold side, as I anticipated after its parabolic acceleration, the penalty fell: -20% from the highs. Here, we have a small bounce of 5%, but let's be clear, it's purely technical.

For Bitcoin, it's even trickier. It continues its "descent into hell", saved in extremis by the $75,000 support. We are oscillating towards 78,000 - 79,000, but technically, it absolutely doesn't make you want to buy for the moment.

A quick word on Disney too: despite good results, the stock is disappointing due to a drop in attendance at international parks. Goes to show, even Mickey isn't safe.

Conclusion

Globally, the market is euphoric, carried by a healthy rotation towards small caps. The Nasdaq has actually just crossed 26,000 points as I speak to you. This level now becomes a key support to watch for potential bounces. But be careful, after a day as easy as yesterday, what follows risks being choppier. Keep your discipline, it's the only bulwark against volatility.

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