Technology bulls won Thursday as many of the stocks that retreated sharply a day ago bounced back, states Jon Markman, editor of Strategic Advantage.

The Nasdaq 100 closed at 14,485, a gain of 1.3%. The rally was significant, yet fewer big capitalization technology issues are extending to new highs.

Microsoft (MSFT), for example, added only 0.6% on Thursday after falling 3.1% the previous session. The more interesting development on Thursday was the stronger performance of lower-quality technology issues.

Carvana (CVNA) shares popped by 56% after executives at the used vehicle retailer said not generally accepted accounting gross profit per vehicle could reach $6,000 in its fiscal second quarter. The fact that non-GAAP, gross profit is becoming an accepted financial metric again should give investors pause.

Questionable accounting aside, the greatest near-term threat to the current tech rally is sector rotation. Stock market rallies since early 2021 have been zero-sum events. Technology issues either attract investment capital from professional money managers, or they become a source of funds to fuel the rally in cyclical stock sectors such as energy, industrial, materials, and consumer discretionary, and vice-versa.

 A shallow, near-term decline for big technology stocks would not be a terrible development. Leadership issues need to digest recent gains for a healthy advance in the second half of the year. Overhead resistance for the Nasdaq 100 is 14,775. Critical support is 14,050, the rising 20-day moving average.

The NDX Loop: Members earned an overall profit of 16.5% by buying ProShares Ultra QQQ (QLD), a 2x leveraged Nasdaq 100 fund, on May second and then selling in halves higher for gains of 10.6% and 22.4%. That’s great for a hold of just three weeks.

Let’s do that again. I’m hunting for a new low-risk entry. I will send instructions when ready.

Behind the Headlines: The Nasdaq Composite increased 1% to 13,238.5, while the Dow moved up 0.5% to 33,833.6. Among sectors, consumer discretionary led the gainers, followed by technology. Real estate and energy posted the steepest declines. Breadth favored the advancers four-three. There were 72 new lows vs 192 new highs.

The seasonally adjusted number of initial unemployment claims rose by 28,000 to 261,000 in the week ended June third, according to the Department of Labor. The consensus on Econoday was for a small gain of 235,500.

"One week's worth of data is nowhere near enough evidence to conclude that claims are now breaking decisively to the upside, but other indicators have been signaling a jump in claims for some time now," Kieran Clancy, Pantheon Macroeconomics' senior US economist, said in a note. "Higher claims also are consistent with the ongoing deterioration in credit availability and the lagged effect of the (Federal Reserve's) tightening."

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