Most people can see that the market is climbing higher. Major indexes are hitting fresh record levels almost every day. The real question is: what is pushing the market up, and can this strength keep going?
After the recent pull‑back, the S&P 500 shows two clear price floors that could hold if selling starts again.
Is the market too expensive? The answer is yes, the Relative Strength Index (RSI) is close to 75, which normally means the market is overbought. However, in a long‑term bull run, the RSI can stay high for a while.
Since the RSI broke above 70 around mid‑April, the S&P 500 has moved from the 7,000 point breakout to almost 7,400. Selling just because the RSI is high would be a mistake; price action usually wins over a single indicator.
What might happen next?
Semiconductor stocks have been very strong, but they will need a break at some point. When they pause, another group will likely take the lead. The software sector (IGV) is beginning to show strength.
After months of falling, the software ETF has broken a classic bottom pattern and its RSI has moved above the 60 level twice. That suggests the bottom is done and an uptrend may be starting.
For the first time in a long while, software is showing more strength than the broader S&P 500 over a one‑month period.
Only 14 industry groups beat the S&P 500 in the past month. Semiconductors, the biggest group, lifted the index by 19 points, making it hard for others to outshine it. Software is large enough to keep the index moving if semiconductors take a short rest.
Because of that, the software chart is worth watching. The recent pattern gives it price support at the neckline, and a rising 20‑day average adds extra strength.
Rotating money among aggressive sectors helps the bull market stay healthy. When the market climbs, we want to see new groups stepping up, not just the same few leading the charge.
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