DJI, DJT, Equal Weight S&P 500 all at New Highs while Big Tech Stocks Decline

By the Curmudgeon with Victor Sperandeo

Executive Summary:

The Dow Theory is BULLISH! On Friday, the DJI closed up +1,206.97 (+2.47%) at 50,115.67 while the DJT was +346.66 (+1.77%) at 19,892.36+346.66(+1.77%)- both at all-time record highs (see graph below).

While most attention focused on the decline in big tech stocks, most failed to note that the equal-weighted S&P—tracked by the Invesco S&P 500 Equal Weight ETF (RSP) also closed at a record high. Barron’s reports that since last Oct. 29 through Feb. 4, the equal-weighted S&P 500 gained 6.3% while the cap-weighted S&P was off 0.1%, amid a dramatic rotation.

Among sectors, “Energy (+20.6%), Materials (+18.3%), and Consumer Staples (+13.8%) have surged, while Tech is down 11.2%,” Deutsche Bank strategist Jim Reid wrote in a note to clients.

Since Jan. 28^th, when Microsoft’s (MSFT) earnings report kicked off a wave of selling in tech, the State Street Technology Select Sector SPDR ETF (XLK) is down about 6%. While some tech companies have yet to report— Nvidia is releasing its results in late February—the numbers companies have disclosed so far haven’t been enough to boost their stock prices.

The average tech-stock price movement the trading day after earnings is a decline of about 1%, according to Evercore, even though aggregate earnings for the sector are almost 9% better than analysts expected. Yet that was outweighed by the serious Wall Street concern that big tech stocks, especially the hyperscalers, are spending way too much on AI data center buildouts.

Yardeni’s Bullish Stock Market Forecast:

It’s impossible for anyone, except the accountants at big tech firms, to quantify if there is or will be any positive ROI for the massive capex related to AI data center build outs and investments (e.g. Alphabet invested $3B and Amazon invested $8B in Anthropic).

Yet on Friday morning Edward Yardeni wrote in a client note:

"There’s more confidence that the overall economy will get a big boost. Investors are becoming less obsessed with a handful of stocks.”

“Hyperscaler capex is freaking out investors, who are worrying that such massive spending might not pay off. However, all that spending in just this year will certainly provide lots of revenues and earnings to the companies that are vendors to the hyperscalers. The economy will also get a big boost from so much capex."

The three-part bottom line, according to Yardeni: “The hyperscalers’ cash flow will increase as a result of all their capex, their humongous spending will boost the broad economy, and that’s bullish for a broadening of the Roaring 2020s stock market!”

-->Yardeni is still forecasting DJIA at 70,000 by the end of the Roaring 2020s.

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Other Voices:

1. Investech Research Technical Update:

InvesTech’s Artificial Intelligence Index tumbled -32% below its peak from early November and their Canary Index broke through its support level from last year, confirming the weakness in speculative investments. The risk-off sentiment was especially prevalent in Bitcoin, which has now fallen -50% from its peak in early October of last year.

InvesTech’s Gorilla Index broke down as well this week, falling -10% from its high in late October 2025. A prolonged decisive fall in this Index would confirm the breakdown in the AI Index.

2. Feb 5, 2026 Aden Forecast:

“The stock market is bullish but it’s showing some mixed signals. The Dow Jones Transportation Average, for instance, is rising sharply into new record high territory. This is very bullish action, especially since the Dow Industrials is holding near the highs. If it now follows the Transports up, it will be a reconfirmation of the Dow Theory bull market signal. The Nasdaq, on the other hand, fell to an over two-month low today and it’s looking a bit toppy. We’ll soon see how this unfolds. For now, keep the stocks you have. If you’re not in the market, stay on the sidelines.”

Richard Russell’s Primary Trend Index (PTI):

3. Feb 6, 2026 Elliott Wave Short Term Update:

“Today was a relief rally after a rough week for risk assets. Bitcoin led the charge lower, accompanied by software stocks and a whole host of individual stocks that experienced lower gap openings, often a bearish sign. Google, for instance, announced great earnings on Wednesday and the stock gapped lower at Thursday’s open. In just three market days, the stock dropped 12% from its high on Tuesday, February 3. The stock rallied intra-day to within 40 cents of closing Wednesday’s gap but the shares still closed the session lower. We surmise there was a large number of shorts that were covered based on the large size of the rally in the S&P 500 E-mini futures. Once the relief rallies exhaust, most assets will resume their slide lower.”

4. Feb 2026 Elliott Wave Financial Forecast:

“Investment grade credit spreads are the tightest in 28 years, signaling an epic complacency towards risk. The (forthcoming) bear market will change this sentiment and spreads will widen sharply.”

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Victor’s Conclusions:

The strength in the major U.S. stock indexes is based on the belief that President Trump will do anything to win the November mid-term elections. Small caps are also trading up on this “throwing the kitchen sink” at the economy mentality by Trump.

Even corporate bonds are going up. For example, the AGG ETF gap opened Friday -a rare event with no news- and it never sold off.

I believe strongly the economy will slow down while the November congressional elections will go to the Democratic party as the Republicans stay home. The Dems are on fire to “get Trump.”

Meanwhile, no news from the Supreme Court on the Trump tariff ruling. The Constitution is clear on whether they are illegal, yet the judges hide from the truth. These nine Supreme Court judges are obviously stalling, after three months of no decision.

Other questions for the Supreme Court are:

1. Did Fed Governor Lisa Cook commit fraud or not?

2. Did Fed Chairman Jerome Powell lie under oath in his testimony before CONGRESS or not?

If not, they both should be cleared of wrongdoing; if not, they should be guilty and resign. This is not about FED INDEPENDENCE! No where in the Constitution, the 1914 Federal Reserve Act, or anywhere else does the FED have a “get out of jail free” card or any other type of immunity from court cases.

-->Why is the Court dragging its feet on these three important rulings? In particular, the lack of clarity on U.S. trade policies from the Court is extremely disappointing!

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Cartoon of the Week (courtesy of Hedgeye):

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Wishing you good health, success, and good luck. Till next time.

The Curmudgeon
ajwdct@gmail.com

Follow the Curmudgeon on Twitter @ajwdct247

Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.

Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever-changing and arcane world of markets, economies, and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.

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