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Dow Leads, Nasdaq Stalls: Where the Money Is Flowing · The SPY Trader

• 0:00
  Good morning , traders , and welcome back to Spy Trader .
• 0:04
  I’m your host , Skip Charts , and we are kicking off the first full trading week of the new year with a deep dive into market rotation .
• 0:12
  It's 5 am on Monday , January 5th , 2026 , Pacific time , and while the market might look broadly green , there's a serious turf war happening beneath the surface .
• 0:25
  To quickly summarize the action : 2025’s narrow rally is broadening out , and it's not favoring the highgrowth darlings right now .
• 0:33
  The Dow Jones Industrial Average is the clear leader , showing strength with a solid 0.66% gain , driven by core economic sectors .
• 0:42
  The S&P 500 is moderately up , balancing things out .
• 0:46
  But look at the Nasdaq Composite — it’s flat to slightly negative , down 0.03% .
• 0:52
  That tells the whole story : money is moving .
• 0:56
  So , where is the money flowing ?
• 0:58
  Two major themes are dominating .
• 1:00
  First , geopolitical events , specifically the shock coming out of Venezuela , are massively boosting the ‘ hard ’ sectors .
• 1:08
  Energy , tracked by the XLE , is up a huge 2.10% , and Industrials , the XLI , is right behind it with a 1.85% jump .
• 1:20
  Defense contractors and heavy machinery names like Boeing and Caterpillar are benefiting directly from the anticipation of new infrastructure investment and the shifting geopolitical landscape .
• 1:33
  Second , the AI supercycle is getting incredibly focused .
• 1:37
  While the overall tech sector is modestly green , it’s entirely because of the chipmakers .
• 1:43
  We’re seeing massive momentum in names like Micron Technology , which soared over 10% , and Intel , up 7% .
• 1:51
  This suggests that the capital expenditure wave for AI hardware is still incredibly strong .
• 1:57
  However , that strength is not translating to the software or consumer side .
• 2:03
  Laggard sectors like Communication Services and Consumer Discretionary are notably weak , signaling soft consumer spending and rotation out of highvaluation growth stocks like Salesforce and Amazon .
• 2:18
  This rotation is backed by some key insights .
• 2:21
  The broader optimism rests on the Federal Reserve potentially cutting rates later in 2026 , with the Fed Funds Rate currently at 3.75% .
• 2:31
  That’s a good setup for equities .
• 2:34
  But the caution comes from the AI space itself .
• 2:37
  Market chatter suggests deep uncertainty about the positive return on investment for AI tools .
• 2:44
  An MIT study found only 5% of companies are actually achieving a positive ROI , which pressures the valuations of the software names , even as the hardware manufacturers are minting money .
• 2:59
  This background of rotation and sticky 3% inflation , coupled with this week’s critical December jobs report , forces us to be diversified but targeted .
• 3:11
  For concrete trading recommendations today , we stick to the rotation theme .
• 3:16
  First , maintain your core exposure to the broad US market via something reliable like the iShares CORE S&P 500 ETF , IVV .
• 3:27
  This gives you exposure to both the Dow strength and the core S&P tech .
• 3:32
  Second , chase the undeniable momentum in chips .
• 3:36
  Use the Technology Select Sector SPDR Fund , XLK , which has a heavy allocation to chip giants like Nvidia , despite the overall Nasdaq softness .
• 3:48
  This is your targeted highgrowth play .
• 3:51
  Third , lean into the cyclical rotation .
• 3:54
  Since Industrials and Energy are leading , consider adding exposure through the Energy Select Sector SPDR Fund , XLE .
• 4:03
  Or , if you prefer a stock pick , look at a major defense name like Boeing , which is currently leading the Dow .
• 4:10
  Finally , for a defensive hedge against geopolitical risk and sticky inflation , consider adding a commodity component like SPDR Gold Shares , GLD .
• 4:21
  Gold acts as a safehaven asset , which is prudent given the uncertainty introduced by the Venezuela news and broader global tensions .
• 4:31
  That’s the playbook for today .
• 4:33
  Stick to your charts , manage your risk , and I'll catch you on the next episode of Spy Trader .