Last week’s action capped off with U.S. equity indices rallying to or near recent all-time highs. Prior to that, earlier in the week though, investor sentiment indicators witnessed notable action with bearish sentiment increasing and bullish sentiment dropping.

The investment sentiment indicators discussed plot the weekly American Association of Individual Investors (AAII) Sentiment Survey data on a point and figure chart and can be found by going to the Securities tab and selecting Chart Lists. Once on the Chart Lists page, click on Economic Indicator Charts under the Special Reports section on the lower left of the list box located on the left-hand side of the page. For those not familiar with the AAII Sentiment Survey, it offers insight into individual investor sentiment and simply asks whether investors think the market is heading within the next six months. The survey is taken weekly, updated on Thursdays, and these indicator charts – along with the longer-term 4-week averages – can be found near the top of the list of economic indicators.

Following last week’s survey, the bearish sentiment camp increased to 43% from 36% the prior week, leading the AAII Sentiment Survey – Bearish (^AAIIBEARS) chart to reverse back into a column of Xs after having been in a column of Os since early April. The Bullish (^AAIBULL) reversed down into Os in late April, but this week’s action brought bullish sentiment down to 31% and the chart down to its lowest level since March.  Consequently, the Bull-Bear Spread (^AAIISPREAD) reached double digits in favor of the bears camp for the first time since early April.

While bearish sentiment hasn’t quite reached the 50% levels seen since late March, bullish sentiment has fallen to its lowest since that time. The neutral camp still remains below the 30% mark on the chart that has been somewhat of a line in the sand since early 2025.

Over the weekend, geopolitical tensions within the middle east have shifted further towards a peace settlement. Given these developments and the tensions being the primary driver of near-term action in the recent months, it will be worth monitoring whether sentiment sees an uptick in bullish sentiment and decrease in bearish sentiment or if last week’s divergence in sentiment continues.

Technology has been a growing sector within the S&P 500 over a decade. At the end of 2016, Information Technology made up just 13.53% of the S&P 500, as of the end of April this year it now makes up 34.97% of the index. Within Information Technology, there are four GICS industries: Semiconductors, Software, Technology Hardware Storage & Peripherals, and Electronic Equipment Instruments & Components. A decade ago, software, hardware, and semis each made up 3-4% of the overall S&P 500. Through second half of the 2010s and first four years of the 2020s, software was the biggest gainer, moving from 3.99% to over 10% by the end of 2023. Both hardware and semis followed suit albeit to a lesser extent. Starting in 2022, semis began a consistent ascendancy, more than tripling their size within the S&P 500 in less than four years, going from 5.05% to 16.67%. If semiconductors were their own broad sector, it would be larger than every other sector except for technology. Furthermore, semiconductors make up more of the S&P 500 than the energy, consumer staples, utilities, real estate, basic materials, and communications combined. With our data through the end of April, semis are even larger than displayed in the chart below. The iShares Semiconductor ETF (SOXX) is up 15.37% (not including the 5% intraday gain during the time of this writing) in May while the SPX is up just 3.37%.

Drilling further into the weight of each industry in the information technology sector, we can see how dominant semis have become within the broader sector. Semiconductors now make up just under half of the technology sector, more than doubling since the launch of OpenAI’s ChatGPT at the end of 2022. Besides an increase from software’s share of the technology sector in 2018, the four industry groups had been in balance until 2022. While semis have increased their intrasector weighting significantly, software and tech hardware have been the biggest losers. Electronic equipment, by far the smallest portion of the tech sector, has stayed at roughly the same level over the last decade.

*Note that the weightings do not add up to 100% due to lack of industry level data for some stocks*

In short, semiconductors are in the driver’s seat for the technology sector and have a greater impact on the market than every other broad sector. Looking at semis’ technical picture via the iShares Semiconductor ETF (SOXX), the fund has a near-perfect 5.96 fund score, recently completed a shakeout pattern, and reached a new all-time high today. With today’s move, SOXX has an intraday weekly overbought/oversold reading of almost 150%, near the highest level ever. To say price action is frothy in the short term would be an understatement. Nonetheless, with a near-perfect fund score, it’s hard to be bearish on SOXX except for the possibility of a pullback in a greater uptrend. However, a pullback could be uncomfortable as the fund is about 15% away from its nearest support level which was established last week. In any case, it would be prudent to look through any direct exposure to the sector via ETFs like SOXX or individual equity names to consider trimming exposure or putting in some stops so a large pullback won’t be detrimental to unrealized gains.

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Call 

Gilead Sciences Inc (GILD) Aug. 21 $130 Call

Put

The Trade Desk Inc (TTD) Sep 18 $22.50 Put

Income (Short Put)

Philip Morris International (PM) June 26 $170 Put