The Nasdaq 100 index experienced the largest intraday reversal in four months on Thursday. Dan Kosh, a market intelligence analyst at JPMorgan Chase ( Jefferies ), believes that this is one of the most encouraging signs since the market adjustment began in October. He argues that the current market volatility may present a few attractive opportunities for investors to build positions, and expects the U.S. stock market to perform strongly in November and December.

In his technical analysis report released on Friday, Kash pointed out that although he had previously anticipated an increase in market volatility this month, the extent of weakness in tech stocks is still worth noting. What makes him more optimistic about the market outlook is that the expected spread of market gains is actually occurring, and with more intensity than anticipated.

On Friday, as U.S. stocks opened, the storage sector started the day on a downward note for the entire week. The Philadelphia Semiconductor Index fell by nearly 2%, marking its eighth consecutive day of decline and setting the stage for the longest streak of losses since May 2006.

Kesh has recently been focusing on the performance differences between tech stocks and other market sectors. The Nasdaq index has fallen by about 5% from its highs, while weight indices such as the S&P 500 have rebounded by about 7% to 8% from their lows. He originally hoped that as the market's upward movement expanded, tech stocks would also maintain their strength, but he believes that even if the tech sector performs weakly, it is still a positive sign that other stocks are strengthening.

This divergence is also reflected in recent market performance. On Friday, the Nasdaq 100 index fell by 0.05%, and exchange-traded funds (ETFs) in the technology sector ( XLK ) declined by 0.65%; weight-based indices such as the S&P 500 rose by 1.37%, with the S&P 500 index increasing by 0.33%.

However, Kash does not believe that the market adjustment has ended. His technical analysis indicates that the S&P 500 index may still test the 100-day moving average of around 7,600 points. Investors still need to pay attention to whether the subsequent trend can hold above these key support levels.

BTIG Technical analyst Jonathan Klingsky ( Jonathan Krinsky ) believes that after several consecutive days of decline, semiconductor stocks finally have the conditions for a short-term rebound, but this does not change his judgment on the medium-term trend: the sector may still have room for further decline.

Klinsky found that the Philadelphia Semiconductor Index had only experienced two previous instances of consecutive declines of similar duration, which occurred in 2002 and 2008 respectively. After each of these declines, the index rebounded significantly, but then went on to experience even larger declines of 33% and 38% respectively.

Kash also remains cautious about the semiconductor sector and identifies 11,000 points as the next important support level for the Philadelphia Semiconductor Index. Therefore, even if a short-term rebound occurs, it cannot be assumed that the adjustment in tech stocks has come to an end based on that.

Kosh pointed out that currently, investors' positions are not as crowded as they were during the summer. The report cites data from Vanda stating that the market's allocation to tech stocks has become nearly neutral, and the recent decline in tech stocks may have further reduced investors' exposure to these assets.

Weaker tech stocks continue to drive down U.S. Treasury yields. Kash has set a target of 5.00% for the yield on 10-year U.S. Treasuries and expects it to possibly fall further to 4.8% thereafter. Currently, the yield is around 5.13%.

The decline in yields has also contributed to the spread of the market's upward trend. Recently, as tech stocks have come under pressure, the performance of other sectors has improved; several market observers have also noticed that beneath the surface, a broader upward movement is forming within the S&P 500 index.

For Kash, the coexistence of a pullback in tech stocks and the strengthening of other sectors indicates that the market structure is undergoing changes. Although technical indicators still suggest that adjustments may continue, the reduced position pressure, expanded market participation, and declining yields constitute the main reasons for his optimism about the U.S. stock market at the end of the year.