Mag-7 has become Lag-7

TopdownCharts
06-29 06:38

$Apple(AAPL)$ $Microsoft(MSFT)$ $Alphabet(GOOG)$ $Amazon.com(AMZN)$ $Meta Platforms, Inc.(META)$ $NVIDIA(NVDA)$ $Tesla Motors(TSLA)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$

Learnings and conclusions from this week’s charts:

  • Mag-7 has become Lag-7 (almost -20% performance gap).

  • Across a number of indicators valuations look expensive.

  • Strong earnings expectations are supporting high valuations.

  • Tech stocks have become the dominant sector on many metrics.

  • After a long period of trending, a period of ranging is “overdue”.

Overall, the bullish rotation theme remains in play as Mag-7 loses and the S&P493 wins. But in this edition we explore the bearish interpretation where the Lag-7 might actually be a harbinger (even if it manages a short-term rebound rally).

1. Mag-7 vs the Rest: 

the divergence widens —Mag-7 is increasingly being rebranded as the Lag-7 as Mag-7 dropped -14% from the 14th May peak (vs ex-Mag-7 up +5% over the same period). But note that tick-up from oversold levels on Friday.

2. Lag-7: 

also of interest is how significantly the Mag-7 have fallen behind vs the Nasdaq-100. I think this speaks to; a. the bullish rotation theme (that the “S&P493” has managed to push higher); b. the oversold conditions in Mag-7 (the potential for a rebound rally); and c. whispers of peak-risk (after-all if the former leaders of the big tech-led bull market are coming undone, that’s a pretty significant warning sign).

(p.s. all 3 might be right, but just a matter of sequencing…)

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