Kevin Warsh has spent his first few weeks as Fed Chair talking about inflation, productivity, and the long-term impact of artificial intelligence.
The stocks most closely associated with that theme are suddenly losing momentum.
Today's number is... 0%
0% of the Magnificent Seven are currently trading above their 20-day moving average, just 17 trading days after the Magnificent Seven Equal Weight Index made a new all-time high.
Here’s the chart:
Let's break down what the chart shows:
The chart displays the Equal Weight Magnificent Seven Index in black.
The index includes Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia with each stock receiving an equal weighting.
The table displays whether each Magnificent Seven stock is trading above or below its 5-day, 10-day, 20-day, 50-day, 100-day, 150-day, and 200-day moving averages.
The final columns display each stock's year-to-date return and percentage distance from its all-time high.
TheTakeaway: Just 17 trading days ago, the Equal Weight Magnificent Seven Index broke out to a new all-time high. Today, that breakout has failed, and the index is down 9.6% from its peak.
The damage underneath the surface is even worse than the decline itself. Only 14% of the group remains above its 5-day moving average. Not a single stock is above its 20-day moving average. Only 29% remain above their 50-day moving average. Those are not the numbers you expect from the market's leadership group.
The weakness isn't limited to the short term. More than half of the Magnificent Seven stocks are now trading below their 200-day moving average.
Microsoft, Amazon, and Meta are below every moving average. Microsoft is down 24.0% this year and sits 32.2% below its all-time high. Meta is down 14.6% this year and remains 28.6% below its peak. Amazon is up just 0.9% this year and is also trading below every moving average.
Not every stock is breaking down. Apple remains above its 50-day, 100-day, 150-day, and 200-day moving averages. Nvidia continues to hold its long-term trend and remains up 11.9% year-to-date. But leadership in the Magnificent Seven has narrowed considerably.
For years, investors could rely on the Magnificent Seven to drive market returns. Today, that leadership is narrowing. The failed breakout and weak participation suggest money is starting to look elsewhere.
This failed breakout has me looking beyond the Magnificent Seven.
I'm spending less time focused on the largest growth stocks and more time following where money is flowing next.
I'm seeing improving relative strength in Materials, Financials, and Industrials.
If this bull market is going to continue, somebody needs to take the baton. If leadership is changing hands, Industrials are one of the groups best positioned to become the next leaders.
Grant Hawkridge | Chief Aussie Operator, All Star Charts
Spencer Israel sits across from the entire analyst network every day, hears more good ideas than any one person could ever trade, and picks the ones he likes most.
The SMTV Portfolio is what happens when he puts $10K of his own money behind those calls.
