16/10 Indices, page-26

TIME TO HEAD THE MAGNIFICENT SEVEN OFF AT THE PASS? (0900 EDT/1300 GMT)
There has been much attention on the narrow leadership provided by what have been called "the Magnificent Seven."
Indeed, the seven biggest stocks in the S&P 500 index SPX: Apple AAPL, Microsoft MSFT, Alphabet GOOG, Amazon.com AMZN, Nvidia NVDA, Meta Platforms META, and Tesla TSLA have ridden to a combined market cap of just over $11 trillion, which accounts for 29% of the benchmark index's $38.74 trillion total market cap.
The S&P 500 is up nearly 14% YTD. However, this has been clearly skewed by the Magnificent Seven given that the average gain for these stocks is 97%.
A check of the equal weighted S&P 500 index (.SPXEW) paints a different picture so far this year. The SPXEW is up about 0.5% in 2023.
Indeed, the broad market has been corralled. And of note, this past Friday, the Nasdaq daily advance/decline line hit a fresh all-time low.
Meanwhile, a check of the charts shows that the equal-weighted SPX is at a critical juncture vs its better-known cap-weighted version:



The SPXEW/SPX ratio is testing the support line from its late-2008 low.
As a proxy for the Seven more specifically, the 10-member equal-weighted NYSE FANG+TM index NNYFANG contains all of these tech titans. It's up 73% YTD.
And the SPXEW is also at a critical juncture vs this index:



The SPXEW/NYFANG ratio is testing its early 2021 low. That low marked an inflection which favored the equal-weighted index.
Thus, traders are watching for a potential relative strength shift that favors the broader market.
That said, if the Magnificent Seven are about to go on the lamb, in order to hold up, it may be critical for the market to see a significant rotation/broadening.
Of note on Tuesday, Nvidia shares were off nearly 4% after the Biden administration said on Tuesday it plans to halt shipments to China of more advanced artificial intelligence chips designed by Nvidia and others.