Showdown time for the magnificent seven?
- U.S. equity index futures mixed, little changed
- U.S. initial jobless claims 261k vs 235 estimate
- Euro STOXX 600 index up ~0.1%
- Dollar dips; gold, crude, bitcoin up
- U.S. 10-Year Treasury yield edges up to ~3.80%
SHOWDOWN TIME FOR THE MAGNIFICENT SEVEN? (0900 EDT/1300 GMT)
There has been much attention on the narrow leadership provided by what have been called "the magnificent seven."
In a note on Tuesday, Mike O'Rourke, chief market strategist at JonesTrading, said such stocks were responsible for 95% of the S&P 500 index's 
SPX YTD gain.
As a proxy for the seven, the 10-member equal-weighted NYSE FANG+TM index NNYFANG contains all of these tech titans: Apple 
AAPL, Microsoft 
MSFT, Alphabet 
GOOG, Amazon.com 
AMZN, Nvidia 
NVDA, Tesla 
TSLA, and Meta Platforms 
META.
On a closing basis, NYFANG ended Tuesday up about 68% YTD vs about a 12% rise for the S&P 500 SPX. However, of note, NYFANG slid nearly 3% on Wednesday, suffering its biggest daily drop since Feb. 16.
The NYFANG's downturn came after it ended Tuesday at a potentially extended level: that is, at 1.4x the value of its 200-day moving average (DMA).
What may be significant about this is that the index put in significant highs in February 2020 and in February 2021 also at 1.40x its 200-DMA.
From its February 2020 peak, the NYFANG sold off 34% on a closing basis over 20 trading days (tds). From its February 2021 top, it declined 17% over 14 tds on a closing basis.
In the event the index now retreats to meet the long-term moving average, there could be another significant sell off. The 200-DMA ended Wednesday at 5,531, which is 26% below where NYFANG closed.
The moving average is, however, rising around 9 points per trading day. Even an index decline to the zone defined by its early-April high, at 6,198, and the late-April low, at 5,752, would equate to a decline of around a 17%-23% NYFANG decline from its close on Tuesday.
Thus, if the magnificent seven are about to go on the lamb, it may be critical for the market to see a rotation/broadening.
A breakout above 1.4x on the 200-day disparity may, instead, suggest room for further gains. The NYFANG's record-high 200-day disparity was at 1.55x on Sept. 2, 2020. A rise to this level could, depending on the speed of advance, project a more than 20% NYFANG thrust to new highs.
(Terence Gabriel)
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