Magnificent 7 Basket

This indicator is engineered for traders focused specifically on the seven most influential technology stocks (At the time of writing). It moves beyond single-asset analysis by establishing a sophisticated multi-factor validation system. Its primary mission is to filter out the noise and transient volatility of the local chart you are observing by determining whether the price action is fundamentally aligned with the coordinated capital flow driving Market Leadership (the Magnificent 7) and Global Risk Appetite (the U.S. Dollar Index, DXY).

The indicator achieves this by integrating three distinct data streams—local momentum, Mag 7 synchronized flow, and DXY context—into one final, powerful metric: the Self-Confirming Line (the Combined Plot). This line is a statistically refined score that provides the ultimate signal. It tells you, with high conviction, if the local move you are observing is merely an isolated event or is genuinely supported by coordinated capital deployment across the most influential assets in the market: Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Nvidia (NVDA), Tesla (TSLA), and Meta Platforms (META). This validation is crucial because trades that lack systemic backing are often high-risk, low-reward propositions.

Part I: The Alignment Philosophy – Systemic Context in Modern Markets

1. Market Leadership: The Magnificent 7 Index as a Capital Flow Barometer

The Mag 7 basket is not simply an aggregate of large stocks; it is the thermometer of risk appetite for the highest-value technology companies. Their collective momentum serves as a real-time proxy for the conviction of institutional capital managers.

The Necessity of Validation: When one of the seven stocks flashes a buy signal, the movement must be checked against the collective health of the Mag 7. If one stock is rising while the basket is stagnating or declining, the local move is likely based on short-term news or a temporary enthusiasm spike. Such moves often lack the institutional commitment required for sustained follow-through.

High-Conviction Bullish Confirmation: Imagine one of the seven stocks is completing a bullish pattern breakout. If the indicator confirms that the Mag 7 basket is simultaneously exceeding its adaptive volatility threshold (M7s signal), it signifies a coordinated "risk-on" movement. This confirms that the market leaders are validating the sentiment on your chart, greatly increasing the probability that the breakout will continue. The Self-Confirming Line will reflect this powerful alignment by spiking higher than the local Raw Line.

Contradiction and Caution (Bearish Warning): Conversely, if one of the seven stocks shows a deep, alarming pullback, but the Mag 7 basket is holding firm or showing synchronized positive inertia, the indicator issues a warning. The local pullback is likely a shallow, temporary correction that will quickly be bought up by liquidity flowing among the leaders. By identifying this contradiction, the Self-Confirming Line warns against premature bearish entries that are swimming against the overwhelming systemic current.

2. Global Risk Appetite: The DXY as the Inverse Barometer

The DXY (U.S. Dollar Index) measures the value of the dollar relative to a basket of six major foreign currencies. Because the Dollar is the world's primary reserve currency and a dominant component of global liquidity, its strength or weakness profoundly impacts risk assets, particularly the globally operating Magnificent 7 technology companies.

DXY Strength (The Headwind): A rising DXY signals a tightening of global liquidity, a shift toward safer assets, or the repatriation of capital. For U.S.-based technology giants with substantial international revenue, a strong DXY acts as a systemic Headwind. This structural drag can suppress equity prices even if local earnings news is good. The indicator uses this relationship to penalize the final sentiment score, cautioning you to reduce leverage or size.

DXY Weakness (The Tailwind): A falling DXY suggests greater risk tolerance and capital moving out of safe havens. This creates a powerful systemic Tailwind for the technology sector. The indicator magnifies the conviction score when the local price movement is aligned with this liquidity flow, validating the strength of the bullish move.

Part II: Core Mechanics and Calculation Detail – The Engine Room

The indicator is built upon a layered system of filters and adaptive calculations to produce a reliable, filtered signal.

1. The Basket Calculation and The Adaptive Threshold

The Mag 7 basket's external validation score is generated through a rigorous, multi-step calculation. This process ensures the signal is based on the aggregate quality of momentum, not just raw price movement.

A. Calculating the Basket Total Score (BTS)

Individual Component Fetch: The script first makes seven distinct request.security calls to simultaneously fetch the price data for each of the seven Magnificent 7 stocks, ensuring they are all synchronized to the current bar's close time.

Individual Quality Scoring: For each of the seven stocks, the system calculates a proprietary Momentum Quality Score. This score is based on the stock’s closing strength, its raw Moving Average divergence, and most importantly, its current RSI Strike Batch (detailed below). This step ensures poor-quality moves (e.g., short-lived, high-volume spikes that immediately reverse) do not contribute meaningfully to the basket’s total conviction.

Aggregation: The seven Individual Quality Scores are summed up to create the Basket Total Score (BTS). This BTS represents the instantaneous, aggregated momentum quality of the entire market leadership group.

Standard Deviation Context: The script then calculates the historical standard deviation (volatility) of the BTS over the user-defined Basket Adaptive Lookback. This provides the essential context: How significant is the current BTS movement relative to recent systemic volatility?

B. The M7 Labels (Statistical Significance + Quality Filter)

The M7 confirmation labels (M7s, M7m, M7w) that appear on the price bars are generated only when two conditions are met, acting as a two-factor authentication system for systemic strength: on the left of the labels is a number representing how many of the 7 stocks reached RSI on the viewable timeframe. These labels appear in blue below for buying and orange above in selling pressure.

Statistical Significance (Standard Deviation Check): The current Basket Total Score (BTS) must exceed its historical standard deviation by a defined multiple:

M7w (Weak/Initial): BTS > 1.0 Standard Deviation

M7m (Medium/Confirmation): BTS > 1.5 Standard Deviations

M7s (Strong/High Conviction): BTS > 2.0 Standard Deviations

RSI Quality Check (Accumulation Filter): The collective RSI Strike Batch Count (explained below) for the Mag 7 must indicate a measured accumulation rather than an exhaustion spike. The M7 label will only print on the bar if the combined RSI quality of the basket is within the desirable RSI Strike Batches (55-75). If the BTS is statistically significant (Condition 1) but the underlying RSI profile of the components suggests exhaustion (RSI > 80), the M7 label is suppressed, filtering out false-breakout signals.

The M7 label is thus a powerful confirmation: the move is statistically massive and structurally healthy.

2. RSI Strike Batches and Identifying "Hot Periods"

The core of the "Accumulation Filter" relies on proprietary RSI target ranges, called RSI Strike Batches, designed to find measured, persistent institutional flow as opposed to retail-driven extremes.

A. Defining RSI Strike Batches

Instead of treating the Relative Strength Index (RSI) as a binary overbought/oversold signal, the system uses distinct bands that correlate with different phases of large capital deployment:

RSI Range (Batch)

Interpretation

Momentum Quality

55-65

Early Accumulation/Distribution

The first phase of clear directional bias. Large capital actively establishing positions. This is the highest momentum zone.

65-75

Sustained Trend/Mid-Cap Deployment

Strong follow-through. Trend continuation is confirmed, but liquidity is starting to thin.

75-80

Late-Stage Euphoria/Liquidity Trap

Price is nearing exhaustion. The risk of quick reversal is high. This range penalizes the score.

B. The "Hot Period" Confirmation

A Hot Period is identified when a significant number of Mag 7 components are simultaneously operating within the highest quality momentum zones (RSI 55-65 or 65-75).

Detection: The indicator counts how many of the seven stocks fall into these bullish or bearish strike batches on the current bar.

Conviction Magnification: When, for example, four or more of the Mag 7 stocks are simultaneously in the RSI 55-65 Bullish Strike Batch, it signals synchronized, coordinated capital deployment across the sector. This is a true "Hot Period" of high institutional conviction.

Signal Output: When a Hot Period is detected, the external validation score (which feeds into the Self-Confirming Line) is magnified significantly. This prevents the system from generating high-conviction signals during periods when all the leaders are simply exhibiting exhausted overbought (RSI > 80) conditions, ensuring trades are entered during the measured, sustained phase of accumulation.

Part III: Interpreting the Sentiment Plot Lines – Alignment and Divergence

The indicator plots two distinct lines at the bottom of the chart. Mastering the interplay between these two plots is the key to trading with the indicator.

Sentiment Line

Data Source

Interpretation Focus

Key Use Case

AAI Sentiment Index (The Raw Line)

Internal to the current chart only.

Local Momentum. Measures the asset's own strength, volatility, and internal MA crosses.

Identifying early, pre-validated trade setups, confirming local divergences (e.g., price higher, Raw Line lower).

Self-Confirming Line (The Combined Plot)

Raw Line + Mag 7 Score + DXY Weight.

Systemic Alignment. The final, filtered score validated by external market leadership and global risk context.

The primary signal for trade entry/exit confirmation, position sizing, and determining true conviction.

A. High-Conviction Alignment (The Trade Confirmation)

High-conviction trades occur when the two lines move in synchronized fashion, with the Self-Confirming Line leading or sustaining a level significantly higher than the Raw Line.

Example: High-Conviction Long Entry:

Raw Line Fires: Your local chart begins to move up, and the Raw Line (local momentum) breaks above the centerline. This is your initial setup alert.

Self-Confirming Line Confirms: The Self-Confirming Line immediately follows, not just crossing the centerline, but often exceeding the Raw Line's initial height. This powerful action confirms the Mag 7 leaders are providing a strong synchronized push (M7s signal likely fired, confirming a Hot Period).

Action: This is the ideal moment for a confirmed trade entry, allowing for larger position sizing and a higher expectation of follow-through.

B. Cautionary Divergence (The Risk Filter)

Divergence occurs when the two lines fail to agree, signaling a disconnect between the local price action and the systemic market support.

Example: Bearish Trap Divergence (A Long Warning):

Raw Line Fires Strongly: Your local asset is rocketing up, and the Raw Line spikes to an extreme high (e.g., +80).

Self-Confirming Line Lags: Despite the local spike, the Self-Confirming Line remains flat, moves only slightly, or—critically—starts declining.

Interpretation: This is a severe warning. The local spike is likely a short-term liquidity event. The other six Mag 7 leaders are not confirming this move, or the DXY is suddenly acting as a Headwind. The system is telling you: "The market is not buying this move."

Action: Avoid entering long, or significantly reduce position size. This pattern often precedes a sharp reversal or a failed breakout.

Part IV: Deep Dive into Setting Customization – Adapting to Your Asset

1. AAI Sentiment Weight (% - Balance Slider)

This controls the balance of importance between the local chart's internal momentum and the external indices' input.

Focusing on Individual Stock Volatility (TSLA, NVDA):

Goal: Focus primarily on the local chart's own volatile swings, using the external data as a soft, contextual filter.

Action: Increase the AAI Sentiment Weight (e.g., 70-80%). This forces the Self-Confirming Line to closely track the Raw AAI Line.

Trading Stable, High-Cap Leaders (AAPL, MSFT):

Goal: Demand strong external validation for every signal. Ensure that movement is overwhelmingly validated by the other Mag 7 members.

Action: Decrease the AAI Sentiment Weight (e.g., 20-30%). The Self-Confirming Line becomes heavily influenced by the Mag 7 Basket Momentum Score.

2. Individual Stock MA Weight (% - Basket Importance)

This setting determines the proportional importance of the Mag 7 basket score within the total external component of the calculation.

High Weight: When trading one of the Mag 7 stocks that is highly sensitive to the overall basket flow. This ensures signals fire with high conviction only when the leadership stocks are aligned.

Lower Weight: When focusing on stock-specific news events that temporarily decouple one stock from the other six. The Mag 7 momentum will still be measured, but its influence on the Self-Confirming Line will be significantly reduced, allowing the local momentum to be more dominant in the final validated score.

Part V: Execution and Auxiliary Tools

1. The Dynamic Strike Price Line

This line is calculated as a function of the current Self-Confirming Line's magnitude and the user-defined Target Price Multiplier (%). It does not represent a static resistance level, but rather a dynamic projection of where price should travel given the current level of confirmed, systemic momentum.

2. Adaptive Brightness Range Lines (Dynamic Support/Resistance)

These dynamic support and resistance zones are derived from recent high-volume pivots and short-term volatility envelopes. Their key innovation is a visual cue tied to volatility: the closer the price approaches a range boundary, the brighter the line becomes. This provides an immediate visual warning that the asset is entering a high-probability reversal, consolidation, or test zone.

3. PoS Trend Projection (Probability of Success Filter)

This is a forward-looking trend line that is governed by the internal Probability of Success (PoS) filter. The line uses the validated sentiment to project the likely path of price over the next few bars. The line disappears when conditions are uncertain or contradictory.

Part VI: Screen Clarity and Toggling Features for Focused Analysis

The indicator provides granular visibility controls to ensure the raw price action is never obscured. You can toggle off auxiliary features to allow the trader to focus solely on the primary instrument and the final, most crucial signal: the Self-Confirming Line.

Achieving a Minimalist View by Toggling Features Off

For a clean chart, you can disable the following:

Show Adaptive Brightness Range Lines: Removes the dynamic support/resistance lines.

Show Strike Price Line: Removes the dynamic take-profit/invalidation line.

Show PoS Trend Projection: Removes the forward-looking trend line.

Show M7 Confirmation Labels: Removes the M7s, M7m, and M7w labels that appear directly above or below the price candles. By toggling these off, you rely purely on the magnitude of the Self-Confirming Line in the bottom pane for your M7 confirmation.

This leaves you with a focused view of the price action and the Self-Confirming Line, which is the final, validated, systemic conviction score.

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Always trade with risk control, do your own research, exercise market awareness.