Whispers That the Magnificent Seven's Reign Is Done

Note: I am taking the remainder of the week off. My next column will be on Monday morning. Happy Thanksgiving!

I just want to begin with the chart of MicroStrategy MSTR because by now I’m sure you expect me to say something daily about the speculation we have seen in the month of November! It is down about 30% in the last week, so I will.

I will note that, yes, the speculation is leaking out. But let’s look at the chart with volume now. Notice how, prior to October, the stock barely traded more than 25 million shares each day. Now it is still trading well over that. I would say if you want to know the speculation has been wrung out, look for the volume to dry up again, back under 25 million shares on a regular basis.

In the meantime, the stock has a little bit of support in this 325 to 350 area, but notice how the uptrend line comes in pretty close to where that gap would be filled around 275.

Speaking of volume, take a look at a two-year chart of the QQQs and notice the way volume fell off a cliff just after the April low and with the exception of the July plunge it has not recovered.

I could go back many more years on this chart and the volume would look more like what came before May rather than after. I don’t know why volume in the QQQs dropped off then but it did.

I know the semis topped not long after that and Microsoft MSFT hasn’t done much, nor has Google, but this is very unusual for the ETF. There are a lot of folks who believe — well, they are whispering it right now — that the Mag 7 reign is done and, the same way the "Four Horseman" moniker of the late '90s fell by the wayside, so will "Mag 7."

I find myself staring at the chart of the SPY relative to the QQQ because it really does look like it has been building a base for the last year and a half. When folks lean into SPY more than QQQ, they tend to be running toward safety/less risk. Is that still true? It should be.

Long-time readers might recall back in late 2021/early 2022, I would show this chart of the S&P relative to Nasdaq and I said that as long as the ratio did not breakout to the upside, it was status quo. But once it broke out (January 2022), something had changed.

The ratio is still quite far away from a breakout, but a similar pattern is developing. With that lower volume in the QQQs (that did not occur in late 2021) I think this ratio has to be on our radar.