LIVE ROUNDTABLE AT 3PM ET: TRUMP’S IMPACT ON THE MARKET AND OUR NO. 1 TRADE IDEAS FOR 2025!
Quickly, I won’t be live with “Final Hour” at 3 o’clock today…
Because we’ve got something more juicy cooked up. Instead, I’m joining Kane Shieh, Nate Tucci, Alex Reid, Jeffry Turnmire, Roger Scott and Graham Lindman for a special Inauguration roundtable where we’ll discuss Trump’s impact on the market, and our No. 1 trade ideas for 2025!
You can join that session here at 3 p.m. ET!
Now to today’s mega-cap weakness and what it could mean.
The market has been heavily reliant on the “Mag 7” — Microsoft (MSFT), Apple (AAPL), Google parent Alphabet (GOOG; GOOGL), Tesla (TSLA), Amazon (AMZN), Nvidia (NVDA), and Meta (META).
These mega-cap giants have carried the indexes to significant highs over the past year, but cracks are beginning to show in their dominance.
Tuesday was a textbook example of how much weight these stocks hold.
The S&P 500 and Nasdaq were both down a small amount, yet nearly 60% of stocks in the market are advancing. The Russell 2000 even showed some strength, trading slightly higher.
This divergence highlights one critical point: When the Mag 7 underperform, their sheer market cap drags the entire index down — even if the rest of the market is relatively strong.
This trend raises a big question for traders…
Are we witnessing the start of a significant rotation out of mega-cap tech and into smaller-cap or undervalued sectors like Energy or Industrials? Or is this just a short-term blip in a larger bull market narrative for these tech giants?
Why Rotation Matters
The S&P 500’s Technology sector has been the poster child for high-growth, high-beta trades over the last decade.
But with bond yields now pushing 5% or higher, institutional money has an increasingly attractive alternative. Bonds, especially those tied to the 10-year and 20-year treasuries, offer risk-free returns that make it hard for equities to compete — particularly stocks with already lofty valuations.
Investors who previously had no alternative are now reconsidering. With bonds offering stable yields, institutional flows are shifting, and that’s pressuring the Mag 7.
Now, if mega-caps like Microsoft or Nvidia continue to face selling pressure, broader indexes could struggle. But the rotation into other sectors creates opportunities. For instance, when money flows out of mega-cap stocks, it often rotates into sectors like Consumer Staples or Health Care, which can better weather economic uncertainty.
However, don’t jump the gun just yet.
A slight pullback in mega-caps doesn’t necessarily mean they’re done leading. Key levels — like moving averages or psychological price points — will be critical to monitor. Look for divergences in the Advanced-Decline line and keep an eye on how much of the market is trading above the 50-day moving average.
Currently, Nasdaq stocks above their 50-day moving average are at just 19.8%. If that dips further — say, toward 10% or 11% — it could signal a broader buy opportunity, particularly in sectors and stocks that have been oversold.
The Mag 7’s weakness is worth paying attention to, but it’s not the end of the world. In fact, it might be a sign of healthier market breadth and opportunities elsewhere.
Stay patient, keep your focus on sector rotation, and watch for signals that confirm where the money is headed next.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. 2 Stocks Where I’ve Spotted Liquidity Levels
Wall Street just piled massive buy orders on 2 stocks and I’m live at 4 p.m. ET today, Jan. 15, with their names and tickers.
I’ll also show you the exact strike price these massive buy orders are resting.
I can’t guarantee profits or prevent losses here…
But if we play our cards right with this one, we have a shot at a 2X ROI on either (or both) of these stocks.