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November 16, 2024

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Are the Magnificent 7 Still the Kings of Wall Street?

5 Mins Read

There’s no denying the strength that the mega-cap growth names have exerted on the equity markets in 2024. With their outsized weight in the major equity averages, and their strong performance into November 2024, the Magnificent 7 stocks in many ways reflect the investor optimism that has been much of the story of this bull market. But with these leading growth names rotating lower this week, pushing the Nasdaq 100 down 3.4% and the S&P 500 down 2.1% through Friday’s close, we need to reconsider the sustainability of the uptrend phase through year-end 2024.

To examine more effectively, we can easily group the eight stocks, which I call the “Magnificent 7 and Friends”, into three distinct buckets. Let’s review the technical configurations for these stocks, and focus on what levels could help us confirm a new market trend.

The Breakout Names, Featuring NVDA

Three of these eight leading growth names have already broken to a new all-time high in Q4, and, while Netflix, Inc. (NFLX) and Amazon.com, Inc. (AMZN) both deserve our attention, I think the chart of NVIDIA Corp. (NVDA) perhaps best illustrates what we’re seeing with these top performers.

These three are in confirmed uptrends, as defined by Charles Dow’s original definition of higher highs and higher lows. So the analysis here is simple: as long as that uptrend persists, the charts are in good shape. For NVDA, that means a “line in the sand” around $132, which lines up with late October swing low as well as the 50-day moving average.

During an uptrend phase, stocks will often pull back to an ascending 50-day or 10-week moving average. So, if charts like Nvidia are able to hold this key short-term trend barometer, then the uptrend remains in place. However, if these first three stocks fail to hold expected support, that could provide a key market tell as the “generals” would show signs of weakness.

The Consolidating Charts, Featuring AAPL

Three of the eight charts on this list are testing short-term resistance levels, with Meta Platforms, Inc. (META) testing the $600 level as a prime example. But we’ll focus today on Apple, Inc. (AAPL), which has spent the last four months failing to breakout above its July high around $237.

Quite simply, the chart of AAPL is at best “neutral” until and unless it can demonstrate a confirmed break above the July peak. On top of that, we can see the RSI has failed to push above the 60 level on short-term rallies. In fact, with the RSI basically rangebound between 40 and 60, this stock represents an absence of momentum and an equilibrium of buyers and sellers.

For charts like these, I’m reminded of Jesse Livermore’s famous quote, “There is time to go long, time to go short, and time to go fishing.” When the chart is not providing a clear signal to the upside or downside, it’s usually best to find opportunities elsewhere. But if three of these stocks are failing to break to new highs, that suggests limited upside for the S&P 500 and Nasdaq 100.

The Wild Cards, Featuring MSFT

Now the final two charts are sort of in an “other” bucket, with Tesla Inc. (TSLA) a notable outlier with its exceptionally strong upside rally post-elections, and then an equally dramatic decline over the last week. But I think Microsoft Corp. (MSFT) provides a more compelling technical configuration, given that it’s one of the only growth names on this list that is actively testing price support.

If you connect a trendline from the July peak to the September high, you’ll see that MSFT had a failed breakout above that trendline in late October, and then again earlier this week. In bullish market phases, charts like this usually follow through on breakouts. But when clear technical breakouts don’t see enough follow-through, that can often be an indication of a wider risk aversion and lack of willing buyers.

With Microsoft in particular, it’s all about the $406 level, which represents a 38.2% retracement of the 2023-24 uptrend phase. There have been numerous tests of this support level over the last three months, and a break below this level could indicate a larger theme of distribution in the equity markets. Bear phases are always marked by stocks being unable to hold key price support!

For a deeper dive into these three charts, along with the rest of the Magnificent 7 and Friends, head on over to my YouTube channel!

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

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In World news

Israel’s war conduct in Gaza ‘consistent with the characteristics of genocide,’ UN Special Committee finds

3 Mins Read

Israel’s war conduct in Gaza “is consistent with the characteristics of genocide,” including mass civilian casualties and using starvation as a weapon, according to a new United Nations Special Committee report released Thursday.

“Through its siege over Gaza, obstruction of humanitarian aid, alongside targeted attacks and killing of civilians and aid workers, despite repeated UN appeals, binding orders from the International Court of Justice and resolutions of the Security Council, Israel is intentionally causing death, starvation and serious injury, using starvation as a method of war and inflicting collective punishment on the Palestinian population,” the UN committee said in a press release.

“The Israeli military’s use of AI-assisted targeting, with minimal human oversight, combined with heavy bombs, underscores Israel’s disregard of its obligation to distinguish between civilians and combatants and take adequate safeguards to prevent civilian deaths,” the committee said.

The UN committee added that Israeli officials have publicly supported policies to destroy “vital water, sanitation and food systems” in Gaza as well as prevent access to fuel.

Israel earlier this year rejected what it called the “grossly distorted” accusation of genocide leveled against it by South Africa, arguing in the UN’s International Court of Justice (ICJ) that its war was fought in self-defense and that it was targeting Hamas rather than Palestinians, following the Hamas-led October 7, 2023, terror attacks in Israel.

The UN Special Committee is composed of three UN member states, including Malaysia, Senegal and Sri Lanka.

The UN report comes after the US-based advocacy group Human Rights Watch (HRW) released a report detailing Israel’s forced mass displacement of Palestinians in Gaza in a deliberate and systematic campaign that amounts to a war crime and a crime against humanity.

In a response to the HRW report on Thursday, the Israeli military said it is “committed to international law and operates accordingly,” and that it issues evacuation orders to protect civilians from combat.

Palestinians fleeing northern Gaza after weeks of intense Israeli military operations in recent weeks have told described a chronic lack of food and people dying of hunger, as aid agencies warn that the area is on the brink of famine.

But after a US deadline for Israel to improve getting humanitarian aid into Gaza expired this week, the Biden administration assessed that Israel is not blocking aid and so is not violating US law governing foreign military assistance. The State Department said that while changes were needed, progress had been made, so there would be no disruption to US arms supplies.

But the US view is a stark contrast with the bleak picture on the ground, where much of the aid that reaches Gaza is not being distributed.

The accounts of desperate civilians echo the World Health Organization’s warning last Friday of “a strong likelihood that famine is imminent in areas within the northern Gaza Strip.”

This post appeared first on cnn.com

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In Business

Elon Musk is $70 billion richer since Trump victory due to Tesla stock surge

5 Mins Read

Elon Musk spent $44 billion to buy Twitter, now known as X, and at least $130 million to help get Donald Trump elected president.

It’s a combination that’s paid off handsomely. Since Trump’s victory last week, Musk is about $70 billion richer on paper.

Most of Musk’s wealth is wrapped up in his holdings of Tesla, and in the four trading days since the election, the electric vehicle maker’s stock has soared by about 39%. That’s lifted the company’s market cap well past $1 trillion.

Musk’s net worth has swelled to $320 billion, according to Forbes, putting him close to $90 billion ahead of Oracle founder Larry Ellison, the world’s second-richest person. Ellison, a close friend of Musk’s and a former Tesla board member, is a longtime Republican donor who’s seen his own Trump bump, with Oracle’s 10% increase lifting his net worth by about $20 billion.

For Musk, getting Trump back into the White House became another full-time job. He funded a swing-state operation to register right-leaning voters, and he led rallies as a surrogate for his favored candidate. He started $1 million giveaways to registered voters who signed one of his America PAC petitions, and he faced a lawsuit over running an illegal lottery in Pennsylvania.

Musk also used X, the social media platform he acquired in 2022, to constantly tout his support for Trump while frequently spreading misinformation about his opponent, Vice President Kamala Harris, as well as topics like immigration and voter fraud.

Now, Musk is trying to make sure he cashes in on his investments.

After the election last week, Musk briefly joined Trump’s phone call with Ukrainian President Volodymyr Zelenskyy, NBC News reported. Other outlets, including The New York Times and ABC, have reported that Musk has been weighing in on staffing decisions for the next administration, and he’s spent a lot of time since the election at Trump’s Mar-a-Lago resort in Florida. Brendan Carr, who is likely to be Trump’s choice to run the Federal Communications Commission, is seen as a longstanding Musk ally.

Musk ran a straw poll on X for his 200-million plus followers asking who should be Senate majority leader, and he’s personally endorsed Florida Republican Sen. Rick Scott for the position. He also reposted a comment from Trump about the need for the majority leader to support recess appointments for his nominees so they don’t need Senate confirmation.

“Without recess appointments, it will take two years or more to confirm the new administration!” Musk wrote.

Musk has long sought to reduce regulatory authority so that he can eliminate impediments to his sprawling business empire, which includes Tesla and X, as well as defense contractor SpaceX, artificial intelligence startup xAI, brain computer interface company Neuralink and tunneling venture Boring Co.

Those companies are currently embroiled in a range of probes and lawsuits from federal agencies pertaining to matters including alleged securities law violations, workplace safety, labor and civil rights violations, violations of federal environmental laws, consumer fraud and vehicle safety defects.

Given the executive branch’s outsized control over federal regulatory bodies, Musk can look forward to regulators and intelligence agencies winding down some or all of the 19 known ongoing federal investigations and lawsuits against Tesla, SpaceX and X.

“He’s got the golden touch right now and has the ear,” said Deepwater Asset Management’s Gene Munster, a longtime Tesla bull, in an interview with CNBC on Wednesday.

In addition to Tesla, SpaceX is also a “clear beneficiary” of a Trump presidency, Munster said. He added that xAI could be rewarded as the new administration considers AI regulations.

“I’m stretched to try to find out how this could play out negative for Elon,” Munster said.

Musk didn’t immediately respond to a request for comment.

Musk owns 411.06 million Tesla shares, as of the latest filings, and about 304 million performance-based options. In January, Judge Kathaleen McCormick of the Delaware Chancery Court voided Musk’s historic pay package from 2018 that included the options, calling it “unfathomable” in part because Musk controlled the board. Shareholders then voted in June to retroactively ratify the package. McCormick has said a final ruling on whether to restore Musk’s compensation will come soon.Musk and Ellison aren’t the only two billionaire tech executives to see a post-election windfall.

Coinbase CEO Brian Armstrong has added about $4.5 billion to his net worth since Trump’s victory. Coinbase shares soared 20% on Monday, bringing their gains since Tuesday to 67%.

The crypto exchange was a major contributor to pro-crypto candidates up and down the ballot, largely through a PAC called Fairshake. Most of its preferred candidates were victorious, setting the stage for the likelihood of a more favorable regulatory environment for the industry.

That’s a win for Tesla as well. At the end of the third quarter, the company reported “digital assets” with a fair value of $729 million. Cryptocurrencies have rallied since the election, with bitcoin jumping about 29% to a record of over $88,000 on Monday.

This post appeared first on NBC NEWS

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