Your best players are supposed to lead the way.
That’s how winning works. In sports, in markets, anywhere performance actually matters. The stars show up, they produce, and the rest of the team follows.
When that’s not happening, you’ve got a problem.
This doesn’t stay out of sync for long. Either the leaders step up and lift everything higher, or they pull the rest of the team down with them.
That’s where we are right now.
The biggest, most important stocks in the world are no longer moving with the market they’re supposed to be leading.
When the Leaders Stop Leading
The Magnificent 7 represents roughly $20 trillion in market cap.
That’s Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).
Put that in perspective. The entire U.S. stock market is about $60 trillion. So a third of the market is tied up in just seven names.
Right now, they’re not acting like it. Instead of leading, they’ve been moving out of sync with the rest of the market.
The 100-day correlation between the equal-weight S&P 500 and the Mag 7 just hit its most negative level since 2023:
That doesn’t happen often.
So can this kind of divergence stick around? I don’t think so.
These relationships tend to resolve, and when they do, it’s usually in a big way.
Either the Mag 7 steps up and drives the next leg higher for equities, or the rest of the market gives back ground and gets pulled lower.
Last time we saw this kind of setup in 2023, Big Tech didn’t lag for long. They ripped.
Now we’re back at a similar crossroads, and how this resolves is what sets up the next move.
Decision Time for Leaders
The relative weakness in the Mag 7 started back in Q4. It’s something we’ve been pointing out all year.
During that entire stretch, the S&P 500 hasn’t done much. It’s been stuck.
That’s not a coincidence. If the biggest stocks in the world aren’t pulling their weight, the index is going to feel it.
Now here we are.
If mean reversion is going to kick in, this is where it happens. This is where the leaders get off the sidelines and start carrying the team again.
Prices of the Roundhill Magnificent Seven ETF (MAGS) are right back at those former resistance levels from late 2024:
This is the spot. And it’s just like the Dow Transports.
Either they reclaim it and leadership returns, pushing equities to new highs.
Or they fail here, and the rest of the market follows them lower.
It’s that simple.
If the Mag 7 is going to lead, it starts now.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs