# Is It Time To Dump The Magnificent Seven?

## Метаданные

- **Канал:** CiovaccoCapital
- **YouTube:** https://www.youtube.com/watch?v=OIckEXmqlIw
- **Источник:** https://ekstraktznaniy.ru/video/45071

## Транскрипт

### Segment 1 (00:00 - 05:00) []

In this week's video, we'll review the latest charts and data to help us answer the question, is it time to dump the magnificent seven stocks? If you follow the markets closely, you know recent sessions have been highly volatile, including Wednesday of this week. Based on the topic that we covered two weeks ago, a slide on your screen is from that video. After the close on Wednesday of this week, it was logical to ask an answer. Were our model scores starting to indicate that we were moving into volatility to respect? Scores on your screen are as of the close after the big down day on Wednesday, November 17th. And we explained these concepts in detail in last week's video. And thus, the models told us we really weren't particularly vulnerable to a major reversal, and we weren't even close to seeing anything that would say there was significant or visible damage to the secular bull market. Same thing with the trend strength scores. They dropped a little bit. 98. 66 66 was the broad score, but the long-term score was 100, telling us that the long-term trend, even as of the close on Wednesday, November 17th, was still intact. The next logical question for us is leadership. There's been a lot of talk about rotation and shifts away from the Magnificent 7. So, we want to look at the charts in front of us today, the present- day trends to help us with this concept. Successful investing requires the discipline to do nothing when nothing should be done and the courage to act when the evidence changes. Chart on your screen is a ratio chart of two ETFs. The ticker symbols are MGK. Second one is RSP, Vanguard Mega Cap Growth relative to the equally weighted S&P 500 index. And this ratio is relevant to many present- day topics because there's a lot of chatter about overweighting the great 493 stocks in the S&P 500, meaning everything except the Magnificent 7. And there's a lot of talk about rotation away from the Magnificent 7. So we have an ETF here that has very heavy exposure to the Magnificent 7. Obviously this figure fluctuates on a daily basis. Recently MGK Mark George Kangaroo has had roughly a 57 to 60% exposure to the Magnificent 7. A very heavy weight. Contrast that with RSP where every stock is equally weighted. RSP has a measly 1. 47% allocation to the Magnificent 7. And the Magnificent 7 include Alphabet, which now trades under two symbols, G O G L and G O G. And it's not shocking that this 59% figure with the recent pullback in the Magnificent 7 has fallen to about 57. 39%. So let's say it's somewhere around 58 to 60%. And we know the Magnificent 7 have been outperforming for a long period of time. This is the ratio in 2017, 2018, and 2019. It's moving from the lower left to the upper right telling us what we already know that the Magnificent 7 have been outperforming the great 493. So if the narrative is correct or if at least the data that we have in hand supports the narrative that we should dump the magnificent 7 and overweight the 493 and the ratio on your screen really shouldn't be moving from the lower left to the upper right in the present day. So this a strong trend look in Q4 of 2019. It's a weekly chart and we've got weekly moving averages down here. They range from the 80week moving average out to the 130week moving average. And this is the Shondaai trend meter on the bottom of your screen. And we'll use price, the moving averages, and the trend meter to see what we can learn about the present day narrative relative to the present- day facts. If we walk forward from Q4 of 2019 to summer of the year 2000, you can see the Magnificent 7 significantly outperforming RSP, more

### Segment 2 (05:00 - 10:00) [5:00]

specifically MGK significantly outperforming RSP. But then when market participants started to get concerned about inflation in the second half of 2020 with all the liquidity in the system, inflation concerns are picking up and the rally is broadening out. You can see in this window here RSP starts to outperform MGK. So, we have a little bit of a yellow flag in 2020 and that turns into a waving orange flag in 2021. You can see here for the most part the ratio stays above the moving average cluster. This looks significantly different relative to this where we came in and came right back out. And the fact that the ratio is hanging inside the moving average cluster tells us that this trend is starting to wayne. Thus, it wasn't shocking based on the chart in front of us that things got ugly in 2022. If you know your stock market history, you know the S&P 500 peaked on a closing basis on January 3rd, 2022. And you can see this ratio gave quite a bit of warning well before January 3rd of 2022. In 2022, the S&P 500 bottomed in October. The NASDAQ bottomed very late in 2022. Thus, it's not surprising in 2023 here that this ratio of MGK relative to RSP got off the deck, came back to a moving average cluster with all the moving averages sloping down here, significantly different to what we have over here. And what once acted as support here, may now act as resistance as it did momentarily in 2023. You can see the trend meter pops up here. This looks a little bit better than this back here. And now we move to a bullish somewhat indecisive state with the moving averages now flattening out. And importantly, the ratio is back above the moving averages. Couldn't do that at any time in 2022. And if we walk forward from the summer of 2023, things really started to improve into the summer of 2024 with the heavily weighted in the MAG 7 MGK significantly outperforming the minuscule weighted to the MAG 7 RSP. It's also noteworthy here that we can also compare and contrast the look of the moving averages. This turn here to the turn that we have here in early 2024. This looks a lot better than this in the first half of 2022. So in the present day, we really wouldn't want to see anything like this or even this would be a significant pay much closer attention yellow flag. So let's see what happens. We know it's not unusual for our market to consolidate its gains and that's what happened here. The ratio moved a long way and then we get into this indecisive period into the summer of 2025. And it's noteworthy that this pattern of indecisiveness formed a W. And it's also noteworthy that we recently broke out of that pattern. That tends to be bullish. And after the breakout here, you can see good things happened. So from a long-term trend perspective, what did this ratio recently do? It just printed a new all-time high up here in Q4 of 2025. Has it printed a significant lower low? It has not. Is the ratio into the moving averages? It is not. It is well above the moving averages. Are the moving averages rolling over in a concerning manner? They are not. And if we take a step back and look at the entire chart, this time focusing on the ratio or price, you can see in January of 2022 pattern that we had was significantly different almost a double topping pattern or an upside down W. We broke out of that pattern in a bearish manner in Q1 of 2022. Contrast that with what just happened in 2025. This really doesn't look anything like this. This is a bearish breakdown. You just recently made the lowest low that you've made in over 2 years here in Q1 of 2022. We recently made a new all-time high in 2025.

### Segment 3 (10:00 - 15:00) [10:00]

This looks a lot more constructive than any of this over here. And clients and regular viewers know this type of look with the slowest moving average the 80week on top and the fastest moving average the 130 week on the bottom and white space between the moving averages. That's a strong trend look. That's a constructive look. And if we come down to the trend meter and examine it in the period where the MAG 7 were lagging significantly, it's probably fair to say that 2020 dropping into the yellow band here. And 2021 looks significantly different relative to what was happening back here in 2017, 2018, and 2019. Thus, we have a yellow flag, an orange flag, and then early in 2022, remember we said the S&P 500 peaked here on January 3rd on a closing basis, the trend meter dropped down to its lowest level. You have to go all the way back to this period here where it was rising in early 2017. This looks significantly different from anything in this window here. And the present day over here really doesn't look anything like this nor this. And you can make an argument that it does look more like this window in here. And it is fair to make this observation. This is a hiccup here and eventually bad things happen. it's telling us to keep an open mind about bad things happening. But notice how long the trend meter was getting weak in here before the S&P 500 peaked. The S&P 500 peaks here. We just don't have that yet in the present day. This doesn't look radically different from any of this in here or really here. And clients and regular viewers know that we've talked about this point in miday 2023 numerous times. And the look of this chart align with everything that we've talked about in the past. That is a nice conviction bullish move, strong move above the moving average cluster and then it turns back up. So keep in mind the numerator here has roughly let's round up a 60% waiting to the magnificent 7. The denominator has roughly a 98% waiting to the other 493 stocks. Thus, if it were logical for us long-term trend followers to ditch the magnificent 7 and overweight the other 493 stocks in the S&P 500, then we really wouldn't expect this chart on December 18th, 2025 to look like this over here. Thus, if the present- day chart starts to morph into something more like this, then concerns would increase. Look how extended this chart was here from a base. We just broke out over here recently. We're not wildly extended from a base. This is a base right here that lasted from mid 2024 to mid 2025 and we just broke out a few months ago. This doesn't look anything like that over here. We got a base back here and then we go straight up. Look at all the white space between the moving averages. Look at the area of all this white space here compared to the area of this white space. This area from here to here is significantly higher than the area here. Doesn't predict anything. But the chart that we have in front of us, especially within the context of a bull market, says we'd rather heir on the side of doing nothing and trading less and trying to participate in the ongoing bull market than getting too cute and anticipating that this chart is going to roll over. Is it possible that this is going to morph into something like this? We all know the answer is absolutely positively yes. And that's what makes this analysis useful. We should be learning something either way. If this breakout above this box holds or this W formation, then we'll learn something. If this ratio starts to get back near the moving average cluster and the trend meter starts to look more like this in here, concerns would increase. Remember last Friday we said the S&P 500 had a broad band of potential support between 6800 and 6650.

### Segment 4 (15:00 - 20:00) [15:00]

So we're still trading in this region here. And we're probably not going to learn anything either way until price either exceeds this high here or we drop below this region in here which would be about right here and then stay there for a while. That would be concerning. So far we came down to this region in here and bounced this week and came back up right around 6,800. And that's as of Thursday's close this week. Just look back in your own life. Go back six years and think about what you were worrying about. What percentage of the things that you were worrying about 6 years ago actually happened? months ago actually happened. Nothing wrong with being concerned. We don't want to be overly concerned. You can pause your video player on these signals to learn a little bit more. This one from Sentiment Trader in similar circumstances. Tech XLK was higher a year later 12. 6%. Communication services XLC up over 20%. And the S&P 500 up roughly 12%. Another signal based on hedge fund exposure. You can see the red dots, a lot of signals, average gain one year later in the S&P 500 index, 13%. The market was higher every single case one year later. And also part of the weight of the evidence, high beta relative to high quality. Again, you can pause your video player. The red dots show you the number of historical signals. One year later, the market was higher 80% of the time. The median gain was 14. 45%. The average gain in the S&P 500 just under 15%. All right, let's get back to the leadership question, which we spent a tremendous amount of time on this week to help us answer the question or address the concept on your screen relative to our asset allocation. So, we already said that RSP has less than 2% exposure to the Magnificent 7. XLF, the financial sector ETF, the financial sector of the S&P 500, has no exposure to the MAG 7. XLI, the industrial sector in the S&P 500, no exposure. XLV, the healthc care We looked at hundreds of charts this week and that included examining XLV, XLI, XLF, and RSP. This is another way to look at trends. This is a busy chart. Again, this is RSP, the Invesco equally weighted S&P 500 ETF, the ETF that has less than 2% exposure to the Magnificent 7 and has about 98% of its exposure to the other 493 that the media keeps saying people are rotating to. Well, if that were true and the trends were flipping, if we anchor these volume weighted average price lines to major highs and lows, and that's what we've done here, you can see we have an uptrend in RSP. Price is above all of the volume weighted average price lines. They're all sloping upward. This is a goodlooking chart in isolation. So, we wanted to know what would happen if we took this exact same chart anchored to the exact same dates and divided RSP by the ETF that has exposure to the magnificent 7 that's closer to 60% relative to less than 2%. And it's almost the polar opposite. In this case, we're looking at AWOP lines because volume's not part of the equation. Anchored weighted average price lines. They're all sloping downward. The ratio is below all of them. The last thing the ratio did was make a new low. It's not even remotely close to making a significant higher high. And even if a strong counter trend rally is about to start like this counter trend rally here, we would like to see something at least like this where you can clear these lines here. And really, we'd really like to see this

### Segment 5 (20:00 - 25:00) [20:00]

black line cleared. But that would be a good first step. And even that would still look like a counter trend move within the context of existing downtrend. And why is that relevant? Because if we have a secular bull market that lasts hypothetically another six to 10 years and you stay with the denominator here and this trend remains in place, well, this will be the winner in the long run. So, we want to see some evidence. We want to trade the chart in front of us. We want to see some evidence that this trend is potentially flipping. And we really don't even have that yet. Same exact concept here. This is the equally weighted S&P 500 ETF. A lot of talk about rotation away from tech. Well, for the S&P 500, the tech sector is XLK. So, how does this chart look? If we take this exact chart with the same anchors and take RSP and divide it by XLK, has the trend started to flip? It has not. Everything that we said about the prior chart and downtrend applies to this chart. If this ratio can get out here, that would just be a baby step. Notice here, this ratio in this counter trend move, it never made an important higher high. It never got anywhere near this region in here where this run to the downside started. This really looks like a market that needs to consolidate its gains. Meaning we went a long way here. Then we need to consolidate and then the primary trend resumed. And we don't have anything in hand today that says the 493 the trend in the 493 has flipped relative to the tech sector nor the mag 7 at this point. A lot of talk this week about rotation to banks and banks are doing well. So we've anchored to major highs and lows here. So these are anchored volume weighted average price lines and once again this is a healthy looking chart. It's a long-term chart because we want to see if the longterm trend has flipped. So this is 2016. This is 2025. The other charts were long-term charts. So if we take this chart and look at the exact same chart, same anchors, but now take XLF and divide it by XLK, you can see we really haven't made any significant progress. Having said that, if we can get to the other side of this cluster, that will be a good baby step and it might tell us that we've got the beginning of a counter trend move. It's also noteworthy that these lines, the slope of the lines, you could picture these potentially flattening out here. They're not pointing down sharply. They don't have a sharp negative slope. So, we always want to keep an open mind, but we also want to trade the chart in front of us. We don't want to get hung up in counter trend moves in the context of a secular bull market. Now, let's take an even broader view. This is XLK, the tech sector, relative to the S&P 500 standard weight, the capitalization weighted S&P 500, which has a heavy weight to the Magnificent 7 and tech stocks. You can see here tech has been outperforming for a long time, but that's after a period of massive underperformance here from the year 2000 to the period where the S&P 500 bottomed in October of 2002. In fact, the current uptrend really didn't start until this low here in 2006. And as far as the cloud goes, the monthly cloud, it clearly became an uptrend more in this window here. When we popped above the cloud, the cloud flipped from red to green and eventually we were checking all of the bullish boxes. So in the present day, if we wanted to see what does the long-term trend of XLK look like relative to financials XLF, is that trend starting to flip? Meaning, should we be dumping XLK and buying XLF? There's not a lot of improvement here in the monthly cloud. In fact, the last thing the XLF XLK ratio did chart on your screen dated December 18th, 2025 was make a new all-time low. It's still below a red cloud. Having said that, the

### Segment 6 (25:00 - 30:00) [25:00]

cloud is moving sideways here and all of the spans and price are near the cloud. So, this is telling us that we should keep an open mind about this ratio getting to the other side. And if it did, we would be much more open to shifting our allocation a little bit. So this looks like it's a waning downtrend, but we could have said the same thing here and then the primary trend resumed. So we'll see how it plays out. And if you want to keep an open mind about XLK underperforming, this chart can help you with that. See how we had the short stay below the rising 200E moving average and we know that's bullish and it was bullish. However, the second drop below here, see the area here is a little bit larger than this area. This too is indicative of a waning trend. So the question is, is this a waning trend that's taking a break and then is going to resume the primary trend or is it about to roll over? Like all charts, the last thing this chart did was make a new all-time high. This is a weekly chart of XLK relative to SPY. We'll learn something either way. If we get a break down into this region here again, that would be concerning and that would say that we would be open to potentially making some adjustments to our allocation. But we just had a breakout to the upside and we know markets like to retest and we know they like to overshoot on retests. So, let's just see how it unfolds. We're happy to make adjustments if the charts and data back it up. Now, we know we like to invest in charts that move from the lower left to the upper right. This is RSP, the equal 8 S&P 500, divided by XLK, the S&P 500 tech sector, in mid December 2025. And the last thing it did was make a new all-time low. If a counter trend move is getting ready to start, it would be good if this ratio could move in this region here to kind of break this downward sloping trend line. But we could draw a trend line from here to here and it would slope into this region down here somewhere below that downward sloping 200E moving average. So if RSP is going to flip this script, it's got a lot of work to do relative to XLK. And even if we go to a weekly time frame and look at RSP, roughly that 2% or 1. 5% weight to the MAG 7 relative to MGK, let's say a 57 to 60% weight to the MAG 7. We haven't even checked one box yet on the weekly cloud, which is really too fast for our time frame. So, let's go look at the questions. Is the green span above price? No, it's not even close. Is price above red? No, but it's close. Is blue above red? It's not, but they are starting to get closer together. Is price above the cloud? Not even close. Has the cloud flipped from red to green? Not even close. In fact, the area of this cloud out here tells you somewhat like this downward sloping trend line here that if this ratio moves into this white space, it could potentially run into strong resistance out here. So RSP relative to MGK has gotten off the deck here, but it's not even checking one of the bullish boxes yet. And as we've discussed in past videos, you can't get stuck on the data center story for AI. That's just the beginning of all of this. The AI story isn't we're going to build out data centers and then that's it. It's very similar to electricity. It will take a long time for the second level inventions and implementations to be live and impactful relative to earnings. It's going to be a slow process, but as the CEO of Blackstone said this week, when we look back in 5 to 10 years, the world is going to be significantly different. And we all know the only way that we can use all of this effectively is if we headed next week and every week with that flexible, unbiased, and open mind. The material in this video has no regard to the specific investment objectives, financial situation, or particular needs of any viewer. This video is presented solely

### Segment 7 (30:00 - 30:00) [30:00]

forformational purposes, and is not to be construed as a solicitation or an offer to buy or sell any securities or any related financial instruments. Nor should any of its content be taken as investment advice. Any opinions expressed in this video are subject to change without notice and Shivaco Capital Management LLC or CCM is not under any obligation to update or keep current the information contained herein. CCM and its respective officers and associates or clients may have an interest in the securities or derivatives of any entities referred to in this material. CCM accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this material. We recommend that you consult with a licensed and qualified professional before making any investment decision.