The Weekend Edition is pulled from the daily Stansberry Digest.
The "S&P 493" is back in the lead...
The so-called "magnificent" stocks have been – finally – underperforming the rest of their peers.
We can track the performance of the "Mag 7" stocks using the Roundhill Magnificent Seven Fund (MAGS). This tracks Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Meta Platforms (META), Nvidia (NVDA), and Tesla (TSLA), and equally weights them in an exchange-traded fund.
Since July 10, MAGS is down around 12%. The S&P 500 is just about even. The popular mega-cap tech stocks are heavily weighted in the S&P 500 and account for about 30% of the benchmark index... So this means the rest of the market is outperforming the headliners.
Another indicator of this shift is that the S&P 500 Equal Weight Index recently closed at a new all-time high.
This could be a change in "leadership," or more signs of "rotation." Either way, it's a good indicator of a healthy bull market.
We're also seeing this play out below the surface. Certain "defensive" or "boring" sectors, like health care and consumer staples, have been trading at new all-time highs lately.
The Consumer Staples Select Sector SPDR Fund (XLP) is up 4% in a month, also outperforming the Magnificent Seven.
Here's another "boring" recent winner...
On Tuesday, our colleague and DailyWealth Trader editor Chris Igou covered the Materials Select Sector SPDR Fund (XLB).
The materials sector includes companies that "do everything from making the chemicals in paint to getting copper out of the ground," as Chris put it. It's all about the "stuff" that keeps society running.
Lately, XLB has traded above a key level of "resistance" (in technical analysis, that's a price level that assets have trouble rising above). As Chris explained to his subscribers...
In 2021 and 2022, XLB hit a ceiling around $90 a share. It tried to break out above that level four times over the course of a year. Then, that resistance led to lower prices in XLB into late 2022.
XLB has since made up all the ground it lost over that span. And where it found "resistance" at the $90 level back then, it's finding "support" today.
In the chart below, you can see XLB punching through that $90 barrier in early 2024. And anytime it dropped to or slightly below that level, it turned higher...
This change from resistance to support is a great sign that XLB is done trading in that sideways range.
Chris then shared the history of action like this... and why it means more gains are likely in the materials sector. It's another sign that the market's "unsung heroes" are gaining strength.
As for the "why" behind this change in dominance...
Technical traders don't necessarily need a reason for price action. They see it for what it is – and look ahead to what's next.
However, I personally enjoy marrying observations, trends, history, and a macroeconomic outlook with the ongoing price action. So I'll offer my own take on what's happening...
It's no secret that the "Mag 7" have been on an incredible run since October 2022, which was the start of the current bull market. Now, it seems the "rest" – many of which haven't done all that great in the past few years – are catching up and outperforming.
Does that mean all is well with the economy? I'm not so sure. But Mr. Market doesn't care what I think. We may have concerns, but it is interesting that an apparent changing "leadership" in the U.S. stock market is taking hold just as investors are expecting lower interest rates ahead and into 2025.
One possible explanation is that the Federal Reserve's "juice" may be working already... But that also doesn't mean the catalyst will last forever, especially if the economy sees unexpected weakening in the months ahead.
No matter what: Own shares of high-quality companies and other inflation hedges.
We believe in owning shares of high-quality, cash-generating companies over the long run. These businesses will reward you no matter what direction the economy or market goes – with dividends, buybacks, and continued growth potential.
That's why they're essential in an investing portfolio. So are inflation hedges and keeping your eye on the ball (by that, I mean your goals, whatever they may be).
But with recession jitters already in the market – and the previous market "leaders" beginning to underperform – be prepared to see more volatility this year.
That brings me back to technical trading – and to my colleague Greg Diamond...
Regular readers don't need an introduction to Greg, editor of our Ten Stock Trader advisory.
Greg was a Wall Street trader before joining Stansberry Research. And he has made plenty of impressive calls over the years...
For example, in early 2020, he warned about an important upcoming inflection point in the market – months before the pandemic panic. He also nailed the top and bottom of the bear market of 2022.
Earlier this week, Greg released a new briefing. In it, he explained how he has been able to make these calls... and his game plan for the rest of 2024, which he expects to be "volatile" for stocks.
Without giving too much away, Greg explained the cycles that consistently repeat throughout history...
In particular, he follows a strategy first created about 100 years ago by a trader named W.D. Gann.
Gann used observations about market history and cycles to make money while he was living. And all these years later, his findings have continued to predict important turning points in the market. You could say they're predictions from the grave.
This might sound like voodoo to a lot of investors... But Greg has proved otherwise. In fact, it might be more trustworthy than the "this time is different" takes from many stock market and economic analysts. (Have I soured so much on "financial experts" that I now trust dead people more than the living? Maybe.)
So why is Greg spreading the word about his strategy right now?
He's using the past – again – to predict the future. And based on the past, Greg says folks should be ready for a "September surprise" that could shake up the U.S. stock market. It could even end up influencing the upcoming presidential election in November.
As Greg said this week...
As one of W.D. Gann's teachers once put it, "God is in the prices."
He meant that unforeseeable events in the future are often reflected in market prices – what Gann called "the truth of the tape" – long before these events come to pass in reality.
It's been this way for hundreds of years.
For example, four months before it became clear that World War II was coming to an end, the London stock market saw a historic bottom... before starting what became a 30-year bull run. As Greg said...
At the time, the British had no clue if they would defeat the Germans... But the markets have a collective wisdom.
He continued...
Did you know America saw a massive bull market back when Abraham Lincoln was president? More than 20 different railroad stocks tripled, on average, from 1861 to 1864.
Most people don't care. But Gann did, and he got rich.
Of course, the "Lincoln bull market" was followed by a great panic in 1869.
Something similar happened a few decades later when the "Roaring Twenties" culminated in the 1929 crash and the Great Depression – which Gann predicted.
As Greg says, "History repeats itself... These patterns exist. And if you can spot them, you can get absolutely rich. Especially in a bumpy year like 2024."
Greg went all the way back to the presidency of William McKinley, from 1897 until his assassination in 1901, to make the point.
If you missed Greg's presentation, the video is still online for a limited time...
You'll hear exactly what Greg expects in the stock market for the rest of this year... and why his strategy is designed to profit from volatility – no matter who ultimately ends up winning the White House or whatever other major story that develops. You can watch a replay right here.
Even if you're not interested in the short-term trading that Greg uses in Ten Stock Trader, you might find his research valuable for your investment portfolio...
Maybe the fundamentals and valuation of a company like Nvidia mean more to you when making investment decisions. Or maybe it's how the economy is doing... or what you see in your town or city.
If you've been with us for a while, you likely have your own strategies that work for you. I'm not trying to tell you to change your entire approach on a dime.
But if you haven't heard about Greg's technical strategy before, you ought to hear him out. It's worth checking in on "the truth of the tape"... and learning how you can put it to work.
Good investing,
Corey McLaughlin
Editor's note: If you missed Greg's urgent briefing, time is running out... because he says the next turning point in the markets could occur as early as September 9. The sooner you understand this setup, the better positioned you'll be to act on it. You'll even learn how a powerful investment vehicle could double your money up to 10 times this year, based on Greg's track record... Watch the video right here.
