The stock market action over the past few sessions has been interesting. For almost all of 2024, the market's gains have been fueled by the Magnificent 7 stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla). The rest of the market has basically just gone sideways. If you include inflation--which is always more severe than the government says, regardless of which political party is doing the saying--then small caps have actually declined in real terms.
Now we're seeing something different. The S&P 500 index doesn't seem to have changed much. It's still a nice ramp upwards.
(I'm having trouble posting images right now. Blogger is being difficult. Sorry.)
When you look at the equal-weight version of the S&P 500 index, you see a dramatic spike upwards over the past five trading sessions. It went nowhere all year, and now it's at an all-time high for 2024.
And the small cap index is even more pronounced. Not only have the past four sessions all spiked up, but they've gapped up. Volume for the iShares Russell 2000 is two to three times what it was just the week before.
This suggests to me that the smart money is taking profits from their Mag-7 holdings and putting that money into small caps. Maybe the smart money knows something, or maybe they're just trying to read the tea leaves regarding Jay Powell's statements. I don't know. But something has definitely changed, and it's changed in a big way.
Gold has also risen lately, though not as dramatically as small caps. I think gold is reacting to Powell/inflation only, whereas the smart money is reacting to both that and the fundamentals and technical indicators regarding the Mag-7 stocks. But all that's just a guess on my part.
I don't have any Mag-7 shares, but if I did, I'd be tightening my stops.
