The Sleeping Giants

We need to be reminded more than we need to be taught.

As a friendly reminder, the S&P 500 plays favorites. It's a market-capitalization-weighted index, which means it gives more weight to companies that are growing and less to those that are shrinking.

Over time, this design can lead to periods of concentration, where a few large companies dominate the index. While some view this as a flaw, it’s actually a feature. These companies have returned shareholder value and dominated returns for years, leading to their outsized influence.

Take the "Magnificent 7," for example - these companies now make up about 30% of the S&P 500.

Complaining about this dynamic solves nothing. Instead, as technicians, we can use this data to our advantage. By focusing on these market-moving names, we gain crucial context for understanding the underlying moves within the market.

What’s interesting right now is that while the S&P 500 and the Advance-Decline line are hitting all-time highs, many of the giants may just be waking up from their nap.

The Magnificent 7 have become so influential that there are now ETFs devoted solely to these seven names.

For technicians, new ETFs provide another tool to help us piece together the market puzzle.

When you equal-weight these giants and analyze them collectively, a clear consolidation pattern emerges. Surprisingly, the S&P 500’s new highs aren’t being driven by these heavyweights but rather by improved breadth across the market—addressing what was once the primary “worry.”

This is what bull markets do, they rotate leadership, quietly solving problems beneath the surface while giving people who want to doubt reasons to. My hope is that people remain opportunistic in the midst of Bull Markets.

While bears may use the “sleepy giants” moment to sound alarms, I see it as the ideal setup for the next leg higher. Even if market breadth begins to cool, 30% of the index breaking out of a consolidation could fuel the next leg higher.

To truly understand what’s happening, we need to look at these giants individually. Are they showing reasons to be cautious or signs of opportunity?

$AAPL (7% of the S&P 500)

Apple is breaking out of a four-month base (or ascending triangle, for the chart nerds). The largest component of the S&P 500 is just now joining the party. A dagger to the heart for the bears.

$NVDA (6.5% of the S&P 500)

Nvidia is consolidating in the $130–$150 range. It’s holding above a prior base breakout, looking less “extended” and more like it’s just waking up.

$MSFT (6.2% of the S&P 500)

Microsoft has struggled this year, but long-term investors won’t ignore the opportunity to buy near its 200-day moving average with well-defined risk. Bears often overlook this when spinning their “extended market” narrative. Imagine if Microsoft joins the rally—bull markets make this scenario more likely than a generational top.

$AMZN (3.8% of the S&P 500)

Amazon recently retested its breakout beautifully, with RSI staying strong and firmly in bull territory. It’s primed to attack all-time highs again.

$META (2.4% of the S&P 500)

Meta is consolidating above support—classic "not a top" behavior. In bull markets, failed tops often provide excellent trading opportunities, especially when they align with prior support levels.

$GOOGL (2% of the S&P 500)

Alphabet is consolidating and seems content to nap for now. While the chart isn’t my favorite, it’s not bearish unless we see consistent closes below support.

$TSLA (1.8% of the S&P 500)

Tesla has been one of the few Magnificent 7 actively participating in the market’s recent highs. Its breakout is impressive, and the current high-and-tight flag is worth watching closely.

The Magnificent 7 index as a whole looks fantastic, ready to break out of consolidation and fuel the market to all-time highs.

On a chart-by-chart basis, the overwhelming majority present strong opportunities.

The beauty of data lies in its subjectivity—people see what they want to see.

This is where context and expertise truly add value.

While some might interpret the sideways churn in the largest components as a warning sign, evaluating these charts on their individual merits within the context of an underlying bull market reveals a different narrative.

It looks less like a red flag and more like the foundation for the next leg higher.

Stay Bullish, Friends.

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The best is yet to come—stay tuned!

Cheers,

Larry

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