Market Strength Broadens as Tariff Fears Subsides: Where Money Is Flowing
As mega-caps correct, stock picking improves.
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All major indexes are indicated higher for the fourth straight day Thursday, but there is an interesting shift with the Magnificent Seven MAGS mega-cap names lagging while smaller stocks are outperforming.
The Mag 7 stocks are still struggling with the DeepSeek fallout, but it also appears that they still have to ramp up capital spending to stay competitive in the AI space. Alphabet GOOGL, Microsoft MSFT, Apple AAPL, and Nvidia NVDA have all broken key technical levels. Amazon AMZN reports earnings Thursday night and will be the latest test of AI spending and cloud strength.
Despite the Mag 7 struggles, or maybe because of them, the broader market is acting quite bullish. Volume is picking up, and a large number of stocks are moving up by more than 10%. There is a focus on stock picking rather than just piling into mega-caps with relative strength. For a while, the Mag 7 were safe havens due to their relative strength, but that is no longer the case.
In the short term, there will be more focus on economic news and interest rates. Jobs news is due out on Friday, but interest rates have been falling, probably due in part to the Trump government layoffs and attacks on spending.
The tariff issue is not dead, and it is very likely to flare up again as Trump considers what to do with Europe, but for now, the situation with China, Mexico, and Canada appears calm.
While there are plenty of economic and political issues out there that can shake up the market at any time, this is a market that favors stock picking over indexes. Money is flowing into individual stocks with good fundamentals and good stories.
The bulls have been complaining about overvaluation for some time, but most of that overvaluation is due to the mega-caps that are now struggling. There are many stocks that offer both good valuations and good technical patterns.
We have a positive open with weekly unemployment claims due at 8:30 am ET.
At the time of publication, Rev Shark was long NVDA.
